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COUSINS
PROPERTIES
INCORPORATED
2015 Annual Report
2015 was a year of solid execution
for Cousins Properties across all areas
of our business. Our strategic initiatives
for 2015, as outlined in last year’s letter,
included driving positive results within
our operating portfolio and growing and
executing our development pipeline, all
while maintaining an industry-leading
balance sheet.
During the course of the year, we specifically
achieved the following:
• We increased funds from operation
per share from $ 0.81 to $ 0.89, a 10
percent increase from 2015.
• We completed approximately 3 million
square feet of new and renewal leases, a
record high for the second year in a row.
• We commenced operations at
Colorado Tower, a 373,000 square
foot Class-A office tower in downtown
Austin, TX and at Research Park V,
a 173,000 square foot office building
in Austin, TX.
• We opened Phase II of Emory Point,
a mixed-use development in Atlanta,
GA. Together with Phase I of the
project, which was completed in
2012, Emory Point now contains 750
apartment units and 125,000 square
feet of retail space.
2015 also marked a point in the real estate
cycle where we had an opportunity to take
advantage of the private market’s demand
for quality real estate by pruning our portfolio
of non-core assets and recycling the
proceeds into higher-returning investments,
specifically our growing development
pipeline. On the disposition front, in 2015
and early 2016, we sold $267 million in
non-core assets and land. These funds are
earmarked for, and complete the funding
of, our committed development pipeline,
which includes:
• Carolina Square, a mixed-use project in
Chapel Hill, NC which includes 159,000
square feet of office, 43,000 square
feet of retail and 246 apartments.
Dear SHAREHOLDERS,
“
Despite the challenges posed by macro-economic events,
which are beyond our control, the Cousins platform is
well-positioned to execute in 2016 and beyond.”
• The 485,000 square foot global
headquarters for NCR in Midtown
Atlanta.
• The 285,000 square foot East Coast
Headquarters for Dimensional Fund
Advisors in Charlotte, NC, which is
currently in the pre-development stage.
Collectively these projects have a low-risk
execution profile. They are 100 percent
funded with the asset sales discussed
above and retained cash, and the office
portion of these projects are approximately
96 percent preleased.
By any metric, the company successfully
executed its strategy; however, after many
years of outperforming the broader market,
our share price clearly did not reflect the
strong fundamentals and results posted for
the year. Unfortunately, macro-economic
events, like the interest rate environment
and fears of a global slowdown, oftentimes
overwhelm underlying market fundamentals.
In 2015, Cousins’ share price, as well as
the broader REIT market, reacted to this
phenomenon. Cousins’ share price was
more adversely affected than that of many
of our peers as a result of our Houston
exposure and the recent decline in
energy prices.
Looking toward the future, I remain
optimistic. Despite the challenges posed
by macro-economic events, which are
beyond our control, the Cousins platform
is well-positioned to execute in 2016 and
beyond. First, we have a well-leased
and fully-funded development pipeline
in markets where fundamentals remain
solid. Second, our Houston portfolio is
stable at 91% leased with 6.5 years of
weighted average lease term, a strong
credit profile and no significant near-term
lease expiration risk. Next, I believe our
core markets of Atlanta, Austin, Charlotte
and Dallas will continue to outperform the
broader market, benefiting from years of
strong employment growth and limited
new office supply. And finally, our balance
sheet, with 28% leverage, affords us the
flexibility to pursue and execute on future
opportunities that may present themselves
as the real estate market inevitably cycles.
Therefore, our long-term strategic
objectives remain unchanged:
1. We will continue to emphasize leasing,
efficient operations management and
excellent customer service.
2. We will continue to conservatively
grow the company’s trophy portfolio
through best-in-class development and
opportunistic value-add acquisitions.
3. We will maintain our approach to
balance sheet management by keeping
leverage low to be able to aggressively
react to market opportunities.
In closing, I would like to thank my talented
colleagues at Cousins Properties, as well
as our distinguished Board of Directors,
for all of their contributions this year. I’m
truly inspired by their passion, integrity and
commitment to excellence. And to you, our
shareholders, I believe our continued focus
on the strategic objectives outlined above,
as well as our competitive advantages of
deep market relationships and financial
strength, will provide us with the foundation
to deliver long-term value for years to come.
I thank you for your continued support and
confidence in our efforts.
Sincerely,
LARRY L. GELLERSTEDT III
President and Chief Executive Officer
Cover image of NCR Headquarters, Atlanta, GA by Bob Hughes and topsidefront.
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, 2015 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, 2015, the aggregate market value of the common stock of Cousins Properties Incorporated held by non-affiliates was $2,128,680,591 based on the closing sales price as reported on the New York Stock Exchange. As of February 5, 2016, 211,441,397 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 3, 2016 are incorporated by reference into Part III of this Form 10-K. T A B L E O F C O N T E N T S
P A R 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 A R 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 A R 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 A R T I V
SIGNATURES
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F O R W A R D - L O O K I N G
S T A T E M E N T S
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 business of Cousins Properties
Incorporated (“the Company”) 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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our business and financial strategy;
our ability to obtain future financing arrangements;
future acquisitions and future dispositions of operating
assets;
future acquisitions of land;
future development and redevelopment opportunities;
future dispositions of land and other non-core assets;
future repurchases of our common stock;
projected operating results;
– market and industry trends;
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future distributions;
projected capital expenditures; and
interest rates.
statements
forward-looking
are based upon
Any
management’s beliefs, assumptions, and expectations of
our 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,
our 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 or repay 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;
the potential dilutive effect of any common stock
offerings;
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the failure to achieve benefits from the repurchase of
our common stock;
the availability of buyers and adequate pricing with
respect to the disposition of assets;
risks related to the geographic concentration of our
portfolio, including, but not limited to, metropolitan
Houston and metropolitan Atlanta;
risks related to industry concentration of our portfolio
including, but, not limited to, the energy industry;
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 our 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 our major 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
(such as zoning approval, receipt 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
we believe that our plans, intentions, and expectations
reflected in any forward-looking statements are reasonable,
we can give no assurance that such plans, intentions, or
expectations will be achieved. We undertake 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 A R T I
I T E M 1 .
B U S I N 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 owns and
manages its own real estate portfolio and performs certain
real estate related services for other parties beginning in
2015. The Registrant, its subsidiaries, CREC and CTRS
combined are hereafter referred to as “we,” “us,” “our”
and the “Company.” Our common stock trades on the New
York Stock Exchange under the symbol “CUZ.”
Our operations are conducted through a number of segments
based on our method of internal reporting, which classifies
operations by property and geographical area. For financial
information related to each of our operating segments, see
note 17 to the consolidated financial statements included in
this Annual Report on Form 10-K.
Company Strategy Our strategy is to create value for our
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. This strategy
is based on a simple platform, trophy assets, opportunistic
investments, and a strong balance sheet. This approach
enables us to maintain a targeted, asset-specific approach
to investing where we seek to leverage our acquisition and
development skills, relationships, market knowledge, and
operational expertise.
2015 Activities During 2015, we shifted our investment
activities from acquisitions to development by initiating
and completing Class A office assets in our target markets,
enhancing the value of our existing assets through leasing
activities, and maintaining a strong balance sheet. The
following is a summary of our significant 2015 activities.
I N V E S T M E N T AC T I V I T Y
– Commenced construction on NCR Corporation’s
corporate headquarters building in midtown Atlanta,
Georgia. The project is expected to contain 485,000
square feet of space with a total projected cost of $200.0
million.
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Formed a joint venture to potentially develop HICO
Avalon, an office building in Alpharetta, Georgia.
Formed a joint venture to develop Carolina Square, a
mixed-use property in Chapel Hill, North Carolina,
which is expected to have 159,000 square feet of office
space, 246 apartment units, and 43,000 square feet
of retail space. Total project costs are expected to be
$123.0 million.
– Opened Research Park V, a Class-A office tower in
Austin, Texas, containing 173,000 square feet of space.
– Opened Colorado Tower, a Class-A office tower in
downtown Austin, Texas, containing 373,000 square
feet of space.
– Opened the second phase of Emory Point in Atlanta,
Georgia, a mixed-use property which consists of 307
apartments and 45,000 square feet of retail space.
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Initiated a $100.0 million share repurchase program.
Through year-end, we repurchased 5.2 million shares
for $47.8 million.
D I S P O S I T I O N AC T I V I T Y
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Sold 200, 333, and 555 North Point Center East,
office buildings located in Atlanta, Georgia, containing
411,000 square feet, for $70.3 million.
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Sold The Points at Waterview, a 203,000 square foot
office tower in Dallas, Texas, for $26.8 million
Sold 2100 Ross, an 844,000 square foot office tower in
Dallas, Texas, for $131.0 million.
Sold 8,643 acres of residential land for total gross
proceeds of $20.9 million.
1
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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 we are not aware of any such
situation, we may have such liabilities on properties previously
sold. We believe that we and our properties are in compliance
in all material respects with applicable federal, state, and local
laws, ordinances, and regulations governing the environment.
Competition We compete with other real estate owners
with similar properties located in our markets and distinguish
ourselves to tenants/buyers primarily on the basis of location,
rental rates/sales prices, services provided, reputation, and the
design and condition of the facilities. We also compete with
other real estate companies, financial institutions, pension
funds, partnerships, individual investors, and others when
attempting to acquire and develop properties.
Executive Offices; Employees Our executive offices
are located at 191 Peachtree Street NE, Suite 500, Atlanta,
Georgia 30303-1740. On December 31, 2015, we employed
257 people.
Available Information We make available free of
charge on the “Investor Relations” page of our website,
www.cousinsproperties.com, our 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”).
Our Corporate Governance Guidelines, Director Independence
Standards, Code of Business Conduct and Ethics, and
the Charters of the Audit Committee, the Investment
Committee, and the Compensation, Succession, Nominating
and Governance Committee of the Board of Directors are
also available on the “Investor Relations” page of our
website. The information contained on our website is not
incorporated herein by reference. Copies of these documents
(without exhibits, when applicable) are also available free
of charge upon request to us at 191 Peachtree Street NE,
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 us, that file
electronically with the SEC at www.sec.gov.
F I N A N C I N G AC T I V I T Y
– Repaid without recourse, the $14.2 million The Points
at Waterview mortgage loan.
– Reduced total consolidated indebtedness by $71.1
million and maintained strong leverage ratios.
P O R T FO L I O AC T I V I T Y
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Leased or renewed 3.0 million square feet of office
space.
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Increased second generation net rent per square foot
by 36.7% in accordance with accounting principles
generally accepted in the United States (“GAAP”) and
19.8% on a cash basis.
Increased same property net operating income by 3.3%
on a GAAP basis and 7.3% on a cash basis.
OT H E R AC T I V I T Y
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In the first quarter of 2015, increased the quarterly
common stock dividend from $0.075 per share to
$0.080 per share.
Environmental Matters Our 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.
liability
this potential
typically manage
We
through
performance of Phase I Environmental Site Assessments and,
as necessary, Phase II environmental sampling, on properties
we acquire or develop, 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
us. In certain situations, we have also sought to avail ourselves
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. We are not
aware of any environmental liability that we believe would
have a material adverse effect on our business, assets, or
results of operations.
2
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT I T E M 1 A .
R I S K F A C T O R S
Set forth below are the risks we believe investors should
consider carefully in evaluating an investment in the securities
of Cousins Properties Incorporated.
G E N E R A L R I S K S O F OW N I N G A N D O P E R AT I N G
R E A L E S TAT 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 in the national, regional, and local economic
climate;
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, availability of
financing, changes in laws, and governmental regulations
(including those governing usage, zoning and taxes) may
adversely affect our financial condition.
