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C O U S I N S P R O P E R T I E S I N C O R P O R A T E D 2 0 1 4 A N N U A L R E P O R T
D E A R S H A R E H O L D E R S ,
2014 marked another exceptional year for Cousins. This
performance reflected once again the high quality of our
markets, assets and, most importantly, our team. I am for-
tunate to work with extraordinarily talented professionals
whose passion and commitment drive the success of
Cousins.
During the course of the year, we continued to grow
strategically:
• In our core markets of Charlotte and Atlanta, we acquired
$563 million in value-add trophy assets at an average of
75 percent of replacement cost.
• We executed on a development pipeline of $245 million,
including three projects in various stages of development.
• We completed 2.2 million square feet of new and renewal
leases, an all-time high and a 57 percent increase over 2013.
• We issued 26.7 million shares of new common equity
with net proceeds of approximately $322 million.
• We increased our credit facility to $500 million while
reducing the interest rate spread and fees.
Strong financial results reflected these accomplishments,
with funds from operations totaling $0.81 per share com-
pared to $0.53 per share in 2013, an increase of over 50
percent. Same property net operating income grew 12.3
percent and second generation rents increased 19.7 percent,
both on a cash basis. Our balance sheet, with 29 percent
leverage, continued to be one of the strongest among our
office peers.
Executing the Strategy
We remain focused on the strategy that has served us well
since 2012: simple platform, trophy assets and opportunis-
tic investments. We don’t just acquire, develop and manage
office buildings; we approach and execute each investment
decision deliberately and strategically.
First, we target the best urban submarkets in the Sun Belt
cities of Atlanta, Austin, Charlotte, Dallas and Houston,
where we expect to see strong job growth and limited new
supply. The Bureau of Labor Statistics data show that our
markets account for only 6.2 percent of all jobs in the
country, but generated 12.3 percent of all new jobs in 2014.
On the supply side, 98.7 million square feet of Class-A
office space is under construction in the United States, and
only 5 percent of it is located in our targeted submarkets.
These favorable supply/demand characteristics provide the
avenue for steady absorption and accelerated rent growth.
Also playing to our urban submarket focus is the trend
toward urbanization and changes in use of space.
Companies are locating and designing their offices to
appeal to talented 21st Century workers who want to live,
work and play in the urban core. These preferences call for
more emphasis on offices that are near transit, affordable
housing and amenities, and with environments that encour-
age collaboration.
Second, we have the flexibility of internal talent, backed by
the strength of a rock solid balance sheet to drive returns
for our shareholders in all phases of the real estate cycle
through ground up development and value-add acquisition
L A R R Y L . G E L L E R S T E D T I I I
P R E S I D E N T A N D C H I E F E X E C U T I V E O F F I C E R
Cover Photo of Fifth Third Center, Charlotte, NC by John Fulton
opportunities. A recent example is Colorado Tower, a $126
million, 373,000 square-foot office tower that we com-
pleted in January of 2015. With over 15 years of on the
ground experience in Austin, our local team was able to
identify a development pad in one of the city’s highest
demand, supply constrained markets. In May of 2013 we
broke ground only 17 percent pre-leased due to our local
team’s strong conviction that significant demand would
emerge from customers outside of Austin. Today the new
tower is 95 percent leased two years earlier than originally
expected—an outstanding result for Cousins and our
shareholders.
As another example, in late 2011 we acquired Promenade,
a 777,000 square-foot Midtown Atlanta tower at 57 per-
cent of replacement cost and 60 percent leased. Consistent
with our strategy, we used our deep market knowledge to
uncover this classic trophy tower with lease-up potential in
a centrally-located, high-demand urban submarket. By
repositioning the building and applying our redevelopment,
deal-making and management skills, we increased leasing
to 90 percent within 25 months. This is a terrific illustra-
tion of identifying an attractive investment, building appeal
among existing and new tenants—and, again, creating
value for Cousins shareholders.
2015 Opportunities
In 2015 positive economic tailwinds are tightening vacancy
rates and driving rents. Given the strength of our assets and
the economic state of our markets, we firmly believe there is
room to build value by moving occupancy and rental rates in
our 16.5 million square-foot operating portfolio.
Simultaneously, we are pursuing and executing on addi-
tional investment opportunities. As mentioned, we had
$245 million in our development pipeline in 2014, which
included Colorado Tower, a $126 million office tower in
Austin, Emory Point Phase II, a $75 million mixed use
project in Atlanta, and Research Park V, a $44 million
office building in Austin. We have identified another $190
million in potential development starts for 2015, including
our Carolina Square mixed use project in Chapel Hill and
a retail/multi-family project in downtown Decatur.
Lastly we remain committed to our approach to balance
sheet management. Our conservative position provides a
platform, when the timing is right, to aggressively pursue
targeted investment opportunities that build long-term
value for our shareholders.
In closing I’d like to reflect back to my first shareholder
letter, covering the year 2009 when our country was in the
worst economic environment since the Great Depression.
The letter closed with this: “We will continue to strengthen
the balance sheet; operate efficiently; focus on core opera-
tions that drive revenues and profitability; monetize non-
core assets prudently; and invest capital with discipline
and strategic timing.”
Our focus on these strategic objectives, and our competi-
tive advantages of market knowledge and expertise, have
driven our success. We are dedicated to continue recogniz-
ing and fulfilling opportunities that reward your trust and
loyalty, which are deeply valued and much appreciated.
Sincerely,
UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 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, 2014 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-11312 COUSINS PROPERTIES INCORPORATED(Exact name of registrant as specified in its charter)Georgia58-0869052(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)191 Peachtree Street NE, Suite 500, Atlanta, Georgia30303-1740(Address of principal executive offices)(Zip Code)(404) 407-1000 (Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each className of Exchange on which registeredCommon Stock ($1 par value)New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company)Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No As of June 30, 2014, the aggregate market value of the common stock of Cousins Properties Incorporated held by non-affiliates was $2,316,983,943 based on the closing sales price as reported on the New York Stock Exchange. As of February 9, 2015, 216,437,991 shares of common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s proxy statement for the annual stockholders meeting to be held on May 5, 2015 are incorporated by reference into Part III of this Form 10-K. T a b l e o f c o nTe nTs
PaR T I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
Item X.
Executive Officers of the Registrant
Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters
P aR T I I
Item 6.
Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
P aR T I I I
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
P aR T I V
SIGNATURES
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f oR W aR D -l o oK InG
s T a TeMe nT
Certain matters contained in this report are “forward-looking
statements” within the meaning of the federal securities laws
and are subject to uncertainties and risks, as itemized in
Item 1A included in this Form 10-K. These forward-looking
statements include information about possible or assumed
future results of the Company’s business and the Company’s
financial condition, liquidity, results of operations, plans,
and objectives. They also include, among other things,
statements regarding subjects that are forward-looking by
their nature, such as:
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the Company’s business and financial strategy;
the Company’s ability to obtain future financing
arrangements;
future acquisitions and
operating assets;
future acquisitions of land;
future dispositions of
future development and redevelopment opportunities;
future dispositions of land and other non-core assets;
projected operating results;
– market and industry trends;
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future distributions;
projected capital expenditures; and
interest rates.
statements
forward-looking
The
are based upon
management’s beliefs, assumptions, and expectations of
the Company’s future performance, taking into account
information currently available. These beliefs, assumptions,
and expectations may change as a result of possible events
or factors, not all of which are known. If a change occurs,
the Company’s business, financial condition, liquidity,
and results of operations may vary materially from those
expressed in forward-looking statements. Actual results
may vary from forward-looking statements due to, but not
limited to, the following:
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the availability and terms of capital and financing;
the ability to refinance indebtedness as it matures;
the failure of purchase, sale, or other contracts to
ultimately close;
the failure to achieve anticipated benefits from
acquisitions and investments or from dispositions;
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the potential dilutive effect of common stock offerings;
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the availability of buyers and adequate pricing with
respect to the disposition of assets;
risks related to the geographic concentration of our
portfolio;
risks and uncertainties related to national and local
economic conditions, the real estate industry in general,
and the commercial real estate markets in particular;
changes to the Company’s strategy with regard to land
and other non-core holdings that require impairment
losses to be recognized;
leasing risks, including the ability to obtain new tenants
or renew expiring tenants, and the ability to lease newly
developed and/or recently acquired space;
the adverse change in the financial condition of one or
more of its tenants;
volatility in interest rates and insurance rates;
the availability of sufficient investment opportunities;
competition from other developers or investors;
the risks associated with real estate developments
and acquisitions (such as zoning approval, receipts of
required permits, construction delays, cost overruns,
and leasing risk);
the loss of key personnel;
the potential liability for uninsured losses, condemnation,
or environmental issues;
the potential liability for a failure to meet regulatory
requirements;
the financial condition and liquidity of, or disputes with,
joint venture partners;
any failure to comply with debt covenants under credit
agreements; and
any failure to continue to qualify for taxation as a real
estate investment trust.
The words “believes,” “expects,” “anticipates,” “estimates,”
“plans,” “may,” “intend,” “will,” or similar expressions are
intended to identify forward-looking statements. Although
the Company believes its plans, intentions, and expectations
reflected in any forward-looking statements are reasonable,
the Company can give no assurance that such plans,
intentions, or expectations will be achieved. The Company
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of future
events, new information, or otherwise, except as required
under U.S. federal securities laws.
P aR T I
ITeM 1 . bu sIn e s s
Corporate Profile Cousins Properties Incorporated (the
“Registrant” or “Cousins”) is a Georgia corporation, which
has elected to be taxed as a real estate investment trust
(“REIT”). Through December 31, 2014, Cousins Real Estate
Corporation (“CREC”), including its subsidiaries, was a
taxable entity wholly-owned by the Registrant, which was
consolidated with the Registrant. CREC owned, developed,
and managed its own real estate portfolio and performed
certain real estate related services for other parties. On
December 31, 2014, CREC merged into the Registrant.
Coincident with this merger, the Registrant formed Cousins
TRS Services LLC ("CTRS"), a new taxable entity wholly-
owned by the Registrant. Upon formation, CTRS received a
capital contribution of certain real estate assets and contracts
that were previously owned by CREC. CTRS will own and
manage its own real estate portfolio and perform certain real
estate related services for other parties beginning in 2015.
The Registrant, its subsidiaries, CREC and CTRS combined
are hereafter referred to as the “Company.” The Company’s
common stock trades on the New York Stock Exchange
under the symbol “CUZ.”
is
Company Strategy The Company’s strategy
to
create value for its stockholders through the acquisition,
development, ownership, and management of Class A office
assets and opportunistic mixed-use developments in Sunbelt
markets, with a particular focus on Georgia, Texas, and
North Carolina. The Company’s strategy is based on a simple
platform, trophy assets, opportunistic investments, and a
strong balance sheet. This approach enables the Company to
maintain a targeted, asset-specific approach to investing where
it seeks to leverage its acquisition and development skills,
relationships, market knowledge, and operational expertise.
2014 Activities During 2014, the Company engaged in
several transactions that increased its investment in Class A
office assets in its target markets through acquisition and
development activities, enhanced the value of its existing
assets through leasing activities, and maintained its strong
balance sheet through equity and debt activities. The
following is a summary of the significant 2014 activities of
the Company.
Acq u i s i t i o n Ac t i v i t y
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Purchased Fifth Third Center, a Class-A office tower in
the Charlotte central business district submarket, for
$215 million.
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Purchased Northpark Town Center, a Class-A office
complex in the Central Perimeter submarket of Atlanta,
for $348 million.
D e v e lo p m e n t Ac t i v i t y
– Commenced construction of Research Park V, a Class-A
office building in the Northwest submarket of Austin,
Texas which is expected to have 173,000 square feet of
space with a total projected cost of $44 million.
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Formed a joint venture to develop Victory Center, a
Class-A office tower in the Uptown submarket of
Dallas, Texas which is expected to have 466,000 square
feet of space. The joint venture acquired the land
in 2014.
Substantially completed construction of Colorado
Tower, a Class-A office tower in downtown Austin,
Texas, containing 373,000 square feet of space. Total
expected costs for the project are $126.1 million and the
building is 95% leased.
– Continued construction of the second phase of Emory
Point in Atlanta, Georgia, which is expected to consist
of 307 apartments and 45,000 square feet of retail
space, with a total projected cost of $75.3 million. The
Company expects to complete this project in the first
half of 2015.
D i s p o s i t i o n Ac t i v i t y
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Sold 600 University Park Place, a 123,000 square
foot office building in Birmingham, Alabama, for
$19.7 million.
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Sold Lakeshore Park Plaza, a 197,000 square foot office
building in Birmingham, Alabama, for $25.0 million.
Sold Mahan Village, a 147,000 square foot retail
property in Tallahassee, Florida, for $29.5 million.
– Through Cousins Watkins LLC, sold four retail
properties in Tennessee and Florida which totaled
339,000 square feet. The Company received proceeds
from the venture (after debt repayment) related to this
sale of $19.8 million.
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Sold 777 Main, a 980,000 square foot office tower in
Ft. Worth, Texas, for $167.0 million.
F i nAn c i n g Ac t i v i t y
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Issued 26.7 million shares of common stock in two
offerings generating net proceeds of $321.9 million.
– Redeemed all outstanding shares of Series B Cumulative
Redeemable Preferred Stock for $94.8 million.
– Recast its credit facility to, among other things, increase
the size to $500 million, extend the maturity to 2019
and reduce the per annum variable interest rate spread
and other fees.
1
2014 ANNUAL REPORT cousins properties incorporated – Closed a non-recourse mortgage loan on 816 Congress
with a principal balance of $85.0 million, a fixed interest
rate of 3.75%, and a term of ten years. The loan requires
interest only payments through November 2016.
po r tF o l i o Ac t i v i t y
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Leased or renewed 2.2 million square feet of office
space.
ot h e r Ac t i v i t y
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In the first quarter of 2014, increased the quarterly
common stock dividend from $0.045 per share to
$0.075 per share. In the first quarter of 2015, increased
the quarterly common stock dividend to $0.08 per share.
Environmental Matters The Company’s business
operations are subject to various federal, state, and local
environmental laws and regulations governing land, water,
and wetlands resources. Among these are certain laws and
regulations under which an owner or operator of real estate
could become liable for the costs of removal or remediation
of certain hazardous or toxic substances present on or in such
property. Such laws often impose liability without regard
to whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances. The presence
of such substances, or the failure to properly remediate such
substances, may subject the owner to substantial liability
and may adversely affect the owner’s ability to develop the
property or to borrow using such real estate as collateral.
The Company typically manages this potential liability through
performance of Phase I Environmental Site Assessments and,
as necessary, Phase II environmental sampling, on properties it
acquires or develops, although no assurance can be given that
environmental liabilities do not exist, that the reports revealed
all environmental liabilities or that no prior owner created any
material environmental condition not known to the Company.
In certain situations, the Company has also sought to avail
itself of legal and regulatory protections offered by federal and
state authorities to prospective purchasers of property. Where
applicable studies have resulted in the determination that
remediation was required by applicable law, the necessary
remediation is typically incorporated into the acquisition or
development activity of the relevant property. The Company
is not aware of any environmental liability that the Company’s
management believes would have a material adverse effect on
the Company’s business, assets, or results of operations.
Certain environmental laws impose liability on a previous
owner of a property to the extent that hazardous or toxic
substances were present during the prior ownership period. A
transfer of the property does not necessarily relieve an owner
of such liability. Thus, although the Company is not aware of
any such situation, the Company may be liable in respect to
properties previously sold. The Company believes that it and
its properties are in compliance in all material respects with
all applicable federal, state, and local laws, ordinances, and
regulations governing the environment.
Competition The Company competes with other real
estate owners with similar properties located in its markets
and distinguishes itself to tenants/buyers primarily on the
basis of location, rental rates/sales prices, services provided,
reputation, and the design and condition of the facilities. The
Company also competes with other real estate companies,
financial institutions, pension funds, partnerships, individual
investors, and others when attempting to acquire and
develop properties.
Executive Offices; Employees The Registrant’s executive
offices are located at 191 Peachtree Street, Suite 500, Atlanta,
Georgia 30303-1740. On December 31, 2014, the Company
employed 257 people.
Available Information The Company makes available
free of charge on the “Investor Relations” page of its website,
www.cousinsproperties.com, its filed and furnished reports
on Forms 10-K, 10-Q, and 8-K, and all amendments thereto,
as soon as reasonably practicable after the reports are filed
with or furnished to the Securities and Exchange Commission
(the “SEC”).
Investment Committee, and
The Company’s Corporate Governance Guidelines, Director
Independence Standards, Code of Business Conduct
and Ethics, and the Charters of the Audit Committee,
the Compensation,
the
Succession, Nominating and Governance Committee of
the Board of Directors are also available on the “Investor
Relations” page of the Company’s website. The information
contained on the Company’s website is not incorporated
herein by reference. Copies of these documents (without
exhibits, when applicable) are also available free of charge
upon request to the Company at 191 Peachtree Street,
Suite 500, Atlanta, Georgia 30303-1740, Attention: Marli
Quesinberry, Investor Relations. Ms. Quesinberry may also
be reached by telephone at (404) 407-1898 or by facsimile at
(404) 407-1899. In addition, the SEC maintains a website that
contains reports, proxy and information statements, and other
information regarding issuers, including the Company, that
file electronically with the SEC at www.sec.gov.
2
cousins properties incorporated 2014 ANNUAL REPORT ITeM 1a.
RIsK f
a cT oRs
Set forth below are the risks we believe investors should
consider carefully in evaluating an investment in the securities
of Cousins Properties Incorporated.
financing, changes in laws, and governmental regulations
(including those governing usage, zoning and taxes) may
adversely affect our financial condition.
ge n e rAl ri s k s oF o w n i n g AnD op e rA t i n g
reAl es t At e
Our ownership of commercial real estate involves a
number of risks, the effects of which could adversely affect
our business.
General economic and market risks. Our assets are subject
to general economic and market risks. As such, in a general
economic decline or recessionary climate, our assets may
not generate sufficient cash to pay expenses, service debt, or
cover maintenance, and, as a result, our results of operations
and cash flows may be adversely affected. Factors that may
adversely affect the economic performance and value of our
properties include, among other things:
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changes
economic climate;
in
the national,
regional and
local
local real estate conditions such as an oversupply
of rentable space or a reduction in demand for
rentable space;
the attractiveness of our properties to tenants or buyers;
competition from other available properties;
changes in market rental rates and related concessions
granted to tenants including, but not limited to, free rent,
tenant allowances, and tenant improvement allowances;
and
the need to periodically repair, renovate, and re-lease
buildings.
Uncertain economic conditions may adversely impact current
tenants in our various markets and, accordingly, could affect
their ability to pay rents owed to us pursuant to their leases.
In periods of economic uncertainty, tenants are more likely to
close less profitable locations and/or to declare bankruptcy;
and, pursuant to various bankruptcy laws, leases may be
rejected and thereby terminated. Furthermore, our ability to
sell or lease our properties at favorable rates, or at all, may be
negatively impacted by general or local economic conditions.
Our ability to collect rent from tenants may affect our ability
to pay for adequate maintenance, insurance, and other
operating costs (including real estate taxes). Also, the expense
of owning and operating a property is not necessarily reduced
when circumstances such as market factors cause a reduction
in income from the property. If a property is mortgaged
and we are unable to meet the mortgage payments, the
lender could foreclose on the mortgage and take title to the
property. In addition, interest rate levels, the availability of
Impairment risks. We regularly review our real estate
assets for impairment; and based on these reviews, we may
record impairment losses that have an adverse effect on our
results of operations. Negative or uncertain market and
economic conditions, as well as market volatility, increase
the likelihood of incurring impairment losses. If management
decides to sell a real estate asset rather than holding it for
long term investment or reduces its estimates of future cash
flows on a real estate asset, the risk of impairment increases.
The magnitude and frequency with which these charges
occur could materially and adversely affect our business,
financial condition, and results of operations.
Leasing risk. Our operating revenues are dependent upon
entering into leases with, and collecting rents from, our
tenants. Tenants whose leases are expiring may desire to
decrease the space they lease and/or may be unwilling to
continue their lease. When leases expire or are terminated,
replacement tenants may not be available upon acceptable
terms and market rental rates may be lower than the
previous contractual rental rates. Also, our tenants may
approach us for additional concessions in order to remain
open and operating. The granting of these concessions may
adversely affect our results of operations and cash flows to
the extent that they result in reduced rental rates, additional
capital improvements, or allowances paid to, or on behalf
of, the tenants.
Tenant and property concentration risk. As of December 31,
2014, our top 20 tenants represented 41% of our annualized
base rental revenues with no single tenant accounting for
more than 7% of our annualized base rent. In addition, as
of December 31, 2014, 24% of our annualized base rent
comes from tenants in the energy sector with no other sector
representing more than 19% of our annualized base rent.
The inability of any of our significant tenants to pay rent
or to vacate their premises prior to, or at the conclusion of,
their lease terms could have a significant negative impact on
our results of operations or financial condition if a suitable
replacement tenant is not secured in a timely manner. In
addition, a prolonged period of low oil or natural gas prices
or other factors negatively impacting the energy industry
could have an adverse impact on our energy tenants’ ability
to pay rent or could cause them to vacate their premises prior
to, or at the conclusion of, their lease terms. These events
could have a significant adverse impact on our results of
operations or financial condition.
3
2014 ANNUAL REPORT cousins properties incorporated For the three months ended December 31, 2014, 45% of
our net operating income was derived from the metropolitan
Houston area and 39% was derived from the metropolitan
Atlanta area. Any adverse economic conditions impacting
Atlanta or Houston could adversely affect our overall results
of operations and financial condition. Given the fact that the
Houston metropolitan area is dependent upon the energy
sector, a prolonged period of low oil or natural gas prices,
or other factors negatively impacting the energy industry
could have an adverse impact on our ability to maintain
the occupancy of our Houston properties or could cause
us to lease space at rates below current in place rents or at
rates below the rates we have leased space in our Houston
properties over the prior year. In addition, factors negatively
impacting the energy industry could reduce the market
values of our Houston properties which could reduce our net
asset value and adversely affect our financial condition and
results of operations, or cause a decline in the value of our
common stock.
losses and condemnation costs. Accidents,
Uninsured
earthquakes, terrorism incidents, and other losses at our
properties could adversely affect our operating results.
Casualties may occur that significantly damage an operating
property, and insurance proceeds may be less than the total
loss incurred by us. Although we maintain casualty insurance
under policies we believe to be adequate and appropriate,
including rent loss insurance on operating properties, some
types of losses, such as those related to the termination of
longer-term leases and other contracts, generally are not
insured. Certain types of insurance may not be available
or may be available on terms that could result in large
uninsured losses. Property ownership also involves potential
liability to third parties for such matters as personal injuries
occurring on the property. Such losses may not be fully
insured. In addition to uninsured losses, various government
authorities may condemn all or parts of operating properties.
Such condemnations could adversely affect the viability of
such projects.
Environmental issues. Environmental issues that arise at
our properties could have an adverse effect on our financial
condition and results of operations. Federal, state, and
local laws and regulations relating to the protection of the
environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or
toxic substances or petroleum product releases at a property.
If determined to be liable, the owner or operator may have
to pay a governmental entity or third parties for property
damage and for investigation and clean-up costs incurred
by such parties in connection with the contamination, or
perform such investigation and clean-up itself. Although
certain legal protections may be available to prospective
purchasers of property, these laws typically impose clean-
up responsibility and liability without regard to whether
the owner or operator knew of or caused the presence of
the regulated substances. Even if more than one person may
have been responsible for the release of regulated substances
at the property, each person covered by the environmental
laws may be held responsible for all of the clean-up costs
incurred. In addition, third parties may sue the owner or
operator of a site for damages and costs resulting from
regulated substances emanating from that site. We are not
currently aware of any environmental liabilities at locations
that we believe could have a material adverse effect on our
business, assets, financial condition, or results of operations.
Unidentified environmental liabilities could arise, however,
and could have an adverse effect on our financial condition
and results of operations.
Joint venture structure risks. Similar to other real estate
companies, we have interests in various joint ventures
(including partnerships and limited liability companies) and
may in the future invest in real estate through such structures.
Our venture partners may have rights to take actions over
which we have no control, or the right to withhold approval
of actions that we propose, either of which could adversely
affect our interests in the related joint ventures and in some
cases our overall financial condition and results of operations.
These structures involve participation by other parties
whose interests and rights may not be the same as ours. For
example, a venture partner might have economic and/or
other business interests or goals which are incompatible
with our business interests or goals and that venture partner
may be in a position to take action contrary to our interests.
In addition, such venture partners may default on their
obligations, which could have an adverse impact on the
financial condition and operations of the joint venture. Such
defaults may result in our fulfilling their obligations that may,
in some cases, require us to contribute additional capital to
the ventures. Furthermore, the success of a project may be
dependent upon the expertise, business judgment, diligence,
and effectiveness of our venture partners in matters that
are outside our control. Thus, the involvement of venture
partners could adversely impact the development, operation,
ownership, or disposition of the underlying properties.
Liquidity risk. Real estate investments are relatively illiquid
and can be difficult to sell and convert to cash quickly. As
a result, our ability to sell one or more of our properties,
whether in response to any changes in economic or other
conditions or in response to a change in strategy, may be
limited. In the event we want to sell a property, we may not
be able to do so in the desired time period, the sales price of
the property may not meet our expectations or requirements,
and we may be required to record an impairment loss on the
property as a result.
Compliance or failure to comply with federal, state and local
regulatory requirements could result in substantial costs.
Our properties are subject to various federal, state, and
local regulatory requirements, such as the Americans with
Disabilities Act and state and local fire, health, and life
safety requirements. Compliance with these regulations
may involve upfront expenditures and/or ongoing costs. If
4
cousins properties incorporated 2014 ANNUAL REPORT we fail to comply with these requirements, we could incur
fines or other monetary damages. We do not know whether
existing requirements will change or whether compliance
with existing or future requirements will require significant
unanticipated expenditures that will affect our cash flows
and results of operations.
F i nAn c i n g ri s k s
At certain times, interest rates and other market conditions
for obtaining capital are unfavorable, and, as a result, we may
be unable to raise the capital needed to invest in acquisition
or development opportunities, maintain our properties, or
otherwise satisfy our commitments on a timely basis, or
we may be forced to raise capital at a higher cost or under
restrictive terms, which could adversely affect returns on our
investments, our cash flows, and results of operations.
We generally finance our acquisition and development
projects through one or more of the following: our Credit
Facility, non-recourse mortgages, the sale of assets,
construction loans, joint venture equity, and the issuance of
common stock. Each of these sources may be constrained
from time to time because of market conditions, and the
related cost of raising this capital may be unfavorable at any
given point in time. These sources of capital, and the risks
associated with each, include the following:
– Credit facilities. Terms and conditions available in the
marketplace for credit facilities vary over time. We can
provide no assurance that the amount we need from our
Credit Facility will be available at any given time, or at
all, or that the rates and fees charged by the lenders will
be reasonable. We incur interest under our Credit Facility
at a variable rate. Variable rate debt creates higher debt
service requirements if market interest rates increase,
which would adversely affect our cash flow and results
of operations. Our Credit Facility contains customary
restrictions, requirements and other limitations on our
ability to incur indebtedness, including restrictions on
unsecured debt outstanding, restrictions on secured
recourse debt outstanding, and requirements to maintain
minimum fixed charge coverage ratios. Our continued
ability to borrow under our Credit Facility is subject to
compliance with these covenants.
– Non-recourse mortgages. The availability of financing
is dependent upon various conditions, including the
willingness of mortgage lenders to lend at any given
point in time. Interest rates and loan-to-value ratios
may also be volatile, and we may from time to time
elect not to proceed with mortgage financing due to
unfavorable terms offered by lenders. Inability to access
the mortgage market could adversely affect our ability
to finance acquisition or development activities. In
addition, if a property is mortgaged to secure payment
of indebtedness and we are unable to make the mortgage
payments, the lender may foreclose, resulting in loss of
income and asset value. We may not be able to refinance
debt secured by our properties at the same levels or
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on the same terms, which could adversely affect our
business, financial condition and results of operations.
Further, at the time a mortgage matures, the property
may be worth less than the mortgage amount and, as a
result, the Company may determine not to refinance the
mortgage and permit foreclosure, generating a loss to
the Company and defaults on other mortgages.
Property sales. Real estate markets tend to experience
market cycles. Because of such cycles, the potential
terms and conditions of sales, including prices, may
be unfavorable for extended periods of time. In
addition, our status as a REIT limits our ability to sell
properties, which may affect our ability to liquidate
an investment. As a result, our ability to raise capital
through property sales in order to fund our acquisition
and development projects or other cash needs could be
limited. In addition, mortgage financing on a property
may prohibit prepayment and/or impose a prepayment
penalty upon the sale of that property, which may
decrease the proceeds from a sale or refinancing or make
the sale or refinancing impractical.
– Construction loans. Construction loans generally relate
to specific assets under construction and fund costs
above an initial equity amount deemed acceptable to the
lender. Terms and conditions of construction facilities
vary, but they generally carry a term of two to five years,
charge interest at variable rates, require the lender to
be satisfied with the nature and amount of construction
costs prior to funding and require the lender to be
satisfied with the level of pre-leasing prior to closing.
Construction loans frequently require a portion of the
loan to be recourse to the Company in addition to being
recourse to the equity in the asset. While construction
lending is generally competitive and offered by many
financial institutions, there may be times when these
facilities are not available or are only available upon
unfavorable terms which could have an adverse effect
on our ability to fund development projects or on our
ability to achieve the returns we expect.
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Joint ventures. Joint ventures, including partnerships
or limited liability companies, tend to be complex
arrangements, and there are only a limited number of
parties willing to undertake such investment structures.
There is no guarantee that we will be able to undertake
these ventures at the times we need capital.
– Common stock. Common stock offerings may have a
dilutive effect on our earnings per share and funds from
operations per share. The actual amount of dilution,
if any, from any future offering of common stock will
be based on numerous factors, particularly the use of
proceeds and any return generated thereby, and cannot
be determined at this time. The per share trading price
of our common stock could decline as a result of sales
of a large number of shares of our common stock in the
market in connection with an offering, or otherwise, or
as a result of the perception or expectation that such
5
2014 ANNUAL REPORT cousins properties incorporated Our Credit Facility
imposes financial and operating
covenants on us. These covenants may be modified from
time to time, but covenants of this type typically include
restrictions and limitations on our ability to incur debt, as
well as limitations on the amount of our unsecured debt,
limitations on distributions to stockholders, and limitations
on the amount of joint venture activity in which we may
engage. These covenants may limit our flexibility in making
business decisions. If we fail to comply with these covenants,
our ability to borrow may be impaired, which could
potentially make it more difficult to fund our capital and
operating needs. Our failure to comply with such covenants
could cause a default, and we may then be required to repay
our outstanding debt with capital from other sources. Under
those circumstances, other sources of capital may not be
available to us or may be available only on unattractive
terms, which could materially and adversely affect our
financial condition and results of operations. In addition,
the cross default provision on the Credit Facility may affect
business decisions on other mortgage debt.
Some of our property mortgages contain customary negative
covenants, including limitations on our ability, without the
lender’s prior consent, to further mortgage that property,
to enter into new leases, to modify existing leases, or to
sell the property. Compliance with these covenants and
requirements could harm our operational flexibility and
financial condition.
Our degree of leverage could limit our ability to obtain
additional financing or affect the market price of our
securities.
Total debt as a percentage of either total asset value or total
market capitalization is often used by analysts to gauge the
financial health of equity REITs such as us. If our degree
of leverage is viewed unfavorably by lenders or potential
joint venture partners, it could affect our ability to obtain
additional financing. In general, our degree of leverage could
also make us more vulnerable to a downturn in business or
the economy. In addition, increases in our debt to market
capitalization ratio, which is in part a function of our stock
price, or to other measures of asset value used by financial
analysts, may have an adverse effect on the market price of
common stock.
reAl es t At e Acq u i s i t i o n AnD
D e v e lo p m e n t ri s k s
We face risks associated with the development of real estate,
such as delay, cost overruns and the possibility that we are
unable to lease a portion of the space that we build, which
could adversely affect our results.
sales could occur. We can also provide no assurance
that conditions will be favorable for future issuances of
common stock when we need the capital, which could
have an adverse effect on our ability to fund acquisition
and development activities.
As a result of any additional indebtedness incurred to
consummate investment activities, we may experience a
potential material adverse effect on our financial condition
and results of operations.