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 we decide to sell a real
estate asset rather than holding it for long term investment
or reduce our 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,
2015, our top 20 tenants represented 41% of our annualized
base rental revenues with no single tenant accounting for
more than 8% of our annualized base rent. In addition, as
3
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED of December 31, 2015, 23% of our annualized base rent
comes from tenants in the energy sector with no other sector
representing more than 17% of our annualized base rent.
The inability of any of our significant tenants to pay rent
or a decision by a significant tenant to vacate their premises
prior to, or at the conclusion of, their lease term 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.
For the three months ended December 31, 2015, 45% of
our net operating income was derived from the metropolitan
Houston area and 41% was derived from the metropolitan
Atlanta area. Any adverse economic conditions impacting
Houston or Atlanta could adversely affect our overall results
of operations and financial condition. Given the fact that
the Houston metropolitan area has a significant presence in
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 in 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.
Uninsured
losses and condemnation costs. Accidents,
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
4
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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, financing, 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
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 N A N C I N G R I 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 Unsecured
Credit Facility (“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
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, we may determine not to refinance the mortgage
and permit foreclosure, generating a loss to us and
defaults on other mortgages.
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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
5
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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.
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:
– 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 us in addition
to being recourse to the equity in the asset. In addition,
construction loans generally require a completion
guarantee by the borrower. 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
sales could occur. We can also provide no assurance
that conditions will be favorable for future issuances of
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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;
properties,
exploiting
or
restricting the way in which we conduct our business
in
because of financial and operating covenants
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.
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT Covenants contained in our Credit Facility and mortgages
could restrict or hinder our operational flexibility, which
could adversely affect our results of operations.
imposes financial and operating
Our Credit Facility
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 and
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.
The repurchase of our shares of common stock may not
result in benefits to our shareholders.
In 2015, we initiated a plan to repurchase shares of our
common stock. We repurchase shares in our discretion based
on the price of our common stock and the relative expected
profitability of other investment options available to us,
including acquisition and development properties. As with
any investment, there can be no assurance that the benefits
of repurchasing our common stock will be superior to other
investment options available to us.
R E A L E S TAT E ACQ U I S I T I O N A N D
D E V E LO P M E N T R I 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.
inherent risks.
Development activities contain certain
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
7
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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.
– Construction delays. Real estate development carries the
risk that the project could be delayed due to a number
of issues that may arise including, but not limited to,
weather and other forces of nature, availability of
materials, availability of skilled labor, and the financial
health of general contractors or sub-contractors.
Construction delays could cause adverse financial
impacts to us which could include higher interest and
other carrying costs than originally budgeted, monetary
penalties from tenants pursuant to their leases, and
higher construction costs. Delays could also result in
a violation of terms of construction loans that could
increase fees, interest, or trigger additional recourse of
the loan to us.
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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 approvals. All necessary 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;
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 not match
the timing of property dispositions, leading to periods
of time where projects’ proceeds are not invested as
profitably as we desire or where we increase short-term
borrowings until sales proceeds become available;
the inability to obtain financing for acquisitions on
favorable terms or at all;
the inability to successfully integrate the operations,
maintain consistent standards, controls, policies and
8
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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.
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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,
which might not be fully covered by owner’s title insurance
policies. 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.
G E N E R A L B U S I N E S S R I 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
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. We provide waivers to this limitation on
a case by case basis, which could result in increased voting
control by a shareholder. 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 market price of our common stock may fluctuate.
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.
9
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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 E D E R A L I N CO M E TA X R I 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.
10
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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.
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 CO N T R O L S A N D I N T E R N A L
CO N T R O L OV E R F I N A N C I A L R E P O R T I N G R I 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 could
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.
I T E M 1 B .
U N R E S O L V E D S T A F F C O M M E N T S
Not applicable.
11
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED I T E M 2 .
P R O P E R T I E S
The following table sets forth certain information related to operating properties in which we have an ownership interest.
Information presented in note 5 to the consolidated financial statements provides additional information related to our
unconsolidated joint ventures. Except as noted, all information presented is as of December 31, 2015:
Operating Properties
Property Description
I. OFFICE PROPERTIES
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 (7)
Company’s Share
Greenway Plaza (3)
Houston
4,348,000 Consolidated
100% 89.8%
Post Oak Central (3)
Houston
1,280,000 Consolidated
100% 95.4%
816 Congress
Colorado Tower
Austin
435,000 Consolidated
100% 93.4%
Austin
373,000 Consolidated
100% 100.0%
Research Park V (4)
Austin
173,000 Consolidated
100% 29.9%
TEXAS
6,609,000
Northpark Town Center (3)
Atlanta
1,528,000 Consolidated
100% 84.5%
191 Peachtree Tower
Atlanta
1,225,000 Consolidated
100% 91.5%
Promenade
The American Cancer
Society Center
Terminus 100
Terminus 200
Meridian Mark Plaza
Emory University Hospital
Midtown Medical Office Tower
Atlanta
777,000 Consolidated
100% 93.0%
Atlanta
996,000 Consolidated
100% 86.6%
Atlanta
659,000 Unconsolidated
50% 92.3%
Atlanta
566,000 Unconsolidated
50% 92.2%
Atlanta
160,000 Consolidated
100% 98.2%
Atlanta
358,000 Unconsolidated
50% 98.8%
100 North Point Center East (5)
Atlanta
129,000 Consolidated
100% 99.9%
GEORGIA
6,398,000
Fifth Third Center
Gateway Village
Charlotte
698,000 Consolidated
100% 94.6%
Charlotte
1,065,000 Unconsolidated
50% 100.0%
NORTH CAROLINA
1,763,000
88.7%
95.7%
91.6%
76.8%
—%
85.2%
89.4%
91.0%
86.6%
90.5%
90.4%
97.7%
99.7%
99.9%
84.5%
100%
33% $
—
12% 181,770
4% 85,000
4%
—%
—
—
53% 266,770
10%
—
8% 100,000
5% 108,203
5% 129,342
3% 64,608
3% 41,000
2% 24,978
2% 37,143
1%
—
39% 505,274
6%
—%
—
8,768
6%
8,768
TOTAL OFFICE PROPERTIES
14,770,000
98% $ 780,812 $ 241,719(8)
12
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT Property Description
II. OTHER PROPERTIES
Emory Point Apartments
(Phase I) (6)
Emory Point Retail (Phase I)
Emory Point Retail (Phase II)
Emory Point Apartments
(Phase II) (6)
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 (7)
Company’s Share
Atlanta
404,000 Unconsolidated
75% 95.7%
Atlanta
Atlanta
80,000 Unconsolidated
75% 84.7%
45,000 Unconsolidated
75% 69.1%
96.0%
76.8%
64.7%
2% $ 36,123
—%
—%
7,399
4,602
Atlanta
257,000 Unconsolidated
75% 42.7%
36.4%
—% 26,081
TOTAL OTHER PROPERTIES
786,000
2% 74,205 $
8,717
TOTAL PORTFOLIO
15,556,000
100% $ 855,017
(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, 2015.
(3) Contains multiple buildings that are grouped together for reporting purposes.
(4) Research Park V became operational on December 1, 2015.
(5) 100 North Point Center East was sold in January 2016.
(6) Phase I consists of 443 units and Phase II consists of 307 units.
(7) 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.
(8) Included in this amount is $9.6 million of Annualized Base Rent for tenants in a free rent period.
Office Lease Expirations
As of December 31, 2015, our portfolio included 16 operating office properties. The weighted average remaining lease term
of these office properties was 7 years as of December 31, 2015. 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) (1)(2)
% of Total Annual
Contractual Rents
Annual Contractual
Rent/Sq. Ft. (2)
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025 &Thereafter
Total
123
112
90
96
74
68
43
44
21
59
657,081
877,583
602,005
1,576,714
761,835
1,204,654
1,309,819
1,497,307
731,773
2,954,394
5.3%
7.2%
4.9%
13.0%
6.3%
9.9%
10.8%
12.3%
6.0%
24.3%
$ 12,454
18,904
13,882
35,505
17,501
30,115
31,009
34,083
20,878
77,377
4.2%
6.5%
4.8%
12.2%
6.0%
10.3%
10.6%
11.7%
7.2%
26.5%
$ 18.95
21.54
23.06
22.52
22.97
25.00
23.67
22.76
28.53
26.19
730
12,173,165
100.0%
$ 291,708
100.0%
$ 23.96
(1) Company’s share.
(2) Annual Contractual Rent shown is the rate in the year of expiration. It includes the minimum contractual rent paid by the tenant which
may or may not include a base year of operating expenses depending upon the terms of the lease.
13
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Development Pipeline (1)
As of December 31, 2015, we had the following projects under development:
Project
Type Metropolitan Area
Company’s
Ownership
Interest
Project
Start
Date
Number of
Square Feet /
Apartment
Units
Estimated
Project Cost (2)
($ in thousands)
Project Cost
Incurred to Date (2)
($ in thousands)
Percent
Leased
Initial
Occupancy (3)
Estimated
Stabilization (4)
Carolina Square Mixed Chapel Hill, NC
50% 2Q15
$123,000
$ 14,698
Office
Retail
Apartments
159,000
43,000
246
67%
—%
—%
NCR Phase I
Office Atlanta, GA
100% 3Q15
485,000
200,000
27,890 100%
2Q17
2Q17
2Q17
1Q18
2Q18
2Q18
2Q18
1Q18
Total
$323,000
$ 42,588
(1) This schedule shows projects currently under active development through the substantial completion of construction. 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.
(2) Amount represents 100% of the estimated project cost. Carolina Square is expected to be funded with a combination of equity from the
partners and up to $80.0 million from a construction loan, which has no outstanding balance as of December 31, 2015.
(3) Represents the quarter which the Company estimates the first tenant occupies space.
(4) Stabilization represents the earlier of the quarter in which the Company estimates it will achieve 90% economic occupancy or one year
from initial occupancy.
Land Holdings
As of December 31, 2015, we owned the following land holdings, either directly, or indirectly, through joint ventures:
COMMERCIAL
North Point
Wildwood Office Park
The Avenue Forsyth-Adjacent Land
NCR Phase II (1)
GEORGIA
Victory Center
TEXAS
COMMERCIAL LAND HELD (ACRES)
Metropolitan
Area
Company’s
Ownership
Interest
Total
Developable
Land (Acres)
Company’s
Share
Atlanta
100.00%
Atlanta
50.00%
Atlanta
100.00%
Atlanta
100.00%
Dallas
75.0%
32
22
10
1
65
3
3
68
56
COST BASIS OF COMMERCIAL LAND HELD
$ 39,364
$ 20,577
14
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT RESIDENTIAL (2)
Paulding County
Callaway Gardens (3)
GEORGIA
Padre Island
TEXAS
RESIDENTIAL LAND HELD (ACRES)
COST BASIS OF RESIDENTIAL LAND HELD
GRAND TOTAL LAND HELD (ACRES)
GRAND TOTAL COST BASIS OF LAND HELD
Metropolitan
Area
Company’s
Ownership
Interest
Total
Developable
Land (Acres)
Company’s
Share
Atlanta
50.00%
Atlanta
100.00%
Corpus Christi
50.00%
478
218
696
15
15
711
465
$ 11,899
$ 8,363
779
521
$ 51,263
$ 28,940
(1) Represents land adjacent to NCR Development project. Upon completion of the NCR development project, NCR is required to pay rent
on this land.
(2) Residential represents land that may be sold to third parties as lots or in large tracts for residential development.
(3) Company’s ownership interest is shown at 100% as Callaway Gardens is owned in a joint venture which is consolidated with the
Company.
I T E M 3 .
L E G A L P R O C E E D I N G S
We are 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. We record 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, we accrue the best estimate within the range. If no
amount within the range is a better estimate than any other
amount, we accrue the minimum amount within the range.
If an unfavorable outcome is probable but the amount of the
loss cannot be reasonably estimated, we disclose the nature
of the litigation and indicate 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,
we disclose the nature and estimate of the possible loss of
the litigation. We do 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 our liquidity, results of operations,
business, or financial condition.
15
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED I T E M 4 .
M I N E S A F E T Y D I S C L O S U R E S
Not applicable.
I T E M X .
E X E C U T I V E O F F I C E R S O F T H E R E G I S T R A N T
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
M. Colin Connolly
John S. McColl
John D. Harris, Jr.
Pamela F. Roper
59
51
39
53
56
42
President, Chief Executive Officer
Executive Vice President, Chief Financial Officer
Executive Vice President, Chief Investment Officer
Executive Vice President
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.
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. Connolly was appointed Executive Vice President and
Chief Investment Officer in December 2015. From May
2013 to December 2015, Mr. Connolly served as Senior Vice
President and Chief Investment Officer. 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. McColl was appointed Executive Vice President in
December 2011. From February 2010 to December 2011,
Mr. McColl served as Executive Vice President-Development,
Office Leasing and Asset Management. From May 1997 to
February 2010, Mr. McColl served as Senior Vice President.
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.
16
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
P A R T I I
I T E M 5 .
M A R K E T F O R R E G I S T R A N T ’ S C O M M O N S T O C K A N D
R E L A T E D S T O C K H O L D E R M A T T E R S
M A R K E T I N FO R M AT I O N
The high and low sales prices for our common stock and dividends declared per common share were as follows:
2015 Quarters
2014 Quarters
First
Second
Third
Fourth
First
Second
Third
Fourth
High
Low
Dividends
Payment Date
$11.63
$10.01
$0.080
$13.20
$10.69
$0.075
2/23/2015 5/28/2015 8/24/2015 12/18/2015 2/24/2014 5/28/2014 8/25/2014 12/19/2014
$ 10.89
$ 8.68
$ 0.080
$ 11.77
$ 10.10
$ 0.075
$12.50
$11.23
$0.075
$10.37
$ 8.87
$0.080
$13.30
$11.95
$0.075
$10.96
$ 9.40
$0.080
H O L D E R S
Our common stock trades on the New York Stock Exchange
(ticker symbol CUZ). On February 5, 2016, there were 730
common stockholders of record.
P U R C H A S E S O F E Q U I T Y S E C U R I T I E S
For information on our equity compensation plans, see note
12 of the accompanying consolidated financial statements,
which is incorporated herein.
We purchased the following common shares during the fourth quarter of 2015:
October 1 - 31
November 1 - 30
December 1 - 31
Total Number
of Shares
Purchased (1)
1,351
—
3,157,438
3,158,789
Average Price
Paid per Share (1)
$10.25
$ —
$ 9.20
$ 9.20
(1) All activity for the fourth quarter of 2015 is related to the remittances of shares for option exercises and share repurchases. Share
repurchases were made under our $100 million share repurchase program initiated in September 2015. Share repurchases may be
executed in the open market, through private negotiations, or other transactions permitted by law.
17
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED
P E R FO R M A N C E G R A P H
The following graph compares the five-year cumulative total return of our 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, 2010 and the reinvestment of all dividends.
TOTA L R E T U R N P E R FO R M A N C E
e
u
l
a
V
x
e
d
n
I
200
180
160
140
120
100
80
60
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
12/31/15
Cousins Properties Incorporated
FTSE NAREIT Equity Index
NYSE Composite Index
SNL US REIT Ofÿce Index
CO M PA R I S O N O F C U M U L AT I V E TOTA L R E T U R N O F O N E O R M O R E CO M PA N I E S , P E E R
G R O U P S , I N D U S T RY I N D I C E S A N D/O R B R OA D M A R K E T S
Index
Cousins Properties Incorporated
NYSE Composite Index
FTSE NAREIT Equity Index
SNL US REIT Office Index
Fiscal Year Ended
12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015
100.00
100.00
100.00
100.00
78.77
96.33
108.29
99.10
105.01
111.89
127.85
113.54
131.86
141.41
131.01
120.99
150.06
151.12
170.49
152.53
127.92
145.12
175.94
153.87
18
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
I T E M 6 .
S E L E C T E D F I N A N C I A 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 our 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
Interest expense
Depreciation and amortization
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
Income (loss) from discontinued operations
Net income (loss)
Net income attributable to noncontrolling interests
Preferred share original issuance costs
Preferred dividends
For the Years Ended December 31,
2015
2014
2013
2012
2011
(in thousands, except per share amounts)
$ 373,068
7,297
1,278
381,643
156,157
3,430
17,099
30,723
135,416
—
1,299
344,124
—
—
8,302
80,394
126,215
(586)
125,629
(111)
—
—
$ 343,910
12,519
4,954
361,383
155,934
3,652
19,969
29,110
140,018
—
4,674
353,357
—
20
11,268
12,536
31,850
21,158
$ 194,420
10,891
5,430
210,741
90,498
5,215
22,460
21,709
76,277
—
11,177
227,336
—
23
67,325
61,288
112,041
14,788
53,008
(1,004)
(3,530)
(2,955)
126,829
(5,068)
(2,656)
(10,008)
$ 114,208
17,797
4,841
136,846
50,329
7,063
23,208
23,933
39,424
488
7,922
152,367
(94)
(91)
39,258
4,053
27,605
20,314
47,919
(2,191)
—
(12,907)
$
94,704
13,821
9,600
118,125
40,817
6,208
24,166
26,677
30,666
96,818
9,951
235,303
—
186
(18,299)
3,494
(131,797)
8,330
(123,467)
(4,958)
—
(12,907)
Net income (loss) available to common stockholders
$ 125,518
$
45,519
$ 109,097
$
32,821
$ (141,332)
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)
$
$
$
0.58
0.58
0.32
$
$
$
0.12
0.22
0.30
$
$
$
0.66
0.76
0.18
$
$
$
0.12
0.32
0.18
$
$
$
(1.44)
(1.36)
0.18
$2,597,803
$ 721,293
$1,683,415
$2,667,330
$ 792,344
$1,673,458
$2,273,206
$ 630,094
$1,457,401
$1,124,242
$ 425,410
$ 620,342
$1,235,535
$5,394,423
$ 603,692
Common shares outstanding (at year-end)
211,513
216,513
189,666
104,090
103,702
19
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED I T E M 7 .
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
O F F I N A N C I A L C O N D I T I O N A N D R E S U L T S
O F O P E R A T I O N S
We are currently conducting pre-development activities on
projects in Decatur, Georgia; Alpharetta, Georgia; Dallas,
Texas; and Charlotte, North Carolina. We are pursuing
additional development opportunities that may result in
projects that commence in 2016 or thereafter.
We have grown significantly over the past two to three
years through acquisition and development activities that
management believes provide opportunity to
increase
value through leasing and superior management of the
properties. We believe that the number of similar acquisition
and development opportunities will be lower in 2016, and
management will focus on leasing, renewing, and servicing
tenants at our existing properties.
In addition to these traditional investment activities, we also
initiated a stock repurchase plan in 2015 which provides
that management may repurchase up to $100.0 million of
shares over the next two years. In determining the timing and
amount of shares to be repurchased, we assess the returns
from investing in our common stock against other investment
options. In 2015, we repurchased 5.2 million shares totaling
$47.8 million at an average per share price of $9.22.
D I S P O S I T I O N AC T I V I T Y
We funded the investment activity discussed above primarily
with the sale of certain non-core assets in 2015. We sold 2100
Ross, an 844,000 square foot office tower in Dallas, Texas,
for $131.0 million. We sold The Points at Waterview, a
203,000 square foot office tower in Dallas, Texas, for
$26.8 million. We also sold 200, 333, and 555 North Point
Center East, office buildings located in Atlanta, Georgia,
containing 411,000 square feet, for $70.3 million. Subsequent
to year end, we sold our final building at North Point, 100
North Point Center East, containing 129,000 square feet,
for $22.0 million.
Throughout 2015, we sold 8,643 acres of land, including
the sale of land in Wildwood, 549/555/557 Peachtree Street,
Paulding County, and Blalock Lakes, which generated gross
proceeds of $20.9 million.
The following discussion and analysis should be read
in conjunction with the selected financial data and the
consolidated financial statements and notes.
Overview of 2015 Performance and Company and
Industry Trends
Our strategy is to create value for our 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 2015, we
completed the development of two office projects and one
mixed-use project and commenced development activities
on two other development projects, all within our target
markets. To fund our investment activities, we completed the
disposition of three of our non-core office assets and several
land holdings.
I N V E S T M E N T AC T I V I T Y
Our investment strategy is to purchase Class A office assets or
locate opportunistic development or redevelopment projects
in our core markets to which we can add value through
relationships, capital, or market expertise. During 2015, we
purchased land and commenced construction on the NCR
corporate headquarters, a 485,000 square foot office tower
in the midtown sub-market of Atlanta, which is expected to
cost $200.0 million. With a joint venture partner, we also
commenced construction of Carolina Square, a mixed-use
property containing 159,000 square feet of office space,
246 apartments, and 43,000 square feet of retail space.
The total estimated project costs for Carolina Square are
$123.0 million.
In 2015, we substantially completed construction and opened
Colorado Tower, a 373,000 square foot office tower, and
Research Park V, a 173,000 square foot office tower, in
Austin, Texas. Colorado Tower is currently 100% leased
and Research Park is 30% leased. We also substantially
completed construction and opened the second phase of
Emory Point, a mixed-use project containing 307 apartments
and 45,000 square feet of retail space. The apartments at
Emory Point Phase II are 43% leased and the retail portion
of the project is 69% leased.
20
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
F I N A N C I N G AC T I V I T Y
We entered 2015 with a strong balance sheet, and one of
our ongoing strategic objectives is to maintain a strong
balance sheet that provides us with the flexibility to act on
investment opportunities as they arise. As a result of the fact
that we used proceeds from disposition activities to fund
our development activities, our credit ratios remain strong.
Our debt to total undepreciated assets ratio at December 31,
2015 was 27.5%, down from 29.5% at December 31, 2014.
Also, our fixed charges coverage ratio improved to 4.8 times
for 2015, up from 4.3 times in 2014. Our debt to annualized
EBITDA ratio remained consistent and strong at 4.0.
P O R T FO L I O AC T I V I T Y
In 2015, we leased or renewed approximately 3.0 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 $14.66 per square foot in 2015. Cash basis net effective
rent per square foot increased 19.8% 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 A R K E T CO N D I T I O N S
We continue to target high barrier-to-entry submarkets
in Atlanta, Austin, Charlotte, Dallas, and Houston. We
believe these Sunbelt cities 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 is currently our strongest market in terms of total
new employment. After averaging 64,000 new jobs per year
in 2013 and 2014, Atlanta added over 78,000 new jobs in
2015, which ranks fourth in total job growth nationally.
Office fundamentals are equally strong. 2015 net absorption
eclipsed 3.6 million square feet for the first time in the last
30 years, and due to limited new supply, vacancy rates
reached 12.1%, the lowest level since 2000.