The incurrence of new indebtedness could have adverse
consequences on our business, such as:
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requiring us to use a substantial portion of our cash
flow from operations to service our indebtedness, which
would reduce the available cash flow to fund working
capital, capital expenditures, development projects
and other general corporate purposes and reduce cash
for distributions;
limiting our ability to obtain additional financing to
fund our working capital needs, acquisitions, capital
expenditures or other debt service requirements or for
other purposes;
increasing the costs of incurring additional debt;
increasing our exposure to floating interest rates;
limiting our ability to compete with other companies
who are not as highly leveraged, as we may be less
capable of responding to adverse economic and
industry conditions;
restricting us from making strategic acquisitions,
developing
business
opportunities;
exploiting
properties
or
restricting the way in which we conduct our business
because of
covenants
financial and operating
in
the agreements governing our existing and
future indebtedness;
exposing us to potential events of default (if not cured
or waived) under covenants contained in our debt
instruments that could have a material adverse effect on
our business, financial condition and operating results;
increasing our vulnerability to a downturn in general
economic conditions; and
limiting our ability to react to changing market
conditions in our industry.
The impact of any of these potential adverse consequences
could have a material adverse effect on our results of
operations, financial condition, and liquidity.
Covenants contained in our Credit Facility and mortgages
could restrict or hinder our operational flexibility, which
could adversely affect our results of operations.
6
cousins properties incorporated 2014 ANNUAL REPORT Development activities contain certain
inherent risks.
Although we seek to minimize risks from commercial
development through various management controls and
procedures, development risks cannot be eliminated. Some
of the key factors affecting development of commercial
property are as follows:
– The availability of sufficient development opportunities.
Absence of sufficient development opportunities could
result in our experiencing slower growth in earnings and
cash flows. Development opportunities are dependent
upon a wide variety of factors. Availability of these
opportunities can be volatile as a result of, among other
things, economic conditions and product supply/demand
characteristics in a particular market.
– Abandoned predevelopment costs. The development
process inherently requires that a large number of
opportunities be pursued with only a few actually
being developed. We may incur significant costs for
predevelopment activity for projects that are later
abandoned, which would directly affect our results of
operations. For projects that are later abandoned, we
must expense certain costs, such as salaries, that would
have otherwise been capitalized. We have procedures
and controls in place that are intended to minimize this
risk, but it is likely that we will incur predevelopment
expense on subsequently abandoned projects on an
ongoing basis.
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Project costs. Construction and leasing of a project
involves a variety of costs that cannot always be
identified at the beginning of a project. Costs may arise
that have not been anticipated or actual costs may
exceed estimated costs. These additional costs can be
significant and could adversely impact our return on
a project and the expected results of operations upon
completion of the project. Also, construction costs
vary over time based upon many factors, including the
demand for building materials. We attempt to mitigate
the risk of unanticipated increases in construction
costs on our development projects through guaranteed
maximum price contracts and pre-ordering of certain
materials, but we may be adversely affected by increased
construction costs on our current and future projects.
Leasing risk. The success of a commercial real estate
development project is heavily dependent upon entering
into leases with acceptable terms within a predefined
lease-up period. Although our policy is to achieve pre-
leasing goals (which vary by market, product type and
circumstances) before committing to a project, it is
expected that not all the space in a project will be leased
at the time we commit to the project. If the additional
space is not leased on schedule and upon the expected
terms and conditions, our returns, future earnings and
results of operations from the project could be adversely
impacted. Whether or not tenants are willing to enter
into leases on the terms and conditions we project and
on the timetable we expect will depend upon a number
of factors, many of which are outside our control. These
factors may include:
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general business conditions in the local or broader
economy or in the prospective tenants’ industries;
supply and demand conditions for space in the
marketplace; and
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level of competition in the marketplace.
– Reputation risks. We have historically developed and
managed a significant portion of our real estate portfolio
and believe that we have built a positive reputation
for quality and service with our lenders, joint venture
partners and tenants. If we were viewed as developing
underperforming properties, suffered sustained losses
on our investments, defaulted on a significant level of
loans or experienced significant foreclosure or deed in
lieu of foreclosure of our properties, our reputation
could be damaged. Damage to our reputation could
make it more difficult to successfully develop or acquire
properties in the future and to continue to grow and
expand our relationships with our lenders, joint venture
partners and tenants, which could adversely affect our
business, financial condition, and results of operations.
– Governmental
necessary
approvals. All
zoning,
land-use, building, occupancy and other required
governmental permits and authorization may not be
obtained, may only be obtained subject to onerous
conditions or may not be obtained on a timely basis
resulting in possible delays, decreased profitability, and
increased management time and attention.
We may face risks associated with property acquisitions.
The risks associated with property acquisitions are similar to
those described above for real estate development. However,
certain additional risks may be present for property
acquisitions. These risks may include:
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difficulty finding properties that are consistent with our
strategy and that meet our standards;
difficulty negotiating with new or existing tenants;
the extent of competition in a particular market for
attractive acquisitions may hinder our desired level of
property acquisitions or redevelopment projects;
the costs and timing of repositioning or redeveloping
acquired properties may be greater than our estimates;
the occupancy levels, lease-up timing and rental rates
may not meet our expectations;
the acquired properties may fail to meet internal
projections or otherwise fail to perform as expected;
7
2014 ANNUAL REPORT cousins properties incorporated the acquired property may be in a market that is
unfamiliar to us and could present additional unforeseen
business challenges;
the timing of property acquisitions may lag the timing
of property dispositions, leading to periods of time
where projects’ proceeds are not invested as profitably
as we desire;
adoption of these limitations, and except for persons that
are granted waivers by our Board of Directors, no individual
or entity may own more than 3.9% of the value of our
outstanding stock. The ownership limitation may have the
effect of delaying, inhibiting or preventing a transaction or a
change in control that might involve a premium price for our
stock or otherwise be in the best interest of our stockholders.
the inability to obtain financing for acquisitions on
favorable terms or at all;
Our operating results and the market price of our common
stock may fluctuate.
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the inability to successfully integrate the operations,
maintain consistent standards, controls, policies and
procedures, or realize the anticipated benefits of
acquisitions within the anticipated time frames or at all;
the inability to effectively monitor and manage our
expanded portfolio of properties, retain key employees
or attract highly qualified new employees;
the possible decline in value of the acquired assets;
the diversion of our management’s attention away from
other business concerns; and
the exposure to any undisclosed or unknown issues,
expenses, or potential liabilities relating to acquisitions.
In addition, we may acquire properties subject to liabilities
with no, or limited, recourse against the prior owners or other
third parties. As a result, if a liability were asserted against
us based upon ownership of those properties, we might have
to pay substantial sums to settle or contest it. Any of these
risks could cause a failure to realize the intended benefits of
our acquisitions and could have a material adverse effect on
our financial condition, results of operations, and the market
price of our common stock.
ge n e rAl B u s i n e s s ri s k s
We are dependent upon the services of certain key personnel,
the loss of any of whom could adversely impair our ability to
execute our business.
One of our objectives is to develop and maintain a strong
management group at all levels. At any given time, we could
lose the services of key executives and other employees.
None of our key executives or other employees is subject
to employment contracts. Further, we do not carry key
person insurance on any of our executive officers or other
key employees. The loss of services of any of our key
employees could have an adverse effect upon our results of
operations, financial condition and our ability to execute our
business strategy.
Our restated and amended articles of incorporation contain
limitations on ownership of our stock, which may prevent a
change in control that might otherwise be in the best interests
of our stockholders.
Our restated and amended articles of incorporation impose
limitations on the ownership of our stock. In general, except
for certain individuals who owned stock at the time of
8
Our operating results have fluctuated greatly in the past,
due to, among other things, volatility in land sales, property
sales, and impairment losses. We have simplified our business
and focus our resources on Class A office properties in our
primary markets which we expect to make our operating
results less volatile over time. Therefore, our historical
performance may not be a meaningful indicator of our
future results.
The market prices of shares of our common stock have
been, and may continue to be, subject to fluctuation due
to many events and factors such as those described in this
report including:
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actual or anticipated variations in our operating results,
funds from operations or liquidity;
the general reputation of real estate as an attractive
investment in comparison to other equity securities
and/or the reputation of the product types of our assets
compared to other sectors of the real estate industry;
– material changes in the energy industry or other
significant tenant industry concentration;
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the general stock and bond market conditions, including
changes in interest rates or fixed income securities;
changes in tax laws;
changes to our dividend policy;
changes in market valuations of our properties;
adverse market reaction to the amount of our outstanding
debt at any time, the amount of our maturing debt and
our ability to refinance such debt on favorable terms;
any failure to comply with existing debt covenants;
any foreclosure or deed in lieu of foreclosure of
our properties;
additions or departures of key executives and
other employees;
actions by institutional stockholders;
uncertainties in world financial markets;
the realization of any of the other risk factors described
in this report; and
general market and economic conditions, in particular,
market and economic conditions of Atlanta, Georgia
and Houston, Texas.
cousins properties incorporated 2014 ANNUAL REPORT Many of the factors listed above are beyond our control.
Those factors may cause market prices of shares of our
common stock to decline, regardless of our financial
performance, condition and prospects. The market price
of shares of our common stock may fall significantly in the
future, and it may be difficult for our stockholders to resell
our common stock at prices they find attractive.
If our future operating performance does not meet the
projections of our analysts or investors, our stock price
could decline.
Independent securities analysts publish quarterly and annual
projections of our financial performance. These projections
are developed
independently by third-party securities
analysts based on their own analyses, and we undertake
no obligation to monitor, and take no responsibility for,
such projections. Such estimates are inherently subject to
uncertainty and should not be relied upon as being indicative
of the performance that we anticipate for any applicable
period. Our actual revenues, net income and funds from
operations may differ materially from what is projected by
securities analysts. If our actual results do not meet analysts’
guidance, our stock price could decline significantly.
We face risks associated with security breaches through
cyber attacks, cyber intrusions, or otherwise, as well as other
significant disruptions of our information technology (IT)
networks and related systems.
We face risks associated with security breaches or disruptions,
whether through cyber attacks or cyber intrusions over the
Internet, malware, computer viruses, attachments to emails,
persons inside our organization, or persons with access
to systems inside our organization, and other significant
disruptions of our IT networks and related systems. The risk
of a security breach or disruption, particularly through cyber
attacks or cyber intrusion, including by computer hackers,
foreign governments, and cyber terrorists, has generally
increased as the number, intensity and sophistication of
attempted attacks and intrusions from around the world have
increased. Our IT networks and related systems are essential
to the operation of our business and our ability to perform
day-to-day operations (including managing our building
systems) and, in some cases, may be critical to the operations
of certain of our tenants. There can be no assurance that
our efforts to maintain the security and integrity of these
types of IT networks and related systems will be effective
or that attempted security breaches or disruptions would
not be successful or damaging. A security breach or other
significant disruption involving our IT networks and related
systems could adversely impact our financial condition,
results of operations, cash flows, liquidity, and the market
price of our common stock.
F eDe rAl in co m e tAx ri s k s
Any failure to continue to qualify as a REIT for federal
income tax purposes could have a material adverse impact
on us and our stockholders.
We intend to continue to operate in a manner to qualify as
a REIT for federal income tax purposes. Qualification as a
REIT involves the application of highly technical and complex
provisions of the Internal Revenue Code (the “Code”),
for which there are only limited judicial or administrative
interpretations. Certain facts and circumstances not entirely
within our control may affect our ability to qualify as a REIT.
In addition, we can provide no assurance that legislation, new
regulations, administrative interpretations or court decisions
will not adversely affect our qualification as a REIT or the
federal income tax consequences of our REIT status.
If we were to fail to qualify as a REIT, we would not be
allowed a deduction for distributions to stockholders in
computing our taxable income. In this case, we would be
subject to federal income tax (including any applicable
alternative minimum tax) on our taxable income at regular
corporate rates. Unless entitled to relief under certain Code
provisions, we also would be disqualified from operating
as a REIT for the four taxable years following the year
during which qualification was lost. As a result, we would
be subject to federal and state income taxes which could
adversely affect our results of operations and distributions
to stockholders. Although we currently intend to operate in
a manner designed to qualify as a REIT, it is possible that
future economic, market, legal, tax or other considerations
may cause us to revoke the REIT election.
In order to qualify as a REIT, under current law, we generally
are required each taxable year to distribute to our stockholders
at least 90% of our net taxable income (excluding any net
capital gain). To the extent that we do not distribute all of
our net capital gain or distribute at least 90%, but less than
100%, of our other taxable income, we are subject to tax
on the undistributed amounts at regular corporate rates. In
addition, we are subject to a 4% nondeductible excise tax to
the extent that distributions paid by us during the calendar
year are less than the sum of the following:
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85% of our ordinary income;
95% of our net capital gain income for that year; and
100% of our undistributed taxable income (including
any net capital gains) from prior years.
We generally intend to make distributions to our stockholders
to comply with the 90% distribution requirement to avoid
corporate-level tax on undistributed taxable income and to
avoid the nondeductible excise tax. Distributions could be
made in cash, stock or in a combination of cash and stock.
9
2014 ANNUAL REPORT cousins properties incorporated Differences in timing between taxable income and cash
available for distribution could require us to borrow funds to
meet the 90% distribution requirement, to avoid corporate-
level tax on undistributed taxable income and to avoid
the nondeductible excise tax. Satisfying the distribution
requirements may also make it more difficult to fund new
investment or development projects.
Certain property transfers may be characterized as prohibited
transactions, resulting in a tax on any gain attributable to
the transaction.
From time to time, we may transfer or otherwise dispose
of some of our properties. Under the Code, any gains
resulting from transfers or dispositions, from other than our
taxable REIT subsidiary, that are deemed to be prohibited
transactions would be subject to a 100% tax on any gain
associated with the transaction. Prohibited transactions
generally include sales of assets that constitute inventory
or other property held for sale to customers in the ordinary
course of business. Since we acquire properties primarily for
investment purposes, we do not believe that our occasional
transfers or disposals of property are deemed to be prohibited
transactions. However, whether or not a transfer or sale of
property qualifies as a prohibited transaction depends on
all the facts and circumstances surrounding the particular
transaction. The Internal Revenue Service may contend that
certain transfers or disposals of properties by us are prohibited
transactions. While we believe that the Internal Revenue
Service would not prevail in any such dispute, if the Internal
Revenue Service were to argue successfully that a transfer or
disposition of property constituted a prohibited transaction,
we would be required to pay a tax equal to 100% of any gain
allocable to us from the prohibited transaction. In addition,
income from a prohibited transaction might adversely affect
our ability to satisfy the income tests for qualification as a
REIT for federal income tax purposes.
D i s c lo s u r e c o n t r o l s AnD in t e r nAl
co n t r o l ov e r F i nAn c iAl re p o r t i n g ri s k s
Our business could be adversely impacted if we have
deficiencies in our disclosure controls and procedures or
internal control over financial reporting.
The design and effectiveness of our disclosure controls and
procedures and internal control over financial reporting may
not prevent all errors, misstatements or misrepresentations.
In addition, new system implementations, such as our
recent conversion from the JD Edwards information system
to the Yardi information system, increase the risk that
undetected errors in publicly disclosed financial information
will occur. While management will continue to review the
effectiveness of our disclosure controls and procedures and
internal control over financial reporting, there can be no
guarantee that our internal control over financial reporting
will be effective in accomplishing all control objectives at all
times. Deficiencies, including any material weakness, in our
internal control over financial reporting which may occur
in the future could result in misstatements of our results of
operations, restatements of our financial statements, a decline
in our stock price, or otherwise materially adversely affect
our business, reputation, results of operations, financial
condition or liquidity.
ITeM 1b. unRe s o l
VeD s T
a f f c oM Me nT
s
Not applicable.
10
cousins properties incorporated 2014 ANNUAL REPORT ITeM 2 .
PRoPeR T Ie s
The following table sets forth certain information related to operating properties in which the Company has an ownership
interest. Information presented in note 5 to the consolidated financial statements provides additional information related to the
Company’s unconsolidated joint ventures. Except as noted, all information presented is as of December 31, 2014:
Operating Properties
Property Description
I. OFFICE PROPERTIES
Greenway Plaza (3)
Post Oak Central (3)
2100 Ross Avenue
816 Congress
The Points at Waterview
TEXAS
Northpark Town Center (3)
191 Peachtree Tower
The American Cancer
Society Center
Promenade
Terminus 100
North Point Center East (3)
Terminus 200
Meridian Mark Plaza
Emory University Hospital
Midtown Medical Office Tower
GEORGIA
Gateway Village
Fifth Third Center
NORTH CAROLINA
Metropolitan
Area
Rentable
Square Feet
Financial
Statement
Presentation
Company’s
Ownership
Interest
End of
Period
Leased
Weighted
Average
Occupancy (1)
% of
Total Net
Operating
Income (2)
Property
Level Debt
($000)
Annualized
Base Rents (5)
Company’s Share
Houston
Houston
Dallas
Austin
Dallas
Atlanta
Atlanta
Atlanta
Atlanta
Atlanta
Atlanta
Atlanta
Atlanta
4,348,000 Consolidated
1,280,000 Consolidated
844,000 Consolidated
435,000 Consolidated
203,000 Consolidated
7,110,000
1,528,000 Consolidated
1,225,000 Consolidated
996,000 Consolidated
777,000 Consolidated
656,000 Unconsolidated
540,000 Consolidated
566,000 Unconsolidated
160,000 Consolidated
100% 95.6%
100% 95.6%
100% 86.3%
100% 90.4%
100% 83.5%
100% 92.6%
100% 89.4%
100% 84.4%
100% 92.8%
50% 95.6%
100% 96.5%
50% 87.8%
100% 98.3%
92.8%
95.7%
81.3%
87.6%
81.6%
87.6%
85.8%
84.5%
82.2%
94.3%
92.6%
84.3%
96.2%
34%
—
11% 185,109
—
3%
3% 85,000
1% 14,598
52% 284,707
—
10%
7% 100,000
5% 131,083
5% 110,946
3% 65,820
3%
—
2% 41,000
2% 25,408
Atlanta
358,000 Unconsolidated
50% 100.0%
99.2%
2% 37,500
6,806,000
Charlotte 1,065,000 Unconsolidated
698,000 Consolidated
Charlotte
50% 100.0%
100% 83.4%
100%
79.8%
1,763,000
39% 511,757
1% 17,765
—
6%
7% 17,765
TOTAL OFFICE PROPERTIES
15,679,000
98% 814,229
$257,226(6)
II. OTHER PROPERTIES
Emory Point Apartments
(Phase I) (4)
Emory Point Retail (Phase I)
Atlanta
Atlanta
404,000 Unconsolidated
80,000 Unconsolidated
75% 91.6%
75% 90.0%
68.6%
77.3%
2%
—%
36,328
7,194
TOTAL OTHER PROPERTIES
484,000
2%
43,522
$ 1,360(7)
TOTAL PORTFOLIO
16,163,000
100% 857,751
(1) Weighted average economic occupancy represents an average of the square footage occupied at the property during the year. If the
property was purchased during the year, average economic occupancy is calculated from the date of purchase forward.
(2) Net operating income represents rental property revenues less rental property operating expenses for the three months ended
December 31, 2014.
(3) Contains multiple buildings that are grouped together for reporting purposes.
(4) This property consists of 443 units.
(5) Annualized base rents represents the sum of the annualized rent each tenant is paying as of the end of the reporting period. If a tenant is
not paying rent due to a free rent concession, annualized base rent is calculated based on the annualized base rent the tenant will pay in
the first period it is required to pay rent.
(6) Included in this amount is $11.1 million of Annualized Base Rent for tenants in a free rent period.
(7) Included in this amount is $91,000 of Annualized Base Rent for tenants in a free rent period.
11
2014 ANNUAL REPORT cousins properties incorporated
Lease Expirations
As of December 31, 2014, the Company’s portfolio included 16 operating office properties. The weighted average remaining
lease term of these office properties was approximately six years as of December 31, 2014. Most of the major tenant leases
in these properties provide for pass through of operating expenses and contractual rents which escalate over time. The leases
expire as follows:
Year of Expiration
Number of Tenants
Square Feet
Expiring (1) % of Leased Space
Annual Contractual
Rents ($000’s) (2)
% of Total Annual
Contractual Rents
Annual Contractual
Rent/Sq. Ft. (2)
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024 & Thereafter
123
110
123
73
93
52
42
37
42
57
911,276
1,293,613
1,552,776
1,098,573
1,224,994
778,477
1,059,455
1,292,396
1,102,805
2,960,055
6.9%
9.7%
11.7%
8.3%
9.2%
5.9%
8.0%
9.7%
8.3%
22.3%
Total
752
13,274,420
100.0%
$ 17,691
26,268
32,008
22,717
29,935
18,276
26,127
28,560
25,174
82,121
$308,877
5.7%
8.5%
10.4%
7.3%
9.7%
5.9%
8.5%
9.2%
8.2%
26.6%
100.0%
$19.41
20.31
20.61
20.68
24.44
23.48
24.66
22.10
22.83
27.74
$23.27
Note: Excludes apartment and retail lease expirations.
(1) Company’s share.
(2) Annual Contractual Rent shown is the estimated rate in the year of expiration. It includes the minimum contractual rent paid by the
tenant which, in most of the office leases, includes a base year of operating expenses.
Development Pipeline
As of December 31, 2014, the Company had the following projects under development ($ in thousands):
Metropolitan
Area
Type
Company’s
Ownership
Interest
Project
Start
Date
Number of
Apartment
Units/
Square Feet
Estimated
Project
Cost (1)
Project
Cost
Incurred
to
Date (1)
Percent
Leased
Percent
Occupied
Initial
Occupancy
Estimated
Stabilization (4)
Office Austin, TX
Office Austin, TX
100% 2Q13
100% 4Q14
373,000 $126,100 $ 86,150
95%
173,000 $ 44,000 $ 5,233 —%
—% 1Q15(2)
—% 4Q15(2)
Mixed Atlanta, GA
75% 4Q13
$ 75,300 $ 44,863
307
45,000
—%
62%
—% 2Q15(3)
—% 2Q15(3)
1Q16
4Q16
2Q16
2Q16
Project
Colorado Tower
Research Park V
Emory Point
(Phase II)
Apartments
Retail
Note: This schedule shows projects currently under active development through the point of stabilization. Amounts included in the estimated
project cost column represent the estimated costs of the project through stabilization. Significant estimation is required to derive these costs
and the final costs may differ from these estimates. The projected stabilization dates are also estimates and are subject to change as the project
proceeds through the development process.
(1) Amount represents 100% of the estimated project cost. Colorado Tower is being funded 100% by the Company, and Emory Point Phase
II is being funded with a combination of equity from the partners and a $46 million construction loan. Emory Point Phase II will initially
be funded by equity contributions until the partners have contributed their required equity amounts. All subsequent funding is expected
to come from the Emory Point Phase II construction loan. As of December 31, 2014, $9.6 million was outstanding on the Emory Point
Phase II construction loan.
(2) Represents the estimated quarter within which the Company estimates the first office square feet to be occupied.
(3) Represents the estimated quarter within which the first apartment/retail is expected to be occupied.
(4) Stabilization represents the quarter within which the Company estimates it will achieve 90% economic occupancy or one year from
Initial Occupancy.
12
cousins properties incorporated 2014 ANNUAL REPORT Inventory of Land
As of December 31, 2014, the Company owned the following land holdings either directly or indirectly through joint ventures:
COMMERCIAL
North Point
Wildwood Office Park
The Avenue Forsyth-Adjacent Land
Wildwood Office Park
549 / 555 / 557 Peachtree Street
GEORGIA
Victory Center
TEXAS
COMMERCIAL LAND HELD
Metropolitan
Area
Company’s
Ownership
Interest
Total
Developable
Land (Acres)
Company’s
Share of
Developable
Land (Acres)
Atlanta
Atlanta
Atlanta
Atlanta
Atlanta
100.00%
50.00%
100.00%
100.00%
100.00%
Dallas
75.0%
32
22
10
10
1
75
3
3
78
67
COST BASIS OF COMMERCIAL LAND HELD
$ 34,599
$15,777
RESIDENTIAL (1)
Paulding County
Blalock Lakes
Callaway Gardens (2)
GEORGIA
Padre Island
TEXAS
RESIDENTIAL LAND HELD
COST BASIS OF RESIDENTIAL LAND HELD
GRAND TOTAL LAND HELD
GRAND TOTAL COST BASIS OF LAND HELD
Atlanta
Atlanta
Atlanta
50.00%
100.00%
100.00%
Corpus Christi
50.00%
4,706
2,657
218
7,581
15
15
7,596
5,235
$ 24,600
$19,022
7,674
5,302
$ 59,199
$34,799
(1) Residential represents land that may be sold to third parties as lots or in large tracts for residential or commercial development.
(2) Company’s ownership interest is shown at 100% as Callaway Gardens is owned in a joint venture which is consolidated within the
Company. The partner is entitled to a share of the profits after the Company’s capital is recovered.
ITeM 3 . leGa l PRo c e eD InGs
The Company is subject to various legal proceedings, claims
and administrative proceedings arising in the ordinary
course of business, some of which are expected to be covered
by liability insurance. Management makes assumptions
and estimates concerning the likelihood and amount of
any potential loss relating to these matters using the latest
information available. The Company records a liability for
litigation if an unfavorable outcome is probable and the
amount of loss or range of loss can be reasonably estimated.
If an unfavorable outcome is probable and a reasonable
estimate of the loss is a range, the Company accrues the best
estimate within the range. If no amount within the range is a
better estimate than any other amount, the Company accrues
the minimum amount within the range. If an unfavorable
outcome is probable but the amount of the loss cannot be
reasonably estimated, the Company discloses the nature of
the litigation and indicates that an estimate of the loss or
range of loss cannot be made. If an unfavorable outcome is
reasonably possible and the estimated loss is material, the
Company discloses the nature and estimate of the possible
loss of the litigation. The Company does not disclose
information with respect to litigation where an unfavorable
outcome is considered to be remote or where the estimated
loss would not be material. Based on current expectations,
such matters, both individually and in the aggregate, are not
expected to have a material adverse effect on the liquidity,
results of operations, business or financial condition of
the Company.
13
2014 ANNUAL REPORT cousins properties incorporated ITeM 4 .
MIn e s
a f eTy DIs c l o s uRe s
Not applicable.
ITeM X . e Xe c uT I Ve of fIc eRs o f Th e R eG Is
T Ra nT
The Executive Officers of the Registrant as of the date hereof are as follows:
Name
Age
Office Held
Lawrence L. Gellerstedt III
Gregg D. Adzema
John S. McColl
M. Colin Connolly
John D. Harris, Jr.
Pamela F. Roper
58
50
52
38
55
41
President, Chief Executive Officer
Executive Vice President, Chief Financial Officer
Executive Vice President
Senior Vice President, Chief Investment Officer
Senior Vice President, Chief Accounting Officer, Treasurer and Assistant Secretary
Senior Vice President, General Counsel and Corporate Secretary
Family Relationships There are no family relationships
among the Executive Officers or Directors.
Office Leasing and Asset Management. From May 1997 to
February 2010, Mr. McColl served as Senior Vice President.
Term of Office The term of office for all officers expires
at the annual stockholders’ meeting. The Board retains the
power to remove any officer at any time.
Business Experience Mr. Gellerstedt was appointed
President and Chief Executive officer and Director in
July 2009. From February 2009 to July 2009, Mr. Gellerstedt
served as President and Chief Operating Officer. From
May 2008 to February 2009, Mr. Gellerstedt served as
Executive Vice President and Chief Development Officer.
Mr. Adzema was appointed Executive Vice President and
Chief Financial Officer in November 2010. Prior to joining
the Company, Mr. Adzema served as Chief Investment
Officer of Hayden Harper Inc., an investment advisory and
hedge fund company, from October 2009 to November 2010.
Mr. McColl was appointed Executive Vice President in
December 2011. From February 2010 to December 2011,
Mr. McColl served as Executive Vice President-Development,
Mr. Connolly was appointed Senior Vice President and Chief
Investment Officer in May 2013. From September 2011 to
May 2013, Mr. Connolly served as Senior Vice President.
Prior to joining the Company, Mr. Connolly served as
Executive Director with Morgan Stanley from December
2009 to August 2011 and as Vice President with Morgan
Stanley from December 2006 to December 2009.
Mr. Harris was appointed Senior Vice President
and Chief Accounting Officer
in February 2005. In
May 2005, Mr. Harris was appointed Assistant Secretary. In
December 2014, Mr. Harris was appointed Treasurer.
Ms. Roper was appointed Senior Vice President, General
Counsel, and Corporate Secretary in October 2012. From
February 2008 to October 2012, Ms. Roper served as
Senior Vice President, Associate General Counsel, and
Assistant Secretary.
14
cousins properties incorporated 2014 ANNUAL REPORT P aR T I I
ITeM 5 .
M aR KeT f oR R eG Is
R e l a TeD s T
o cKh o lDeR M a
T TeRs
T Ra nT’ s c
oM Mo n s T
o cK a nD
m Ar k e t inF o r mA t i o n
The high and low sales prices for the Company’s common stock and dividends declared per common share
were as follows:
High
Low
Dividends
Payment Date
2014 Quarters
2013 Quarters
First
Second
Third
Fourth
First
Second
Third
Fourth
$ 11.77
$ 10.10
$ 0.075
2/24/2014
$ 12.50
$ 11.23
$ 0.075
5/28/2014
$ 13.30
$ 11.95
$ 0.075
8/25/2014
$ 13.20
$ 10.69
$ 0.075
12/19/2014
$ 10.84
$ 8.34
$ 0.045
2/22/2013
$ 11.28
$ 9.30
$ 0.045
5/29/2013
$ 10.87
$ 9.30
$ 0.045
8/26/2013
$ 11.45
$ 9.94
$ 0.045
12/20/2013
ho lDe r s
The Company’s common stock trades on the New York
Stock Exchange (ticker symbol CUZ). On February 9, 2015,
there were 754 common stockholders of record.
pu r c hA s e s oF eq u i t y se c u r i t i e s
For information on the Company’s equity compensation
plans, see note 13 of the accompanying consolidated financial
statements, which is incorporated herein.
The Company purchased the following common shares during the fourth quarter of 2014:
October 1 - 31
November 1 - 30
December 1 - 31
Total Number
of Shares
Purchased (1)
Average Price
Paid per Share (1)
—
21,553
—
21,553
$ —
$ 13.10
$ —
$ 13.10
(1) All activity for the fourth quarter of 2014 related to the remittances of shares for income taxes associated with option exercises.
15
2014 ANNUAL REPORT cousins properties incorporated
pe rF o r mAn c e grAp h
The following graph compares the five-year cumulative total return of the Company’s Common Stock with the NYSE
Composite Index, the FTSE NAREIT Equity Index and the SNL US REIT Office Index. The graph assumes a $100 investment
in each of the indices on December 31, 2009 and the reinvestment of all dividends.
totAl r e t u r n p e rF o r mAn c e
250
200
e
u
l
a
V
x
e
d
n
I
150
100
50
0
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
Cousins Properties Incorporated
FTSE NAREIT Equity Index
NYSE Composite Index
SNL US REIT Office Index
co m pAr i s o n oF c u m u lA t i v e tot Al r e t u r n oF o n e o r m o r e co m p An i e s , p e e r
g r o up s , i nDu s t ry i nDi c e s AnD/ o r Br o A D mAr k e t s
Index
12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014
Cousins Properties Incorporated
100.00
114.77
90.40
120.52
151.34
172.22
NYSE Composite Index
FTSE NAREIT Equity Index
SNL US REIT Office Index
100.00
113.60
109.43
127.11
160.65
171.67
100.00
127.96
138.57
163.60
167.63
218.16
100.00
121.29
120.20
137.70
146.75
184.99
Fiscal Year Ended
16
cousins properties incorporated 2014 ANNUAL REPORT
ITeM 6 . se l e cTeD f In a n cIa l D a
T a
The following selected financial data sets forth consolidated financial and operating information on a historical basis. This
data has been derived from the Company’s consolidated financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto. The data below has been restated for discontinued operations detailed in
note 3 of the consolidated financial statements.