Austin’s economy continues to grow well ahead of the
national pace. Job growth in Austin over the past year
was 3.8%, and its unemployment rate at the end of 2015
was 3.1%, below the national average of 4.8%, and one
of the lowest in the country. Although new construction is
increasing in and around Austin, our Austin portfolio is well
leased and market-wide vacancy rates have dropped to 8.0%.
The Charlotte office market continues to gain momentum
as the low cost, business-friendly environment which has
helped sustain increased demand in 2015. Charlotte’s
employment has passed the pre-recession peak of 2007, and
2015 job growth is among the best in the nation at 3.3%.
Multiple high-profile relocations and expansions have been
announced over the last year in a vast array of industries
signaling a more diversified Charlotte economy.
Dallas ranks third nationally in total job growth adding
more than 100,000 new jobs in 2015. A number of corporate
relocations and expansions has translated into strong demand
leading to vacancy compression in the best submarkets.
Class A office net absorption has been the best in recent years
at over 7 million square feet in 2015. Management expects
market fundamentals to remain strong in 2016; but with an
increasing amount of speculative construction underway, we
will continue to view Dallas as a more opportunistic market.
Houston’s office market showed signs of slowing over
the course of 2015. However, our portfolio is defensively
positioned for the near and long term, and operating results
and leasing metrics posted strong numbers during the year.
Our 5.6 million square foot portfolio is 91% leased with
approximately 6.5 years in average remaining lease term and
no significant expirations until late 2019. In addition, of our
top 10 customers in Houston, representing 52% of the entire
Houston portfolio, eight carry an investment grade rating.
With this tenant roster and limited roll-over exposure,
management believes that it is well-positioned in Houston.
Going forward, we expect to generate returns and create
stockholder value through the lease up of our existing
portfolio, through the execution of our development pipeline,
and through opportunistic acquisition and development
investments within our core markets.
Critical Accounting Policies Our financial statements
are prepared in accordance with GAAP as outlined in
the Financial Accounting Standards Board’s (“FASB”)
Accounting Standards Codification (“ASC”), 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 our accounting policies are considered
to be critical accounting policies, which are ones that are
both important to the portrayal of our financial condition,
21
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED results of operations, and cash flows, and ones that also
require significant judgment or complex estimation processes.
Our critical accounting policies are as follows:
R E A L E S TAT E A S S E T S
Cost Capitalization. We are 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), we expense predevelopment costs.
After we determine a 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 we
abandon development of a project that had earlier been
deemed probable, we charge all previously capitalized costs
to expense. If this occurs, our predevelopment expenses could
rise significantly. The determination of whether a project is
probable requires judgment. If we determine 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,
we capitalize 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 us, in some cases, to exercise judgment.
If we determine 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 we determine
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. We consider
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. Our
judgment of the date the project is substantially complete has
a direct impact on our operating expenses and net income for
the period.
Operating Property Acquisitions. Upon acquisition
of an operating property, we record the acquired tangible
and intangible assets and assumed liabilities at fair value at
22
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 leases.
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 our assessment of lost revenue and costs incurred for the
period required to lease the “assumed vacant” 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
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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 values
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. We depreciate or
amortize operating real estate assets over their estimated
useful lives using the straight-line method of depreciation.
We use 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 our real
estate assets.
Impairment. We review our real estate assets on a
property-by-property basis for impairment. This review
includes our operating properties and land holdings.
The first step in this process is for us 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,
we 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
we determine 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, we 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 in 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 we determine that an asset that is held and used has
indicators of impairment, we 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, we must
reduce the carrying amount of the asset to fair value.
In calculating the undiscounted net cash flows of an asset, we
must estimate a number of inputs. For operating properties,
we 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, we 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, we must assess the probability of each alternative
strategy and perform a probability-weighted undiscounted
cash flow analysis to assess the recoverability of the asset.
We 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, we exercise judgment
on a number of factors. We may determine fair value by
using a discounted cash flow calculation or by utilizing
comparable market information. We must determine an
appropriate discount rate to apply to the cash flows in the
discounted cash flow calculation. We must use judgment in
analyzing comparable market information because no two
real estate assets are identical in location and price.
The estimates and judgments used in the impairment process
are highly subjective and susceptible to frequent change. If
we determine 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 we use 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. Our
assumptions about the discount rate used in a discounted cash
flow estimate of fair value and our judgment with respect to
market information could materially affect the decision to
record impairment losses or, if required, the amount of the
impairment losses.
23
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED R E V E N U E R E CO G N I T I O N – VA LUAT I O N O F
R E C E I VA B L E S
Notes and accounts receivable are reduced by an allowance
for amounts that may become uncollectible in the future.
We review our receivables regularly for potential collection
problems in computing the allowance to record against
our receivables. This review requires us to make certain
judgments regarding collectibility, notwithstanding the
fact that ultimate collections are inherently difficult to
predict. Economic conditions fluctuate over time, and we
have 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.
I N V E S T M E N T I N J O I N T V E N T U R E S
We hold ownership interests in a number of joint ventures
with varying structures. We evaluate all of our 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 we determine that we are
the primary beneficiary, we consolidate the assets, liabilities,
and results of operations of the VIE. We quarterly reassess
our 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, we evaluate
whether or not we have control or significant influence over
the joint venture to determine the appropriate consolidation
and presentation. Generally, entities under our control are
consolidated, and entities over which we can exert significant
influence, but do not control, are accounted for under the
equity method of accounting.
We use judgment to determine whether an entity is a VIE,
whether we are the primary beneficiary of the VIE, and
whether we exercise control over the entity. If we determine
that an entity is a VIE and we are the primary beneficiary
or if we conclude that we exercise control over the entity,
the balance sheets and statements of operations would be
significantly different than if we concluded otherwise. In
addition, VIEs require different disclosures in the notes
to the financial statements than entities that are not VIEs.
We may also change our conclusions and, thereby, change
our 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.
24
We perform an impairment analysis of the recoverability of
our investments in joint ventures on a quarterly basis. As
part of this analysis, we first determine whether there are any
indicators of impairment in any joint venture investment.
If indicators of impairment are present for any of our
investments in joint ventures, we calculate the fair value of the
investment. If the fair value of the investment is less than the
carrying value of the investment, we must determine whether
the impairment is temporary or other than temporary,
as defined by GAAP. If we assesses the impairment to be
temporary, we do not record an impairment charge. If we
conclude that the impairment is other than temporary, we
record an impairment charge.
We use 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. We also use judgment in making the determination
as to whether the impairment is temporary or other than
temporary. We utilize 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. Our 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 our financial
condition, results of operations, and cash flows.
In
I N CO M E TA X E S – VA LUAT I O N A L LOWA N C E
We establish 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. We periodically
assesses the need for valuation allowances for deferred
tax assets based on the “more likely than not” realization
threshold criterion.
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, our experience with operating loss and tax credit
carryforwards, and tax planning alternatives. If management
determines that we require a valuation allowance on our
deferred tax assets, income tax expense or benefit could be
materially different than if we determine no such valuation
allowance is necessary.
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT from
tenants
R E COV E R I E S F R O M T E N A N T S
Recoveries
for operating expenses are
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 lease
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 E D CO M P E N S AT I O N
We have several types of stock-based compensation plans.
These plans are described in note 12, 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. For compensation plans that contain market
performance measures, we must estimate the fair value of the
awards on a quarterly basis and must adjust compensation
expense accordingly. The fair values of these awards are
estimated using complex pricing valuation models that
require a number of estimates and assumptions. For awards
that are based on our future earnings, we must estimate
future earnings and adjust the estimated fair value of the
awards accordingly.
We use considerable judgments in determining the fair value
of these awards. Compensation expense associated with these
awards could vary significantly based upon these estimates.
Discussion of New Accounting Pronouncements
In 2015, the FASB issued ASC 2015-02 “Consolidation
(Topic 810): Amendments to the Consolidation Analysis.”
All legal entities are subject to reevaluation under the
revised consolidation model. The amendment modifies the
evaluation of whether limited partnerships and similar legal
entities are variable interest entities or voting interest entities.
It also eliminates the presumption that a general partner
should consolidate a limited partnership. The guidance
is effective for public entities with periods beginning after
December 15, 2015 with early adoption permitted. We
adopted this guidance effective January 1, 2016, and expect
no material impact to our financial statements.
In 2015, the FASB issued ASU 2015-03, “Simplifying the
Presentation of Debt Issuance Costs,” which will require
companies to present debt issuance costs as a direct deduction
from the related debt rather than as an asset. These costs will
continue to be amortized into interest expense. The guidance
is effective for periods beginning after December 15, 2015
with early adoption permitted. ASU 2015-15 was issued
further clarifying that entities may defer and present debt
costs as an asset and amortize the deferred debt issuance
costs ratably over the term for line of credit arrangements,
regardless of the outstanding balance. We adopted this
guidance in ASU 2015-03 effective January 1, 2016 for
mortgage debt and have elected to defer adoption for costs
related to line of credit arrangements. We expect no material
impact to our financial statements.
In 2015, the FASB voted to defer ASU 2014-09, “Revenue
from Contracts with Customers (Topic 606).” 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 under the current guidance. The
standard specifically excludes revenue associated with lease
contracts. The guidance is effective for periods beginning
after December 15, 2017, with early adoption permitted for
periods beginning after December 15, 2016. We expect to
adopt this guidance effective January 1, 2018, and we are
currently assessing the potential impact of adopting the
new guidance.
Results of Operations For The Three Years Ended
December 31, 2015
G E N E R A L
Our financial results have historically been significantly
affected by purchase and sale transactions. Accordingly, our
historical financial statements may not be indicative of future
operating results. During 2014, we purchased Fifth Third
Center and Northpark Town Center (collectively, the “2014
Acquisitions”). During 2013, we purchased Greenway Plaza,
777 Main, 816 Congress, and Post Oak Central (collectively,
the “2013 Acquisitions”). There were no operating property
acquisitions in 2015. During 2015, we sold 2100 Ross,
25
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED The Points at Waterview, and 200, 333, and 555 North
Point Center East (collectively, the “2015 Dispositions”).
During 2014, we sold 600 University Park Place, Lakeshore
Park Plaza, Mahan Village, and 777 Main (collectively, the
“2014 Dispositions”). During 2013, we sold Terminus 100
to the Terminus Office Holdings LLC joint venture, Tiffany
Springs MarketCenter, and Inhibitex (collectively, the “2013
Dispositions”).
R E N TA L P R O P E R T Y N E T O P E R AT I N G I N CO M E
The following results include the performance of our Same
Property portfolio. Our Same Property portfolio includes
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 periods presented or has been substantially
complete and owned by us for each of the periods
presented. Same Property amounts for the 2015 vs 2014
comparison are from properties that have been owned since
January 1, 2014 through the end of the current reporting
period, excluding dispositions. Same Property amounts
for the 2014 vs 2013 comparison are from properties that
were owned from January 1, 2013 to December 31, 2014,
excluding dispositions. This information includes revenues
and expenses of only consolidated properties.
We use Net Operating Income (“NOI”), a non-GAAP
financial measure, to measure operating performance of
our properties. NOI is also widely used by industry analysts
and investors to evaluate performance. NOI, 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 NOI. Same Property
NOI allows analysts, investors, and management to analyze
continuing operations and evaluate the growth trend of
our portfolio.
NOI increased $28.9 million between the 2015 and 2014 periods as follows:
Rental Property Revenues
Same Property
Non-Same Property
Rental Property Operating Expenses
Same Property
Non-Same Property
Same Property NOI
Non-Same Property NOI
Total NOI
Year Ended December 31,
2015
2014
$ Change
% Change
$260,634
112,434
$260,055
83,855
$
579
28,579
$373,068
$343,910
$29,158
$110,209
45,948
$114,691
41,243
$ (4,482)
4,705
$156,157
$155,934
$
223
$150,425
$ 66,486
$145,364
$ 42,612
$ 5,061
$23,874
$216,911
$187,976
$28,935
0.2%
34.1%
8.5%
(3.9)%
11.4%
0.1%
3.5%
56.0%
59.5%
The increase in Same Property NOI was primarily driven by
decreased real estate tax expense in 2015 from Greenway
Plaza and Post Oak Central.
The increase in Non-Same Property NOI is primarily due to
commencement of operations at Colorado Tower and the
2014 Acquisitions, offset by decreases from the 2015 and
2014 Dispositions.
26
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT NOI increased $84.1 million between the 2014 and 2013 periods as follows:
Rental Property Revenues
Same Property
Non-Same Property
Rental Property Operating Expenses
Same Property
Non-Same Property
Same Property NOI
Non-Same Property NOI
Total NOI
Year Ended December 31,
2014
2013
$ Change
% Change
$ 73,558
270,352
$ 72,584
121,836
$
974
148,516
$343,910
$194,420
$149,490
$ 32,925
123,009
$ 33,109
57,389
$
(184)
65,620
$155,934
$ 90,498
$ 65,436
$ 40,633
$147,343
$ 39,475
$ 64,447
1,158
$
$ 82,896
1.3%
121.9%
76.9%
(0.6)%
114.3%
72.3%
2.9%
128.6%
$187,976
$103,922
$ 84,054
131.5%
The increase in Same Property NOI was primarily caused
by increased occupancy at American Cancer Society Center
and 191 Peachtree. These increases were offset by lower
occupancy at The Points at Waterview.
The increase in Non-Same Property NOI was primarily
due to the 2014 and 2013 Acquisitions, and an increase in
average occupancy at 2100 Ross, offset by decreases from
the 2014 and 2013 Dispositions.
F E E I N CO M E
Fee
income decreased $5.2 million (41.7%) between
2015 and 2014 and increased $1.6 million (14.9%)
between 2014 and 2013. Fee income for 2014 was higher
than 2015 and 2013 because the 2014 amount includes a
$4.5 million participant interest related to a contract that
was assumed in the acquisition of an entity several years ago.
In addition, between 2013 and 2015, we have fewer third
party development fee engagements on which we receive
management fees.
OT H E R R E V E N U E S
Other revenues decreased $3.7 million (74.2%) between
2015 and 2014 and decreased by $476,000 (8.8%) between
2014 and 2013. These decreases were primarily due to
lower lease termination fees recognized in 2015 and 2014
compared to the prior periods.
R E I M B U R S E D E X P E N S E S
Reimbursed expenses decreased $222,000 (6.1%) between
2015 and 2014 and decreased $1.6 million (30.0%) between
2014 and 2013. Reimbursed expenses are primarily incurred
on projects where we pay various expenses on third party and
joint venture management and development fee engagements
that are later reimbursed by the client. The offsetting income
related to these expenses is recorded in fee income. The
decreases are a result of fewer third party development
engagements and fewer joint ventures on which we receive
management fees.
G E N E R A L A N D A D M I N I S T R AT I V E E X P E N S E S
General and administrative expenses decreased $2.9 million
(14.4%) between 2015 and 2014 and decreased $2.5 million
(11.1%) between 2014 and 2013 primarily as a result of
fluctuations in stock-based compensation expense due
to the volatility in our stock price relative to office peers
included in the SNL US Office REIT Index. Additionally,
in 2015 and 2014 there were higher capitalized salaries
associated with software implementation and development
activities as compared to 2013.
I N T E R E S T E X P E N S E
Interest expense increased $1.6 million (5.5%) between
2015 and 2014 primarily as a result of higher interest
expense related the 816 Congress loan which closed in 2014
and higher interest expense on the Credit Facility due to
higher average borrowings. These increases were partially
offset by higher capitalized interest as a result of increased
development expenditures.
Interest expense increased $7.4 million (34.1%) between
2014 and 2013 primarily as a result of higher interest expense
on the Post Oak and Promenade loans that closed in 2013
and the 816 Congress loan. In 2014, there was also higher
interest expense on the Credit Facility due to higher average
borrowings. These increases were offset by higher capitalized
interest due to an increase in development expenditures.
D E P R E C I AT I O N A N D A M O R T I Z AT I O N
Depreciation and amortization decreased $4.6 million
(3.3%) between 2015 and 2014 primarily due to the 2015
and 2014 Dispositions, partially offset by an increase related
to the commencement of operations of Colorado Tower and
the 2014 Acquisitions.
27
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Depreciation and amortization increased $63.7 million
(83.6%) between 2014 and 2013 primarily due to increases
related to the 2014 and 2013 Acquisitions. These increases
were partially offset by decreases related to the 2014 and
2013 Dispositions.
ACQ U I S I T I O N A N D R E L AT E D CO S T S
Acquisition and related costs decreased $831,000 between
2015 and 2014 and decreased $6.4 million between 2014
and 2013. In 2015, we did not purchase any operating
properties. In 2014, we incurred costs related to the 2014
Acquisitions. In 2013, we incurred costs related to the
2013 Acquisitions.
I N CO M E F R O M U N CO N S O L I DAT E D J O I N T V E N T U R E S
Income from unconsolidated joint ventures consisted of the following in 2015, 2014 and 2013:
Net operating income
Other income
Depreciation and amortization
Interest expense
Land sales gain
Other gains
Income from unconsolidated joint ventures
Income from unconsolidated
joint ventures decreased
between 2015 and 2014 primarily because of a gain of
$1.8 million on the sale of our investment in Cousins Watkins
LLC in 2014. Income from unconsolidated joint ventures
decreased between 2014 and 2013 primarily as a result of
gains totaling $60.3 million on the sale or effective sale of
our interests in CP Venture Five LLC, CP Venture Two LLC,
and CF Murfreesboro Associates in 2013. NOI, depreciation
and amortization, and interest expense decreased in 2014 as
a result of these sales.
G A I N O N S A L E O F I N V E S T M E N T P R O P E R T I E S
Gain on sale of investment properties increased $67.9 million
between 2015 and 2014 and decreased $48.8 million
between 2014 and 2013. The variance is due to increased
operating property sales in 2015 and 2013. The 2015 amount
includes gains on the sales of 200, 333, and 555 North Point
Center East, The Points at Waterview, and 2100 Ross of
$35.7 million, $6.7 million, and $36.2 million, respectively.
The combined sales prices of these assets represents a
weighted average capitalization rate of 6.5%. Capitalization
rates are calculated by dividing projected annualized NOI
by the sales price. The 2014 amount includes 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 our 50% interest in 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 the sale of our interest in
CP Venture Two LLC of $3.6 million.
28
Year Ended December 31,
2015
2014
2013
$ 24,335
787
(11,645)
(7,455)
2,280
—
$ 25,896
717
(11,913)
(7,364)
2,165
1,767
$ 27,763
501
(13,435)
(7,963)
115
60,344
$ 8,302
$ 11,268
$ 67,325
from
operations
discontinued
D I S CO N T I N U E D O P E R AT I O N S
decreased
Income
$21.7 million between the 2015 and 2014 periods and
increased $6.4 million between 2014 and 2013. The 2015
decrease is due to new accounting guidance issued by the
FASB 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. We adopted this new standard in
the second quarter of 2014. Therefore, the properties sold
subsequently are not reflected as discontinued operations in
our consolidated statements of operations.
Discontinued operations
includes the operations and
gains or losses associated with the 2014 dispositions of
600 University Park Place and Lakeshore Park Plaza and
the 2013 dispositions of Tiffany Springs MarketCenter
and Inhibitex. The combined sales prices of the 2014
Dispositions represents a weighted average capitalization
rate of 6.3%. The capitalization rate on the sale of Tiffany
Springs MarketCenter was 7.9% and the capitalization rate
on Inhibitex was 9.1%.
N E T I N CO M E AT T R I B U TA B L E TO
N O N CO N T R O L L I N G I N T E R E S T
We consolidate certain entities and allocate the partner’s
share of those entities’ results to net income attributable to
noncontrolling interests on the consolidated statements of
operations. The noncontrolling interests’ share of our net
income decreased $893,000 between 2015 and 2014, and
decreased $4.1 million between 2014 and 2013. The 2015
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
and 2014 amounts represented amounts that were 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 our purchase of the partner’s interest.
P R E F E R R E D S TO C K O R I G I N A L I S S UA N C E CO S T S
In 2014, we redeemed all outstanding shares of our 7.5%
Series B Cumulative Redeemable Preferred Stock. In
connection with the redemption of Preferred Stock, net
income available for common shareholders decreased by
$3.5 million (non-cash), which represents the original
issuance costs applicable to the shares redeemed.
In 2013, we redeemed all outstanding shares of our 7.75%
Series A Cumulative Redeemable Preferred Stock. In
connection with the redemption of Preferred Stock, net loss
available for common shareholders decreased by $2.7 million
(non-cash), which represents the original issuance costs
applicable to the shares redeemed.
D I V I D E N D S TO P R E F E R R E D S TO C K H O L D E R S
We redeemed Series B preferred stock in 2014 and redeemed
Series A preferred stock in 2013. We had no remaining
outstanding preferred stock as of December 31, 2014
and, as a result, in future periods will have no preferred
stock dividends.
F U N D S F R O M O P E R AT I O N S
The table below shows Funds from Operations Available
to Common Stockholders (“FFO”), a non-GAAP financial
measure, and the related reconciliation to net income
available to common stockholders for the Company. The
Company calculates FFO in accordance with the National
Association of Real Estate Investment Trusts’ (“NAREIT”)
(computed
definition, which is net income available to common
stockholders
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. Our management evaluates
operating performance in part based on FFO. Additionally,
the our management uses FFO, along with other measures,
to assess performance in connection with evaluating and
granting incentive compensation to our 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, 2015, 2014, and 2013 (in thousands,
except per share information):
Net Income Available to Common Stockholders
Depreciation and amortization:
Consolidated properties
Share of unconsolidated joint ventures
Gain on sale of depreciated properties:
Consolidated properties
Share of unconsolidated joint ventures
Noncontrolling interest related to the sale of depreciated properties
Year Ended December 31,
2015
2014
2013
$125,518
$ 45,519
$109,097
133,796
11,645
139,151
11,915
78,607
13,434
(78,210)
—
—
(30,188)
(1,767)
574
(67,056)
(60,345)
3,397
Funds From Operations Available to Common Stockholders
$192,749
$165,204
$ 77,134
Per Common Share—Basic and Diluted:
Net Income Available
Funds From Operations
Weighted Average Shares—Basic
Weighted Average Shares—Diluted
$
$
0.58
0.89
$
$
0.22
0.81
$
$
0.76
0.53
215,827
204,216
144,255
215,979
204,460
144,420
29
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Liquidity and Capital Resources
Our primary short-term and long-term liquidity needs
include the following:
–
–
–
–
–
–
property acquisitions;
expenditures on development projects;
building improvements, tenant improvements, and
leasing costs;
principal and interest payments on indebtedness;
repurchase of our common stock; and
common stock dividends.
We may satisfy these needs with one or more of the following:
–
–
–
–
–
–
net cash from operations;
sales of assets;
borrowings under our Credit Facility;
proceeds from mortgage notes payable;
proceeds from equity offerings; and
joint venture formations.