Rental property revenues
Fee income
Other
Total revenues
Rental property operating expenses
Reimbursed expenses
General and administrative expenses
Depreciation and amortization
Interest expense
Impairment losses
Other
Total expenses
Loss on extinguishment of debt and interest rate swaps
Benefit (provision) for income taxes from operations
Income (loss) from unconsolidated joint ventures
Gain on sale of investment properties
Income (loss) from continuing operations
Discontinued operations
Net income (loss)
Net income attributable to noncontrolling interests
Preferred share original issuance costs
Preferred dividends
For the Years Ended December 31,
2014
2013
2012
2011
2010
$ 343,910
12,519
4,954
361,383
155,934
3,652
19,784
140,018
29,110
—
4,859
353,357
—
20
11,268
12,536
31,850
21,158
53,008
(1,004)
(3,530)
(2,955)
($ in thousands, except per share amounts)
$ 194,420
10,891
5,430
$ 114,208
17,797
4,841
$
94,704
13,821
9,600
$
90,373
14,442
38,008
210,741
136,846
118,125
142,823
90,498
5,215
21,940
76,277
21,709
—
11,697
50,329
7,063
23,208
39,424
23,933
488
7,922
40,817
6,208
24,166
30,666
26,677
96,818
9,951
39,133
6,303
28,679
32,602
35,136
2,554
34,142
227,336
152,367
235,303
178,549
—
23
67,325
61,288
112,041
14,788
126,829
(5,068)
(2,656)
(10,008)
(94)
(91)
39,258
4,053
27,605
20,314
47,919
(2,191)
—
(12,907)
—
186
(18,299)
3,494
(131,797)
8,330
(123,467)
(4,958)
—
(12,907)
(9,827)
1,079
9,493
1,946
(33,035)
21,002
(12,033)
(2,540)
—
(12,907)
Net income (loss) available to common stockholders
$
45,519
$ 109,097
$
32,821
$ (141,332)
$
(27,480)
Net income (loss) from continuing operations
attributable to controlling interest per common
share—basic and diluted
Net income (loss) per common share—basic and diluted
Dividends declared per common share
Total assets (at year-end)
Notes payable (at year-end)
Stockholders’ investment (at year-end)
Common shares outstanding (at year-end)
$
$
$
0.12
0.22
0.30
$
$
$
0.66
0.76
0.18
$
$
$
0.12
0.32
0.18
$
$
$
(1.44)
(1.36)
0.18
$
$
$
(0.48)
(0.27)
0.36
$2,667,330
$ 792,344
$1,673,458
216,513
$2,273,206
$ 630,094
$1,457,401
189,666
$1,124,242
$ 425,410
$ 620,342
104,090
$1,235,535
$5,394,423
$ 603,692
103,702
$1,371,282
$ 509,509
$ 760,079
103,392
17
2014 ANNUAL REPORT cousins properties incorporated ITeM 7 .
M a n a GeMe nT’ s DIs c u s sIo n a nD an a l y sIs
o f f In a n cIa l c
o f o PeRa
o nD I T Io n a nD R e s u l
T Io n s
T s
The following discussion and analysis should be read
in conjunction with the selected financial data and the
consolidated financial statements and notes.
Overview of 2014 Performance and Company and
Industry Trends
The Company’s strategy is to create value for its stockholders
through the acquisition, development, ownership, and
management of Class A office assets and opportunistic
mixed-use developments
in Sunbelt markets, with a
particular focus on Georgia, Texas, and North Carolina.
During 2014, the Company completed the acquisition of two
properties, substantially completed the development of one
office tower and commenced development activities on two
other development projects, all within its target markets. To
fund its investment activities, the Company completed the
disposition of its remaining grocery-anchored retail assets as
well as the disposition of three of its non-core office assets in
addition to issuing common equity and closing a long term
mortgage loan on an existing office building. As a result of
these activities, the Company increased its size (in terms of
total market capitalization) by 20% while lowering its debt
to total market capitalization ratio to 29%. In addition,
the Company became more diversified geographically by
increasing its exposure to North Carolina and Georgia while
decreasing its exposure to Texas.
in v e s t m e n t Ac t i v i t y
The Company’s investment strategy is to purchase Class
A office assets or locate opportunistic development or
redevelopment projects in its core markets to which it can
add value through relationships, capital, or market expertise.
During 2014, the Company purchased an office tower
in the downtown submarket of Charlotte and purchased
a three building office property in the Central Perimeter
submarket of Atlanta. The Charlotte acquisition, Fifth
Third Center, is a Class A office tower that the Company
acquired for $215 million. The building was 82% occupied
upon acquisition, providing potential to increase the value
of the asset through leasing activities, and the Company
estimates that existing leases are, on average, below market.
The Company also believes that it purchased the property
below replacement cost. The Atlanta acquisition, Northpark
Town Center, also represents a value opportunity. The
Company acquired this 1.5 million square foot complex of
Class A office buildings for $358 million which is below the
Company’s estimate of replacement cost. Upon acquisition,
the property was 87% leased, which the Company increased
to 93% at year end, in part, through a 68,000 square foot
lease it sourced and negotiated prior to closing. The Company
believes that existing leases are below market rates.
The Company has grown significantly over the past two years
through acquisitions at prices and with characteristics that
management believes provide opportunity to increase value
through leasing and repositioning activities. Management
believes that the number of similar acquisition opportunities
will be lower in 2015 while development opportunities are
expected to increase. The Company has historically been
an active developer and has maintained its development
platform. As a result, the Company is positioned to take
advantage of near-term development opportunities.
In 2014, the Company commenced construction of Research
Park V, a 173,000 square foot office building in Austin
which is expected to cost $44 million, $5.1 million of which
is land that the Company already owned. This building
will complete the Company’s multi-phase Research Park
office development in northwest Austin. Also during 2014,
the Company formed a joint venture to develop Victory
Center in Uptown Dallas. This property is expected to be a
466,000 square foot, Class A office tower. In addition, the
Company substantially completed construction of Colorado
Tower, a 373,000 square foot office tower in Austin in
2014, and the first tenants moved into the building in early
2015. Colorado Tower is currently 95% leased. Finally, the
Company continues construction of Emory Point Phase II, a
mixed use project consisting of apartments and retail space
in Atlanta. The Company expects to complete this project in
the first half of 2015.
The Company is currently conducting pre-development
activities on projects in Decatur, Georgia and Chapel Hill,
North Carolina and expects to break ground on these projects
in 2015. The Company is pursuing additional development
opportunities that may result in projects that commence in
2015 or thereafter.
D i s p o s i t i o n Ac t i v i t y
To help finance the investment activity discussed above and
to continue to reposition its portfolio, the Company disposed
of $259.1 million in non-core operating assets during 2014.
The strategic result of these dispositions is that the Company
no longer holds assets in the Birmingham, Alabama and Ft.
Worth, Texas markets and no longer owns stand-alone,
grocery-anchored or power center retail assets.
The Company exited the Birmingham market with the sales
of 600 University Park Place and Lakeshore Park Plaza.
The Company sold these assets for a total of $44.7 million.
The Company also reduced its retail exposure with the sale
of its interests in five Publix-anchored shopping centers.
The Company received net proceeds from these sales of
$47.4 million after debt repayment and after payments to
18
cousins properties incorporated 2014 ANNUAL REPORT
the Company’s partner in the joint ventures that owned these
assets. In addition to these sales, the Company sold 777 Main,
its 980,000 square foot office tower in Downtown Ft. Worth,
Texas, for $167.0 million. The Company had acquired this
asset in 2013 as part of the transaction to acquire Greenway
Plaza in Houston, Texas. The Company sold this property
because Ft. Worth is not a core market for the Company,
and the Company believed that opportunities for leveraging
growth in this market were limited.
Throughout 2014, the Company reduced its share of land
holdings by 484 acres, including the sale of land in Wildwood
Office Park, Paulding County and Blalock Lakes. These sales,
combined with the transfer of the Research Park V land to
projects under construction, reduced the Company’s share
of the net book value of its land holdings by $10.0 million.
In 2014, the Company considered pursuing a strategic joint
venture for 191 Peachtree to harvest value that the Company
created since its purchase in 2006. Although the Company
will continue to consider this strategy for 191 Peachtree, it
is also considering raising capital from different sources to
meet its investment needs.
F i nAn c i n g Ac t i v i t y
The Company entered 2014 with a strong balance sheet,
and one of its ongoing strategic objectives is to maintain a
strong balance sheet that provides it with the flexibility to
act on investment opportunities as they arise. The Company
issued 26.7 million shares of common stock in two offerings
that generated net proceeds of $321.9 million. The Company
also generated $85.0 million of gross proceeds upon the
closing of a non-recourse mortgage loan on 816 Congress.
This loan has a fixed annual interest rate of 3.75% and a
term of 10 years. The Company also recast its credit facility
during 2014. The recast credit facility increased the size of
the facility from $350 million to $500 million, extended
the maturity date from 2016 to 2019, and reduced the per
annum variable rate spread and other fees.
po r tF o l i o Ac t i v i t y
In 2014, the Company leased or renewed 2.2 million square
feet of office space. The weighted average net effective rent
per square foot, representing base rent less operating expense
reimbursements and leasing costs, for new or renewed non-
amenity leases with terms greater than one year was $17.17
per square foot in 2014. Cash basis net effective rent per
square foot increased 20% on spaces that have been
previously occupied in the past year. Cash basis net effective
rent represents net rent at the end of the term paid by the
prior tenant compared to the net rent at the beginning of the
term paid by the current tenant. The same property leasing
percentage remained stable throughout the year.
m Ar k e t c o nDi t i o n s
The Company continues to target high barrier-to-entry
submarkets in Atlanta, Austin, Charlotte, Dallas and
these Sunbelt cities
Houston. Management believes
possess some of the most robust economic and market
fundamentals including above-average population and job
growth, steady office absorption, positive rent growth and
limited new supply.
Atlanta, while slower to recover from the recent recession,
is showing positive signs of economic growth, having added
63,000 new jobs in 2013 and over 64,000 new jobs in 2014.
The metro area’s diverse economic base coupled with its major
research universities provide a platform for positive economic
development with job growth forecast at 2.2% over the next
four years compared to the national average of 1.3%.
Austin is the Company’s strongest market in terms of
employment and forecasted job growth over the next four
years. Job growth in Austin over the past 12 months has been
almost double the national average and the unemployment
rate is 4.1% compared to the national average of 5.6%.
Class-A office rents have grown 25% since 2010 as vacancy
rates have dropped below 10%. With limited new supply
under way in our targeted submarket of downtown Austin,
the office market is well positioned to see continued rent
growth into 2015.
The Charlotte office market continues to improve. The city
emerged from the recent recession with a more diversified
economy, and its low cost, business-friendly environment
has lured many high-profile relocations and expansions.
New supply is limited; as a result, overall vacancy is less than
10% and rental rates for new space are strong relative to the
past several years.
Dallas, fueled by corporate relocations and expansions, has
experienced job growth over the last year twice the national
average. Office vacancy rates are as low as they have been
in recent years and market fundamentals are expected to
remain strong in 2015. The Dallas economy has become
more diverse compared to previous cycles. Since 2010, the
largest share of office demand was generated by insurance,
financial services and technology with only 5% of office
growth coming from the energy sector.
Houston has experienced four years of employment growth,
adding approximately 440,000 new jobs since 2010, or three
jobs for every job lost in the downturn. With an estimated
GDP of $517.4 billion for 2014, the region ranks as the
nation’s fourth largest economy. Houston’s accelerated
growth, however, is beginning to face uncertainty as the
recent volatility in energy prices has raised questions about
the sustainability of the positive trends. Although Houston’s
economy is substantially dependent upon the energy industry,
it also has a major medical complex and may be positively
impacted by the pending expansion of the Panama Canal.
When the Company entered the Houston market in 2013, it
focused on two specific submarkets: Galleria and Greenway.
These submarkets have what management believes are high
barriers to entry with few available development sites and
minimal new supply. Therefore, management believes that
there is potential to increase rents as leases expire, and
19
2014 ANNUAL REPORT cousins properties incorporated renewals or releasing occurs. In addition, of the Company’s
top 10 customer in Houston representing 52% of the entire
Houston portfolio, eight carry an investment grade rating.
With this tenant roster and these submarkets, management
believes that it is well-positioned in Houston.
Going forward, the Company expects to generate returns and
create stockholder value through the lease up of its existing
portfolio, through the execution of its development pipeline,
and through opportunistic acquisition and development
investments within its core markets.
Critical Accounting Policies The Company’s financial
statements are prepared in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”) as outlined in the Financial Accounting Standards
Board’s Accounting Standards Codification, and the notes
to consolidated financial statements include a summary of
the significant accounting policies for the Company. The
preparation of financial statements in accordance with GAAP
requires the use of certain estimates, a change in which could
materially affect revenues, expenses, assets or liabilities.
Some of the Company’s accounting policies are considered
to be critical accounting policies, which are ones that are
both important to the portrayal of a company’s financial
condition and results of operations, and ones that also require
significant judgment or complex estimation processes. The
Company’s critical accounting policies are as follows:
reAl es t At e A s s e t s
Cost Capitalization. The Company is involved in all
stages of real estate ownership, including development. Prior
to the point a project becomes probable of being developed
(defined as more likely than not), the Company expenses
predevelopment costs. After management determines the
project is probable, all subsequently incurred predevelopment
costs, as well as interest, real estate taxes, and certain internal
personnel and associated costs directly related to the project
under development, are capitalized in accordance with
accounting rules. If the Company abandons development
of a project that had earlier been deemed probable, the
Company charges all previously capitalized costs to expense.
If this occurs, the Company’s predevelopment expenses
could rise significantly. The determination of whether a
project is probable requires judgment by management. If
management determines that a project is probable, interest,
general and administrative, and other expenses could be
materially different than if management determines the
project is not probable.
During the predevelopment period of a probable project
and the period in which a project is under construction, the
Company capitalizes all direct and indirect costs associated
with planning, developing, leasing, and constructing the
project. Determination of what costs constitute direct and
indirect project costs requires management, in some cases,
to exercise judgment. If management determines certain
costs to be direct or indirect project costs, amounts recorded
in projects under development on the balance sheet and
amounts recorded in general and administrative and other
expenses on the statements of operations could be materially
different than if management determines these costs are not
directly or indirectly associated with the project.
Once a project is constructed and deemed substantially
complete and held for occupancy, carrying costs, such as
real estate taxes, interest, internal personnel, and associated
costs, are expensed as incurred. Determination of when
construction of a project is substantially complete and held
available for occupancy requires judgment. The Company
considers projects and/or project phases to be both
substantially complete and held for occupancy at the earlier
of the date on which the project or phase reached economic
occupancy of 90% or one year after it is substantially
complete. The Company’s judgment of the date the project is
substantially complete has a direct impact on the Company’s
operating expenses and net income for the period.
Operating Property Acquisitions. Upon acquisition of
an operating property, the Company records the acquired
tangible and intangible assets and assumed liabilities at
fair value at the acquisition date. Fair value is based on
estimated cash flow projections that utilize available market
information and discount and/or capitalization rates as
appropriate. Estimates of future cash flows are based on
a number of factors including historical operating results,
known and anticipated trends, and market and economic
conditions. The acquired assets and assumed liabilities for
an acquired operating property generally include, but are
not limited to: land, buildings, and identified tangible and
intangible assets and liabilities associated with in-place
leases, including tenant improvements, leasing costs, value
of above-market and below-market leases, and value of
acquired in-place lease.
The fair value of land is derived from comparable sales of
land within the same submarket and/or region. The fair
value of buildings, tenant improvements, and leasing costs
are based upon current market replacement costs and other
relevant market rate information.
The fair value of the above-market or below-market
component of an acquired in-place lease is based upon
the present value (calculated using a market discount
rate) of the difference between (i) the contractual rents to
be paid pursuant to the lease over its remaining term and
(ii) management’s estimate of the rents that would be paid
using fair market rental rates and rent escalations at the
date of acquisition over the remaining term of the lease. In-
place leases at acquired properties are reviewed at the time
of acquisition to determine if contractual rents are above or
below current market rents for the acquired property, and an
identifiable intangible asset or liability is recorded if there is
an above-market or below-market lease.
The fair value of acquired in-place leases is derived based on
management’s assessment of lost revenue and costs incurred
for the period required to lease the “assumed vacant”
20
cousins properties incorporated 2014 ANNUAL REPORT property to the occupancy level when purchased. This fair
value is based on a variety of considerations including, but
not necessarily limited to: (1) the value associated with
avoiding the cost of originating the acquired in-place leases;
(2) the value associated with lost revenue related to tenant
reimbursable operating costs estimated to be incurred during
the assumed lease-up period; and (3) the value associated
with lost rental revenue from existing leases during the
assumed lease-up period. Factors considered in performing
these analyses include an estimate of the carrying costs
during the expected lease-up periods, such as real estate
taxes, insurance, and other operating expenses, current
market conditions, and costs to execute similar leases, such
as leasing commissions, legal, and other related expenses.
The amounts recorded for above-market and in-place leases
are included in other assets on the balance sheets, and the
amounts for below-market leases are included in other
liabilities on the balance sheets. These amounts are amortized
on a straight-line basis as an adjustment to rental income
over the remaining term of the applicable leases.
The determination of the fair value of the acquired tangible
and intangible assets and assumed liabilities of operating
property acquisitions requires significant judgments and
assumptions about the numerous inputs discussed above. The
use of different assumptions in these fair value calculations
could significantly affect the reported amounts of the
allocation of the acquisition related assets and liabilities and
the related amortization and depreciation expense recorded
for such assets and liabilities. In addition, since the value
of above-market and below-market leases are amortized as
either a reduction or increase to rental income, respectively,
the judgments for these intangibles could have a significant
impact on reported rental revenues and results of operations.
Depreciation and Amortization. The Company
depreciates or amortizes operating real estate assets over
their estimated useful lives using the straight-line method of
depreciation. Management uses judgment when estimating
the life of real estate assets and when allocating certain
indirect project costs to projects under development.
Historical data, comparable properties, and replacement
costs are some of the factors considered in determining useful
lives and cost allocations. The use of different assumptions
for the estimated useful life of assets or cost allocations could
significantly affect depreciation and amortization expense
and the carrying amount of the Company’s real estate assets.
Impairment. Management reviews its real estate assets
on a property-by-property basis for impairment. This
review includes the Company’s operating properties and the
Company’s land holdings.
The first step in this process is for management to use
judgment to determine whether an asset is considered to be
held and used or held for sale, in accordance with accounting
guidance. In order to be considered a real estate asset held
for sale, management must, among other things, have the
authority to commit to a plan to sell the asset in its current
condition, have commenced the plan to sell the asset and
have determined that it is probable that the asset will sell
within one year. If management determines that an asset is
held for sale, it must record an impairment loss if the fair
value less costs to sell is less than the carrying amount. All
real estate assets not meeting the held for sale criteria are
considered to be held and used.
In the impairment analysis for assets held and used,
management must use judgment to determine whether there
are indicators of impairment. For operating properties,
these indicators could include a decline in a property’s
leasing percentage, a current period operating loss or
negative cash flows combined with a history of losses at
the property, a decline on lease rates for that property or
others in the property’s market, or an adverse change in the
financial condition of significant tenants. For land holdings,
indicators could include an overall decline in the market
value of land in the region, a decline in development activity
for the intended use of the land or other adverse economic
and market conditions.
If management determines that an asset that is held and used
has indicators of impairment, it must determine whether the
undiscounted cash flows associated with the asset exceed the
carrying amount of the asset. If the undiscounted cash flows
are less than the carrying amount of the asset, the Company
must reduce the carrying amount of the asset to fair value.
In calculating the undiscounted net cash flows of an
asset, management must estimate a number of inputs.
For operating properties, management must estimate
future rental rates, expenditures for future leases, future
operating expenses, and market capitalization rates for
residual values, among other things. For land holdings,
management must estimate future sales prices as well as
operating income, carrying costs, and residual capitalization
rates for land held for future development. In addition, if
there are alternative strategies for the future use of the asset,
management must assess the probability of each alternative
strategy and perform a probability-weighted undiscounted
cash flow analysis to assess the recoverability of the asset.
Management must use considerable judgment in determining
the alternative strategies and in assessing the probability of
each strategy selected.
In determining the fair value of an asset, management
exercises judgment on a number of factors. Management
may determine fair value by using a discounted cash flow
calculation or by utilizing comparable market information.
Management must determine an appropriate discount rate
to apply to the cash flows in the discounted cash flow
calculation. Management must use judgment in analyzing
comparable market information because no two real estate
assets are identical in location and price.
21
2014 ANNUAL REPORT cousins properties incorporated The estimates and judgments used in the impairment process
are highly subjective and susceptible to frequent change. If
management determines that an asset is held and used, the
results of operations could be materially different than if it
determines that an asset is held for sale. Different assumptions
management uses in the calculation of undiscounted net cash
flows of a project, including the assumptions associated with
alternative strategies and the probabilities associated with
alternative strategies, could cause a material impairment
loss to be recognized when no impairment is otherwise
warranted. Management’s assumptions about the discount
rate used in a discounted cash flow estimate of fair value and
management’s judgment with respect to market information
could materially affect the decision to record impairment
losses or, if required, the amount of the impairment losses.
judgments
re v e n u e re co g n i t i o n – vAlu At i o n oF
re c e i v A Bl e s
Notes and accounts receivable are reduced by an allowance
for amounts that may become uncollectible in the future.
The Company reviews its receivables regularly for potential
collection problems in computing the allowance to record
against its receivables. This review requires management
to make certain
regarding collectibility,
notwithstanding the fact that ultimate collections are
inherently difficult to predict. Economic conditions fluctuate
over time, and the Company has tenants in many different
industries which experience changes in economic health,
making collectibility prediction difficult. Therefore, certain
receivables currently deemed collectible could become
uncollectible, and those reserved could ultimately be
collected. A change in judgments made could result in an
adjustment to the allowance for doubtful accounts with a
corresponding effect on net income.
in v e s t m e n t i n J o i n t ve n t u r e s
The Company holds ownership interests in a number of joint
ventures with varying structures. Management evaluates all
of its joint ventures and other variable interests to determine
if the entity is a variable interest entity (“VIE”), as defined in
accounting rules. If the venture is a VIE, and if management
determines that the Company is the primary beneficiary, the
Company consolidates the assets, liabilities and results of
operations of the VIE. The Company quarterly reassesses its
conclusions as to whether the entity is a VIE and whether
consolidation is appropriate as required under the rules. For
entities that are not determined to be VIEs, management
evaluates whether or not the Company has control or
significant influence over the joint venture to determine
the appropriate consolidation and presentation. Generally,
entities under the Company’s control are consolidated,
and entities over which the Company can exert significant
influence, but does not control, are accounted for under the
equity method of accounting.
Management uses judgment to determine whether an entity
is a VIE, whether the Company is the primary beneficiary of
the VIE, and whether the Company exercises control over
the entity. If management determines that an entity is a VIE
with the Company as primary beneficiary or if management
concludes that the Company exercises control over the
entity, the balance sheets and statements of operations would
be significantly different than if management concludes
otherwise. In addition, VIEs require different disclosures in
the notes to the financial statements than entities that are
not VIEs. Management may also change its conclusions
and, thereby, change its balance sheets, statements of
comprehensive income, and notes to the financial statements,
based on facts and circumstances that arise after the original
consolidation determination is made. These changes could
include additional equity contributed to entities, changes in
the allocation of cash flow to entity partners, and changes in
the expected results within the entity.
Management performs an impairment analysis of the
recoverability of its investments in joint ventures on a
quarterly basis. As part of this analysis, management first
determines whether there are any indicators of impairment
in any joint venture investment. If indicators of impairment
are present for any of the Company’s investments in joint
ventures, management calculates the fair value of the
investment. If the fair value of the investment is less than
the carrying value of the investment, management must
determine whether the impairment is temporary or other
than temporary, as defined by GAAP. If management
assesses the impairment to be temporary, the Company does
not record an impairment charge. If management concludes
that the impairment is other than temporary, the Company
records an impairment charge.
Management uses considerable judgment in the determination
of whether there are indicators of impairment present and in
the assumptions, estimations and inputs used in calculating
the fair value of the investment. These judgments are similar
to those outlined above in the impairment of real estate
assets. Management also uses judgment in making the
determination as to whether the impairment is temporary
or other than temporary. The Company utilizes guidance
provided by the SEC in making the determination of whether
the impairment is temporary. The guidance indicates that
companies consider the length of time that the impairment
has existed, the financial condition of the joint venture, and
the ability and intent of the holder to retain the investment
long enough for a recovery in market value. Management’s
judgment as to the fair value of the investment or on the
conclusion of the nature of the impairment could have a
material impact on the results of operations and financial
condition of the Company.
in co m e tAx e s – vAlu At i o n A l lowAn c e
The Company establishes a valuation allowance against
deferred tax assets if, based on the available evidence, it is
more likely than not that such assets will not be realized. The
realization of a deferred tax asset ultimately depends on the
existence of sufficient taxable income in either the carryback
or carryforward periods under tax law. The Company
periodically assesses the need for valuation allowances for
22
cousins properties incorporated 2014 ANNUAL REPORT deferred tax assets based on the “more likely than not”
realization threshold criterion. In the assessment, appropriate
consideration is given to all positive and negative evidence
related to the realization of the deferred tax assets. This
assessment requires considerable judgment by management
and includes, among other matters, the nature, frequency
and severity of current and cumulative losses, forecasts of
future profitability, the duration of statutory carryforward
periods, its experience with operating loss and tax credit
carryforwards, and tax planning alternatives. If management
determines that the Company requires a valuation allowance
on its deferred tax assets, income tax expense or benefit
could be materially different than if management determines
no such valuation allowance is necessary.
from
tenants
re cov e r i e s Fr o m te nAn t s
for operating expenses are
Recoveries
determined on a calendar year and on a lease by lease basis.
The most common types of cost reimbursements in our
leases are utility expenses, building operating expenses, real
estate taxes, and insurance, for which the tenant pays its pro
rata share in excess of a base year amount, if applicable.
The computation of these amounts is complex and involves
numerous judgments, including the interpretation of terms
and other customer lease provisions. Leases are not uniform
in dealing with such cost reimbursements and there are many
variations in the computation. We accrue income related
to these payments each month. We make monthly accrual
adjustments, positive or negative, to recorded amounts to
our best estimate of the annual amounts to be billed and
collected with respect to the cost reimbursements. After the
end of the calendar year, we compute each customer’s final
cost reimbursements and, after considering amounts paid
by the tenant during the year, issue a bill or credit for the
appropriate amount to the tenant. The differences between
the amounts billed less previously received payments and the
accrual adjustments are recorded as increases or decreases
to revenues when the final bills are prepared, which occurs
during the first half of the subsequent year.
s to c k- B A s eD c o m p e n s At i o n
The Company has several types of stock-based compensation
plans. These are described in note 13, as are the accounting
policies by type of award. Compensation cost for all stock-
based awards requires measurement at estimated fair value
on the grant date and compensation cost is recognized over
the service vesting period, which represents the requisite
service period. The grant date fair value for compensation
plans that contain market measures are performed using
complex pricing valuation models that require the input of
assumptions, including judgments to estimate expected life,
expected stock price volatility, and assumed dividend yield.
Specifically, the grant date fair value of performance-based
restricted stock units are calculated using a Monte Carlo
simulation pricing model and the grant date fair value of
stock option grants are calculated using the Black-Scholes
valuation model.
Discussion of New Accounting Pronouncements
In 2014, The Financial Accounting Standards Board
(“FASB”) issued new guidance related to the presentation
of discontinued operations. Prior to this new guidance,
the Company included activity for all assets held for sale
and disposals in discontinued operations on its statements
of operations. Under the new guidance, only assets held
for sale and disposals representing a major strategic shift
in operations, such as the disposal of a line of business, a
significant geographical area, or a major equity investment,
will be presented as discontinued operations. Additionally,
the new guidance requires expanded disclosures about
discontinued operations that will provide more information
about their assets, liabilities, income, and expenses. The
guidance is effective for periods beginning after December 15,
2014. Early adoption is permitted, but only for disposals (or
classifications as held for sale) that have not been reported
in financial statements previously issued. The Company
adopted this guidance in the second quarter of 2014.
In 2014, the FASB issued new guidance related to the
accounting for revenue from contracts with customers which
requires a new five-step model to recognize revenue. Under
the new guidance, companies will recognize revenue when
the seller satisfies a performance obligation, which would
be when the buyer takes control of the good or service.
This new guidance could result in different amounts of
revenue being recognized and could result in revenue being
recognized in different reporting periods than it is under the
current guidance. The new guidance specifically excludes
revenue associated with lease contracts. The guidance is
effective for periods beginning after December 15, 2016
and early adoption is prohibited. Retrospective application
will be required either to all periods presented or with the
cumulative effect of initial adoption recognized in the period
of adoption.
Results of Operations For The Three Years Ended
December 31, 2014
ge n e rAl
The Company’s financial results have historically been
significantly affected by purchase and sale transactions.
Accordingly, the Company’s historical financial statements
may not be indicative of future operating results. During 2014,
the Company purchased Fifth Third Center and Northpark
Town Center (collectively, the “2014 Acquisitions”). During
2013, the Company purchased Greenway Plaza, 777 Main,
816 Congress and Post Oak Central (collectively, the “2013
Acquisitions”). In 2012, the Company purchased 2100 Ross.
re n t Al pr o p e r t y re v e n u e s
Rental property
(77%) between 2014 and 2013 as a result of the following:
increased $149.5 million
revenues
–
Increase of $124.1 million as a result of the
2013 Acquisitions;
23
2014 ANNUAL REPORT cousins properties incorporated –
–
–
Increase of $17.5 million as a result of
2014 Acquisitions;
the
Increase of $2.4 million as a result of higher average
occupancy at Promenade;
–
–
Increase of $1.3 million as a result of higher average
occupancy at 2100 Ross;
Increase of $609,000 as a result of higher average
occupancy at Promenade; and
Increase of $2.3 million as a result of higher average
occupancy at 2100 Ross; and
– Decrease of $598,000 as a result of the 2013 sale of
50% of the Company’s interest in Terminus 100.
– Decrease of $2.5 million as a result of the 2013 sale of
50% of the Company’s interest in Terminus 100.
Rental property operating expenses increased $40.2 million
(80%) between 2013 and 2012 as a result of the following:
Rental property revenues increased $80.2 million (70%)
between 2013 and 2012 as a result of the following:
–
–
–
–
–
Increase of $87.7 million as a result of the 2013
Acquisitions;
Increase of $6.5 million as a result of the 2012
acquisition of 2100 Ross;
Increase of $1.9 million at 191 Peachtree due to higher
economic occupancy;
Increase of $1.7 million at Mahan Village as a result of
the commencement of operations in late 2012;
Increase of $1.3 million at Promenade due to higher
economic occupancy; and
– Decrease of $19.7 million due to the sale of 50% of the
Company’s interest in Terminus 100.
F e e in co m e
Fee income increased $1.6 million (15%) between 2014 and
2013 due to the receipt of a $4.5 million participation interest
in 2014 related to a contract that the Company assumed in
the acquisition of an entity several years ago. Under this
contract, the Company is entitled to receive a portion of the
proceeds from the sale of a project that the entity developed
and from payments received from a related seller-financed
note. The payment in 2014 represents the final payment that
the Company will receive under this arrangement.
Fee
income decreased approximately $6.9 million
(39%) between 2013 and 2012. This decrease is primarily
due to the receipt of a $4.5 million participation interest in
2012 related to the contract discussed above. Fee income
also decreased as a result of a decrease in reimbursed
expenses primarily due to the third quarter 2013 sale of the
Company’s interest in two unconsolidated joint ventures, CP
Venture Two LLC and CP Venture Five LLC, and the sale
of The Avenue Murfreesboro retail center, which was held
through the CF Murfreesboro Associates unconsolidated
joint venture. The Company was earning management and
leasing fees associated with these ventures that ended upon
the sale of the Company’s interest in these ventures.
re n t Al pr o p e r t y op e rA t i n g ex p e n s e s
Rental property operating expenses increased $65.4 million
(72%) between 2014 and 2013 as a result of the following:
Increase of $58.6 million as a result of
2013 Acquisitions;
the
Increase of $6.1 million as a
2014 Acquisitions;
result of
the
–
–
24
–
–
–
Increase of $40.4 million as a result of
2013 Acquisitions;
the
Increase of $3.4 million as a result of the 2012
acquisition of 2100 Ross;
Increase of $1.1 million at 191 Peachtree due to higher
economic occupancy; and
– Decrease of $5.5 million due to the sale of 50% of the
Company’s interest in Terminus 100.
re i mBu r s eD ex p e n s e s
Reimbursed expenses decreased $1.6 million (30%) between
2014 and 2013 and decreased $1.8 million (26%) between
2013 and 2012. Reimbursed expenses are primarily incurred
on projects for which the Company pays management and
development expenses and is later reimbursed by the client.
The offsetting income related to these expenses is recorded
in fee income.
ge n e rAl AnD ADm i n i s t rA t i v e ex p e n s e s
General and administrative (G&A) expenses decreased
$2.2 million (10%) between 2014 and 2013 as a result of
the following:
– Decrease of bonus expense of $814,000 as a result of
lower bonuses awarded;
–
–
Increase
in stock-based compensation expense of
$402,000 due to an increase in the Company’s stock
price between years and higher relative performance on
the performance based restricted stock units; and
Increase in capitalized salaries of $2.3 million as a result
of increased development activities and internal costs
associated with a software implementation.
G&A expense decreased $1.3 million (5%) between 2013
and 2012 as a result of the following:
– Decrease in employee salaries and benefits, other than
stock-based compensation and bonus, of $2.0 million
due to a decrease in the number of corporate employees
between 2013 and 2012;
–
–
–
Increase in capitalized salaries of $2.3 million as a result
of increased development activity;
Increase
in stock-based compensation expense of
$1.7 million primarily due to an increase in the Company’s
stock price between years and higher relative performance
on the performance based restricted stock units; and
Increase in bonus expense of $1.2 million as a result of
the Company exceeding its bonus goals for 2013.
cousins properties incorporated 2014 ANNUAL REPORT in t e r e s t ex p e n s e
Interest expense increased $7.4 million (34%) between 2014
and 2013 as a result of the following:
– Higher interest expense of $5.5 million as a result of the
Post Oak Central loan that closed in 2013;
– Higher interest expense of $3.3 million as a result of the
Promenade loan that closed in 2013;
– Higher interest expense of $709,000 as a result of the
new 816 Congress loan;
– Higher interest expense of $1.1 million related to higher
average borrowings under the Credit Facility during
the year;
–
–
Lower interest expense of $2.2 million due to higher
capitalized interest in 2014 as a result of an increase in
development expenditures in 2014; and
Lower interest expense of $725,000 as a result of the
sale of 50% of Terminus 100 in 2013.
Interest expense decreased $2.2 million (9%) between 2013
and 2012 as a result of the following:
–
–
Lower interest expense of $6.5 million as a result of the
sale of 50% of Terminus 100;
Lower interest expense of $1.5 million related to lower
average borrowings under the Credit Facility during
the year;
– Higher interest expense of $2.6 million related to the
Post Oak Central loan;
– Higher interest expense of $1.6 million related to the
Promenade loan;
– Higher interest expense of $1.1 million due to lower
capitalized interest in 2013 as a result of a reduction in
development expenditures in 2013; and
– Higher interest expense of $784,000 related to the 191
Peachtree Tower loan that closed in 2012.
D e p r e c iA t i o n AnD A m o r t i zA t i o n
Depreciation and amortization increased $63.7 million
(84%) between 2014 and 2013 as a result of the following:
–
–
–
Increase of $54.9 million as a result of
2013 Acquisitions;
the
Increase of $8.9 million as a
2014 Acquisitions;
result of
the
Increase of $666,000 as a result of higher average
occupancy at Promenade; and
– Decrease of $825,000 as a result of the 2013 sale of
50% of the Company’s interest in Terminus 100.
Depreciation and amortization increased $36.9 million
(93%) between 2013 and 2012 as a result of the following:
–
Increase of $37.6 million as a result of
2013 Acquisitions;
the
–
–
–
–
Increase of $4.4 million as a result of the 2012
acquisition of 2100 Ross;
Increase of $1.2 million at 191 Peachtree due to higher
economic occupancy;
Increase of $662,000 at Mahan Village as a result of the
commencement of operations in late 2012;
Increase of $572,000 at Promenade due to higher
economic occupancy; and
– Decrease of $8.0 million due to the sale of 50% of the
Company’s interest in Terminus 100.
Acq u i s i t i o n AnD re lA t eD c o s t s
Acquisition and related costs decreased $6.4 million between
2014 and 2013 primarily as a result of the Texas Acquisition
in 2013. Included in acquisition and related costs in 2013
is $2.6 million in costs associated with a term loan that
was obtained in connection with the Texas Acquisition
but was terminated unused upon closing of the acquisition.
Acquisition and related costs in 2012 related primarily to the
acquisition of 2100 Ross.
in co m e Fr o m un co n s o l iDA t eD
J o i n t ve n t u r e s
In 2014, 2013, and 2012, the Company had a considerable
income (loss) from
amount of activity that affected
unconsolidated joint ventures. In 2014, Cousins Watkins
LLC sold substantially all of its assets and the Company
recognized income from unconsolidated joint ventures of
$2.2 million as a result. Also in 2014, Wildwood Associates
sold a tract of land that resulted in the recognition of
$2.1 million in income from unconsolidated joint ventures.
In 2013, the Company sold its interests in CP Venture
Two LLC and CP Venture Five LLC for $23.3 million and
$30.0 million, respectively. The Company recorded gains
from unconsolidated joint ventures on these transactions
totaling $37.0 million. In addition, CF Murfreesboro
Associates sold The Avenue Murfreesboro, the venture’s only
asset. The Company received a distribution from this sale
of $33.8 million and recognized a gain from unconsolidated
joint ventures of $23.5 million associated with this sale.
In 2012, the Company sold its interest in Palisades West LLC
for $64.8 million and recognized a gain from unconsolidated
joint ventures of $23.3 million associated with this sale. In
addition, Ten Peachtree Place Associates sold Ten Peachtree
Place to a third party. The Company received proceeds
from this sale of $5.1 million and recognized a gain from
unconsolidated joint ventures of $7.3 million associated with
this sale. CP Venture Two LLC sold Presbyterian Medical
Plaza to a third party and the Company received proceeds
from the sale of $450,000 and recognized a gain of $167,000
associated with this sale. In addition, the Emory Point
Phase I development project became operational within EP I
LLC and the Company recorded $330,000 in its share of the
losses from the start-up operations.
25
2014 ANNUAL REPORT cousins properties incorporated g Ai n o n s Al e oF in v e s t m e n t pr o p e r t i e s
Gain on sale of investment properties decreased $48.8 million
between 2014 and 2013 and increased $57.2 million between
2013 and 2012. The 2014 amount includes a gains of the
sale of 777 Main and Mahan Village of $6.2 million and
$4.6 million, respectively. The 2013 amount includes a gain
on the sale of Terminus 100 of $37.1 million, a gain on the
acquisition of Terminus 200, which was acquired in stages, of
$19.7 million, and the recognition of a deferred gain associated
with CP Venture Two LLC of $3.6 million that was recognized
when the Company sold its interest in CP Venture Two LLC.
The 2012 and 2011 amounts include gains recognized on the
sale of various land tracts during those years.
D i s co n t i n u eD op e rA t i o n s
In April 2014, the Financial Accounting Standards Board
issued new guidance on discontinued operations. Under
the new guidance, only assets held for sale and disposals
representing a major strategic shift in operations will be
presented as discontinued operations. This guidance is
effective for periods beginning after December 15, 2014
with early adoption permitted. The Company adopted this
new standard in 2014. As a result, two of the Company’s
properties (777 Main and Mahan Village) that were sold
subsequent to the adoption that under the previous guidance
would have been considered discontinued operations, are not
considered discontinued operations under the new guidance.
In 2014, the Company sold two assets in Birmingham,
Alabama that had been classified as held for sale in 2013.
The Company sold 600 University Park Place, a 123,000
square foot office building, for a gross sales price of
$19.7 million, before adjustments for customary closing costs
and other closing credits and sold Lakeshore Park Plaza, a
197,000 square foot office building, for a gross sales price
of $25.0 million, before adjustments for customary closing
costs and other closing credits. The combined sales prices of
these two assets, along with the sales of 777 Main and Mahan
Village, represents a weighted average 6.3% capitalization
rate. Capitalization rates are calculated by dividing projected
annualized net operating income by the sales price.
In 2013, the Company sold Tiffany Springs MarketCenter, a
238,000 square foot center in Kansas City, Missouri, for a sales
price of $53.5 million, which represented a 7.9% capitalization
rate. In 2013, the Company also sold the Inhibitex building,
a 51,000 square foot medical office building in Atlanta, for
$8.3 million, prior to the allocation of free rent credits, which
represented a 9.1% capitalization rate.
In 2012, the Company sold the following retail assets: The
Avenue Collierville, a 511,000 square foot center in Memphis,
Tennessee, for a sales price of $55.0 million; The Avenue
Forsyth, a 524,000 square foot center in Atlanta, Georgia for
a sales price of $119.0 million; and The Avenue Webb Gin,
a 322,000 square foot center in Atlanta, Georgia for a sales
price of $59.6 million. The weighted average capitalization
rates for these three retail projects was 7.8%. The Company
also sold Galleria 75, a 111,000 square foot office building
in Atlanta, Georgia, for a sales price of $9.2 million and a
capitalization rate of 9.5%. In 2012, the Company also sold
26
Cosmopolitan Center, a 51,000 square foot office building
for a sales price of $7.0 million. The capitalization rate of
Cosmopolitan Center was not a significant determinant of
the sales price as it was being sold for its underlying land
value as opposed to its in-place income stream. In 2012, the
Company also sold its third party management and leasing
business to Cushman & Wakefield.
Included in discontinued operations are the operations
and gains on sale of all properties sold in 2014, 2013 and
2012 (with the exception of 777 Main and Mahan Village).
Discontinued operations also includes the operations and
gains recognized on the sale of the Company’s third party
management and leasing business. For 2012, discontinued
operations includes impairment losses recorded on The
Avenue Collierville and Inhibitex in the amounts of
$12.2 million and $1.6 million, respectively.
ne t in co m e At t r iBu t A Bl e to
no n co n t r o l l i n g in t e r e s t
The Company consolidates certain entities and allocates
the partner’s share of those entities’ results to net income
attributable to noncontrolling interests on the statements of
comprehensive income. The noncontrolling interests’ share
of the Company’s net income decreased $4.1 million between
2014 and 2013, and increased $2.9 million between 2013
and 2012. The 2014 amount includes $574,000 that was
allocated to the noncontrolling partner in the entity that sold
Mahan Village. The 2013 amount includes $3.4 million that
was allocated to the noncontrolling partner in CP Venture
Six LLC in connection with the Company’s purchase of the
partner’s interest. The 2012 amount includes $2.1 million
that was allocated to the noncontrolling partner in the entity
that sold The Avenue Collierville and $1.8 million that was
allocated to the noncontrolling partner in the entity that sold
The Avenue Forsyth.
pr eFe r r eD s to c k or i g i nAl is s u An c e c o s t s
In 2014, the Company redeemed all outstanding shares of
its 7.5% Series B Cumulative Redeemable Preferred Stock.
In connection with the redemption of Preferred Stock, the
Company decreased net income available for common
shareholders by $3.5 million (non-cash), which represents
the original issuance costs applicable to the shares redeemed.
In 2013, the Company redeemed all outstanding shares of
its 7.75% Series A Cumulative Redeemable Preferred Stock.
In connection with the redemption of Preferred Stock,
the Company increased net loss available for common
shareholders by $2.7 million (non-cash), which represents
the original issuance costs applicable to the shares redeemed.
D i v iDe nD s to pr eFe r r eD s to c k h o lDe r s
Dividends to preferred stockholders decreased $7.0 million
between 2014 and 2013 and decreased $2.9 million
between 2013 and 2012. These decreases are the result of
the redemption of the Series B preferred stock in 2014 and
the redemption of the Series A preferred stock in 2013. The
Company has no remaining outstanding preferred stock as
of December 31, 2014 and, as a result, in future periods will
have no preferred stock dividends.
cousins properties incorporated 2014 ANNUAL REPORT (“FFO”) and
F u nD s Fr o m op e rA t i o n s
The table below shows Funds from Operations Available
the related
to Common Stockholders
reconciliation to net income (loss) available to common
stockholders for the Company. The Company calculates
FFO in accordance with the National Association of Real
Estate Investment Trusts’ (“NAREIT”) definition, which is
net income available to common stockholders (computed
in accordance with GAAP), excluding extraordinary items,
cumulative effect of change in accounting principle and
gains on sale or impairment losses on depreciable property,
plus depreciation and amortization of real estate assets, and
after adjustments for unconsolidated partnerships and joint
ventures to reflect FFO on the same basis.
FFO is used by industry analysts and investors as a supplemental
measure of a REIT’s operating performance. Historical cost
accounting for real estate assets implicitly assumes that the
value of real estate assets diminishes predictably over time.
Since real estate values instead have historically risen or
fallen with market conditions, many industry investors and
analysts have considered presentation of operating results for
real estate companies that use historical cost accounting to
be insufficient by themselves. Thus, NAREIT created FFO
as a supplemental measure of REIT operating performance
that excludes historical cost depreciation, among other items,
from GAAP net income. The use of FFO, combined with the
required primary GAAP presentations, has been fundamentally
beneficial, improving the understanding of operating results
of REITs among the investing public and making comparisons
of REIT operating results more meaningful. Company
management evaluates operating performance in part based
on FFO. Additionally, the Company uses FFO, along with
other measures, to assess performance in connection with
evaluating and granting incentive compensation to its officers
and other key employees. The reconciliation of net income
(loss) available to common stockholders to FFO is as follows
for the years ended December 31, 2014, 2013, and 2012 (in
thousands, except per share information):
Net Income (Loss) Available to Common Stockholders
Depreciation and amortization:
Consolidated properties
Discontinued properties
Share of unconsolidated joint ventures
Impairment losses on depreciable investment properties, net of amounts attributable to
noncontrolling interests
Gain on sale of investment properties:
Consolidated properties
Discontinued properties
Share of unconsolidated joint ventures
Noncontrolling interest related to the sale of depreciated properties
Year Ended December 31,
2014
2013
2012
$ 45,519
$109,097
$ 32,821
139,151
—
11,915
75,524
3,083
13,434
38,349
13,479
10,215
—
—
11,748
(10,832)
(19,356)
(1,767)
574
(60,587)
(6,469)
(60,345)
3,397
(334)
(10,948)
(30,662)
1,824
Funds From Operations Available to Common Stockholders
$165,204
$ 77,134
$ 66,492
Per Common Share—Basic and Diluted:
Net Income (Loss) Available
Funds From Operations
Weighted Average Shares—Basic
Weighted Average Shares—Diluted
$
$
0.22
0.81
$
$
0.76
0.53
$
$
0.32
0.64
204,216
144,255
104,117
204,460
144,420
104,125
is used by
s Am e pr o p e r t y ne t op e rA t i n g in co m e
industry analysts,
Net Operating Income
investors and Company management to measure operating
performance of the Company’s properties. Net Operating
Income, which is rental property revenues less rental
property operating expenses, excludes certain components
from net income in order to provide results that are more
closely related to a property’s results of operations. Certain
items, such as interest expense, while included in FFO and
net income, do not affect the operating performance of a
real estate asset and are often incurred at the corporate level
as opposed to the property level. As a result, management
uses only those income and expense items that are incurred
at the property level to evaluate a property’s performance.
Depreciation and amortization are also excluded from
Net Operating Income. Same Property Net Operating
Income includes those office properties that have been fully
operational in each of the comparable reporting periods.
A fully operational property is one that has achieved 90%
economic occupancy for each of the two periods presented or
has been substantially complete and owned by the Company
for each of the two periods presented and the preceding
year. Same Property Net Operating Income allows analysts,
investors and management to analyze continuing operations
and evaluate the growth trend of the Company’s portfolio.
27
2014 ANNUAL REPORT cousins properties incorporated Net Operating Income - Consolidated Properties
Rental property revenues
Rental property expenses
Net Operating Income - Discontinued Operations
Rental property revenues
Rental property expenses
Net Operating Income - Unconsolidated Joint Ventures
Total Net Operating Income
Net Operating Income
Same Property
Non-Same Property
Year ended December 31, 2014
2014
2013
% Change
$ 343,910
(155,934)
187,976
$194,420
(90,498)
103,922
$
2,927
(1,128)
1,799
25,898
10,552
(4,157)
6,395
27,768
76.9%
72.3%
80.9%
(72.3)%
(72.9)%
(71.9)%
(6.7)%
$ 215,673
$138,080
56.2%
$ 58,859
156,814
$ 56,789
81,291
$ 215,673
$138,080
3.6%
92.9%
56.2%
Same Property Net Operating Income increased 3.6% between
2014 and 2013. This increase is primarily attributable to an
increase in occupancy at North Point Center East and 191
Peachtree Tower as well as lower expenses and increased
parking income at American Cancer Society Center.
Liquidity and Capital Resources
The Company’s primary liquidity sources are:
– Net cash from operations;
–
–
–
–
–
Sales of assets;
Borrowings under its Credit Facility;
Proceeds from mortgage notes payable;
Proceeds from equity offerings; and
Joint venture formations.
The Company’s primary liquidity uses are:
–
–
–
Property acquisitions;
Expenditures on development projects;
Building improvements, tenant improvements, and
leasing costs;
–
Principal and interest payments on indebtedness; and
– Common stock dividends.
F i nAn c iAl c o nDi t i o n
The Company’s goal is to maintain a conservative balance
sheet with leverage ratios that will enable it to be positioned
for future growth. During 2014, the Company’s total assets
increased from $2.3 billion at the beginning of the year to
$2.7 billion at year end. In light of this growth, the Company
took steps to maintain its relatively conservative balance
sheet and to improve its leverage ratios.
During 2014, the Company purchased two office properties
for gross proceeds of $563 million and began or continued
the development of four other properties resulting in
expenditures of $157.0 million. To fund these investments,
the Company issued 26.7 million shares of common stock
in two offerings generating net proceeds of $321.9 million.
The Company generated an additional $85 million in
proceeds from the closing of a mortgage loan and generated
additional net proceeds of $244.5 million from the sale
of properties.
The Company also improved its financial condition by
redeeming all of its remaining preferred stock for $94.8 million,
thereby eliminating preferred stock from its capital structure
and, as a result, improving its fixed charges coverage ratio.
In 2014, the Company recast its Credit Facility to, among other
things, increase the size to $500 million, extend the maturity
to May 28, 2019, and reduce the per annum variable interest
rate spread and other fees. This transaction improved the
financial condition of the Company by reducing the spread it
pays over LIBOR and by extending the average maturity of its
debt. At December 31, 2014, the Company had $140.2 million
outstanding under its Credit Facility and the ability to borrow
$359.8 million under the Credit Facility.
Consistent with its goals, the Company believes it will make
additional investments in 2015 and beyond and expects to
fund these activities with one or more of the following: sale
of additional non-core assets, additional borrowings under
its Credit Facility, mortgage loans on existing or newly
acquired properties, issuance of common or preferred equity,
and joint venture formation with third parties.
28
cousins properties incorporated 2014 ANNUAL REPORT Contractual Obligations and Commitments
At December 31, 2014, the Company was subject to the following contractual obligations and commitments (in thousands):
Contractual Obligations:
Company debt:
Unsecured Credit Facility and construction loan
Mortgage notes payable
Interest commitments (1)
Ground leases
Other operating leases
Total
Less than
1 Year
1-3 Years
3-5 Years
More than
5 years
$ 140,200
652,144
176,333
146,223
521
$
— $
8,826
31,642
1,549
231
— $140,200
115,267
37,644
3,311
42
162,205
72,516
3,300
248
$
—
365,846
34,531
138,063
—
Total contractual obligations
$1,115,421
$42,248
$238,269
$296,464
$538,440
Commitments:
Unfunded tenant improvements and other
Letters of credit
Performance bonds
102,485
1,000
1,386
63,621
1,000
117
22,516
—
100
5,348
—
—
11,000
—
1,169
Total commitments
$ 104,871
$64,738
$ 22,616
$
5,348
$ 12,169
(1) Interest on variable rate obligations is based on rates effective as of December 31, 2014.
In addition, the Company has several standing or renewable
service contracts mainly related to the operation of its
buildings. These contracts were entered into in the ordinary
course of business and are generally one year or less. These
contracts are not included in the above table and are usually
reimbursed in whole or in part by tenants.
In 2014, the Company entered into a $85 million non-
recourse mortgage note payable, secured by 816 Congress.
The loan has a fixed interest rate of 3.75% and matures in
2024. In 2013, the Company entered into a $188.8 million
non-recourse mortgage note payable, secured by the Post
Oak Central office buildings. The loan has a fixed interest
rate of 4.26% and matures in 2020. In 2013, the Company
also entered into a $114.0 million non-recourse mortgage
note payable, secured by the Promenade office building. The
loan has a fixed interest rate of 4.27% and matures in 2022.
The Company repaid the 100/200 North Point Center East
mortgage loan during 2012 totaling $24.5 million. The
Company repaid this note to provide flexibility to sell these
assets or refinance them at a later date, depending upon its
strategic direction.
In 2012, the Company entered into a $100.0 million non-
recourse mortgage note payable, secured by the 191 Peachtree
Tower office building. The loan has a fixed interest rate of
3.35% and matures in 2018.
The Company’s existing mortgage debt is primarily non-
recourse, fixed-rate mortgage notes secured by various real
estate assets. Many of the Company’s non-recourse mortgages
contain covenants which, if not satisfied, could result in
acceleration of the maturity of the debt. The Company expects
that it will either refinance the non-recourse mortgages at
maturity or repay the mortgages with proceeds from other
financings. As of December 31, 2014, the weighted average
interest rate on the Company’s consolidated debt was 3.99%.
cr eDi t F Ac i l i t y inF o r mA t i o n
The Company amended its $350 million Credit Facility in
2014, extending the maturity from February 2016 to May
2019, reducing the per annum variable interest rate, and
providing for expansion that allows it to increase capacity
under the Credit Facility to $750 million. The Company’s
Credit Facility bears interest at the London Interbank
Offered Rate (“LIBOR”) plus a spread, based on the
Company’s leverage ratio, as defined in the Credit Facility.
At December 31, 2014, the Company had $140.2 million
drawn on the facility and a total available borrowing
capacity of $359.8 million on the facility. The amount that
the Company may draw under the Credit Facility is a defined
calculation based on the Company’s unencumbered assets
and other factors and is reduced by both letters of credit and
borrowings outstanding.
The Credit Facility includes customary events of default,
including, but not limited to, the failure to pay any interest or
principal when due, the failure to perform under covenants of
the credit agreement, incorrect or misleading representations
or warranties, insolvency or bankruptcy, change of control,
the occurrence of certain ERISA events and certain judgment
defaults. The amounts outstanding under the Credit Facility
may be accelerated upon an event of default. The Credit
Facility contains restrictive covenants pertaining to the
operations of the Company, including limitations on the
amount of debt that may be incurred, the sale of assets,
transactions with affiliates, dividends and distributions. The
Credit Facility also includes certain financial covenants (as
defined in the agreement) that require, among other things,
29
2014 ANNUAL REPORT cousins properties incorporated the maintenance of an unencumbered interest coverage ratio
of at least 2.00; a fixed charge coverage ratio of 1.50; and
a leverage ratio of no more than 60%. The Company is
currently in compliance with its financial covenants.
–
Increase of $7.6 million as a result of lower interest
paid due to lower average debt outstanding and a lower
weighted average interest rate;
– Decrease of $22.8 million
as
a
result of
F u t u r e c Ap i t Al re q u i r e m e n t s
Over the long term, management intends to actively manage
its portfolio of properties and strategically sell assets to exit
its non-core holdings, reposition its portfolio of income-
producing assets geographically and by product type,
and generate capital for future investment activities. The
Company expects to continue to utilize indebtedness to
fund future commitments and expects to place long-term
mortgages on selected assets as well as to utilize construction
facilities for some development assets, if available and under
appropriate terms.
The Company may also generate capital through the issuance
of securities that include common or preferred stock,
warrants, debt securities or depositary shares. In March 2013,
the Company filed a shelf registration statement to allow for
the issuance from time to time of such securities. Management
will continue to evaluate all public equity sources and select
the most appropriate options as capital is required.
The Company’s business model is dependent upon raising or
recycling capital to meet obligations. If one or more sources of
capital are not available when required, the Company may be
forced to reduce the number of projects it acquires or develops
and/or raise capital on potentially unfavorable terms, or may
be unable to raise capital, which could have an adverse effect
on the Company’s financial position or results of operations.
Cash Flows The reasons for significant increases and
decreases in cash flows between the years are as follows:
ca s h F l ows f ro m op e rat i n g Ac t i v i t i e s
Cash flows provided by operating activities increased
$5.1 million between 2014 and 2013 due to the following:
– Decrease of $57.1 million in operating distributions from
joint ventures due to the 2013 sale of the Company’s
interests in CP Venture Two LLC and CP Venture Five
LLC and the sale of The Avenue Murfreesboro through
CF Murfreesboro Associates;
– Decrease of $7.6 million as a result of lower interest paid
due to higher average debt outstanding during 2014;
–
– Decrease of $4.6 million as a result of discontinued
operations; and
– The remaining increase is primarily a result of acquisition
activities in 2014 and 2013.
Cash flows provided by operating activities increased
$42.0 million between 2013 and 2012 due to the following:
Increase of $29.7 million in operating distributions
from joint ventures due to the sale of the Company’s
interests in CP Venture Two LLC and CP Venture Five
LLC and the sale of The Avenue Murfreesboro through
CF Murfreesboro Associates;
–
30
discontinued operations;
– Decrease of $14.2 million related to the deconsolidation
of Terminus 100;
– Decrease of $6.7 million as a result of higher
acquisition and related costs associated with increased
acquisition activity;
– Decrease of $3.5 million in fee income as a result of the
sale of the Company’s interest in CP Venture Two LLC
and CP Venture Five LLC and the sale of The Avenue
Murfreesboro through CF Murfreesboro Associates;
– Decrease of $3.5 million due to the receipt of a lease
termination fee in 2012;
– Decrease of $3.4 million related to a participation
interest in a former development project in 2012; and
– The remaining increase is primarily a result of acquisition
activities in 2013 and 2012 and increased occupancy at
191 Peachtree Tower and Promenade in 2013.
ca s h F l ows f ro m inve st i n g Ac t i v i t i e s
Net cash used in investing activities decreased $804.6 million
between 2014 and 2013 due to the following:
– Decrease of $815.5 million related to acquisition,
development, and tenant asset expenditures. This
decrease
the 2014
acquisitions of Fifth Third and Northpark requiring less
cash than the 2013 acquisitions of Post Oak Central,
816 Congress, Greenway Plaza, and 777 Main;
is primarily attributable
to
– Decrease of $62.5 million
in distributions
from
unconsolidated joint ventures. In 2014, Cousins Watkins
LLC sold all of its assets and made a distribution to the
Company. In 2013, the Company sold its investments in
CP Venture Two LLC and CP Venture Five LLC, sold
The Avenue Murfreesboro retail center through CF
Murfreesboro Associates, and received distributions from
Crawford Long - CPI LLC as a result of a new mortgage
note financing. The cash flows from the 2013 activities
were greater than the cash flows from the 2014 activities.
Increase of $65.5 million in proceeds from investment
property sales. In 2014, the Company sold four
operating properties and one tract of land. In 2013, the
Company sold two operating properties and three tracts
of land.
Net cash from investing activities decreased $1.5 billion
between 2013 and 2012 due to the following:
–
Increase of $1.4 billion in acquisition, development,
and tenant asset expenditures. This increase is primarily
attributable to the acquisition of Post Oak Central, 816
Congress, Greenway Plaza, and 777 Main in 2013 and
2100 Ross in 2012;
cousins properties incorporated 2014 ANNUAL REPORT –
–
Increase of $94.4 million due to a decrease in investment
property sales. In 2013, the Company sold two operating
properties and three tracts of land. In 2012, the Company
sold six operating properties and four tracts of land;
Increase of $3.7 million due to a decrease in proceeds
from the sale of the third party management and leasing
business; and
– Decrease of $15.9 million from joint ventures. In 2013,
the Company sold its investments in CP Venture Two
LLC and CP Venture Five LLC, sold The Avenue
Murfreesboro retail center through CF Murfreesboro
Associates, and received distributions from Crawford
Long - CPI LLC as a result of a new mortgage note
financing. In 2012, the Company sold its investment
in Palisades West, received distributions from Ten
Peachtree Place Associates from the sale of its only asset,
and received distributions from CL Realty, L.L.C. and
Temco Associates in connection with the sale of most of
the assets owned in these two ventures. In addition, the
Company invested more in its joint ventures as a result
of capital contributions in EP II, which was formed and
initially capitalized in 2013.
ca s h F l ows f ro m F i n a n c i n g Ac t i v i t i e s
Net cash provided by financing activities decreased
$634.7 million between 2014 and 2013 due to the following:
– Decrease of $504.4 million from the issuance of
common stock;
– Decrease of $104.2 million in net debt borrowings;
–
Increase of $27.3 million in common and preferred
dividends paid;
– Decrease of $23.5 million
in distributions from
noncontrolling interests as a result of the 2013 sale of
the Company’s interest in CP Venture Five LLC; and
–
Increase of $19.9 million in preferred stock redemptions.
Net cash used in financing activities increased $1.1 billion
between 2013 and 2012 due to the following:
–
–
Increase of $826.2 million from the issuance of
common stock;
Increase of $380.5 million from new debt, net
of repayments;
– Decrease of $74.8 million from the redemption of
preferred shares;
– Decrease of $9.9 million due to an increase of distributions
to noncontrolling interests as a result of the sale of the
Company’s interest in CP Venture Five LLC; and
– Decrease of $8.4 million due to an increase in common
dividends paid related to the increase in common
shares outstanding.
c Ap i t Al ex p e nDi t u r e s
The Company incurs costs related to its real estate assets
that include acquisition of properties, development of new
properties, redevelopment of existing or newly purchased
properties, leasing costs for new or replacement tenants and
ongoing property repairs and maintenance.
Capital expenditures for assets the Company develops
or acquires and then holds and operates are included in
the property acquisition, development, and tenant asset
expenditures line item within investing activities on the
statements of cash flows. Amounts accrued are removed
from the table below (accrued capital adjustment) to
show the components of these costs on a cash basis.
Components of costs included in this line item for the years
ended December 31, 2014, 2013 and 2012 are as follows
(in thousands):
Acquisition of property
Projects under development
Operating properties—leasing costs
Operating properties—building improvements
Land held for investment
Capitalized interest
Capitalized salaries
Accrued capital adjustment
2014
2013
2012
$551,153
63,911
10,431
76,296
—
2,535
6,821
(404)
$1,470,147
16,829
14,594
20,726
—
518
5,230
(1,781)
$ 63,562
13,387
20,179
4,499
480
407
1,515
1,040
Total property acquisition, development and tenant asset expenditures
$710,743
$1,526,263
$105,069
Capital expenditures decreased $815.5 million between
2014 and 2013 mainly due to decreased acquisition activity.
In 2014, the Company acquired Fifth Third Center and
Northpark Town Center. In 2013, the Company acquired
Post Oak Central, 816 Congress Avenue, Greenway Plaza,
and 777 Main. In addition, the Company was constructing
Colorado Tower and commenced construction on Research
Park V in 2014, causing an increase in projects under
development. Leasing costs, as well as some of the tenant
improvements and capitalized personnel costs, are a function
of the number and size of executed new and renewed leases,
which generally increased in 2014 due to the 2013 and 2014
acquisition activity. The amount of tenant improvements
and leasing costs on a per square foot basis was $5.71 for
2014, but varies by lease and by market. Given the level of
expected leasing and renewal activity in future periods and
the 2013 and 2014 acquisitions, management anticipates
future tenant improvement and leasing costs to be greater
than those experienced in 2014.
31
2014 ANNUAL REPORT cousins properties incorporated
Dividends. The Company paid common and preferred
dividends of $64.5 million, $37.2 million, and $31.7 million
in 2014, 2013 and 2012, respectively, which it funded with
cash provided by operating activities. The Company expects
to fund its quarterly distributions to common and preferred
stockholders with cash provided by operating activities,
proceeds from investment property sales, distributions from
unconsolidated joint ventures and indebtedness, if necessary.