F I N A N C I A L CO N D I T I O N
A key component of our strategy is to maintain a conservative
balance sheet with leverage ratios that will enable us to be
positioned for future growth. During 2015, we acquired
no operating properties but commenced two development
projects and completed
three previously commenced
development projects. Expenditures on these development
projects, along with capital improvements on our existing
projects totaled $195.0 million. In addition, in 2015, we
initiated a $100 million stock repurchase plan. Under this
Contractual Obligations and Commitments
plan, we may repurchase shares of common stock through
September 8, 2017. The repurchases may be executed in
the open market, through private negotiations, or in other
transactions permitted under applicable law. The timing,
manner, price and amount of any repurchases will be in
our discretion and will be subject to economic and market
conditions, stock price, applicable legal requirements and
other factors. Through December 31, 2015, we repurchased
approximately 5.2 million shares for a total aggregate cost
of approximately $47.8 million. Subsequent to year-end,
through January 31, 2016, we repurchased an additional
192,800 shares for a total cost of $1.6 million. The
repurchased shares were recorded as treasury shares on the
consolidated balance sheets. We may discontinue or suspend
repurchases at any time.
We funded these investment activities with cash from
operations and with proceeds from the 2015 Dispositions.
In addition, we reduced overall consolidated indebtedness
by $71.1 million thereby maintaining and improving our
already strong leverage ratios. As of December 31, 2015,
we had $92.0 million outstanding under our Credit Facility,
down from $140.2 million at December 31, 2014, and had
the ability to borrow an additional $407.0 million under the
Credit Facility.
We will continue to pursue acquisition and development
opportunities that are consistent with our strategy. We
expect to fund any additional future investments with one
or more of the following: sale of additional non-core assets,
additional borrowings under our Credit Facility, additional
mortgage loans secured by existing or newly acquired
properties, construction loans, the issuance of common
equity, and joint ventures with third parties.
At December 31, 2015, we were subject to the following contractual obligations and commitments (in thousands):
Total
Less than
1 Year
1-3 Years
3-5 Years
More than
5 years
Contractual Obligations:
Company debt:
Unsecured Credit Facility
Mortgage notes payable
Interest commitments (1)
Ground leases
Other operating leases
Total contractual obligations
Commitments:
Unfunded tenant improvements and other
Letters of credit
Performance bonds
$
92,000
629,293
149,988
144,674
262
$1,016,217
82,400
1,000
946
$
— $
10,070
53,373
1,648
136
$65,227
48,943
1,000
113
— $ 92,000
204,469
33,174
3,316
—
$332,959
243,929
47,893
3,306
126
$295,254
$
—
170,825
15,548
136,404
—
$322,777
17,299
—
—
16,158
—
—
—
—
833
833
Total commitments
$
84,346
$50,056
$ 17,299
$ 16,158
$
(1) Interest on variable rate obligations is based on rates effective as of December 31, 2015.
30
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT In addition, we have several standing or renewable service
contracts mainly related to the operation of our 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 2015, we repaid the The Points at Waterview mortgage
loan totaling $14.2 million. In 2014, we entered into an
$85.0 million non-recourse mortgage note payable, secured
by 816 Congress. The loan has a fixed interest rate of 3.75%
and matures in 2024.
Our existing mortgage debt is primarily non-recourse, fixed-
rate mortgage notes secured by various real estate assets.
Many of our non-recourse mortgages contain covenants
which, if not satisfied, could result in acceleration of the
maturity of the debt. We expect to either refinance the non-
recourse mortgages at maturity or repay the mortgages with
proceeds from other financings. As of December 31, 2015,
the weighted average interest rate on our consolidated debt
was 4.18%.
C R E D I T FAC I L I T Y I N FO R M AT I O N
We maintain a $500 million Credit Facility that matures in
May 2019. The Credit Facility may be expanded to $750
million. The Credit Facility bears interest at the London
Interbank Offered Rate (“LIBOR”) plus a spread, based
on our leverage ratio, as defined in the Credit Facility. At
December 31, 2015, we had $92.0 million drawn on the
facility and a total available borrowing capacity of $407.0
million. The amount that we may draw is a defined calculation
based on our 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 our operations, 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,
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%. We are currently in
compliance with our financial covenants.
F U T U R E C A P I TA L R E Q U I R E M E N T S
Over the long term, we intend to actively manage our
portfolio of properties and strategically sell assets to exit
our non-core holdings, reposition our portfolio of income-
producing assets geographically, and generate capital for
future investment activities. We expect to continue to utilize
indebtedness to fund future commitments and expect 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.
We may also generate capital through the issuance of
securities that include common or preferred stock, warrants,
debt securities or depositary shares. In March 2013, we 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.
Our business model is dependent upon raising or recycling
capital to meet obligations. If one or more sources of capital
are not available when required, we may be forced to reduce
the number of projects we acquire or develop and/or raise
capital on potentially unfavorable terms, or may be unable
to raise capital, which could have an adverse effect on our
financial position or results of operations.
Cash Flows We report and analyze our cash flows based
on operating activities, investing activities and financing
activities. Cash and cash equivalents were $2.0 million,
$0, and $975,000 at December 31, 2015, 2014, and 2013,
respectively. The following table sets forth the changes in
cash flows (in thousands):
Year Ended December 31,
2015
2014
2013
2015 to 2014
Change
2014 to 2013
Change
Net cash provided by operating activities
$ 151,661
$ 142,400
$
137,340
$
9,261
$
5,060
Net cash provided by (used in) investing activities
38,482
(461,615)
(1,266,193)
500,097
804,578
Net cash provided by (used in) financing activities
(188,140)
318,240
952,936
(506,380)
(634,696)
31
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED The reasons for significant increases and decreases in cash
flows between the periods are as follows:
C a s h F l ows f ro m O p e rat i n g Ac t i v i t i e s
Cash provided by operating activities increased $9.3 million
between the 2015 and 2014 periods. This difference is
primarily caused by an increase in cash provided from
property operations. Cash provided by operating activities
increased $5.1 million between the 2014 and 2013 periods
primarily due to cash provided by the 2014 and 2013
Acquisitions, offset by a decrease in operating distributions
from joint ventures.
C a s h F l ows f ro m I nve st i n g Ac t i v i t i e s
Cash flows provided by investing activities increased $500.1
million between the 2015 and 2014 periods. This primarily
relates to decreases in acquisition, development and tenant
expenditures during 2015 as compared to 2014. Cash flows
from investing activities increased $804.6 million between
the 2014 and 2013 period due to a decrease in acquisition,
development and tenant asset expenditures and an increase in
proceeds from investment sales. These amounts were partially
offset by a decrease in distributions from unconsolidated
joint ventures.
C a 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
Cash flows used in financing activities decreased $506.4
million between the 2015 and 2014 periods and decreased
$634.7 million between 2014 and 2013 periods. The
decreases in each period are a result of a decrease of proceeds
from common stock offerings and a decrease in net proceeds
from indebtedness.
C A P I TA L E X P E N D I T U R E S
We incur costs related to our 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 we develop or acquire and then
hold and operate 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
expenditures 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, 2015, 2014 and
2013 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 expenditures adjustment
$
2015
—
52,015
28,052
83,615
8,098
3,579
7,146
2,483
2014
2013
$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)
Total property acquisition, development and tenant asset expenditures
$184,988
$710,743
$1,526,263
Capital expenditures decreased $525.8 million between
2015 and 2014 and decreased $815.5 million between
2014 and 2013, mainly due to decreased operating property
acquisition activity. 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. The amount of tenant improvements and leasing costs
on a per square foot basis for 2015 were as follows:
New leases
Renewal leases
Expansion leases
$5.90
$2.15
$6.32
32
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
The amounts of tenant improvement and leasing costs on
a per square foot basis vary by lease and by market. Given
the level of expected leasing and renewal activity, in future
periods, we expect tenant improvements and leasing costs
per square foot to remain consistent with those experienced
during 2015.
D i v i d e n d s
We paid common and preferred dividends of $69.2 million,
$64.5 million, and $37.2 million in 2015, 2014 and
2013, respectively, which we funded with cash provided
by operating activities. We expect to fund our quarterly
distributions to common 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, we review the amount of the common
dividend in light of current and projected future cash
flows from the sources noted above and also consider
the requirements needed to maintain our REIT status. In
addition, we have certain covenants under our 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 we are not
in default under our facility. Certain conditions also apply
in which we can still pay dividends if leverage is above that
amount. We routinely monitor the status of our dividend
payments in light of the Credit Facility covenants. In the first
quarter of 2015, we increased the quarterly dividend on our
common stock from $0.075 per share to $0.080 per share.
E F F E C T S O F I N F L AT I O N
We attempt 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. We have 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 we have 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 we 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
we 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 our financial condition or results of operations.
Debt. At December 31, 2015, our unconsolidated joint
ventures had aggregate outstanding indebtedness to third
parties of $402.0 million. These loans are generally mortgage
or construction loans, most of which are non-recourse to us,
except as described below. In addition, in certain instances,
we provide “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 due to interest rate changes. At
December 31, 2015, $3.1 million of the $40.9 million in
recourse loans at unconsolidated joint ventures were recourse
to us.
We guarantee 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, 2015, we
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.
We also guarantee 12.5% of the loan amount related to
the Carolina Square construction loan, which has a lending
capacity of $79.8 million, and no outstanding balance as of
December 31, 2015.
33
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED I T E M 7 A .
Q U A N T I T A T I V E A N D Q U A L I T A T I V E D I S C L O S U R E
A B O U T M A R K E T R I S K
Our primary exposure to market risk results from our debt,
which bears interest at both fixed and variable rates. We
mitigate this risk by limiting our debt exposure in total and
our maturities in any one year and weighting more towards
fixed-rate, non-recourse debt compared to recourse, variable-
rate debt in our portfolio. The fixed rate debt obligations
limit the risk of fluctuating interest rates, and generally are
mortgage loans secured by certain of our real estate assets.
We do not have consolidated fixed-rate mortgage debt
maturing in 2016 and have only one such mortgage maturing
in 2017 in the amount of $129.3 million. We, therefore,
do not have significant exposure for the refinancing of our
mortgage debt in the near term. At December 31, 2015,
we had $629.3 million of fixed rate debt outstanding at a
weighted average interest rate of 4.57%. At December 31,
2014, we had $652.1 million of fixed rate debt outstanding
at a weighted average interest rate of 4.60%. The amount
of fixed-rate debt outstanding decreased and the weighted
average interest rate decreased from 2014 to 2015 as a result
of us repaying the $14.2 million The Points at Waterview
mortgage which had an interest rate of 5.66% and was
scheduled to mature in 2016. See note 8 of the notes to
consolidated financial statements included in this Annual
Report on Form 10-K for additional information regarding
2015 debt activity.
At December 31, 2015, we had $92.0 million of variable
rate debt outstanding, which consisted of the Credit
Facility at a weighted average interest rate of 1.53%. As of
December 31, 2014, we had $140.2 million of variable rate
debt outstanding which consisted of the Credit Facility at a
weighted average interest rate of 1.27%. Borrowings under
the Credit Facility decreased in 2015 due to the cash inflow
resulting from the investment property sales. Based on our
average variable rate debt balances in 2015, interest incurred
would have increased by $1.8 million in 2015 if these interest
rates had been 1% higher.
The following table summarizes our market risk associated
with notes payable as of December 31, 2015. It includes
the principal maturing, an estimate of the weighted average
interest rates on those expected principal maturity dates
and the fair values of the Company’s fixed and variable
rate notes payable. Fair value was calculated by discounting
future principal payments at estimated rates at which similar
loans could have been obtained at December 31, 2015. The
information presented below should be read in conjunction
with note 8 of notes to consolidated financial statements
included in this Annual Report on Form 10-K. We did not
have a significant level of notes receivable at December 31,
2015, and the table does not include information related to
notes receivable.