On a quarterly basis, the Company reviews the amount of
the common dividend in light of current and projected future
cash flows from the sources noted above and also considers
the requirements needed to maintain its REIT status. In
addition, the Company has certain covenants under its
Credit Facility which could limit the amount of dividends
paid. In general, dividends of any amount can be paid as
long as leverage, as defined in the facility, is less than 60%
and the Company is not in default under its facility. Certain
conditions also apply in which the Company can still pay
dividends if leverage is above that amount. The Company
routinely monitors the status of its dividend payments in
light of the Credit Facility covenants. In the first quarter of
2014, the Company increased the quarterly dividend on its
common stock from $0.045 per share to $0.075 per share.
e F Fe c t s oF inFlA t i o n
The Company attempts to minimize the effects of inflation
on income from operating properties by providing periodic
fixed-rent increases or increases based on the Consumer Price
Index and/or pass-through of certain operating expenses of
properties to tenants or, in certain circumstances, rents tied
to tenants’ sales.
Off Balance Sheet Arrangements
General. The Company has a number of off balance sheet
joint ventures with varying structures, as described in note 5
of notes to consolidated financial statements. Most of the
joint ventures in which the Company has an interest are
involved in the ownership and/or development of real estate.
A venture will fund capital requirements or operational
needs with cash from operations or financing proceeds, if
possible. If additional capital is deemed necessary, a venture
may request a contribution from the partners, and the
Company will evaluate such request. Except as previously
discussed, based on the nature of the activities conducted in
these ventures, management cannot estimate with any degree
of accuracy amounts that the Company may be required to
fund in the short or long-term. However, management does
not believe that additional funding of these ventures will
have a material adverse effect on its financial condition or
results of operations.
Debt. At December 31, 2014, the Company’s unconsolidated
joint ventures had aggregate outstanding indebtedness to
third parties of $395.0 million. These loans are generally
mortgage or construction loans, most of which are non-
recourse to the Company, except as described below. In
addition, in certain instances, the Company provides “non-
recourse carve-out guarantees” on these non-recourse loans.
Certain of these loans have variable interest rates, which
creates exposure to the ventures in the form of market risk
to interest rate changes. At December 31, 2014, $2.7 million
of the $12.7 million in recourse loans at unconsolidated joint
ventures were recourse to the Company.
The Company guarantees repayment of up to $8.6 million
of the EP II construction loan, which has a maximum
amount available of $46.0 million. At December 31, 2014,
the Company guaranteed $8.6 million based on amounts
outstanding as of that date under this loan. This guarantee
may be reduced and/or eliminated based on achievement of
certain criteria.
ITeM 7a.
Q u a nT I T a T I Ve a nD Q u a lI T
a b o uT M aR KeT RIsK
a T I Ve DIs c l o s uRe
The Company’s primary exposure to market risk results from
its debt, which bears interest at both fixed and variable rates.
The Company mitigates this risk by limiting its debt exposure
in total and its maturities in any one year and weighting
more towards fixed-rate, non-recourse debt compared to
recourse, variable-rate debt in its portfolio. The fixed rate
debt obligations limit the risk of fluctuating interest rates,
and generally are mortgage loans secured by certain of the
Company’s real estate assets. The Company does not have
consolidated fixed-rate mortgage debt maturing in 2015 and
has only one such mortgage maturing in 2016 in the amount
of $14.0 million. The Company, therefore, does not have
significant exposure for the refinancing of its mortgage debt
in the near term. At December 31, 2014, the Company had
$652.1 million of fixed rate debt outstanding at a weighted
average interest rate of 4.11%. At December 31, 2013, the
Company had $412.4 million of fixed rate debt outstanding
at a weighted average interest rate of 5.24%. The amount
of fixed-rate debt outstanding increased and the weighted
average interest rate decreased from 2013 to 2014 as a
result of the Company entering into a $85.0 million non-
recourse mortgage note payable secured by 816 Congress
at a fixed interest rate of 3.75%. In addition, the Company
effectively sold 50% of its interest in Terminus 100 to a third
party. Based upon the ownership and management structure
of the joint venture that owns Terminus 100 after these
transactions, the Company accounts for its investment in this
entity under the equity method and no longer consolidates
32
cousins properties incorporated 2014 ANNUAL REPORT
the Terminus 100 mortgage note, which has a fixed rate
of 5.25%. See note 8 of the notes to consolidated financial
statements included in this Annual Report on Form 10-K for
additional information regarding 2014 debt activity.
At December 31, 2014, the Company had $140.2 million of
variable rate debt outstanding, which consisted of the Credit
Facility at a weighted average interest rate of 1.25%. As of
December 31, 2013, the variable rate debt consisted primarily
of a the credit facility, which had $40 million outstanding
at an interest rate of 1.67%. Borrowings under the Credit
Facility increased in 2014 due to the cash outflow resulting
from the acquisition of several real estate assets. Based on
the Company’s average variable rate debt balances in 2014,
interest incurred would have increased by $1.3 million in
2014 if these interest rates had been 1% higher.
The following table summarizes the Company’s market risk
associated with notes payable as of December 31, 2014. It
includes the principal maturing, an estimate of the weighted
average interest rates on those expected principal maturity
dates and the fair values of the Company’s fixed and variable
rate notes payable. Fair value was calculated by discounting
future principal payments at estimated rates at which
similar loans could have been obtained at December 31,
2014. The information presented below should be read in
conjunction with note 8 of notes to consolidated financial
statements included in this Annual Report on Form 10-K.
(The Company did not have a significant level of notes
receivable at December 31, 2014, and the table does not
include information related to notes receivable.)
($ in thousands)
2015
2016
2017
2018
2019
Thereafter
Total
Notes Payable:
Fixed Rate
Average Interest Rate
Variable Rate
Average Interest Rate (1)
$ 8,825
4.87%
$ 24,095
5.21%
$
— $
—
— $
—
$ 138,195
6.23%
—
—
$ 105,734
3.37%
—
—
$
$
9,447
3.60%
$ 140,200
1.25%
$ 365,848
3.44%
$
$ 652,144
4.11%
— $ 140,200
1.25%
—
(1) Interest rates on variable rate notes payable are equal to the variable rates in effect on December 31, 2014.
ITeM 8 . f In a n cIa l s T
a TeMe nT
s a nD suP Pl eMe nT
aR y D a T a
The consolidated financial statements, notes to consolidated
financial statements, and report of independent registered
public accounting
included on pages F-1
through F-31.
firm are
Certain components of quarterly net income (loss) available
to common stockholders disclosed below differ from those
as reported on the Company’s respective quarterly reports
on Form 10-Q. As discussed in notes 2 and 3 of notes to
consolidated financial statements, gains and losses from
the disposition of certain real estate assets and the related
historical operating results were reclassified as discontinued
operations for all applicable periods presented. Additionally,
impairment losses were recorded in certain quarters during
both 2014 and 2013, as discussed in note 15 of notes to
consolidated financial statements included in this Annual
Report on Form 10-K. The following selected quarterly
financial information (unaudited) for the years ended
December 31, 2014 and 2013 should be read in conjunction
with the consolidated financial statements and notes thereto
included herein (in thousands, except per share amounts):
2014
Revenues
Income from unconsolidated joint ventures
Gain on sale of investment properties
Income (loss) from continuing operations
Discontinued operations
Net income
Net income attributable to controlling interest
Net income (loss) available to common stockholders
Basic and diluted net income (loss) per common share
Quarters
First
Second
Third
Fourth
(Unaudited)
$81,725
1,287
161
(121)
7,255
7,134
6,979
5,202
0.03
$84,505
2,027
1,327
2,034
580
2,614
2,485
(2,223)
(0.01)
$ 89,098
2,030
81
6,073
13,341
19,414
19,322
19,322
0.09
$ 106,055
5,924
10,967
23,864
(18)
23,846
23,218
23,218
0.11
33
2014 ANNUAL REPORT cousins properties incorporated 2013
Revenues
Impairment losses
Income from unconsolidated joint ventures
Gain (loss) on sale of investment properties
Income from continuing operations
Discontinued operations
Net income
Net income attributable to controlling interest
Net income (loss) available to common stockholders
Basic and diluted net income (loss) per common share
Quarters
First
Second
Third
Fourth
(Unaudited)
$38,266
—
1,652
57,153
56,011
897
56,904
56,397
53,170
0.51
$42,251
—
1,132
406
46
773
819
307
(5,579)
(0.05)
$ 50,434
—
63,078
3,801
55,434
9,603
65,037
61,158
59,381
0.36
$ 79,520
—
1,463
(72)
550
3,515
4,069
3,902
2,125
0.01
The above per share quarterly information does not sum
to full year per share information due to rounding. Other
financial statements and financial statement schedules
required under Regulation S-X are filed pursuant to item 15
of part IV of this report.
During 2014 and 2013, the Company’s quarterly results
varied as a result of the timing of the sales of assets, which
generated gains within quarters of each year. These gains were
recorded within gain (loss) on sale of investment properties,
discounted operations and income from unconsolidated
joint ventures.
ITeM 9 .
ch a nGe s In a nD DIs a
G Re eMe nT
s W I Th
a c c o u nT a nT s o n a c c o u nT InG a nD
f In a n cIa l DIs c l o s uRe
Not applicable.
ITeM 9a. c
o nT Ro l s a nD PRo c eDuRe s
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in
our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SEC’s
rules and forms, and that such information is accumulated and
communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. Management
necessarily applied its judgment in assessing the costs and
benefits of such controls and procedures, which, by their
nature, can provide only reasonable assurance regarding
management’s control objectives.
As of the end of the period covered by this annual report, we
carried out an evaluation, under the supervision and with the
participation of management, including the Chief Executive
Officer along with the Chief Financial Officer, of the
effectiveness, design and operation of our disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)). Based upon the foregoing, the Chief Executive
Officer along with the Chief Financial Officer concluded
that our disclosure controls and procedures were effective.
In addition, based on such evaluation we have identified
no changes in our internal control over financial reporting
that occurred during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
34
cousins properties incorporated 2014 ANNUAL REPORT
Report of Management on Internal Control over
Financial Reporting Management of the Company
is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is
defined in Exchange Act Rule 13a-15(f). Internal control
over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external reporting purposes in accordance with accounting
principles generally accepted in the United States (“GAAP”).
Internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with GAAP and that our receipts
and expenditures are being made only in accordance with
authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on
the financial statements.
Management, under the supervision of and with the
participation of the Chief Executive Officer and the Chief
Financial Officer, assessed the effectiveness of our internal
control over financial reporting as of December 31, 2014.
The framework on which the assessment was based is
described in “Internal Control – Integrated Framework”
(2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this assessment, we
concluded that we maintained effective internal control over
financial reporting as of December 31, 2014. Deloitte &
Touche, our independent registered public accounting firm,
issued an opinion on the effectiveness of our internal control
over financial reporting as of December 31, 2014, which
follows this report of management.
35
2014 ANNUAL REPORT cousins properties incorporated r e p o r t oF i nDe p e nDe n t r e g i s t e r eD p uBl i c Acco u n t i n g Fi r m
To the Board of Directors and Stockholders of
Cousins Properties Incorporated
Atlanta, Georgia
We have audited the internal control over financial reporting
of Cousins Properties Incorporated and subsidiaries (the
“Company”) as of December 31, 2014, based on criteria
established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission. The Company’s management
is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in the
accompanying Report of Management on Internal Control
over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards
of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for
our opinion.
A company’s internal control over financial reporting is
a process designed by, or under the supervision of, the
company’s principal executive and principal financial
officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and
other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
timely
reasonable assurance regarding prevention or
detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion
or improper management override of controls, material
misstatements due to error or fraud may not be prevented
or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk
that the controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting
as of December 31, 2014, based on the criteria established
in Internal Control - Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the
Treadway Commission.
We have also audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United
States), the consolidated financial statements and financial
statement schedule as of and for the year ended December 31,
2014 of the Company and our report dated February 12,
2015 expressed an unqualified opinion on those consolidated
financial statements and financial statement schedule and
included an explanatory paragraph regarding the Company’s
change in method of accounting for and disclosure of
discontinued operations and disposals of components of an
entity due to the adoption of a new accounting standard.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 12, 2015
36
cousins properties incorporated 2014 ANNUAL REPORT ITeM 9b. o Th eR I n f oR Ma
T Io n
None.
P aR T I I I
ITeM 1 0 .
DI Re cT
c oR PoRa
oRs ,
e Xe c uT I Ve of fIc eRs a nD
Te G o VeRn a n c e
The information required by Items 401, 405, 406 and 407
of Regulation S-K is presented in item X in part I above
and is included under the captions “Proposal 1 - Election
of Directors” and “Section 16(a) Beneficial Ownership
Reporting Compliance” in the Proxy Statement relating to
the 2015 Annual Meeting of the Registrant’s Stockholders,
and is incorporated herein by reference. The Company has a
Code of Business Conduct and Ethics (the “Code”) applicable
to its Board of Directors and all of its employees. The Code
is publicly available on the “Investor Relations” page of
its website site at www.cousinsproperties.com. Section 1
of the Code applies to the Company’s senior executive
and financial officers and is a “code of ethics” as defined
by applicable SEC rules and regulations. If the Company
makes any amendments to the Code other than technical,
administrative or other non-substantive amendments, or
grants any waivers, including implicit waivers, from a
provision of the Code to the Company’s senior executive or
financial officers, the Company will disclose on its website
the nature of the amendment or waiver, its effective date and
to whom it applies. There were no amendments or waivers
during 2014.
ITeM 1 1 .
e Xe c uT I Ve c
oM Pe n s a
T Io n
The information required by Items 402 and 407 of Regulation
S-K is included under the captions “Executive Compensation”
“Director Compensation” and "Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement
relating to the 2015 Annual Meeting of the Registrant’s
Stockholders is incorporated herein by reference.
ITeM 1 2 .
se c uR I Ty o Wn eRs hI P o f ceR T
aIn be n e fIcIa l
o Wn eRs a nD M a n a
s T o cKh o lDeR M a
GeMe nT a nD R e l a
TeD
T TeRs
The information under the captions “Beneficial Ownership
of Common Stock” and "Equity Compensation Plan
Information" in the Proxy Statement relating to the
2015 Annual Meeting of the Registrant’s Stockholders is
incorporated herein by reference.
37
2014 ANNUAL REPORT cousins properties incorporated
ITeM 1 3 .
ceR T
aIn R e l a
TRa n s a cT Io n s ,
T Io n s hI Ps a nD R e l a
TeD
a nD DI Re cT
oR I nDePe nDe n c e
The information under the caption “Certain Transactions”
and “Director Independence” in the Proxy Statement relating
to the 2015 Annual Meeting of the Registrant’s Stockholders
is incorporated herein by reference.
ITeM 1 4 .
PR In cI P
a l a c c o u nT a nT fe e s a nD seR V Ic e s
The information under the caption “Summary of Fees to
Independent Registered Public Accounting Firm” in the
Proxy Statement relating to the 2015 Annual Meeting of the
Registrant’s Stockholders has fee information for fiscal years
2014 and 2013 and is incorporated herein by reference.
P aR T I V
ITeM 1 5 .
e XhIbI T
s a nD f In a n cIa l s T
a TeMe nT sc h eDu l e s
(a) 1. Financial Statements
A. The following consolidated financial statements of the Registrant, together with the applicable report of
independent registered public accounting firm, are filed as a part of this report:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets—December 31, 2014 and 2013
Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013, and 2012
Consolidated Statements of Equity for the Years Ended December 31, 2014, 2013, and 2012
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
The following financial statement schedule for the Registrant is filed as a part of this report:
A. Schedule III—Real Estate and Accumulated Depreciation—December 31, 2014
Page Number
F-2
F-3
F-4
F-5
F-6
F-7
Page Number
S-1 through S-4
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.
38
cousins properties incorporated 2014 ANNUAL REPORT
(b) Exhibits
2.1
2.2
2.3
2.4
2.5
2.6
3.1
3.1.1
3.1.2
3.1.3
3.1.4
3.2
First Amendment to Membership Interest Purchase Agreement between 3280 Peachtree III LLC and MSREF VII Global
U.S. Holdings (FRC), L.L.C., dated January 30, 2013, filed as Exhibit 2.2 to the Registrant’s Form 8-K/A filed on
March 26, 2013, and incorporated herein by reference. (Schedules and exhibits omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities
and Exchange Commission upon request.)
Sale and Contribution Agreement between Cousins Properties Incorporated, 3280 Peachtree I LLC, 3280 Peachtree III LLC
and Terminus Acquisition Company LLC, dated February 4, 2013, filed as Exhibit 2.3 to the Registrant’s Form 8-K/A filed
on March 26, 2013, and incorporated herein by reference. (Schedules and exhibits omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities
and Exchange Commission upon request.)
Purchase and Sale Agreement (Post Oak Central) between Crescent POC Investors, L.P. and Cousins POC I LLC, dated
February 4, 2013, filed as Exhibit 2.4 to the Registrant’s Form 8-K/A filed on March 26, 2013, and incorporated herein by
reference. (Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish
supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.)
Purchase and Sale Contract, dated as of July 19, 2013, by and between Crescent Crown Greenway Plaza SPV, LLC,
Crescent Crown Seven Greenway SPV, LLC, Crescent Crown Nine Greenway SPV, LLC, and Crescent Crown Edloe
Garage SPV, LLC and Cousins Properties Incorporated, filed as Exhibit 2.1 to the Registrant’s Current Report on Form
8-K filed July 29, 2013 and incorporated herein by reference. (Schedules and exhibits omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Securities
and Exchange Commission upon request.)
Purchase and Sale Contract, dated as of July 19, 2013, by and between Crescent One SPV, LLC and Cousins Properties
Incorporated, filed as Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed July 29, 2013 and incorporated
herein by reference. (Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to
furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.)
Purchase and Sale Contract for Northpark Town Center, dated as of August 1, 2014, by and between FulcoProp400LLC and
FulcoProp56 LLC and Cousins Acquisitions Entity, LLC, a wholly owned subsidiary of the Registrant, filed as Exhibit 2.1
to the Registrant’s Form 10-Q for the quarter ended September 30, 2014 and incorporated herein by reference. (Schedules
and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy
of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.)
Restated and Amended Articles of Incorporation of the Registrant, as amended August 9, 1999, filed as Exhibit 3.1 to the
Registrant’s Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference.
Articles of Amendment to Restated and Amended Articles of Incorporation of the Registrant, as amended July 22, 2003,
filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on July 23, 2003, and incorporated herein
by reference.
Articles of Amendment to Restated and Amended Articles of Incorporation of the Registrant, as amended December 15, 2004,
filed as Exhibit 3(a)(i) to the Registrant’s Form 10-K for the year ended December 31, 2004, and incorporated herein
by reference.
Articles of Amendment to Restated and Amended Articles of Incorporation of the Registrant, dated May 4, 2010, filed as
Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 10, 2010, and incorporated herein by reference.
Articles of Amendment to Restated and Amended Articles of Incorporation of the Registrant, as amended May 9, 2014, filed
as Exhibit 3.1.4 to the Registrant’s Form 10-Q for the quarter ended June 30, 2014, and incorporated herein by reference.
Bylaws of the Registrant, as amended and restated December 4, 2012, filed as Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K filed on December 7, 2012, and incorporated herein by reference.
39
2014 ANNUAL REPORT cousins properties incorporated 4(a)
Dividend Reinvestment Plan as restated as of March 27, 1995, filed in the Registrant’s Form S-3 dated March 27, 1995,
and incorporated herein by reference.
10(a)(i)*
Cousins Properties Incorporated 1999 Incentive Stock Plan, as amended and restated, approved by the Stockholders on
May 6, 2008, filed as Annex B to the Registrant’s Proxy Statement dated April 13, 2008, and incorporated herein by reference.
10(a)(ii)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan, filed as Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K dated December 9, 2005, and incorporated herein by reference.
10(a)(iii)*
Amendment No. 1 to Cousins Properties Incorporated 2005 Restricted Stock Unit Plan, filed as Exhibit 10(a)(iii) to the
Registrant’s Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference.
10(a)(iv)*
10(a)(v)*
Cousins Properties Incorporated 1999 Incentive Stock Plan – Form of Key Employee Non-Incentive Stock Option and Stock
Appreciation Right Certificate, amended effective December 6, 2007, filed as Exhibit 10(a)(vi) to the Registrant’s Form
10-K for the year ended December 31, 2007, and incorporated herein by reference.
Cousins Properties Incorporated 1999 Incentive Stock Plan – Form of Key Employee Incentive Stock Option and Stock
Appreciation Right Certificate, amended effective December 6, 2007, filed as Exhibit 10(a)(vii) to the Registrant’s Form
10-K for the year ended December 31, 2007, and incorporated herein by reference.
10(a)(vi)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan – Form of Restricted Stock Unit Certificate, filed as Exhibit
10.3 to the Registrant’s Current Report on Form 8-K dated December 11, 2006, and incorporated herein by reference.
10(a)(vii)*
Amendment No. 2 to the Cousins Properties Incorporated 2005 Restricted Stock Unit Plan, filed as Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed on August 18, 2006, and incorporated herein by reference.
10(a)(viii)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan – Form of Restricted Stock Unit Certificate for Directors,
filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on August 18, 2006, and incorporated herein
by reference.
10(a)(ix)*
Form of Change in Control Severance Agreement, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed on August 31, 2007, and incorporated herein by reference.
10(a)(x)*
Amendment No. 1 to the Cousins Properties Incorporated 1999 Incentive Stock Plan, filed as Exhibit 10(a)(ii) to the
Registrant’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by reference.
10(a)(xi)*
10(a)(xii)*
Amendment No. 4 to the Cousins Properties Incorporated 2005 Restricted Stock Unit Plan dated September 8, 2008,
filed as Exhibit 10(a)(xiii) to the Registrant’s Form 10-K for the year ended December 31, 2008, and incorporated herein
by reference.
Amendment No. 5 to the Cousins Properties Incorporated 2005 Restricted Stock Unit Plan dated February 16, 2009,
filed as Exhibit 10(a)(xiv) to the Registrant’s Form 10-K for the year ended December 31, 2008, and incorporated herein
by reference.
10(a)(xiii)*
Form of Amendment Number One to Change in Control Severance Agreement filed as Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K dated May 12, 2009, and incorporated herein by reference.
10(a)(xiv)*
Amendment Number 6 to the Cousins Properties Incorporated 2005 Restricted Stock Unit Plan filed as Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K dated May 12, 2009, and incorporated herein by reference.
10(a)(xv)*
Form of Cousins Properties Incorporated Cash Long Term Incentive Award Certificate filed as Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K dated May 12, 2009, and incorporated herein by reference.
10(a)(xvi)*
Cousins Properties Incorporated 2009 Incentive Stock Plan, as approved by the Stockholders on May 12, 2009, filed as
Annex B to the Registrant’s Proxy Statement dated April 3, 2009, and incorporated herein by reference.
40
cousins properties incorporated 2014 ANNUAL REPORT 10(a)(xvii)*
Cousins Properties Incorporated Director Non-Incentive Stock Option and Stock Appreciation Right Certificate under the
Cousins Properties Incorporated 2009 Incentive Stock Plan, filed as Exhibit 10.2 to the Registrant’s Form 10-Q for the
quarter ended June 30, 2009, and incorporated herein by reference.
10(a)(xviii)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan – Form of Restricted Stock Unit Certificate for 2010-2012
Performance Period filed as Exhibit 10(a)(xx) to the Registrant’s Form 10-K for the year ended December 31, 2009, and
incorporated herein by reference.
10(a)(xix)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Key Employee Non-Incentive Stock Option Certificate
filed as Exhibit 10(a)(xxi) to the Registrant’s Form 10-K for the year ended December 31, 2009, and incorporated herein
by reference.
10(a)(xx)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Stock Grant Certificate filed as Exhibit 10(a)(xxii) to
the Registrant’s Form 10-K for the year ended December 31, 2009, and incorporated herein by reference.
10(a)(xxi)*
Form of New Change in Control Severance Agreement, filed as Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on January 7, 2011, and incorporated herein by reference.
10(a)(xxii)*
Form of Amendment Number Two to Change in Control Severance Agreement, filed as Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K filed on January 7, 2011, and incorporated herein by reference.
10(a)(xxiii)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Stock Grant Certificate filed as Exhibit 10(a)(xxv) to
the Registrant’s Form 10-K for the year ended December 31, 2010, and incorporated herein by reference.
10(a)(xxiv)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Key Employee Non-Incentive Stock Option Certificate
filed as Exhibit 10(a)(xxvi) to the Registrant’s Form 10-K for the year ended December 31, 2010, and incorporated herein
by reference.
10(a)(xxv)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Key Employee Incentive Stock Option Certificate
filed as Exhibit 10(a)(xxvii) to the Registrant’s Form 10-K for the year ended December 31, 2010, and incorporated herein
by reference.
10(a)(xxvi)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan – Form of Restricted Stock Unit Certificate for 2011-2013
Performance Period filed as Exhibit 10(a)(xxviii) to the Registrant’s Form 10-K for the year ended December 31, 2010, and
incorporated herein by reference.
10(a)(xxvii)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan – Form of Restricted Stock Unit Certificate for 2012-2016
Performance Period filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 3, 2012, and
incorporated herein by reference.
10(a)(xxviii)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Key Employee Incentive Stock Option Certificate
filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 3, 2012, and incorporated herein
by reference.
10(a)(xxix)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan – Form of Restricted Stock Unit Certificate for 2012-2016
Performance Period, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 3, 2012 and
incorporated herein by reference.
10(a)(xxx)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Stock Grant Certificate, filed as Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed on February 3, 2012 and incorporated herein by reference.
10(a)(xxxi)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan — Form of Restricted Stock Unit Certificate for 2014-2016
Performance Period, filed as Exhibit 10(a)(xxxi) to the Registrant’s Form 10-K for the year ended December 31, 2013, and
incorporated herein by reference.
10(a)(xxxii)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Stock Grant Certificate, filed as Exhibit 10(a)(xxxii)
to the Registrant’s Form 10-K for the year ended December 31, 2013, and incorporated herein by reference.
10(a)(xxxiii)*†
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan - Form of Restricted Stock Unit Certificate for 2015-2017
Performance period.
41
2014 ANNUAL REPORT cousins properties incorporated 10(d)
10(e)
10(f)
10(g)
10(h)
10(i)
11
21†
23†
31.1†
31.2†
32.1†
32.2†
101†
Loan Agreement dated as of August 31, 2007, between Cousins Properties Incorporated, a Georgia corporation, as
Borrower and JP Morgan Chase Bank, N.A., a banking association chartered under the laws of the United States of
America, as Lender, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 7, 2007, and
incorporated herein by reference.
Loan Agreement dated as of October 16, 2007, between 3280 Peachtree I LLC, a Georgia limited liability corporation,
as Borrower and The Northwestern Mutual Life Insurance Company, as Lender, filed as Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed October 17, 2007, and incorporated herein by reference.
Contribution and Formation Agreement between Cousins Properties Incorporated, CP Venture Three LLC and The
Prudential Insurance Company of America, including Exhibit U thereto, filed as Exhibit 10.1 to the Registrant’s Form 8-K
filed on May 4, 2006, and incorporated herein by reference.
Form of Indemnification Agreement, filed as Exhibit 10.1 to the Registrant’s Form 8-K dated June 18, 2007, and
incorporated herein by reference.
Third Amended and Restated Credit Agreement, dated as of May 28, 2014, among Cousins Properties Incorporated as
the Borrower (and the Borrower Parties, as defined, and the Guarantors, as defined); JPMorgan Chase Bank, N.A., as
Syndication Agent and an L/C Issuer; Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C
Issuer; SunTrust Bank as Documentation Agent and an L/C Issuer; Wells Fargo Bank, N.A., PNC Bank, N. A., U.S.
Bank National, N. A., Citizens Bank, N.A. and Morgan Stanley Senior Funding, Inc. as Co-Documentation Agents; The
Northern Trust Company, First Tennessee Bank N.A. and Atlantic Capital Bank as Other Lender Parties; J.P. Morgan
Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Inc. and SunTrust Robinson Humphrey, Inc. as Joint Lead Arrangers
and Joint Bookrunners, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 28, 2014, and
incorporated herein by reference.
Loan Agreement dated as of July 29, 2013 among Cousins Properties Incorporated, as the Borrower, certain consolidated
entities of the Borrower from time to time party thereto, as the Guarantors, JPMorgan Chase Bank, N.A., as Administrative
Agent, Bank of America, N.A., as Syndication Agent, and the other Lenders party thereto, filed as Exhibit 10.1 to the
Registrant’s Amendment No. 1 to Current Report on Form 8-K filed July 29, 2013 and incorporated herein by reference.
Computation of Per Share Earnings. Data required by SFAS No. 128, “Earnings Per Share,” is provided in note 17 of notes
to consolidated financial statements included in this Annual Report on Form 10-K, and incorporated herein by reference.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
The following financial information for the Registrant, formatted in XBRL (Extensible Business Reporting Language): (i)
the condensed consolidated balance sheets, (ii) the condensed consolidated statements of operations, (iii) the condensed
consolidated statements of equity, (iv) the condensed consolidated statements of cash flows, and (v) the notes to condensed
consolidated financial statements.
*
†
Indicates a management contract or compensatory plan or arrangement.
Filed herewith.
42
cousins properties incorporated 2014 ANNUAL REPORT s i g nA t u r e s
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.
Dated: February 12, 2015
Cousins Properties Incorporated
(Registrant)
BY:
/s/ Gregg D. Adzema
Gregg D. Adzema
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature
Capacity
/s/ Lawrence L. Gellerstedt III
Chief Executive Officer,
Lawrence L. Gellerstedt III
/s/ Gregg D. Adzema
Gregg D. Adzema
/s/ John D. Harris, Jr.
John D. Harris, Jr.
/s/ Tom G. Charlesworth
Tom G. Charlesworth
/s/ James D. Edwards
James D. Edwards
/s/ Lillian C. Giornelli
Lillian C. Giornelli
/s/ S. Taylor Glover
S. Taylor Glover
/s/ James H. Hance, Jr.
James H. Hance, Jr.
/s/ Donna W. Hyland
Donna W. Hyland
/s/ R. Dary Stone
R. Dary Stone
President and Director
(Principal Executive Officer)
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date
February 12, 2015
February 12, 2015
Senior Vice President, Chief
February 12, 2015
Accounting Officer, Treasurer and Assistant Secretary
(Principal Accounting Officer)
Director
Director
Director
February 12, 2015
February 12, 2015
February 12, 2015
Chairman of the Board of Directors
February 12, 2015
Director
Director
Director
February 12, 2015
February 12, 2015
February 12, 2015
43
2014 ANNUAL REPORT cousins properties incorporated
This page intentionally left blank.
InDeX T
o c o n s o lI D
a TeD fIn a n cIa l s
T a TeMe nT
s
Cousins Properties Incorporated
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2014 and 2013
Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013, and 2012
Consolidated Statements of Equity for the Years Ended December 31, 2014, 2013, and 2012
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
f-1
2014 ANNUAL REPORT cousins properties incorporated r e p o r t oF i nDe p e nDe n t r e g i s t e r eD p uBl i c Acco u n t i n g Fi r m
To the Board of Directors and Stockholders of
Cousins Properties Incorporated:
Atlanta, Georgia
We have audited the accompanying consolidated balance
sheets of Cousins Properties Incorporated and subsidiaries
(the “Company”) as of December 31, 2014 and 2013,
and the related consolidated statements of operations,
stockholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2014. Our audits
also included the financial statement schedules listed in the
Index at Item 15. These financial statements and financial
statement schedules are the responsibility of the Company’s
management. Our responsibility is to express an opinion on
the financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United
States). 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, such consolidated financial statements
present fairly, in all material respects, the financial position
of Cousins Properties Incorporated and subsidiaries as
of December 31, 2014 and 2013, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 2014, in conformity
with accounting principles generally accepted in the United
States of America. Also, in our opinion, such financial
statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set
forth therein.
As discussed in Note 1 to the consolidated financial
statements, during the second quarter of 2014, the Company
changed its method of accounting for and disclosure of
discontinued operations and disposals of components of
an entity due to the adoption of Accounting Standards
Update 2014-08, “Reporting Discontinued Operations and
Disclosures of Disposals of Components of an Entity”.
We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board
(United States), the Company’s
internal control over
financial reporting as of December 31, 2014, based on
the criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report
dated February 12, 2015 expressed an unqualified opinion
on the Company’s internal control over financial reporting.
s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 12, 2015
f-2
cousins properties incorporated 2014 ANNUAL REPORT CO U S I N S P R O P E R T I E S I N CO R P O R AT E D A N D S U B S I D I A R I E S
CO N S O L I DAT E D B A L A N C E S H E E T S
( i n t h o u s a n d s , exce p t s h a re a n d p e r s h a re a m o u n t s)
ASSETS:
REAL ESTATE ASSETS:
Operating properties, net of accumulated depreciation of $324,543 and $235,707 in 2014
and 2013, respectively
Projects under development
Land
Operating properties and related assets held for sale,
net of accumulated depreciation and amortization of $21,444 in 2013
Cash and cash equivalents
Restricted cash
Notes and accounts receivable, net of allowance for doubtful accounts of $1,643 and $1,827 in 2014 and
2013, respectively
Deferred rents receivable
Investment in unconsolidated joint ventures
Intangible assets, net of accumulated amortization of $76,050 and $37,544 in 2014 and 2013, respectively
Other assets
Total assets
LIABILITIES:
Notes payable
Accounts payable and accrued expenses
Deferred income
Intangible liabilities, net of accumulated amortization of $16,897 and $6,323 in 2014 and 2013, respectively
Other liabilities
Total liabilities
Commitments and contingencies
EQUITY:
STOCKHOLDERS’ INVESTMENT:
Preferred stock, 20,000,000 shares authorized, $1 par value:
Preferred stock, 7.50% Series B cumulative redeemable preferred stock, $1 par value, $25 liquidation
preference, 20,000,000 shares authorized, -0- and 3,791,000 shares issued and outstanding in 2014
and 2013, respectively
Common stock, $1 par value, 350,000,000 and 250,000,000 shares authorized, 220,082,610 and
193,236,454 shares issued in 2014 and 2013, respectively
Additional paid-in capital
Treasury stock at cost, 3,570,082 shares in 2014 and 2013
Distributions in excess of cumulative net income
Total stockholders’ investment
Nonredeemable noncontrolling interests
Total equity
Total liabilities and equity
See notes to consolidated financial statements.
December 31,
2014
2013
$ 2,181,684
91,615
21,646
2,294,945
$ 1,828,437
21,681
35,053
1,885,171
—
—
5,042
10,732
57,939
100,498
163,244
34,930
24,554
975
2,810
11,778
39,969
107,082
170,973
29,894
$ 2,667,330
$ 2,273,206
$ 792,344
86,668
23,277
70,020
21,563
993,872
—
$ 630,094
76,668
25,754
66,476
15,242
814,234
—
—
94,775
220,083
1,720,972
(86,840)
(180,757)
1,673,458
—
1,673,458
193,236
1,420,951
(86,840)
(164,721)
1,457,401
1,571
1,458,972
$ 2,667,330
$ 2,273,206
F-3
2014 ANNUAL REPORT cousins properties incorporated CO U S I N S P R O P E R T I E S I N CO R P O R AT E D A N D S U B S I D I A R I E S
CO N S O L I DAT E D S TAT E M E N T S O F O P E R AT I O N S
( I n t h o u s a n d s , exce p t p e r s h a re a m o u n t s)
REVENUES:
Rental property revenues
Fee income
Other
COSTS AND EXPENSES:
Rental property operating expenses
Reimbursed expenses
General and administrative expenses
Interest expense
Depreciation and amortization
Separation expenses
Acquisition and related costs
Other
Loss on extinguishment of debt
Income (loss) from continuing operations before taxes, unconsolidated joint ventures,
and sale of investment properties
Benefit (provision) for income taxes from operations
Income from unconsolidated joint ventures
Income from continuing operations before gain on sale of investment properties
Gain on sale of investment properties
Income from continuing operations
Income from discontinued operations:
Income from discontinued operations
Gain on sale from discontinued operations
Net income
Net income attributable to noncontrolling interests
Net income attributable to controlling interests
Preferred share original issuance costs
Dividends to preferred stockholders
Net income available to common stockholders
PER COMMON SHARE INFORMATION — BASIC AND DILUTED:
Income from continuing operations attributable to controlling interest
Income from discontinued operations
Net income available to common stockholders
Weighted average shares — basic
Weighted average shares — diluted
See notes to consolidated financial statements.
Year Ended December 31,
2014
2013
2012
$ 343,910
12,519
4,954
361,383
$ 194,420
10,891
5,430
210,741
$ 114,208
17,797
4,841
136,846
155,934
3,652
19,784
29,110
140,018
185
1,130
3,544
353,357
—
8,026
20
11,268
19,314
12,536
31,850
1,800
19,358
21,158
53,008
(1,004)
52,004
(3,530)
(2,955)
90,498
5,215
21,940
21,709
76,277
520
7,484
3,693
227,336
—
(16,595)
23
67,325
50,753
61,288
112,041
3,299
11,489
14,788
126,829
(5,068)
121,761
(2,656)
(10,008)
50,329
7,063
23,208
23,933
39,424
1,985
793
5,632
152,367
(94)
(15,615)
(91)
39,258
23,552
4,053
27,605
1,907
18,407
20,314
47,919
(2,191)
45,728
—
(12,907)
$ 45,519
$ 109,097
$ 32,821
$
$
0.12
0.10
0.22
204,216
204,460
$
$
0.66
0.10
0.76
144,255
144,420
$
$
0.12
0.20
0.32
104,117
104,125
F-4
cousins properties incorporated 2014 ANNUAL REPORT CO U S I N S P R O P E R T I E S I N CO R P O R AT E D A N D S U B S I D I A R I E S
CO N S O L I DAT E D S TAT E M E N T S O F E Q U I T Y
Ye a r s E n d e d D e ce m b e r 3 1 , 2 01 4 , 2 01 3 a n d 2 01 2
( I n t h o u s a n d s)
Preferred
Stock
Common
Stock
Additional
Paid-In
Capital
Treasury
Stock
Distributions
in Excess of
Cumulative
Net Income
Stockholders’
Investment
Nonredeemable
Noncontrolling
Interests
Total
Equity
BALANCE DECEMBER 31, 2011
$169,602 $107,272 $ 687,835 $(86,840)
$ (274,177) $ 603,692
$ 33,703 $ 637,395
Net income (loss)
Common stock issued pursuant to:
Director stock grants
Stock option exercises
Restricted stock grants, net of amounts
withheld for income taxes
Amortization of stock options and restricted
stock, net of forfeitures
Distribution to nonredeemable
noncontrolling interests
Contributions from nonredeemable
noncontrolling interests
Change in fair value of redeemable
noncontrolling interests
Preferred dividends
Common dividends
—
—
—
—
—
—
—
—
—
—
—
72
—
—
468
—
452
(659)
(136)
2,380
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
45,728
45,728
4,194
49,922
—
—
—
—
—
—
—
540
—
(207)
2,244
—
—
—
(12,907)
(18,748)
(12,907)
(18,748)
—
—
—
—
540
—
(207)
2,244
(15,286)
(15,286)
1,300
1,300
—
—
—
—
(12,907)
(18,748)
BALANCE DECEMBER 31, 2012
$169,602 $107,660 $ 690,024 $(86,840)
$ (260,104) $ 620,342
$ 22,611 $ 642,953
Net income
Common stock issued pursuant to:
Director stock grants
Restricted stock grants, net of amounts
withheld for income taxes
Amortization of stock options and restricted
stock, net of forfeitures
Distributions to nonredeemable
noncontrolling interests
Preferred dividends
Common dividends
—
—
—
—
—
—
—
—
50
30
—
494
(1,209)
(42)
1,940
—
—
—
—
—
—
—
—
—
—
—
—
—
121,761
121,761
5,000
126,761
—
—
—
—
544
(1,179)
1,898
—
—
—
—
(26,040)
(10,008)
(27,192)
(10,008)
(27,192)
—
—
544
(1,179)
1,898
(26,040)
(10,008)
(27,192)
BALANCE DECEMBER 31, 2013
$ 94,775 $193,236 $1,420,951 $(86,840)
$ (164,721) $1,457,401
$ 1,571 $1,458,972
Net income
Common stock issued pursuant to:
Director stock grants
Stock option exercises
Common stock offering, net of issuance costs
Restricted stock grants, net of amounts
withheld for income taxes
Amortization of stock options and restricted
stock, net of forfeitures
Distributions to noncontrolling interests
—
—
—
—
—
—
—
Redemption of preferred shares
(94,775)
Preferred dividends
Common dividends
—
—
—
55
48
—
598
(326)
26,700
295,196
53
(9)
—
—
—
—
(978)
2,001
—
3,530
—
—
—
—
—
—
—
—
—
—
—
—
52,004
52,004
1,004
53,008
—
—
—
—
—
—
(3,530)
(2,955)
653
(278)
321,896
(925)
1,992
—
(94,775)
(2,955)
(61,555)
(61,555)
—
—
—
—
—
(2,575)
—
—
—
653
(278)
321,896
(925)
1,992
(2,575)
(94,775)
(2,955)
(61,555)
BALANCE DECEMBER 31, 2014
$
— $220,083 $1,720,972 $(86,840)
$ (180,757) $1,673,458
$
— $1,673,458
See notes to consolidated financial statements.
F-5
2014 ANNUAL REPORT cousins properties incorporated CO U S I N S P R O P E R T I E S I N CO R P O R AT E D A N D S U B S I D I A R I E S
CO N S O L I DAT E D S TAT E M E N T S O F C A S H F LOWS
( I n t h o u s a n d s)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Impairment losses, including discontinued operations
Gain on sale of investment properties, including discontinued operations
Gain on sale of third party management and leasing business
Loss on extinguishment of debt, including discontinued operations
Depreciation and amortization, including discontinued operations
Amortization of deferred financing costs
Amortization of stock options and restricted stock, net of forfeitures
Effect of certain non-cash adjustments to rental revenues
Income from unconsolidated joint ventures
Operating distributions from unconsolidated joint ventures
Land and multi-family cost of sales, net of closing costs paid
Changes in other operating assets and liabilities:
Change in other receivables and other assets, net
Change in operating liabilities
Year Ended December 31,
2014
2013
2012
$ 53,008
$
126,829
$ 47,919
—
(31,894)
—
—
141,022
604
1,992
(30,039)
(11,268)
10,296
302
(644)
9,021
—
(68,200)
(4,577)
—
76,478
615
1,898
(11,660)
(67,325)
67,101
967
(9,619)
24,833
14,278
(15,001)
(7,459)
94
52,439
1,056
2,244
(3,938)
(39,258)
37,379
1,659
(851)
4,761
Net cash provided by operating activities
142,400
137,340
95,322
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment property sales
Proceeds from sale of third party management and leasing business
Property acquisition, development and tenant asset expenditures
Investment in unconsolidated joint ventures
Distributions from unconsolidated joint ventures
Collection of notes receivable
Change in notes receivable and other assets
Change in restricted cash
244,471
—
(710,743)
(18,342)
26,179
1,020
(2,839)
(1,361)
178,966
4,577
(1,526,263)
(11,922)
88,635
1,580
(1,655)
(111)
273,386
8,247
(105,069)
(6,619)
67,435
—
2,504
2,077
Net cash provided by (used in) investing activities
(461,615)
(1,266,193)
241,961
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility
Repayment of credit facility
Proceeds from other notes payable
Repayment of notes payable
Payment of loan issuance costs
Common stock issued, net of expenses
Common dividends paid
Preferred dividends paid
Redemption of preferred shares
Distributions to noncontrolling interests
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
764,575
(664,450)
85,068
(22,943)
(3,995)
321,845
(61,555)
(2,955)
(94,775)
(2,575)
365,075
(325,000)
304,275
(77,887)
(1,693)
826,233
(27,192)
(10,008)
(74,827)
(26,040)
417,900
(616,150)
113,026
(28,808)
(3,419)
—
(18,748)
(12,907)
—
(16,143)
318,240
952,936
(165,249)
(975)
975
(175,917)
176,892
172,034
7,599
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
— $
975
$ 176,892
See notes to consolidated financial statements.
F-6
cousins properties incorporated 2014 ANNUAL REPORT CO U S I N S P R O P E R T I E S I N CO R P O R AT E D A N D S U B S I D I A R I E S
N OT E S TO CO N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
1. DESCRIPTION OF BUSINESS AND BASIS OF
PRESENTATION
Description of Business: Cousins Properties Incorporated
(“Cousins”), a Georgia corporation, is a self-administered
and self-managed real estate investment trust (“REIT”).
Through December 31, 2014, Cousins Real Estate
Corporation (“CREC”) was a taxable entity wholly-owned
by and consolidated within Cousins. CREC owned,
developed, and managed its own real estate portfolio and
performed certain real estate related services for other parties.
On December 31, 2014, CREC merged into Cousins and
coincident with this merger, Cousins formed Cousins TRS
Services LLC (“CTRS”), a new taxable entity wholly-owned
by Cousins. Upon formation, CTRS received a capital
contribution of some of the real estate assets and contracts
that were previously owned by CREC. CTRS will own and
manage its own real estate portfolio and perform certain real
estate related services for other parties beginning in 2015.
Cousins, CREC, CTRS and their subsidiaries (collectively,
the “Company”) develop, acquire, lease, manage, and
own primarily Class A office properties and opportunistic
mixed-use developments in Sunbelt markets with a focus on
Georgia, Texas, and North Carolina. As of December 31,
2014, the Company’s portfolio of real estate assets consisted
of interests in 15.7 million square feet of office space,
80,000 square feet of retail space, and 404,000 square feet
(443 units) of apartments.
Basis of Presentation: The consolidated financial statements
include the accounts of the Company and its consolidated
partnerships and wholly-owned subsidiaries. Intercompany
transactions and balances have been eliminated
in
consolidation. The Company presents its financial statements
in accordance with accounting principles generally accepted
in the United States (“GAAP”) as outlined in the Financial
Accounting Standard Board’s Accounting Standards
Codification (the “Codification” or “ASC”). The Codification
is the single source of authoritative accounting principles
applied by nongovernmental entities in the preparation of
financial statements in conformity with GAAP.
For the three years ended December 31, 2014, there were
no items of other comprehensive income. Therefore, no
presentation of comprehensive income is required.
The Company evaluates all partnerships, joint ventures and
other arrangements with variable interests to determine
if the entity or arrangement qualifies as a variable interest
entity (“VIE”), as defined in the Codification. If the entity
or arrangement qualifies as a VIE and the Company is
determined to be the primary beneficiary, the Company is
required to consolidate the assets, liabilities, and results of
operations of the VIE.
The Company has a joint venture with Callaway Gardens
Resort, Inc. (“Callaway”) for the development of residential
lots, which is anticipated to be funded fully through Company
contributions. Callaway has the right to receive returns, but
no obligation to fund any costs or absorb any losses. The
Company is the sole decision maker for the venture and
the development manager. The Company has determined
that Callaway is a VIE, and the Company is the primary
beneficiary. Therefore, the Company consolidates this joint
venture. As of December 31, 2014 and 2013, Callaway had
total assets of $2.1 million and $4.6 million, respectively,
and no significant liabilities.
In 2014, the Company acquired a building and transferred
it to a special purpose entity to facilitate a potential Section
1031 exchange under the Internal Revenue Code. To realize
the tax deferral available under the Section 1031 exchange,
the Company must complete the Section 1031 exchange, and
take title to the to-be-exchanged building within 180 days
of the acquisition date. The Company has determined
that this entity is a VIE, and the Company is the primary
beneficiary. Therefore, the Company consolidates this
entity. As of December 31, 2014, this VIE had total assets of
$353.2 million, no significant liabilities, and no significant
cash flows.
Recently Issued Accounting Standards: In 2014, The
Financial Accounting Standards Board (“FASB”) issued
new guidance related to the presentation of discontinued
operations. Prior to this new guidance, the Company generally
included activity for all assets held for sale and disposals in
discontinued operations on the statements of operations.
Under the new guidance, only assets held for sale and
disposals representing a major strategic shift in operations,
such as the disposal of a line of business, a significant
geographical area, or a major equity investment, will be
presented as discontinued operations. Additionally, the new
guidance requires expanded disclosures about discontinued
operations that will provide more information about their
assets, liabilities, income, and expenses. The guidance is
effective for periods beginning after December 15, 2014.
Early adoption is permitted, but only for disposals (or
classifications as held for sale) that have not been reported
in financial statements previously issued. The Company
adopted this guidance in the second quarter of 2014.
In 2014, the FASB issued new guidance related to the
accounting for revenue from contracts with customers which
requires a new five-step model to recognize revenue. Under
the new guidance, companies will recognize revenue when
the seller satisfies a performance obligation, which would
be when the buyer takes control of the good or service.
This new guidance could result in different amounts of
revenue being recognized and could result in revenue being
F-7
2014 ANNUAL REPORT cousins properties incorporated recognized in different reporting periods than it is under the
current guidance. The new guidance specifically excludes
revenue associated with lease contracts. The guidance is
effective for periods beginning after December 15, 2016
and early adoption is prohibited. Retrospective application
will be required either to all periods presented or with the
cumulative effect of initial adoption recognized in the period
of adoption. The Company does not expect the adoption of
this new guidance to have a material impact on its financial
position or results of operations.
2. SIGNIFICANT ACCOUNTING POLICIES
RE A L ES TAT E A S S E T S
Cost Capitalization: Costs related to planning, developing,
leasing, and constructing a property, including costs of
development personnel working directly on projects under
development, are capitalized. In addition, the Company
capitalizes interest to qualifying assets under development
based on average accumulated expenditures outstanding
during the period. In capitalizing interest to qualifying assets,
the Company first uses the interest incurred on specific
project debt, if any, and next uses the Company’s weighted
average interest rate for non-project specific debt. The
Company also capitalizes interest to investments accounted
for under the equity method when the investee has property
under development with a carrying value in excess of the
investee’s borrowings. To the extent debt exists within an
unconsolidated joint venture during the construction period,
the venture capitalizes interest on that venture-specific debt.
The Company capitalizes interest, real estate taxes, and
certain operating expenses on the unoccupied portion of
recently completed development properties from the date a
project is substantially complete to the earlier of (1) the date
on which the project achieves 90% economic occupancy or
(2) one year after it is substantially complete.
The Company capitalizes direct leasing costs related to leases
that are probable of being executed. These costs include
commissions paid to outside brokers, legal costs incurred
to negotiate and document a lease agreement, and internal
costs that are based on time spent by leasing personnel on
successful leases. The Company allocates these costs to
individual tenant leases and amortizes them over the related
lease term.
Impairment: For real estate assets that are considered to be
held for sale according to accounting guidance, the Company
records impairment losses if the fair value of the asset net
of estimated selling costs is less than the carrying amount.
For those long-lived assets that are held and used according
to accounting guidance, management reviews each asset for
the existence of any indicators of impairment. If indicators
of impairment are present, the Company calculates the
expected undiscounted future cash flows to be derived from
such assets. If the undiscounted cash flows are less than the
carrying amount of the asset, the Company reduces the asset
to its fair value.
Acquisition of Operating Properties: The Company records
the acquired tangible and intangible assets and assumed
liabilities of operating property acquisitions at fair value at the
acquisition date. The acquired assets and assumed liabilities
for an operating property acquisition generally include
but are not limited to: land, buildings and improvements,
and identified tangible and intangible assets and liabilities
associated with in-place leases, including leasing costs, value
of above-market and below-market tenant leases, value of
above-market and below-market ground leases, acquired in-
place lease values, and tenant relationships, if any.
The fair value of land is derived from comparable sales of
land within the same submarket and/or region. The fair
value of buildings and improvements, tenant improvements,
and leasing costs are based upon current market replacement
costs and other relevant market rate information.
The fair value of the above-market or below-market
component of an acquired in-place lease is based upon
the present value (calculated using a market discount
rate) of the difference between (i) the contractual rents to
be paid pursuant to the lease over its remaining term and
(ii) management’s estimate of the rents that would be
paid using fair market rental rates and rent escalations
at the date of acquisition over the remaining term of the
lease. The amounts recorded for above-market and below-
market tenant leases are included in intangible assets and
intangible liabilities, respectively, on the balance sheets and
are amortized on a straight-line basis into rental property
revenues over the remaining term of the applicable leases.
The amounts recorded for above-market and below-
market ground leases are included in intangible liabilities
and intangible assets, respectively, and are amortized on a
straight-line basis into rental property operating expenses
over the remaining terms of the applicable leases.
The fair value of acquired in-place leases is derived based on
management’s assessment of lost revenue and costs incurred
for the period required to lease the “assumed vacant”
property to the occupancy level when purchased. The
amount recorded for acquired in-place leases is included in
intangible assets and amortized as an increase to depreciation
and amortization expense over the remaining term of the
applicable leases.
Depreciation and Amortization: Real estate assets are stated
at depreciated cost less impairment losses, if any. Buildings
are depreciated over their estimated useful lives, which range
generally from 24 to 42 years. The life of a particular building
depends upon a number of factors including whether the
building was developed or acquired and the condition of the
building upon acquisition. Furniture, fixtures and equipment
are depreciated over their estimated useful lives of three to
five years. Tenant improvements, leasing costs and leasehold
improvements are amortized over the term of the applicable
leases or the estimated useful life of the assets, whichever is
shorter. The Company accelerates the depreciation of tenant
assets if it estimates that the lease term will end prior to the
F-8
cousins properties incorporated 2014 ANNUAL REPORT termination date. This acceleration may occur if a tenant files
for bankruptcy, vacates its premises or defaults in another
manner on its lease. Deferred expenses are amortized over
the period of estimated benefit. The Company uses the
straight-line method for all depreciation and amortization.
Discontinued Operations: Effective in 2014, only assets
held for sale and disposals representing strategic shifts in
operations will be reflected in discontinued operations.
For previous periods, the Company classified the results of
operations of all properties that have been sold or otherwise
qualify as held for sale as discontinued operations if the
property’s operations are expected to be eliminated from
ongoing operations and the Company will not have any
significant continuing involvement in the operations of the
property after the sale. The Company also classified any
gains or losses on the sale of such properties as discontinued
operations as well as any related impairment losses associated
with such properties. The Company ceases depreciation of a
property when it is categorized as held for sale. See note 3 for
a detail of properties that meet these requirements.
INvE S T M E N T I N JO I N T v E N T U R E S
For joint ventures that the Company does not control,
but exercises significant influence, the Company uses the
equity method of accounting. The Company’s judgment
with regard to its level of influence or control of an entity
involves consideration of various factors including the form
of its ownership interest; its representation in the entity’s
governance; its ability to participate in policy-making
decisions; and the rights of other investors to participate
in the decision-making process, to replace the Company as
manager, and/or to liquidate the venture. These ventures
are recorded at cost and adjusted for equity in earnings
and cash contributions and distributions. Any difference
between the carrying amount of these investments on the
Company’s balance sheet and the underlying equity in net
assets on the joint venture’s balance sheet is adjusted as
the related underlying assets are depreciated, amortized,
or sold. The Company generally allocates income and loss
from an unconsolidated joint venture based on the venture’s
distribution priorities, which may be different from its stated
ownership percentage.
The Company evaluates the recoverability of its investment in
unconsolidated joint ventures in accordance with accounting
standards for equity investments by first reviewing each
investment for any indicators of impairment. If indicators
are present, the Company estimates the fair value of the
investment. If the carrying value of the investment is
greater than the estimated fair value, management makes
an assessment of whether the impairment is “temporary”
or “other-than-temporary.” In making this assessment,
management considers the following: (1) the length of time
and the extent to which fair value has been less than cost,
(2) the financial condition and near-term prospects of the
entity, and (3) the Company’s intent and ability to retain its
interest long enough for a recovery in market value.
The Company consolidates certain joint ventures that it
controls. In cases where the entity’s documents do not
contain a required redemption clause, the Company records
the partner’s share of the entity in the equity section of the
balance sheets in nonredeemable noncontrolling interests.
In cases where the entity’s documents contain a provision
requiring the Company to purchase the partner’s share of
the venture at a certain value upon demand or at a future
date, the Company records the partner’s share of the entity
in redeemable noncontrolling interests on the balance
sheets. Amounts recorded in redeemable noncontrolling
interests are adjusted to the higher of fair value or the
partner’s cost basis each reporting period. The effect of these
adjustments is recorded in additional paid-in capital within
total stockholders’ investment. The noncontrolling partners’
share of all consolidated joint ventures’ income is reflected
in net income attributable to noncontrolling interest on the
statements of operations.
REvE N U E RE COgN I T I O N
Rental Property Revenues: The Company recognizes
contractual revenues from leases on a straight-line basis over
the term of the respective lease. Certain of these leases also
provide for percentage rents based upon the level of sales
achieved by the lessee. Percentage rents are recognized once
the specified sales target is achieved. In addition, leases
typically provide for reimbursement of the tenants’ share of
real estate taxes, insurance, and other operating expenses
to the Company. Operating expense reimbursements are
recognized as the related expenses are incurred. During 2014,
2013, and 2012, the Company recognized $86.0 million,
$43.9 million, and $26.2 million, respectively, in revenues,
including discontinued operations, from tenants related to
operating expenses.
The Company makes valuation adjustments to all tenant-
related accounts receivable based upon its estimate of the
likelihood of collectibility of amounts due from the tenant.
The amount of any valuation adjustment is based on the
tenant’s credit and business risk, history of payment, and
other factors considered by management.
Income: The Company recognizes development,
Fee
management, and leasing fees when earned. The Company
recognizes development, management, and leasing fees
received from unconsolidated joint ventures and related
salaries and other direct costs incurred by the Company as
income and expense based on the percentage of the joint
venture which the Company does not own. Correspondingly,
the Company adjusts the investment in unconsolidated joint
ventures asset when fees are paid to the Company by a joint
venture in which the Company has an ownership interest.
The Company amortizes these adjustments over a relevant
period in income from unconsolidated joint ventures.
Land Sales: The Company recognizes sales and related
cost of sales of land upon closing, the majority of which
historically have been accounted for on the full accrual
method. If a substantial continuing obligation exists related
F-9
2014 ANNUAL REPORT cousins properties incorporated to the sale, the Company uses the percentage of completion
method. If other criteria for the full accrual method are not
met, the Company utilizes the installment method, cost
recovery method, deposit method, or reduced-profit method
as applicable.
Gain on Sale of Investment Properties: The Company
recognizes a gain on sale of investment property when
the sale of a property is consummated, the buyer’s initial
and continuing investment is adequate to demonstrate
commitment to pay, any receivable obtained is not subject
to future subordination, the usual risks and rewards of
ownership are transferred, and the Company has no
substantial continuing involvement with the property.
If the Company has a commitment to the buyer and that
commitment is a specific dollar amount, this commitment is
accrued and the gain on sale that the Company recognizes
is reduced. If the Company has a construction commitment
to the buyer, management makes an estimate of this
commitment, defers a portion of the profit from the sale, and
recognizes the deferred profit as or when the commitment
is fulfilled.
IN CO M E TAxE S
Cousins has elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended (the “Code”). To qualify
as a REIT, Cousins must distribute annually at least 90%
of its adjusted taxable income, as defined in the Code, to
its stockholders and satisfy certain other organizational and
operating requirements. It is management’s current intention
to adhere to these requirements and maintain Cousins’ REIT
status. As a REIT, Cousins generally will not be subject to
federal income tax at the corporate level on the taxable
income it distributes to its stockholders. If Cousins fails to
qualify as a REIT in any taxable year, it will be subject to
federal income taxes at regular corporate rates (including
any applicable alternative minimum tax) and may not be
able to qualify as a REIT for four subsequent taxable years.
Cousins may be subject to certain state and local taxes on
its income and property, and to federal income taxes on its
undistributed taxable income.
Through December 31, 2014, CREC was a C-Corporation for
federal income tax purposes and used the liability method of
accounting for income taxes. CTRS is also a C-Corporation
for federal income tax purposes and uses the liability method
for accounting for income taxes. Tax return positions are
recognized in the financial statements when they are “more-
likely-than-not” to be sustained upon examination by the
taxing authority. Deferred income tax assets and liabilities
result from temporary differences. Temporary differences are
differences between the tax bases of assets and liabilities and
their reported amounts in the financial statements that will
result in taxable or deductible amounts in future periods. A
valuation allowance may be placed on deferred income tax
assets, if it is determined that it is more likely than not that a
deferred tax asset may not be realized.
F-10
S TO Ck- BA S E D CO M P E N S AT I O N
The Company has several types of stock-based compensation
plans. These plans are described in note 13, as are the
accounting policies by type of award. The Company
recognizes compensation expense, net of
forfeitures,
arising from share-based payment arrangements granted
to employees and directors in general and administrative
expense in the statements of operations over the related
awards’ vesting period, which may be accelerated under the
Company’s retirement feature.
EA R N I NgS P E R SH A R E ( “ E P S ” )
Net income (loss) per share-basic is calculated as net income
(loss) available to common stockholders divided by the
weighted average number of common shares outstanding
during the period, including nonvested restricted stock
which has nonforfeitable dividend rights. Net income (loss)
per share-diluted is calculated as net income (loss) available
to common stockholders divided by the diluted weighted
average number of common shares outstanding during the
period. Diluted weighted average number of common shares
uses the same weighted average share number as in the basic
calculation and adds the potential dilution that would occur
if stock options (or any other contracts to issue common
stock) were exercised and resulted in additional common
shares outstanding, calculated using the treasury stock
method. The numerator is reduced for the effect of preferred
dividends in both the basic and diluted net income (loss) per
share calculations.
Stock options are dilutive when the average market price of
the Company’s stock during the period exceeds the option
exercise price. However, in periods where the Company is in
a net loss position, the dilutive effect of stock options is not
included in the diluted weighted average shares total.
CA S H A N D CA S H EQ U Iv A L E N T S A N D
RE S T R I C T E D CA S H
Cash and cash equivalents include cash and highly-liquid
money market instruments. Highly-liquid money market
instruments include securities and repurchase agreements
with original maturities of three months or less, money
market mutual funds, and United States Treasury Bills
with maturities of 30 days or less. Restricted cash primarily
represents amounts restricted under debt agreements
for future capital expenditures or for specific future
operating costs.
SO F T WA R E CO S T CA P I TA L IzAT I O N
Internal and external costs to develop computer software
for internal use are capitalized during the development stage
in accordance with GAAP. These capitalized costs include
the costs to obtain the software, internal and external
development costs, and automated data conversion. Training
and manual data conversion costs are expensed as incurred.
US E O F ES T I M AT E S
The preparation of financial statements in conformity
with GAAP requires management to make estimates
and assumptions that affect the amounts reported in the
accompanying financial statements and footnotes. Actual
results could differ from those estimates.
cousins properties incorporated 2014 ANNUAL REPORT 3. PROPERTY TRANSACTIONS
DI S P O S I T I O N S
In 2014, the FASB issued new guidance related to the
presentation of discounted operations. See note 2 for
further information. The new guidance applies to assets
that are sold or meet the criteria for held for sale after the
date of adoption. The Company adopted the new standard
in 2014; and as a result, two of the Company’s properties
that were sold subsequent to the adoption that under the
previous guidance would have been considered discontinued
operations are not considered discontinued operations
under the new guidance.
The Company sold the following properties in 2014, 2013, and 2012. The results of operations of the properties noted as
discontinued operations are included in a separate section discontinued operations, in the statements of operations for all
periods presented ($ in thousands):
Property
2014
777 Main
Lakeshore Park Plaza
Mahan Village
600 University Park Place
2013
Tiffany Springs MarketCenter
Inhibitex
2012
The Avenue Forsyth
The Avenue Collierville
The Avenue Webb Gin
Galleria 75
Cosmopolitan Center
Property Type
Location
Square Feet
Sales Price
Discontinued
Operations
Office
Office
Retail
Office
Ft. Worth, TX
Birmingham, AL
Tallahassee, FL
Birmingham, AL
980,000
197,000
147,000
123,000
$ 167,000
$ 25,000
$ 29,500
$ 19,700
Retail
Office
Kansas City, MO
Atlanta, GA
238,000
51,000
$ 53,500
8,300
$
Retail
Retail
Retail
Office
Office
Atlanta, GA
Memphis, TN
Atlanta, GA
Atlanta, GA
Atlanta, GA
524,000
511,000
322,000
111,000
51,000
$ 119,000
$ 55,000
$ 59,600
9,200
$
7,000
$
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
In addition, the Company sold its third party management
and leasing business in 2012. The operations of this business
are presented as discontinued operations in the accompanying
statements of operations. The Company recognized a gain on
the sale of its third party management and leasing business of
$7.5 million in 2012 and an additional gain of $4.6 million
in 2013. The additional gain was based on the performance
of the business for the year subsequent to the sale.