($ in thousands)
2016
2017
2018
2019
2020
Thereafter
Total
Notes Payable:
Fixed Rate
Average Interest Rate
Variable Rate
Average Interest Rate (1)
$10,070
$138,195
$105,734
$ 9,447
$195,022
$170,825
$629,293
$
4.87%
—
—
$
6.27%
—
—
$
3.43%
—
—
4.27%
$92,000
$
1.53%
4.46%
—
—
$
4.03%
—
—
4.57%
$ 92,000
1.53%
Estimated
Fair Value
$646,136
—
$ 92,000
—
(1) Interest rates on variable rate notes payable are equal to the variable rates in effect on December 31, 2015.
34
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
I T E M 8 .
F I N A N C I A L S T A T E M E N T S A N D S U P P L E M E N T A R Y D A T A
The consolidated financial statements, notes to consolidated
financial statements, and report of independent registered
included on pages F-1
public accounting
through F-29.
firm are
The following selected quarterly financial information
(unaudited) for the years ended December 31, 2015 and
2014 should be read in conjunction with the consolidated
financial statements and notes thereto included herein (in
thousands, except per share amounts):
2015
Revenues
Income from unconsolidated joint ventures
Gain (loss) on sale of investment properties
Income from continuing operations
Income (loss) from discontinued operations
Net income
Net income attributable to controlling interest
Net income available to common stockholders
Basic and diluted net income per common share
2014
Revenues
Income from unconsolidated joint ventures
Gain on sale of investment properties
Income (loss) from continuing operations
Income (loss) from 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
$91,976
1,611
1,105
7,768
(565)
7,203
7,203
7,203
0.03
(Unaudited)
$97,903
1,761
(576)
7,957
(6)
7,951
7,951
7,951
0.04
$ 98,146
3,716
37,145
53,614
6
53,620
53,620
53,620
0.25
Quarters
$93,618
1,214
42,720
56,876
(21)
56,855
56,744
56,744
0.27
First
Second
Third
Fourth
(Unaudited)
$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
$81,725
1,287
161
(121)
7,255
7,134
6,979
5,202
0.03
$106,055
5,924
10,967
23,864
(18)
23,846
23,218
23,218
0.11
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. The amounts presented in 2014 have been restated
from previous period presentations due to reclassifications
related to discontinued operations. See note 3 in the notes to
the consolidated financial statements for further detail.
During 2015 and 2014, our 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,
income (loss) from discontinued operations and income from
unconsolidated joint ventures.
35
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED
I T E M 9 .
C H A N G E S I N A N D D I S A G R E E M E N T S W I T H
A C C O U N T A N T S O N A C C O U N T I N G A N D
F I N A N C I A L D I S C L O S U R E
Not applicable.
I T E M 9 A .
C O N T R O L S A N D P R O C E D U R E S
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external reporting
purposes in accordance with 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, 2015.
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, 2015. 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, 2015, which
follows this report of management.
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
judgment
in assessing the costs and benefits of such controls and
procedures, which, by their nature, can provide only
reasonable assurance regarding our 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.
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
36
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C ACCO U N T I N G F I 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, 2015, 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 reasonable assurance regarding prevention or timely
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, 2015, 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, 2015 of the Company and our report dated February 10,
2016 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 10, 2016
37
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED I T E M 9 B .
O T H E R I N F O R M A T I O N
None.
P A R T I I I
I T E M 1 0 .
D I R E C T O R S ,
C O R P O R A T E G O V E R N A N C E
E X E C U T I V E O F F I C E R S A N D
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 2016 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 2015.
I T E M 1 1 .
E X E C U T I V E C O M P E N S A T I O 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 2016 Annual Meeting of the Registrant’s
Stockholders is incorporated herein by reference.
I T E M 1 2 .
S E C U R I T Y O W N E R S H I P O F C E R T A I N B E N E F I C I A L
O W N E R S A N D M A N A G E M E N T A N D R E L A T E D
S T O C K H O L D E R M A T T E R S
The information under the captions “Beneficial Ownership
of Common Stock” and “Equity Compensation Plan
Information” in the Proxy Statement relating to the
2016 Annual Meeting of the Registrant’s Stockholders is
incorporated herein by reference.
38
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
I T E M 1 3 .
C E R T A I N R E L A T I O N S H I P S A N D R E L A T E D
T R A N S A C T I O N S ,
A N D D I R E C T O R I N D E P E N D E N C E
The information under the caption “Certain Transactions”
and “Director Independence” in the Proxy Statement relating
to the 2016 Annual Meeting of the Registrant’s Stockholders
is incorporated herein by reference.
I T E M 1 4 .
P R I N C I P A L A C C O U N T A N T F E E S A N D S E R V I C E S
The information under the caption “Summary of Fees to
Independent Registered Public Accounting Firm” in the
Proxy Statement relating to the 2016 Annual Meeting of the
Registrant’s Stockholders has fee information for fiscal years
2015 and 2014 and is incorporated herein by reference.
P A R T I V
I T E M 1 5 .
E X H I B I T S A N D F I N A N C I A L S T A T E M E N T S C H E D U 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, 2015 and 2014
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014, and 2013
Consolidated Statements of Equity for the Years Ended December 31, 2015, 2014, and 2013
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014, and 2013
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, 2015
Page Number
F-2
F-3
F-4
F-5
F-6
F-7
Page Number
S-1 through S-3
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.
39
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED
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.
(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
40
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 3.2
4(a)
10(a)(i)*
10(a)(ii)*
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.
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.
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.
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.
41
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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.
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.
42
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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, filed as Exhibit 10(a)(xxxiii) to the Registrant’s Form 10-K for the year ended December 31, 2014,
and incorporated herein by reference.
10(a)(xxxiv)*†
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan — Form of Restricted Stock Unit Certificate for 2016-2018
Performance Period.
10(a)(xxxv)*†
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Stock Grant Certificate.
10(a)(xxxvi)*†
Form of Amendment Number One to Change in Control Severance Agreement.
10(d)
10(e)
10(f)
10(g)
10(h)
10(i)
11
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 15 of notes
to consolidated financial statements included in this Annual Report on Form 10-K, and incorporated herein by reference.
43
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 21†
23†
31.1†
31.2†
32.1†
32.2†
101†
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.
44
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT S I G N A 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 10, 2016
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
/s/ Lawrence L. Gellerstedt III
Lawrence L. Gellerstedt III
/s/ Gregg D. Adzema
Gregg D. Adzema
/s/ John D. Harris, Jr.
John D. Harris, Jr.
/s/ Robert M. Chapman
Robert M. Chapman
/s/ Tom G. Charlesworth
Tom G. Charlesworth
/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
Capacity
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Senior Vice President, Chief
Accounting Officer, Treasurer and Assistant Secretary
(Principal Accounting Officer)
Director
Director
Director
Date
February 10, 2016
February 10, 2016
February 10, 2016
February 10, 2016
February 10, 2016
February 10, 2016
Chairman of the Board of Directors
February 10, 2016
Director
Director
Director
February 10, 2016
February 10, 2016
February 10, 2016
45
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED
I N D E X T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Cousins Properties Incorporated
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets—December 31, 2015 and 2014
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014, and 2013
Consolidated Statements of Equity for the Years Ended December 31, 2015, 2014, and 2013
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014, and 2013
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C ACCO U N T I N G F I 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, 2015 and 2014, and
the related consolidated statements of operations, equity,
and cash flows for each of the three years in the period
ended December 31, 2015. Our audits also included the
financial statement schedule listed in the Index at Item 15.
These financial statements and financial statement schedule
are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedule 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, 2015 and 2014, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 2015, 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 2 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
internal control over
(United States), the Company’s
financial reporting as of December 31, 2015, 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 10, 2016 expressed an unqualified opinion
on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 10, 2016
F-2
COUSINS PROPERTIES INCORPORATED 2015 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 $352,350 and $324,543 in 2015
and 2014, respectively
Projects under development
Land
Real estate assets and other assets held for sale, net of accumulated depreciation and amortization
of $7,200 in 2015
Cash and cash equivalents
Restricted cash
Notes and accounts receivable, net of allowance for doubtful accounts of $1,353 and $1,643 in 2015
and 2014, respectively
Deferred rents receivable
Investment in unconsolidated joint ventures
Intangible assets, net of accumulated amortization of $103,458 and $76,050 in 2015 and 2014, respectively
Other assets
Total assets
LIABILITIES:
Notes payable
Accounts payable and accrued expenses
Deferred income
Intangible liabilities, net of accumulated amortization of $26,890 and $16,897 in 2015 and 2014, respectively
Other liabilities
Liabilities of real estate assets held for sale
Total liabilities
Commitments and contingencies
EQUITY:
STOCKHOLDERS’ INVESTMENT:
Preferred stock, $1 par value, 20,000,000 shares authorized, -0- shares issued and outstanding
in 2015 and 2014
Common stock, $1 par value, 350,000,000 shares authorized, 220,255,676 and 220,082,610 shares issued
in 2015 and 2014, respectively
Additional paid-in capital
Treasury stock at cost, 8,742,181 and 3,570,082 shares in 2015 and 2014, respectively
Distributions in excess of cumulative net income
Total equity
Total liabilities and equity
See notes to consolidated financial statements.
December 31,
2015
2014
$2,194,781
27,890
17,829
2,240,500
$2,181,684
91,615
21,646
2,294,945
7,246
2,003
4,304
10,828
67,258
102,577
124,615
38,472
—
—
5,042
10,732
57,939
100,498
163,244
34,930
$2,597,803
$2,667,330
$ 721,293
71,739
29,788
59,592
30,629
1,347
914,388
—
$ 792,344
76,240
23,277
70,020
31,991
—
993,872
—
—
—
220,256
1,722,224
(134,630)
(124,435)
1,683,415
220,083
1,720,972
(86,840)
(180,757)
1,673,458
$2,597,803
$2,667,330
F-3
2015 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
Acquisition and related costs
Other
Income (loss) from continuing operations before taxes, unconsolidated joint ventures,
and sale of investment properties
Benefit 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 (loss) from discontinued operations:
Income (loss) from discontinued operations
Gain (loss) 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.