The following table details the components of income from discontinued operations for the years ended December 31, 2014,
2013 and 2012 (in thousands):
2014
2013
2012
Rental property revenues
Other revenues
Third party management and leasing revenues
Third party management and leasing expenses
Impairment losses
Depreciation and amortization
Other expenses
Rental property operating expenses
Income from discontinued operations
$ 2,927
29
—
—
—
—
(28)
(1,128)
$ 10,552
40
76
(99)
—
(3,083)
(25)
(4,162)
$ 33,918
3,557
16,364
(13,678)
(13,791)
(13,479)
(49)
(10,935)
$ 1,800
$ 3,299
$ 1,907
F-11
2014 ANNUAL REPORT cousins properties incorporated
Gains (losses) related on sales of discontinued operations are as follows for the years ended December 31, 2014, 2013 and
2012 (in thousands):
Lakeshore Park Plaza
600 University Park Place
The Avenue Forsyth
Inhibitex
Tiffany Springs MarketCenter
Third party management and leasing business
Cosmopolitan Center
The Avenue Webb Gin
Other
2014
$ 13,025
6,334
1
2
(1)
(3)
—
—
—
$
2013
—
—
(77)
2,989
3,697
4,577
—
(2)
305
$
2012
—
—
4,508
—
—
7,459
2,064
3,590
786
Gain on sale of discontinued operations, net
$ 19,358
$ 11,489
$18,407
for this property, net of rent credits, was $102.4 million. The
Company incurred $342,000 in acquisition and related costs
associated with this acquisition.
In 2013, the Company purchased the remaining 80% interest
in MSREF/Cousins Terminus 200 LLC for $53.8 million
and simultaneously repaid the mortgage loan secured by the
Terminus 200 property in the amount of $74.6 million. The
Company recognized a gain of $19.7 million on this
acquisition achieved in stages. Immediately thereafter,
the Company contributed its interest in the Terminus 200
property and its interest in the Terminus 100 property,
together with the existing mortgage loan secured by the
Terminus 100 property, to a newly-formed entity, Terminus
Office Holdings LLC (“TOH”), and sold 50% of TOH
to institutional investors advised by J.P. Morgan Asset
Management for $112.2 million. The Company recognized
a gain of $37.1 million on this transaction. The Company
incurred $122,000 in acquisition and related costs associated
with these transactions. TOH closed a new mortgage loan on
the Terminus 200 property in the amount of $82.0 million,
and the Company received a distribution of $39.2 million
from TOH as a result. TOH is an unconsolidated joint
venture of the Company (see note 5).
Concurrent with the Terminus 100 and 200 transactions,
the Company purchased Post Oak Central, a 1.3 million
square foot, Class-A office complex in the Galleria district
of Houston, Texas for $230.9 million, net of rent credits,
from an affiliate of J.P. Morgan Asset Management. The
Company incurred $231,000 in acquisition and related costs
associated with this acquisition.
In 2012, the Company purchased 2100 Ross Avenue, a
844,000 square foot Class-A office building in the Arts District
submarket of Dallas, Texas, and paid cash of $59.2 million.
The Company incurred $408,000 in acquisition and related
costs associated with this purchase.
ACQ U I S I T I O N S
In 2014, the Company acquired Northpark Town Center,
a 1.5 million square foot office asset located in Atlanta,
Georgia. The gross purchase price for this property was
$348.0 million, before adjustments for customary closing
costs and other closing credits. The Company incurred
$643,000 in acquisition and related costs associated with
this acquisition.
In 2014, the Company acquired Fifth Third Center, a
698,000 square foot Class A office tower located in the
Charlotte, North Carolina central business district. The gross
purchase price for this property was $215.0 million, before
adjustments for customary closing costs and other closing
credits. The Company incurred $328,000 in acquisition and
related costs associated with this acquisition.
In 2013, the Company acquired Greenway Plaza, a
10-building, 4.3 million square foot office complex in
Houston, Texas, and 777 Main, a 980,000 square foot Class
A office building in the central business district of Fort Worth,
Texas (collectively the “Texas Acquisition”). The aggregate
purchase price for the Texas Acquisition was $1.1 billion,
before adjustment for brokers fees, transfer taxes and other
customary closing costs.
In conjunction with the Texas Acquisition, the Company
entered into a $950 million Loan Agreement with JPMorgan
Chase Bank, N.A. and Bank of America, N.A. (the “Term
Loan”) to assist, if necessary, in the funding of the Texas
Acquisition. The Term Loan was not used to finance the
Texas Acquisition and, pursuant to the agreement, terminated
on the acquisition date. The Company incurred fees and
other costs associated with the Term Loan of $2.6 million.
In addition, the Company incurred $4.2 million in other
acquisition costs related to the Texas Acquisition. The
term loan costs and other acquisition costs are included in
acquisition and related costs on the statement of operations.
In 2013, the Company acquired 816 Congress Avenue, a
435,000 square foot Class-A office property located in the
central business district of Austin, Texas. The purchase price
F-12
cousins properties incorporated 2014 ANNUAL REPORT
The following tables summarize allocations of the estimated fair values of the assets and liabilities of the acquisitions discussed
above (in thousands):
Northpark
Town
Center
Fifth
Third
Center
Post Oak
Central
Terminus
200
816
Congress
Avenue
Texas
Acquisition
2100
Ross
Avenue
Tangible assets:
Land and improvements
Building
Tenant improvements
Other assets
Deferred rents receivable
Tangible assets
Intangible assets:
Above-market leases
In-place leases
Below-market ground leases
Ground lease purchase option
Total intangible assets
Tangible liabilities:
Accounts payable and accrued expenses
Total tangible liabilities
Intangible liabilities:
Below-market leases
Above-market ground lease
Total intangible liabilities
$ 24,577
274,151
21,674
—
—
320,402
$ 22,863
163,649
16,781
1,014
—
204,307
$ 88,406
118,470
10,877
—
—
217,753
$ 25,040
101,472
17,600
101
44
144,257
$
995
26,968
—
—
27,963
—
—
1,512
14,355
—
—
15,867
—
—
2,846
30,159
—
—
33,005
—
—
(8,018)
—
(8,018)
632
17,096
338
—
18,066
(1,026)
(1,026)
(9,374)
—
(9,374)
6,817
86,391
3,500
—
—
96,708
89
8,222
—
2,403
10,714
—
—
$ 306,563
586,150
114,220
—
—
1,006,933
4,959
117,630
2,958
—
125,547
—
—
$ 5,987
36,705
9,034
—
—
51,726
3,267
8,888
—
—
12,155
—
—
(436)
—
(436)
(14,792)
—
(14,792)
(9,273)
—
(9,273)
(2,820)
(1,981)
(4,801)
(47,170)
(2,508)
(49,678)
Total net assets acquired
$ 345,389
$ 211,973
$ 230,924
$ 150,851
$ 102,621
$1,082,802
$ 63,445
See note 6 for a schedule of the timing of amortization of
the intangible assets and liabilities and the weighted average
amortization periods.
The following unaudited supplemental pro forma information
is presented for the years ended December 31, 2014 and
2013, respectively. The pro forma information is based
upon the Company’s historical consolidated statements of
operations, adjusted as if the Northpark Town Center, Post
Oak Central, Terminus, 816 Congress Avenue and the Texas
Acquisition transactions discussed above had occurred at the
beginning of each of the periods presented. The supplemental
pro forma information is not necessarily indicative of future
results or of actual results that would have been achieved
had the transactions been consummated at the beginning of
each period.
Revenues
Income from continuing operations
Net income
Net income available to common stockholders
Per share information:
Basic
Diluted
2014
2013
(unaudited, in thousands,
except per share amounts)
$388,791
31,695
52,853
45,364
$ 354,047
119,825
134,613
116,881
$
$
0.22
0.22
$
$
0.62
0.62
4. NOTES AND ACCOUNTS RECEIVABLE
At December 31, 2014 and 2013, notes and accounts receivables included the following (in thousands):
Notes receivable
Allowance for doubtful accounts related to notes receivable
Tenant and other receivables
Allowance for doubtful accounts related to tenant and other receivables
2014
2013
$
414
(414)
11,961
(1,229)
$ 1,445
(995)
12,160
(832)
$10,732
$11,778
F-13
2014 ANNUAL REPORT cousins properties incorporated
At December 31, 2014 and 2013, the fair value of the
Company’s notes receivable approximated the cost basis.
Fair value was calculated by discounting future cash flows
from the notes receivable at estimated rates in which similar
loans would have been made at December 31, 2014 and
2013. The estimate of the rate, which is the most significant
input in the discounted cash flow calculation, is intended to
replicate notes of similar type and maturity. This fair value
calculation is considered to be a Level 3 calculation under
the accounting guidelines, as the Company utilizes internally
generated assumptions regarding current interest rates at
which similar instruments would be executed.
5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The following information summarizes financial data and principal activities of the Company’s unconsolidated joint ventures.
The information included in the following table entitled summary of financial position is as of December 31, 2014 and 2013.
The information included in the summary of operations table is for the years ended December 31, 2014, 2013 and 2012
(in thousands).
SUMMARY OF FINANCIAL POSITION:
2014
2013
2014
2013
2014
2013
2014
2013
Total Assets
Total Debt
Total Equity
Company’s Investment
Terminus Office Holdings
EP I LLC
EP II LLC
Charlotte Gateway Village, LLC
HICO Victory Center LP
CL Realty, L.L.C.
Temco Associates, LLC
Cousins Watkins LLC
Wildwood Associates
Crawford Long - CPI, LLC
Other
85,228
42,772
130,272
9,962
7,264
6,910
$288,415 $297,815 $213,640 $215,942 $ 62,830
26,671
24,969
92,808
9,962
7,042
6,709
—
— 16,389
(45,762)
979
57,092
58,029
1
12,735
52,408
35,530
—
—
—
—
—
—
— 27,710
—
75,000
—
88,130
12,644
135,966
—
7,602
8,474
— 51,653
21,127
32,042
1,931
16,400
29,946
1,411
75,000
—
$ 69,867
29,229
11,695
82,373
—
7,374
8,315
23,081
21,121
(44,295)
1,700
$ 32,323
22,905
19,905
11,218
7,572
3,546
3,027
—
(1,106)(1)
(21,931)(1)
2
$ 35,885
25,319
9,566
11,252
—
3,704
4,083
17,213
(1,689)(1)
(21,071)(1)
60
$618,580 $657,384 $394,934 $428,153 $202,597
$210,460
$ 77,461
$ 84,322
Total Revenues
Net Income (Loss)
Company’s Share of Net Income (Loss)
SUMMARY OF OPERATIONS:
2014
2013
2012
2014
2013
2012
2014
2013
Terminus Office Holdings
EP I LLC
EP II LLC
Charlotte Gateway Village, LLC
HICO Victory Center LP
CL Realty, L.L.C.
Temco Associates, LLC
Cousins Watkins LLC
Wildwood Associates
Crawford Long - CPI, LLC
MSREF/ Cousins Terminus
200 LLC
Palisades West LLC
Ten Peachtree Place Associates
CP Venture Five LLC
CP Venture Two LLC
CF Murfreesboro Associates
Other
$ 39,531
12,049
—
33,903
—
1,573
2,155
4,415
3,329
11,945
$ 33,109
8,261
—
33,281
—
1,603
630
5,483
—
11,829
(19)
—
—
—
—
4
441
1,197
—
—
20,192
12,965
8,067
490
$
— $
796
—
32,901
—
2,667
702
5,575
1
11,579
12,265
15,401
2,488
30,007
19,533
13,152
1,271
663
2,583
—
11,645
—
1,069
495
8,286
(1,704)
2,775
$
(408) $
100
—
10,693
—
1,027
96
55
(151)
2,827
— $
(441)
—
9,704
—
1,068
(65)
(24)
(139)
2,508
14
—
—
—
—
4
(473)
(1,069)
(235)
(27)
5,330
— 20,895
3,943
10,473
602
(147)
3,075
7,033
48,953
(144)
308
1,937
—
1,176
—
542
(6)
4,168
2,097
1,407
3
—
—
(17)
—
(390)
43
$
(182) $
75
—
1,176
—
524
(12)
2,306
(75)
1,372
(69)
—
—
17,070
21,590
23,553
(3)
2012
—
(330)
—
1,176
—
221
(236)
2,397
(70)
1,248
(215)
25,547
7,843
1,059
1,208
16
(606)
$ 109,326
$ 137,107
$ 148,338
$ 25,357
$ 72,894
$ 52,638
$ 11,268
$ 67,325
$ 39,258
(1) Negative balances are included in deferred income on the balance sheets.
Terminus Office Holdings LLC (“TOH”) – In 2013, TOH, a
50-50 joint venture between the Company and institutional
investors advised by J.P. Morgan Asset Management (“JPM”),
was formed for the purpose of owning and operating two
office buildings in Atlanta, Georgia. See note 3 for further
details. TOH has two non-recourse mortgage loans totaling
$213.6 million that mature on January 1, 2023. The
weighted average interest rate on these fixed rate loans is
F-14
cousins properties incorporated 2014 ANNUAL REPORT 4.69%. The Company does not consolidate TOH because
the Company and its partner share decision making abilities
and have joint control over the venture. Operating cash flows
and proceeds from capital transactions of TOH are allocated
to the partners equally until JPM receives an agreed upon
return, after which the Company may receive an additional
promoted interest. The assets of the venture in the above table
include a cash balance of $7.9 million at December 31, 2014.
and then 50% to each member. The Company’s total project
return on Gateway is ultimately limited to an internal rate
of return of 17% on its invested capital. Gateway has a
non-recourse mortgage loan with an outstanding balance
at December 31, 2014 of $35.5 million, a maturity of
December 1, 2016 and an interest rate of 6.41%. The assets
of the venture in the above table include a cash balance of
$3.2 million at December 31, 2014.
EP I LLC (“EP I”) – EP I is a joint venture between the
Company, with a 75% ownership interest, and Lion Gables
Realty Limited Partnership (“Gables”), with a 25% ownership
interest, for the purpose of developing and operating Emory
Point, the first phase of a mixed-use property in Atlanta,
Georgia. The Company does not consolidate EP I because
the Company and Gables share decision making abilities and
have joint control over the venture. Operating cash flows
and proceeds from capital transactions of EP I are allocated
to the partners pro rata based on their percentage ownership
interests. EP I has a non-recourse construction loan with and
outstanding balance $58.0 million at December 31, 2014,
and the loan bears interest at LIBOR plus 1.75%. The assets
of the venture in the above table include a cash balance of
$917,000 at December 31, 2014.
EP II LLC (“EP II”) – In 2013, EP II was formed between the
Company, with a 75% ownership interest, and Lion Gables
Realty Limited Partnership (“Gables”), with a 25% ownership
interest, for the purpose of developing and operating Emory
Point II, the second phase of a mixed-use property in Atlanta,
Georgia. The Company does not consolidate EP II because
the Company and Gables share decision making abilities and
have joint control over the venture. Operating cash flows
and proceeds from capital transactions of EP II are allocated
to the partners pro rata based on their percentage ownership
interests. EP II has a construction loan to provide for up to
$46.0 million to fund construction, $12.7 million of which
was outstanding at December 31, 2014, and the loan bears
interest at LIBOR plus 1.85%. The loan matures October 9,
2016 and may be extended for two, one-year periods if certain
conditions are met. The Company and Gables guarantee up
to $8.6 million and $2.9 million of the construction loan,
respectively. These guarantees may be eliminated after
project completion, based on certain conditions. The assets
of the venture in the above table include a cash balance of
$175,000 at December 31, 2014.
Charlotte Gateway Village, LLC (“Gateway”) – Gateway is
a 50-50 joint venture between the Company and Bank of
America Corporation (“BOA”), which owns and operates
Gateway Village, a 1.1 million square foot office building
in Charlotte, North Carolina. The project is 100% leased to
BOA through December 1, 2016. Gateway’s net income or
loss and cash distributions are allocated to the members as
follows: first to the Company so that it receives a cumulative
its capital
compounded return equal to 11.46% on
contributions, second to BOA until it receives an amount
equal to the aggregate amount distributed to the Company,
HICO Victory Center LP (“HICO”) – In 2014, HICO, a joint
venture between the Company and Hines Victory Center
Associates Limited Partnership (“Hines”), was formed for
the purpose of acquiring and subsequently developing an
office parcel in Dallas, Texas. Pursuant to the joint venture
agreement, all pre-development expenditures, other than
land, are funded equally by the partners. The Company
is required to fund 75% of the cost of land while Hines is
required to fund 25%. If the partners decide to commence
construction of an office building, the capital accounts and
economics of the venture will be adjusted such that the
Company will effectively own at least 90% of the venture
and Hines will own up to 10%. As of December 31, 2014
the Company accounts for its investment in HICO under
the equity method because it does not control the activities
of the venture. If the partners decide to construct an office
building within the venture, the Company expects to
consolidate the venture. The Company’s investment in HICO
at December 31, 2014 includes its share of pre-development
expenditures and its share of land purchased by the venture.
CL Realty, L.L.C. (“CL Realty”) – CL Realty, a 50-50
joint venture between the Company and Forestar Realty
Inc. (“Forestar”), was one of two ventures through which
the Company operated the majority of its residential land
business. In the first quarter of 2012, CL Realty sold
substantially all of its assets to Forestar. At December 31,
2014, CL Realty owned one parcel of land in Texas and
mineral rights associated with one project in Texas. The
assets of the venture in the above table include a cash balance
of $413,000 at December 31, 2014.
Temco Associates, LLC (“Temco”) – Temco, a 50-50 joint
venture between the Company and Forestar, was one of two
ventures through which the Company operated the majority
of its residential land business. In the first quarter of 2012,
Temco sold substantially all of its assets to Forestar. At
December 31, 2014, Temco owned various parcels of land
and a golf course. The assets of the venture in the above table
include a cash balance of $196,000 at December 31, 2014.
Cousins Watkins LLC (“CW”) – CW was a joint venture
the Company and Watkins Retail Group
between
(“Watkins”), for the purpose of owning and operating four
retail centers in Tennessee and Florida. In 2014, CW sold
substantially all of its assets and made a distribution of
$19.8 million to the Company. Income from unconsolidated
joint ventures includes the Company’s share of the gain on
the sale of these assets of $2.2 million.
F-15
2014 ANNUAL REPORT cousins properties incorporated Wildwood Associates (“Wildwood”) – Wildwood is a
50-50 joint venture between the Company and IBM which
owns 27 acres of undeveloped land in the Wildwood Office
Park in Atlanta, Georgia. In 2014, Wildwood sold a tract
of land resulting in the Company recognizing income
from unconsolidated joint ventures of $2.1 million. Of
this income, $582,000 represents recognition of deferred
income associated with Wildwood’s negative investment. At
December 31, 2014, the Company’s investment in Wildwood
was a credit balance of $1.1 million. This credit balance
resulted from cumulative distributions from Wildwood over
time that exceeded the Company’s basis in its contributions,
and essentially represents deferred gain not recognized at
venture formation. This credit balance will decline as the
venture’s remaining land is sold. The Company does not have
any obligation to fund Wildwood’s working capital needs.
Crawford Long—CPI, LLC (“Crawford Long”) – Crawford
Long is a 50-50 joint venture between the Company and
Emory University and owns the Emory University Hospital
Midtown Medical Office Tower, a 358,000 square foot
medical office building located in Atlanta, Georgia. Crawford
Long has a $75.0 million 3.5% fixed rate mortgage note,
which matures on June 1, 2023. Upon closing of the new
mortgage note in 2013, the Company received a distribution
of $14.3 million from the joint venture. The assets of the
venture in the above table include a cash balance of $812,000
at December 31, 2014.
MSREF/Cousins Terminus 200 LLC (“MSREF/T200”) –
MSREF/T200 was a joint venture between the Company
and Morgan Stanley, which owned and operated Terminus
200, a 566,000 square foot office building in the Buckhead
district of Atlanta, Georgia. At December 31, 2012, the
Company held a 20% interest in MSREF/T200 and Morgan
Stanley held an 80% interest. In 2013, the Company
purchased Terminus 200 from MSREF/T200. See note 3 for
further details.
CP Venture Five LLC (“CPV Five”) – The Company held
a 11.5% effective ownership interest in CPV Five, which
owned five retail properties totaling 1.2 million rentable
square feet; three in Atlanta, Georgia and two in Viera,
Florida. In 2013, the Company sold its interest in CP Venture
Two LLC and CPV Five to its partner and recognized a gain
totaling $37.0 million.
CP Venture Two LLC (“CPV Two”) – The Company held
a 10.4% effective ownership interest in CPV Two, which at
December 31, 2012 owned three retail properties totaling
934,000 rentable square feet. In 2013, the Company sold
its interest in CPV Two and CPV Five to its partner and
recognized a gain totaling $37.0 million. During 2012, CPV
Two sold Presbyterian Medical Plaza, a 69,000 square foot
office building in Charlotte, North Carolina for a gain, the
Company’s share of which was $167,000.
CF Murfreesboro Associates (“CF Murfreesboro”) – CF
Murfreesboro was a 50-50 joint venture between the Company
and an affiliate of Faison Associates. CF Murfreesboro
owned and operated The Avenue Murfreesboro, a 751,000
square foot retail center located in Nashville, Tennessee. In
2013, CF Murfreesboro sold The Avenue Murfreesboro,
the venture’s only asset. The Company recognized a gain on
this transaction through income from unconsolidated joint
ventures of $23.5 million.
Palisades West LLC (“Palisades”) – The Company held a
50% interest in Palisades, which owned and operated two
office buildings totaling 373,000 square feet in Austin,
Texas. In 2012, the Company sold its interest in Palisades
to its 50% partner and recognized a $23.3 million gain on
the sale.
Ten Peachtree Place Associates (“TPPA”) – TPPA was a 50-
50 joint venture between the Company and a wholly-owned
subsidiary of The Coca-Cola Company. TPPA owned Ten
Peachtree Place, a 260,000 square foot office building located
in Atlanta, Georgia. In 2012, Ten Peachtree Place was sold
for $45.3 million to an unrelated third party. The Company
recognized a gain on this transaction through income from
unconsolidated entities of $7.3 million.
The Company recognized $5.2 million, $7.8 million, and
$8.7 million of development, leasing, and management
fees, including salary and expense reimbursements, from
unconsolidated joint ventures in 2014, 2013 and 2012,
respectively. See note 2, fee income, for a discussion of the
accounting treatment for fees and reimbursements from
unconsolidated joint ventures.
6. INTANGIBLE ASSETS
At December 31, 2014 and 2013, intangible assets included the following (in thousands):
In-place leases, net of accumulated amortization
of $62,302 and $26,239 in 2014 and 2013, respectively
Above-market tenant leases, net of accumulated amortization
of $13,748 and $11,284 in 2014 and 2013, respectively
Below-market ground lease, net of accumulated amortization of $21 in 2013
Goodwill
2014
2013
$147,360
$ 152,830
12,017
—
3,867
12,332
1,680
4,131
$163,244
$ 170,973
F-16
cousins properties incorporated 2014 ANNUAL REPORT Intangible assets, other than goodwill, mainly relate to
the acquisitions in 2014, 2013, and 2012 (see note 3).
Aggregate net amortization expense related to intangible
assets and liabilities was $32.7 million, $16.9 million,
and $3.3 million for the years ended December 31, 2014,
2013, and 2012, respectively. Over the next five years and
thereafter, aggregate amortization of these intangible assets
and liabilities is anticipated to be as follows (in thousands):
2015
2016
2017
2018
2019
Thereafter
Below
Market Rents
Above
Market Ground
Lease
Above
Market Rents
In Place
Leases
Total
$(10,477)
(9,803)
(8,884)
(8,092)
(6,050)
(24,160)
$
(55)
(55)
(55)
(55)
(55)
(2,279)
$ 2,784
2,397
1,717
1,489
997
2,633
$ 32,993 $ 25,245
19,844
13,208
10,224
6,652
14,184
27,305
20,430
16,882
11,760
37,990
$(67,466)
$(2,554)
$12,017
$147,360 $ 89,357
Weighted average remaining lease term
9 years
49 years
7 years
7 years
Goodwill relates entirely to the office reporting unit. As
office assets are sold, either by the Company or by joint
ventures in which the Company has an interest, goodwill is
allocated to the cost of each sale. The following is a summary
of goodwill activity for the years ended December 31, 2014
and 2013 (in thousands):
Beginning Balance
Allocated to property sales
Ending Balance
7. OTHER ASSETS
At December 31, 2014 and 2013, other assets included the following (in thousands):
Lease inducements, net of accumulated amortization
of $5,475 and $4,181 in 2014 and 2013, respectively
FF&E and leasehold improvements, net of accumulated depreciation
of $19,137 and $17,684 in 2014 and 2013, respectively
Prepaid expenses and other assets
Predevelopment costs and earnest money
Loan closing costs, net of accumulated amortization
of $2,286 and $2,621 in 2014 and 2013, respectively
2014
$ 4,131
(264)
$ 3,867
2013
$ 4,751
(620)
$ 4,131
2014
2013
$12,245
$12,548
10,590
3,428
1,789
6,878
8,743
3,606
821
4,176
$34,930
$29,894
Lease inducements represent incentives paid to tenants
in conjunction with leasing space, such as moving costs,
sublease arrangements of prior space and other costs.
These amounts are amortized into rental revenues over the
individual underlying lease terms.
Predevelopment costs represent amounts that are capitalized
related to predevelopment projects which the Company
determines are probable of future development.
8. NOTES PAYABLE
The following table summarizes the terms of notes payable outstanding at December 31, 2014 and 2013 ($ in thousands):
Description
Post Oak Central mortgage note
Credit Facility, unsecured
The American Cancer Society Center mortgage note
Promenade mortgage note
191 Peachtree Tower mortgage note
816 Congress mortgage note
Meridian Mark Plaza mortgage note
The Points at Waterview mortgage note
Mahan Village LLC construction facility
Interest Rate
Maturity
2014
2013
4.26%
1.27%
6.45%
4.27%
3.35%
3.75%
6.00%
5.66%
1.80%
2020 $185,109 $188,310
40,075
2019
132,714
2017
113,573
2022
100,000
2018
—
2024
25,813
2020
2016
15,139
— 14,470
—
140,200
131,083
110,946
100,000
85,000
25,408
14,598
$792,344 $630,094
F-17
2014 ANNUAL REPORT cousins properties incorporated CR E D I T FAC I L I T Y
In 2014, the Company modified its $350 million senior
unsecured line of credit by entering into the Third Amended
and Restated Credit Agreement (the “New Facility”), which
replaced the Second Amended and Restated Credit Agreement
dated February 28, 2012 (the “Existing Facility”). The New
Facility amended the Existing Facility by:
amount equal to $1.0 billion, plus a portion of the net cash
proceeds from certain equity issuances. The New Facility
also contains customary representations and warranties and
affirmative and negative covenants, as well as customary
events of default. The amounts outstanding under the New
Facility may be accelerated upon the occurrence of any
events of default.
–
–
Increasing the size by $150 million to $500 million;
Extending the maturity date from February 28, 2016 to
May 28, 2019;
– Reducing the per annum variable interest rate and other
fees; and
–
Providing for the expansion of the New Facility by
an additional $250 million for a total available of
$750 million, subject to receipt of additional commitments
from lenders and other customary conditions.
The New Facility contains financial covenants that require,
among other things, the maintenance of an unencumbered
interest coverage ratio of at least 2.00; a fixed charge coverage
ratio of at least 1.50; an overall leverage ratio of no more
than 60%; and a minimum shareholders’ equity in an
The interest rate applicable to the New Facility varies
according to the Company’s leverage ratio, and may, at the
election of the Company, be determined based on either
(1) the current London Interbank Offered Rate (LIBOR) plus
the applicable spread as detailed below or (2) the greater of
Bank of America’s prime rate, the federal funds rate plus
0.50% or the one-month LIBOR plus 1.0% (the “Base
Rate”), plus the applicable spread as detailed below. Fees
on letters of credit issued under the New Facility are payable
at an annual rate equal to the spread applicable to loans
bearing interest based on LIBOR. The Company also pays
an annual facility fee on the total commitments under the
New Facility. The pricing spreads and the facility fee under
the New Facility are as follows:
Applicable % Spread for LIBOR
Applicable % Spread for Base Rate
Annual Facility Fee %
Leverage Ratio
≤ 30%
>30% but ≤ 35%
>35% but ≤ 40%
>40% but ≤ 45%
>45% but ≤ 50%
>50%
At December 31, 2014, the Credit Facility’s spread over
LIBOR was 1.1%. The amount that the Company may draw
under the Credit Facility is a defined calculation based on
the Company’s unencumbered assets and other factors. The
total available borrowing capacity under the Credit Facility
was $359.8 million at December 31, 2014, and the Credit
Facility is recourse to the Company.
OT H E R DE BT IN FO R M AT I O N
In 2014, the Company entered into a $85.0 million non-
recourse mortgage note payable secured by 816 Congress.
The mortgage note has a fixed rate of 3.75% and matures
in November 2024. The Company also sold Mahan Village
which was owned in a consolidated joint venture, and repaid
the accompanying construction facility without penalty.
The real estate and other assets of The American Cancer
Society Center (the “ACS Center”) are restricted under the
ACS Center loan agreement in that they are not available to
settle debts of the Company. However, provided that the ACS
Center loan has not incurred any uncured event of default, as
defined in the loan agreement, the cash flows from the ACS
Center, after payments of debt service, operating expenses
and reserves, are available for distribution to the Company.
The majority of the Company’s consolidated debt is fixed-
rate long-term non-recourse mortgage notes payable. Assets
with depreciated carrying values of $680.9 million were
F-18
1.10%
1.10%
1.15%
1.20%
1.20%
1.45%
0.10%
0.10%
0.15%
0.20%
0.20%
0.45%
0.15%
0.20%
0.20%
0.20%
0.25%
0.30%
pledged as security on the $652.1 million mortgage notes
payable. As of December 31, 2014, the weighted average
maturity of the Company’s consolidated debt was 5.4 years.
At December 31, 2014 and 2013, the estimated fair value
of the Company’s notes payable was $835.4 million and
$654.1 million, respectively, calculated by discounting the
debt’s remaining contractual cash flows at estimated rates at
which similar loans could have been obtained at December 31,
2014 and 2013. The estimate of the current market rate,
which is the most significant input in the discounted cash flow
calculation, is intended to replicate debt of similar maturity
and loan-to-value relationship. These fair value calculations
are considered to be Level 2 under the guidelines as set forth
in ASC 820 as the Company utilizes market rates for similar
type loans from third party brokers.
For the years ended December 31, 2014, 2013, and 2012,
interest was recorded as follows (in thousands):
2014
2013
2012
Total interest incurred
Interest capitalized
$31,862
(2,752)
$22,227
(518)
$25,570
(1,637)
Total interest expense
$29,110
$21,709
$23,933
cousins properties incorporated 2014 ANNUAL REPORT DE BT MAT U R I T I E S
Future principal payments due on the Company’s notes
payable at December 31, 2014 are as follows (in thousands):
2015
2016
2017
2018
2019
Thereafter
$
8,825
24,095
138,195
105,734
149,647
365,848
$ 792,344
9. COMMITMENTS AND CONTINGENCIES
CO M M I T M E N T S
The Company had a total of $102.5 million in future
obligations under leases to fund tenant improvements and
in other future construction obligations at December 31,
2014. The Company had outstanding letters of credit and
performance bonds totaling $2.4 million at December 31,
2014. The Company recorded lease expense of $1.3 million,
$1.1 million, and $963,000 in 2014, 2013, and 2012,
respectively. The Company has future lease commitments
under ground
totaling
leases and operating
$146.7 million over weighted average remaining terms of
86.6 and 1.7 years, respectively. Amounts due under these
lease commitments are as follows (in thousands):
leases
2015
2016
2017
2018
2019
Thereafter
$
1,780
1,811
1,737
1,696
1,657
138,063
$ 146,744
LI T IgAT I O N
The Company is subject to various legal proceedings, claims
and administrative proceedings arising in the ordinary
course of business, some of which are expected to be covered
by liability insurance. Management makes assumptions
and estimates concerning the likelihood and amount of
any potential loss relating to these matters using the latest
information available. The Company records a liability for
litigation if an unfavorable outcome is probable and the
amount of loss or range of loss can be reasonably estimated.
If an unfavorable outcome is probable and a reasonable
estimate of the loss is a range, the Company accrues the best
estimate within the range. If no amount within the range is a
better estimate than any other amount, the Company accrues
the minimum amount within the range. If an unfavorable
outcome is probable but the amount of the loss cannot be
reasonably estimated, the Company discloses the nature of
the litigation and indicates that an estimate of the loss or
range of loss cannot be made. If an unfavorable outcome is
reasonably possible and the estimated loss is material, the
Company discloses the nature and estimate of the possible
loss of the litigation. The Company does not disclose
information with respect to litigation where an unfavorable
outcome is considered to be remote or where the estimated
loss would not be material. Based on current expectations,
such matters, both individually and in the aggregate, are not
expected to have a material adverse effect on the liquidity,
results of operations, business or financial condition of
the Company.
10. NONCONTROLLING INTERESTS
The Company consolidates various ventures that are
involved in the ownership and/or development of real estate.
The partner’s share of the entity, in cases where the entity’s
documents do not contain a required redemption clause,
is reflected in a separate line item called nonredeemable
noncontrolling interests within equity in the balance sheets.
Correspondingly, the partner’s share of income or loss
is recorded in net income attributable to noncontrolling
interests in the statements of operations.
Other consolidated ventures contain provisions requiring
the Company to purchase the partners’ share of the venture
at a certain value upon demand or at a future prescribed
date. In these situations, the partner’s share of the entity
is recognized as redeemable noncontrolling interests and is
presented between liabilities and equity in the balance sheets,
with the corresponding share of income or loss in the venture
recorded in net income attributable to noncontrolling
interests in the statements of operations. The redemption
values are evaluated each period and adjusted within equity
to the higher of fair value or the partner’s cost basis.
The following table details the components of redeemable noncontrolling interests in consolidated subsidiaries for the years
ended December 31, 2014 and 2013 (in thousands):
Beginning Balance
Net income attributable to redeemable noncontrolling interests
Distributions to redeemable noncontrolling interests
Ending Balance
2014
2013
$— $ —
68
(68)
—
—
$— $ —
F-19
2014 ANNUAL REPORT cousins properties incorporated The following reconciles the net income attributable to
nonredeemable noncontrolling interests as recorded in the
statements of equity and the net income (loss) attributable
to redeemable noncontrolling interests as recorded outside
of the equity section on the balance sheets to the net income
attributable to noncontrolling interests on the statements of
operations for the years ended December 31, 2014, 2013,
and 2012 (in thousands):
Net income attributable to nonredeemable noncontrolling interests
Net income attributable to redeemable noncontrolling interests
Net income attributable to noncontrolling interests
2014
2013
2012
$1,004
—
$5,000
68
$ 4,193
(2,002)
$1,004
$5,068
$ 2,191
11. STOCKHOLDERS’ EQUITY
In 2014, the Company issued 26.7 million shares of common
stock, in two offerings, resulting in net proceeds to the
Company of $321.9 million, which includes customary
legal, accounting, and other expenses. In 2013, the Company
issued 85.6 million shares of common stock, in two offerings,
resulting in net proceeds to the Company of $826.2 million.
net loss available for common shareholders by $2.7 million
(non-cash), which represents the original issuance costs
applicable to the shares redeemed. In addition, the Company
reclassified these costs as well as the basis difference in the
preferred stock repurchased by the Company in 2008 from
Additional Paid-In Capital to Distributions in Excess of Net
Income within the Company’s statements of equity.
In 2014, the Company redeemed all outstanding shares of its
7.5% Series B Cumulative Redeemable Preferred Stock, par
value $1 per share, for $25 per share or $94.8 million, excluding
accrued dividends. In connection with this redemption,
the Company decreased net income available for common
shareholders by $3.5 million (non-cash), which represents the
original issuance costs applicable to the shares redeemed.
In 2013, the Company redeemed all outstanding shares of
its 7 3/4% Series A Cumulative Redeemable Preferred Stock,
par value $1 per share, for $25 per share or $74.8 million.
In connection with this redemption, the Company increased
Ownership Limitations — In order to minimize the risk
that the Company will not meet one of the requirements for
qualification as a REIT, Cousins’ Articles of Incorporation
include certain restrictions on the ownership of more than
3.9% of the Company’s total common and preferred stock,
subject to waiver by Board of Directors.
Distribution of REIT Taxable Income — The following
reconciles dividends paid and dividends applied in 2014,
2013, and 2012 to meet REIT distribution requirements
(in thousands):
Common and preferred dividends paid
Dividends treated as taxable compensation
Portion of dividends declared in current year, and paid in current year,
which was applied to the prior year distribution requirements
Portion of dividends declared in subsequent year, and paid in subsequent year,
which apply to current year distribution requirements
2014
2013
2012
$64,510
(110)
$37,200
(98)
$31,655
(147)
(2,182)
(470)
—
2,182
—
470
Dividends applied to meet current year REIT distribution requirements
$62,218
$38,814
$31,978
Tax Status of Distributions — The following summarizes the components of the taxability of the Company’s distributions for
the years ended December 31, 2014, 2013, and 2012:
Common:
Series A Preferred:
Series B Preferred:
2014
2013
2012
2014
2013
2012
2014
2013
2012
Total
Distributions
Per Share
Ordinary
Dividends
Long-Term
Capital Gain
Unrecaptured
Section 1250
Gain (A)
Cash
Liquidation
Distributions
$ 0.300000
$0.281564
$0.018436
$0.018436
$ 0.180000
$ 0.180000
$0.170355
$0.124724
$0.009645
$0.055276
$0.009457
$0.055276
$
$
$
—
—
—
$
$ 0.968750
$ 1.937500
— $
— $
$0.966882
$1.342220
—
$0.001868
$0.595280
$
$
$0.595280
—
— $
— $25.000000
—
$
$25.776040
$ 1.875000
$ 1.875000
$0.467750
$1.774673
$1.298222
$0.001000
$0.100327
$0.576078
$0.001000
$0.098519
$0.576078
$25.307290
—
$
—
$
(A) Represents a portion of the dividend allocated to long-term capital gain.
F-20
cousins properties incorporated 2014 ANNUAL REPORT leases
12. FUTURE MINIMUM RENTS
The Company’s
escalation
provisions and provisions requiring tenants to pay a pro
rata share of operating expenses. The leases typically include
renewal options and are classified and accounted for as
operating leases.
typically
contain
At December 31, 2014 future minimum rents to be received
by consolidated entities under existing non-cancelable leases
are as follows (in thousands):
2015
2016
2017
2018
2019
Thereafter
$ 219,974
218,991
200,654
191,446
166,739
651,690
$ 1,649,494
13. STOCK-BASED COMPENSATION
The Company maintains the 2009 Incentive Stock Plan (the
“2009 Plan”), which allows the Company to issue awards
of stock options, stock grants, or stock appreciation rights
to employees and directors. As of December 31, 2014,
2,482,592 shares were authorized to be awarded pursuant
to the 2009 Plan. The Company also maintains the 2005
Restricted Stock Unit (“RSU”)Plan, as amended, which
allows the Company to issue awards to employees that
are paid in cash on the vesting date in an amount equal
to the fair market value, as defined, of one share of the
Company’s stock. The Company has granted stock options,
restricted stock and restricted stock units to employees as
discussed below.
S TO Ck OP T I O N S
At December 31, 2014, the Company had 2,210,905 stock
options outstanding to key employees and outside directors
pursuant to the 2009 Plan. The Company typically uses
authorized, unissued shares to provide shares for option
exercises. The stock options have a term of ten years from
the date of grant and generally have a vesting period of four
years, except director stock options, which vest immediately.
The Company calculates the fair value of each option grant
on the grant date using the Black-Scholes option-pricing
model, which requires the Company to provide certain
inputs as follows:
-
-
-
-
The risk-free interest rate utilized is the interest rate on
U.S. Treasury Strips or Bonds having the same life as the
estimated life of the Company’s option awards.
Expected life of the options granted is estimated
based on historical data
reflecting actual hold
periods plus an estimated hold period for unexercised
options outstanding.
Expected volatility is based on the historical volatility of
the Company’s stock over a period equal to the estimated
option life.
The assumed dividend yield is based on the Company’s
expectation of an annual dividend rate for regular
dividends over the estimated life of the option.
In 2014, 2013 and 2012, there were no stock option grants.
The Company recognizes compensation expense using the
straight-line method over the vesting period of the options,
with the offset recognized in additional paid-in capital. During
2014, 2013, and 2012, $140,000, $226,000 and $310,000,
respectively, was recognized as compensation expense.
The Company anticipates recognizing $15,000 in future
compensation expense related to stock options outstanding
at December 31, 2014, which will be recognized in the first
quarter of 2015. During 2014, total cash proceeds from the
exercise of options equaled $1.7 million. As of December 31,
2014, the intrinsic value of the options outstanding and
exercisable was $2.1 million. The intrinsic value is calculated
using the exercise prices of the options compared to the
market value of the Company’s stock. At December 31,
2014 and 2013, the weighted-average contractual lives for
the options outstanding and exercisable were 2.8 years and
3.2 years, respectively.
The following is a summary of stock option activity for the year ended December 31, 2014:
Outstanding, beginning of year
Exercised
Forfeited/Expired
Outstanding, end of year
Options exercisable at end of year
Number of
Options
(000s)
3,078
(206)
(661)
2,211
2,180
Weighted Average
Exercise Price Per Option
$ 22.90
$ 8.26
$ 28.18
$ 22.69
$ 22.89
RE S T R I C T E D S TO Ck
In 2014, 2013, and 2012, the Company issued 137,591,
159,782, and 470,306 shares of restricted stock to
employees, which vest ratably over three years from the
issuance date. In 2014, 2013, and 2012, the Company
also issued 55,293, 50,085, and 72,153 shares of stock to
independent members of the board of directors which vested
immediately on the issuance date. All shares of restricted
stock receive dividends and have voting rights during the
vesting period. The Company records restricted stock in
F-21
2014 ANNUAL REPORT cousins properties incorporated common stock and additional paid-in capital at fair value
on the grant date, with the offsetting deferred compensation
also recorded in additional paid-in capital. The Company
records compensation expense over the vesting period.
Compensation expense related to restricted stock was
$1.8 million, $1.8 million, and $2.0 million in 2014, 2013,
and 2012, respectively.
As of December 31, 2014, the Company had recorded
$1.5 million of unrecognized compensation cost included
in additional paid-in capital related to restricted stock,
which will be recognized over a weighted average period of
1.7 years. The total fair value of the restricted stock which
vested during 2014 was $2.7 million. The following table
summarizes restricted stock activity during 2014:
Non-vested restricted stock at beginning of year
Granted
Vested
Forfeited
Non-vested restricted stock at end of year
RE S T R I C T E D S TO Ck UN I T S
In 2011, the Company awarded 57,246 time-vested RSUs,
which cliff vest three years from the date of grant. Time-
vested RSU holders receive cash dividend payments for each
unit held during the vesting period equal to the common
dividends per share paid by the Company. These dividends
are also recorded in compensation expense.
The following table summarizes time-vested RSU activity for
2014 (in thousands):
Outstanding at beginning of year
Vested
Outstanding at end of year
58
(58)
—
During 2014, 2013, and 2012, the Company awarded two
types of performance-based RSUs to key employees: one based
on the total stockholder return of the Company, as defined,
as compared to that of a peer group of companies (the “TSR
RSUs”) and the other based on the ratio of cumulative funds
from operations per share to targeted cumulative funds from
operations per share (the “FFO RSUs”). The performance
period for these awards is three years and the ultimate
payout of these awards can range from 0% to 200% of the
targeted number of units depending on the achievement of
the performance metrics described above. The Company
expenses an estimate of the fair value of the TSR RSUs
over the performance period using a quarterly Monte Carlo
valuation. The Company expenses the FFO RSUs over the
vesting period using the fair market value of the Company’s
stock at the reporting date multiplied by the anticipated
number of units to be paid based on the current estimate
of what the ratio is expected to be upon vesting. Dividend
equivalents on the TSR RSUs and FFO RSUs will also be
paid based upon the percentage vested. The targeted number
of performance-based RSUs outstanding at December 31,
2014 are 161,783, 161,651, and 191,470 related to the
2014, 2013, and 2012 grants, respectively.
In 2012, the Company also issued 281,532 performance-
based RSUs to the Chief Executive Officer. The payout of
these awards can range from 0% to 150% of the targeted
F-22
Number of
Shares
(000s)
Weighted-Average
Grant Date
Fair Value
450
138
(236)
(10)
342
$ 8.00
$10.75
$ 8.00
$ 9.48
$ 9.08
number of units depending on the total stockholder return of
the Company, as defined, as compared to that of a peer group
of companies. The performance period of the awards is five
years with interim performance measurement dates at each
of the third, fourth and fifth anniversaries. To the extent that
the Company has attained the defined performance goals at
the end each of these periods, one-third of the units may be
credited after each of the third and fourth anniversaries, with
the balance credited at the end of the fifth anniversary, and
to be awarded subject to continuous employment on the fifth
anniversary. This award is expensed using a quarterly Monte
Carlo valuation over the vesting period.
The following table summarizes the performance-based RSU
activity for 2014 (in thousands):
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
755
205
(150)
(14)
796
The Company estimates future expense for all types of
RSUs outstanding at December 31, 2014 to be $3.7 million
(using stock prices and estimated target percentages as
of December 31, 2014), which will be recognized over a
weighted-average period of 1.5 years. During 2014, total
cash paid for all types of RSUs and related dividend payments
was $2.4 million.
During 2014, 2013, and 2012, $5.4 million, $5.3 million, and
$2.5 million, respectively, was recognized as compensation
expense related to RSUs for employees and directors.
OT H E R LO Ng -TE R M CO M P E N S AT I O N
In 2009, the Company granted a long-term incentive
compensation award to key employees which will be settled
in cash if the Company’s stock price achieves a specified level
of growth at the testing dates and a service requirement is
met. This award is valued using the Monte Carlo method. The
Company reversed $28,000 and $286,000 in compensation
expense related to this plan in 2014 and 2013, respectively,
cousins properties incorporated 2014 ANNUAL REPORT and recognized $101,000 in expense in 2012. This award
expired in 2014 with no amounts paid to key employees
thereunder.
14. RETIREMENT SAVINGS PLAN
The Company maintains a defined contribution plan (the
“Retirement Savings Plan”) pursuant to Section 401 of
the Internal Revenue Code (the “Code”) which covers
active regular employees. Employees are eligible under the
Retirement Savings Plan immediately upon hire, and pre-
tax contributions are allowed up to the limits set by the
Code. The Company has a match program of up to 3%
of an employee’s eligible pre-tax Retirement Savings Plan
contributions up to certain Code limits. Employees vest
in Company contributions over a three-year period. The
Company may change this percentage at its discretion,
and, in addition, the Company could decide to make
discretionary contributions in the future. The Company
contributed $592,000, $422,000, and $722,000 to the
Retirement Savings Plan for the 2014, 2013, and 2012 plan
years, respectively.
15. INCOME TAXES
Through December 31, 2014, CREC was a taxable entity and its consolidated benefit (provision) for income taxes from
operations for the years ended December 31, 2014, 2013, and 2012 was as follows (in thousands):
Current tax benefit (provision):
Federal
State
Deferred tax benefit (provision):
Federal
State
Benefit (provision) for income taxes from operations
2014
2012
2012
$ — $ —
23
23
20
20
$ —
(91)
(91)
—
—
—
—
—
—
—
—
—
$20
$ 23
$ (91)
The net income tax benefit (provision) differs from the amount computed by applying the statutory federal income tax rate to
CREC’s income before taxes for the years ended December 31, 2014, 2013 and 2012 as follows ($ in thousands):
Federal income tax benefit (expense)
State income tax benefit (expense), net of federal income tax effect
Valuation allowance
State deferred tax adjustment
Other
2014
2013
2012
Amount
Rate
Amount
Rate
Amount
Rate
$(1,124)
(125)
1,644
(375)
—
(35)% $(1,287)
(147)
(361)
1,818
—
(4)%
50%
(11)%
—%
(35)% $ (4,368)
(91)
(4)%
7,055
(10)%
(2,687)
49%
—
—%
(35)%
—%
57%
(22)%
—%
Benefit (provision) applicable to income (loss) from continuing operations
$
20
—% $
23
—% $
(91)
—%
On December 31, 2014, CREC merged into Cousins and
Cousins contributed some of the assets and contracts that
were previously owned by CREC to Cousins TRS Services
LLC (“CTRS”), a newly formed taxable REIT subsidiary
of Cousins. Cousins retained many of CREC’s tax benefits,
including the significant portion of CREC’s Federal and
state tax carryforwards. Some of CREC’s tax benefits were
assumed by CTRS upon the contributions Cousins made to
CTRS immediately following CREC’s merger into Cousins.
The deferred tax assets as of December 31, 2014 included in
the table below include only those of CTRS. The deferred tax
assets in the table below as of December 31, 2013 include
those of CREC. The tax effect of significant temporary
differences representing deferred tax assets and liabilities of
CTRS and CREC, as applicable, as of December 31, 2014
and 2013 are as follows (in thousands):
Income from unconsolidated joint ventures
Land
Long-term incentive equity awards
Interest carryforward
Federal and state tax carryforwards
Other
Total deferred tax assets
Valuation allowance
Net deferred tax asset
2014
2013
$ 2,441
—
—
—
—
—
2,441
(2,441)
$ 7,361
6,116
2,089
13,158
50,253
364
79,341
(79,341)
$ —
$
—
F-23
2014 ANNUAL REPORT cousins properties incorporated A valuation allowance is required to be recorded against
deferred tax assets if, based on the available evidence, it is
more likely than not that such assets will not be realized. When
assessing the need for a valuation allowance, appropriate
consideration should be given to all positive and negative
evidence related to this realization. This evidence includes,
among other things, the existence of current and recent
cumulative losses, forecasts of future profitability, the length
of statutory carryforward periods, the Company’s history
with loss carryforwards and available tax planning strategies.
As of December 31, 2014 the deferred tax asset of CTRS
equaled $2.4 million and as of December 31, 2013 the
deferred tax asset of CREC equaled $79.3 million with a
valuation allowance placed against the full amount of
each. The conclusion that a valuation allowance should
be recorded as of December 31, 2014 was based the lack
of evidence that CTRS, as a newly formed entity, could
generate future taxable income to realize the benefit of the
deferred tax assets. A valuation allowance was recorded as
of December 31, 2013 based on losses at CREC in current
and recent years, and the inability of the Company to
predict, with any degree of certainty, when CREC would
generate income in the future in amounts sufficient to utilize
the deferred tax asset.
16. EARNINGS PER SHARE
The following table reconciles the denominator for the basic and diluted earnings per share computations shown on the
consolidated statements of operations for the years ended December 31, 2014, 2013, and 2012 (in thousands):
Weighted average shares—basic
Dilutive potential common shares—stock options
Weighted average shares—diluted
Weighted average anti-dilutive stock options
2014
2013
2012
204,216
244
144,255
165
104,117
8
204,460
144,420
104,125
1,553
2,208
5,836
Anti-dilutive stock options represent stock options whose
exercise price exceeds the average market value of the
Company’s stock. These anti-dilutive stock options are
not included in the current calculation of dilutive weighted
average shares, but could be dilutive in the future.
17. CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
Supplemental information related to cash flows, including significant non-cash activity affecting the Statements of Cash Flows,
for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands):
Interest paid, net of amounts capitalized
Income taxes paid
Non-Cash Transactions:
Transfer from operating properties to operating properties and related assets held for sale
Transfer from projects under development to operating properties
Transfer from other assets to projects under development
Transfer from land to projects under development
2014
2013
2012
$28,840
4
$21,216
90
$23,142
63
—
—
—
5,185
24,554
25,629
3,062
—
1,866
—
—
—
18. REPORTABLE SEGMENTS
As of December 31, 2014, the Company had four reportable
segments: Office, Retail, Land, and Other. In 2013 and
2012, the Company had an additional segment, Third
Party Management and Leasing. In 2012, the Company
sold its third party management and leasing business. See
note 3 for detailed information. These reportable segments
represent an aggregation of operating segments reported
to the Chief Operating Decision Maker based on similar
economic characteristics that include the type of product
and the nature of service. Each segment includes both
consolidated operations and joint ventures. The Office and
Retail segments show the results for that product type. The
Land segment includes results of operations for certain land
holdings and single-family residential communities that are
sold as developed lots to homebuilders. Fee income and
related expenses for the third party-owned properties which
are managed or leased by the Company are included in the
Third Party Management and Leasing segment. The Other
segment includes:
–
–
–
–
–
–
–
fee income for third party owned and joint venture
the Company performs
properties
management, development, and leasing services;
for which
compensation for corporate employees
general corporate overhead costs and interest expense
for consolidated and unconsolidated entities;
income attributable to noncontrolling interests;
income taxes;
depreciation; and
preferred dividends
F-24
cousins properties incorporated 2014 ANNUAL REPORT Company management evaluates the performance of its
reportable segments in part based on funds from operations
available to common stockholders (“FFO”). FFO is a
supplemental operating performance measure used in the
real estate industry. The Company calculated FFO using
the National Association of Real Estate Investment Trusts’
(“NAREIT”) definition of FFO, which is net income (loss)
available to common stockholders (computed in accordance
with GAAP), excluding extraordinary items, cumulative
effect of change in accounting principle, and gains on sale or
impairment losses on depreciable property, plus depreciation
and amortization of real estate assets, and after adjustments
for unconsolidated partnerships and joint ventures to reflect
FFO on the same basis.
FFO is used by industry analysts, investors, and the
Company as a supplemental measure of a REIT’s
operating performance. Historical cost accounting for
real estate assets implicitly assumes that the value of real
estate assets diminishes predictably over time. Since real
estate values instead have historically risen or fallen with
market conditions, many industry investors and analysts
have considered presentation of operating results for real
estate companies that use historical cost accounting to be
insufficient by themselves. Thus, NAREIT created FFO as
a supplemental measure of a REIT’s operating performance
that excludes historical cost depreciation, among other
items, from GAAP net income. Management believes the
use of FFO, combined with the required primary GAAP
presentations, has been fundamentally beneficial, improving
the understanding of operating results of REITs among the
investing public and making comparisons of REIT operating
results more meaningful. Company management evaluates
operating performance in part based on FFO. Additionally,
the Company uses FFO, along with other measures, to
assess performance in connection with evaluating and
granting incentive compensation to its officers and other
key employees.
Segment net income, the balance of the Company’s investment in joint ventures and the amount of capital expenditures are not
presented in the following tables. Management does not utilize these measures when analyzing its segments or when making
resource allocation decisions and, therefore, this information is not provided. FFO is reconciled to net income (loss) on a total
Company basis (in thousands):
Year ended December 31, 2014
Net operating income
Sales less costs of sales
Fee income
Other income
Gain on sale of third party management and leasing
Third party management and leasing expenses
Separation expenses
General and administrative expenses
Reimbursed expenses
Interest expense
Other expenses
Preferred stock dividends and original issuance costs
Office
Retail
Land
Other
Total
$ 206,551
—
—
—
—
—
—
—
—
—
—
—
$ 4,479
—
—
—
—
—
—
—
—
—
—
—
$
— $ 4,643
42
3,868
12,519
—
5,404
—
(3)
—
(2)
—
—
(210)
— (19,784)
—
(3,652)
— (36,474)
(5,692)
—
(6,485)
—
$ 215,673
3,910
12,519
5,404
(3)
(2)
(210)
(19,784)
(3,652)
(36,474)
(5,692)
(6,485)
Funds from operations available to common stockholders
$ 206,551
$ 4,479
$ 3,868
$ (49,694)
$ 165,204
Real estate depreciation and amortization, including Company’s share of
joint ventures
Gain on sale of depreciated investment properties, including Company’s
share of joint ventures
Non-controlling interest related to the sale of depreciated properties
Net income available to common stockholders
(151,066)
31,955
(574)
$
45,519
Total Assets
$2,576,449
$ 5,587
$34,799
$ 50,495
$2,667,330
F-25
2014 ANNUAL REPORT cousins properties incorporated Year ended December 31, 2013
Office
Retail
Net operating income
Sales less costs of sales
Fee income
Other income
Gain on sale of third party management and leasing business
Third party management and leasing expenses
Separation expenses
General and administrative expenses
Reimbursed expenses
Interest expense
Other expenses
Preferred stock dividends and original issuance costs
$ 122,503
—
—
—
—
—
—
—
—
—
—
—
$13,278
—
—
—
—
—
—
—
—
—
—
—
$
Land
—
1,273
—
—
—
—
—
—
—
—
—
—
Third Party
Management
and Leasing
Other
Total
$ — $ 2,299
191
10,891
3,528
—
—
(520)
(21,940)
(5,215)
(29,672)
(11,373)
(12,664)
—
76
—
4,576
(97)
—
—
—
—
—
—
$ 138,080
1,464
10,967
3,528
4,576
(97)
(520)
(21,940)
(5,215)
(29,672)
(11,373)
(12,664)
Funds from operations available to common stockholders
$ 122,503
$13,278
$ 1,273
$4,555
$(64,475)
$
77,134
Real estate depreciation and amortization, including
Company’s share of joint ventures
Gain on sale of depreciated investment properties including
the Company’s share of joint ventures
Noncontrolling interest related to sale of
depreciated properties
Net income available to common stockholders
(92,041)
127,401
(3,397)
$ 109,097
Total Assets
$2,163,123
$18,112
$ 47,235
$ — $ 44,736
$2,273,206
Year ended December 31, 2012
Net operating income
Sales less costs of sales
Fee income
Other income
Gain on sale of third party management and
leasing business
Third party management and leasing expenses
Separation expenses
General and administrative expenses
Reimbursed expenses
Interest expense
Impairment losses
Loss on extinguishment of debt
Other expenses
Preferred stock dividends and original issuance costs
Funds from operations available to
common stockholders
Office
Retail
$ 80,907
—
—
—
$ 29,429
—
—
—
$
Land
—
4,915
—
—
Third Party
Management and
Leasing
$
— $
—
16,365
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7,459
(13,675)
—
—
—
—
—
—
—
—
Other
121
309
17,797
5,153
—
—
(1,985)
(23,208)
(7,063)
(28,154)
(488)
(94)
(8,389)
(12,907)
Total
$ 110,457
5,224
34,162
5,153
7,459
(13,675)
(1,985)
(23,208)
(7,063)
(28,154)
(488)
(94)
(8,389)
(12,907)
$ 80,907
$ 29,429
$ 4,915
$ 10,149
$ (58,908)
$
66,492
Real estate depreciation and amortization, including
Company’s share of joint ventures
Impairment losses on depreciable investment properties,
net of amounts attributable to noncontrolling interests
Gain on sale of depreciated investment properties,
including Company’s share of joint ventures
Other
Net income available to common stockholders
(62,043)
(11,748)
41,944
(1,824)
$
32,821
Total Assets
$ 736,867
$ 151,417
$ 50,520
$
— $ 185,438
$ 1,124,242
F-26
cousins properties incorporated 2014 ANNUAL REPORT When reviewing the results of operations for the Company,
management analyzes the following revenue and income
items net of their related costs:
– Rental property operations;
–
Land sales; and
– Gains on sales of investment properties.
These amounts are shown in the segment tables above in the
same “net” manner as shown to management. In addition,
management reviews
the operations of discontinued
operations and its share of the operations of its joint ventures
in the same manner as the operations of its wholly-owned
properties included in the continuing operations. Therefore,
the information in the tables above includes the operations
of discontinued operations and its share of joint ventures
in the same categories as the operations of the properties
included in continuing operations. Certain adjustments are
required to reconcile the above segment information to
the Company’s consolidated revenues. The following table
reconciles information presented in the tables above to the
Company’s consolidated revenues (in thousands):
Net operating income
Sales less cost of sales
Fee income
Other income
Rental property operating expenses
Cost of sales
Net operating income in joint ventures
Sales less cost of sales in joint ventures
Net operating income in discontinued operations
Fee income in discontinued operations
Other income in discontinued operations
Termination fees in discontinued operations and in joint ventures
Gain on land sales (included in gain on investment properties)
2014
2013
2012
$215,673
3,910
12,519
5,404
155,934
325
(25,896)
(2,207)
(1,800)
—
(565)
(187)
(1,727)
$138,080
1,464
10,967
3,528
90,498
1,753
(27,763)
(111)
(6,390)
(76)
(64)
—
(1,145)
$110,457
5,224
34,162
5,153
50,329
1,833
(23,956)
(28)
(22,983)
(16,364)
(3,622)
—
(3,719)
Total consolidated revenues
$361,383
$210,741
$136,486
************
F-27
2014 ANNUAL REPORT cousins properties incorporated I, Lawrence L. Gellerstedt III, certify that:
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
E x h i b i t 3 1 .1
1.
I have reviewed this Annual Report on Form 10-K of Cousins Properties Incorporated (the “Registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the Registrant as of,
and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred
during the Registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s
internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the Registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Registrant’s internal control over financial reporting.
/s/ Lawrence L. Gellerstedt III
Lawrence L. Gellerstedt III
President and Chief Executive Officer
Date: February 12, 2015
cousins properties incorporated 2014 ANNUAL REPORT
E x h i b i t 3 1 . 2
I, Gregg D. Adzema, certify that:
CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
1.
I have reviewed this Annual Report on Form 10-K of Cousins Properties Incorporated (the “Registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the Registrant as of,
and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred
during the Registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s
internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the Registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant
role in the Registrant’s internal control over financial reporting.
/s/ Gregg D. Adzema
Gregg D. Adzema
Executive Vice President and Chief Financial Officer
Date: February 12, 2015
2014 ANNUAL REPORT cousins properties incorporated
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
E x h i b i t 3 2 .1
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Annual Report on Form 10-K
of Cousins Properties Incorporated (the “Registrant”) for the year ended December 31, 2014, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), the undersigned, the President and Chief Executive Officer of the
Registrant, certifies that to his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Registrant.
/s/ Lawrence L. Gellerstedt III
Lawrence L. Gellerstedt III
President and Chief Executive Officer
Date: February 12, 2015
cousins properties incorporated 2014 ANNUAL REPORT
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
E x h i b i t 3 2 . 2
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Annual Report on Form 10-K
of Cousins Properties Incorporated (the “Registrant”) for the year ended December 31, 2014, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), the undersigned, the Executive Vice President and Chief Financial
Officer of the Registrant, certifies that to his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Registrant.
/s/ Gregg D. Adzema
Gregg D. Adzema
Executive Vice President and Chief Financial Officer
Date: February 12, 2015
2014 ANNUAL REPORT cousins properties incorporated
D I R E C T O R S
S. Taylor Glover
Lillian C. Giornelli
Non-executive Chairman of the Board of Directors,
Cousins Properties Incorporated; President and
Chief Executive Officer, Turner Enterprises, Inc.
Chairman, Chief Executive Officer and Trustee,
The Cousins Foundation, Inc.
Tom G. Charlesworth
Former Chief Investment Officer, Chief Financial
Officer and General Counsel, Cousins Properties
Incorporated
James D. Edwards
James H. Hance, Jr.
Former Vice Chairman, Bank of America
Corporation
Donna W. Hyland
President and Chief Executive Officer
Children’s Healthcare of Atlanta
Former Managing Partner Global Markets,
Arthur Andersen LLP
R. Dary Stone
Larry L. Gellerstedt III
President and Chief Executive Officer,
Cousins Properties Incorporated
President and Chief Executive Officer,
R.D. Stone Interests
Thomas G. Cousins
Chairman Emeritus
E X E C U T I V E O F F I C E R S
Larry L. Gellerstedt III
M. Colin Connolly
President and Chief Executive Officer
Senior Vice President and Chief Investment Officer
Gregg D. Adzema
John D. Harris, Jr.
Executive Vice President and Chief Financial Officer
Senior Vice President, Chief Accounting Officer and
Assistant Corporate Secretary
John S. McColl
Executive Vice President
Pamela F. Roper
Senior Vice President, General Counsel and
Corporate Secretary
S H A R E H O L D E R I N F O R M A T I O N
Independent Registered Public
Accounting Firm
Deloitte & Touche LLP
Counsel
King & Spalding LLP
Troutman Sanders LLP
Transfer Agent and Registrar
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Telephone Number: 1.800.937.5449
www.amstock.com
Form 10-K Available
The Company’s Annual Report on Form 10-K for
the year ended December 31, 2014 forms part of the
Annual Report. Additional copies of the Form 10-K,
without exhibits, are available free of charge upon
written request to the Company at 191 Peachtree
Street NE, Suite 500, Atlanta, Georgia 30303.
Exhibits are available if requested.
The Form 10-K is also posted on the Company’s
website at cousinsproperties.com or may be obtained
from the SEC’s website at www.sec.gov.
Investor Relations Contact
Marli Quesinberry
Director, Investor Relations
Telephone Number: 404.407.1898
Fax Number: 404.407.1899
marliquesinberry@cousinsproperties.com
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