F-4
Year Ended December 31,
2015
2014
2013
$373,068
7,297
1,278
381,643
$343,910
12,519
4,954
361,383
$194,420
10,891
5,430
210,741
156,157
3,430
17,099
30,723
135,416
299
1,000
344,124
37,519
—
8,302
45,821
80,394
126,215
(35)
(551)
(586)
125,629
(111)
125,518
—
—
155,934
3,652
19,969
29,110
140,018
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
22,460
21,709
76,277
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)
$125,518
$ 45,519
$109,097
$
$
0.58
—
0.58
$
$
0.12
0.10
0.22
$
$
0.66
0.10
0.76
215,827
204,216
144,255
215,979
204,460
144,420
COUSINS PROPERTIES INCORPORATED 2015 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
( 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, 2012
$169,602 $107,660 $ 690,024 $ (86,840)
$(260,104) $ 620,342
$ 22,611 $ 642,953
Net income (loss)
Common stock issued pursuant to:
Common stock offering, net of issuance costs
Stock based compensation
Amortization of stock options and restricted
stock, net of forfeitures
Distribution to nonredeemable
noncontrolling interests
—
—
—
—
—
Redemption of preferred shares
(74,827)
Preferred dividends
Common dividends ($0.18 per share)
—
—
—
—
85,507
740,726
111
(917)
(42)
1,940
—
—
—
—
—
(10,822)
—
—
—
—
—
—
—
—
—
—
121,761
121,761
5,000
126,761
—
—
—
—
826,233
(806)
1,898
—
—
—
—
(26,040)
10,822
(10,008)
(27,192)
(74,827)
(10,008)
(27,192)
—
—
—
826,233
(806)
1,898
(26,040)
(74,827)
(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:
Common stock offering, net of issuance costs
Stock based compensation
Amortization of stock options and restricted
stock, net of forfeitures
Distributions to nonredeemable
noncontrolling interests
—
—
—
—
Redemption of preferred shares
(94,775)
Preferred dividends
Common dividends ($0.30 per share)
—
—
52,004
52,004
1,004
53,008
26,700
295,196
156
(706)
(9)
2,001
—
—
—
—
—
3,530
—
—
—
—
—
—
—
—
—
—
—
—
—
321,896
(550)
1,992
—
—
—
—
(2,575)
(3,530)
(2,955)
(94,775)
(2,955)
(61,555)
(61,555)
—
—
—
321,896
(550)
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
Net income
Common stock issued pursuant to
stock based compensation
Amortization of stock options and restricted
stock, net of forfeitures
Distributions to nonredeemable
noncontrolling interests
Repurchase of common stock
Common dividends ($0.32 per share)
Other
—
—
—
—
—
—
—
125,518
125,518
111
125,629
173
(245)
—
—
—
—
—
1,473
—
—
—
24
—
—
—
(47,790)
—
—
—
—
—
—
(69,196)
—
(72)
1,473
—
(47,790)
(69,196)
24
—
—
(111)
—
—
—
(72)
1,473
(111)
(47,790)
(69,196)
24
BALANCE DECEMBER 31, 2015
$
— $220,256 $1,722,224 $(134,630)
$(124,435) $1,683,415
$
— $1,683,415
See notes to consolidated financial statements.
F-5
2015 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 to net cash provided by operating activities:
Gain on sale of investment properties, including discontinued operations
Gain on sale of third party management and leasing business
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,
2015
2014
2013
$ 125,629
$ 53,008
$
126,829
(79,843)
—
135,462
1,423
1,473
(26,475)
(8,302)
8,760
—
(31,894)
—
141,022
604
1,992
(30,039)
(11,268)
10,296
302
(10,937)
4,471
(644)
9,021
(68,200)
(4,577)
76,478
615
1,898
(11,660)
(67,325)
67,101
967
(9,619)
24,833
Net cash provided by operating activities
151,661
142,400
137,340
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
Change in notes receivable and other assets
Change in restricted cash
225,307
—
(184,988)
(9,985)
7,555
118
475
244,471
—
(710,743)
(18,342)
26,179
(1,819)
(1,361)
178,966
4,577
(1,526,263)
(11,922)
88,635
(75)
(111)
Net cash provided by (used in) investing activities
38,482
(461,615)
(1,266,193)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility
Repayment of credit facility
Proceeds from notes payable
Repayment of notes payable
Payment of loan issuance costs
Common stock issued, net of expenses
Repurchase of common stock
Redemption of preferred shares
Common dividends paid
Preferred dividends paid
Distributions to nonredeemable noncontrolling interests
355,900
(404,100)
—
(22,851)
—
8
(47,790)
—
(69,196)
—
(111)
764,575
(664,450)
85,068
(22,943)
(3,995)
321,845
—
(94,775)
(61,555)
(2,955)
(2,575)
365,075
(325,000)
304,275
(77,887)
(1,693)
826,233
—
(74,827)
(27,192)
(10,008)
(26,040)
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
(188,140)
318,240
952,936
2,003
—
(975)
975
(175,917)
176,892
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
2,003
$
—
$
975
See notes to consolidated financial statements.
F-6
COUSINS PROPERTIES INCORPORATED 2015 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 owns and manages its
own real estate portfolio and performs 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,
2015, the Company’s portfolio of real estate assets consisted
of interests in 14.8 million square feet of office space,
786,000 square feet of mixed use space.
Basis of Presentation: The consolidated financial statements
include the accounts of the Company and its consolidated
partnerships and wholly-owned subsidiaries. Intercompany
in
transactions and balances have been eliminated
consolidation. The Company presents
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.
its
For the three years ended December 31, 2015, 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, 2015 and 2014, Callaway had
total assets of $4.6 million, and no significant liabilities.
Certain prior year amounts have been reclassified for
consistency with the current period presentation. In 2015,
the Company concluded that certain liabilities associated
with variable stock-based compensation should be classified
as other liabilities. Previously, these items had been classified
as accounts payable and accrued expenses. This change
in classification does not affect the previously reported
consolidated statement of cash flows or consolidated
statement of operations for any period.
FASB
2015-02
issued ASC
Issued Accounting Standards:
In 2015,
Recently
the
“Consolidation
(Topic 810): Amendments to the Consolidation Analysis.”
All legal entities are subject to reevaluation under the
revised consolidation model. The amendment modifies
limited partnerships and
the evaluation of whether
similar legal entities are variable interest entities or voting
interest entities. It also eliminates the presumption that a
general partner should consolidate a limited partnership.
The guidance is effective for public entities with periods
beginning after December 15, 2015 with early adoption
permitted. The Company adopted this guidance effective
January 1, 2016, and expects no material impact to the
financial statements.
F-7
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED In 2015, the FASB issued ASU 2015-03, “Simplifying the
Presentation of Debt Issuance Costs,” which will require
companies to present debt issuance costs as a direct deduction
from the related debt rather than as an asset. These costs will
continue to be amortized into interest expense. The guidance
is effective for periods beginning after December 15, 2015
with early adoption permitted. ASU 2015-15 was issued
further clarifying that entities may defer and present debt
costs as an asset and amortize the deferred debt issuance
costs ratably over the term for line of credit arrangements,
regardless of the outstanding balance. The Company adopted
the guidance in ASU 2015-03 effective January 1, 2016 for
mortgage debt and has elected to defer adoption for costs
related to line of credit arrangements. The Company expects
no material impact to the financial statements.
In 2015, the FASB voted to defer ASU 2014-09, “Revenue
from Contracts with Customers (Topic 606).” 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 under the current guidance. The
standard specifically excludes revenue associated with lease
contracts. The guidance is effective for periods beginning
after December 15, 2017, with early adoption permitted for
periods beginning after December 15, 2016. The Company
expects to adopt this guidance effective January 1, 2018 and
is currently assessing the potential impact of adopting the
new guidance.
2. SIGNIFICANT ACCOUNTING POLICIES
R E A L E S 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
F-8
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT (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 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
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: Beginning in the second quarter
2014, only assets held for sale and disposals representing
strategic shifts in operations are reflected in discontinued
operations. Prior to 2014, the Company classified the results
of operations of all properties that were sold or otherwise
qualified as held for sale as discontinued operations if the
property’s operations were expected to be eliminated from
ongoing operations and the Company would not have any
significant continuing involvement in the operations of the
property after the sale. During 2015, there were no held for
sale assets or disposals that represented a strategic shift in
operations. The Company ceases depreciation of a property
when it is categorized as held for sale.
I N V E S T M E N T I N J O 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 (losses)
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. If
management concludes that the impairment is “other than
temporary,” the Company reduces the investment to its
estimated fair 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
F-9
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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.
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.
R E V E N U E R E CO G N 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 2015, 2014, and 2013, the Company recognized
$93.3 million, $86.0 million, and $43.9 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 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. See note
5 for more information related to fee income received by
unconsolidated joint ventures.
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.
I N CO M E TA X E 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.
CTRS is 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.
S TO C K- B A 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 12, 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.
F-10
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT E A R N I N G S P E R S H A R E ( “ E P S ” )
Net income per share-basic is calculated as net income
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 per share-diluted
is calculated as net income 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 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.
C A S H A N D C A S H E Q U I VA L E N T S A N D
R E S T R I C T E D C A 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.
S O F T WA R E CO S T C A P I TA L I Z AT 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.
U S E O F E S 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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
3. REAL ESTATE TRANSACTIONS
D I S P O S I T I O N S
The Company sold the following properties in 2015, 2014, and 2013 ($ in thousands):
Property
Property Type
Location
Square Feet
Sales Price
Discontinued
Operations
2015
2100 Ross
200, 333, and 555 North Point Center East
The Points at Waterview
2014
777 Main
Lakeshore Park Plaza
Mahan Village
600 University Park Place
2013
Tiffany Springs MarketCenter
Inhibitex
Office
Office
Office
Office
Office
Retail
Office
Dallas, Texas
Atlanta, Georgia
Dallas, Texas
Ft. Worth, TX
Birmingham, AL
Tallahassee, FL
Birmingham, AL
844,000
411,000
203,000
980,000
197,000
147,000
123,000
$ 131,000
$ 70,300
$ 26,800
$ 167,000
$ 25,000
$ 29,500
$ 19,700
Retail
Office
Kansas City, MO
Atlanta, GA
238,000
51,000
$ 53,500
8,300
$
No
No
No
No
Yes
No
Yes
Yes
Yes
F-11
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED the dispositions during
None of
the year ended
December 31, 2015 represented a strategic shift in operations
and, therefore, did not qualify for discontinued operations.
The following table details the components of income
from discontinued operations, and gains (losses) related
on the sales of discontinued operations for the years ended
December 31, 2015, 2014, and 2013 (in thousands):
Rental property revenues
Other revenues
Third party management and leasing revenues
Third party management and leasing expenses
Depreciation and amortization
Other expenses
Rental property operating expenses
Income (loss) from discontinued operations
2015
$
4
6
—
—
—
(27)
(18)
$ (35)
2014
2013
$ 2,927
29
—
—
—
(28)
(1,128)
$ 1,800
$ 10,552
40
76
(99)
(3,083)
(25)
(4,162)
$ 3,299
Gain (loss) on sale of discontinued operations, net
$(551)
$ 19,358
$ 11,489
H E L D FO R S A L E
As of December 31, 2015, 100 North Point Center East,
an 129,000 square foot office building in Atlanta, Georgia
was classified as held for sale. The sale does not represent a
strategic shift in operations and, therefore, will be presented
in continuing operations on the consolidated statements
of operations. The major classes of assets and liabilities of
the property held for sale as of December 31, 2015 are as
follows (in thousands):
Real estate assets and related assets held for sale
Operating Properties, net of accumulated depreciation of $7,072
Notes and accounts receivable
Deferred rents receivable
Other assets, net of accumulated amortization of $128
Liabilities of real estate assets held for sale
Accounts payable and accrued expenses
Deferred Income
Other liabilities
$6,421
210
496
119
$7,246
$ 140
200
1,007
$1,347
In January 2016, the Company sold this property for a gross
sales price of $22.0 million.
$643,000 in acquisition and related costs associated with
this acquisition.
ACQ U I S I T I O N S
In 2015, the Company acquired a 4.16 acre land site located
in Atlanta, Georgia for $27.0 million for the development of
NCR’s corporate headquarters, a 485,000 square foot office
building. The site also includes an additional parcel for a
second office building development.
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
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”).
F-12
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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
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%
in MSREF/ Cousins Terminus 200 LLC for
interest
$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.
its
Immediately thereafter, the Company contributed
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).
In 2013, 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
in
acquisition and related costs associated with this acquisition.
incurred $231,000
The following tables summarize allocations of the estimated fair values of the assets and liabilities of the operating property
acquisitions discussed above (in thousands):
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
2014
Northpark
Town
Center
Fifth
Third
Center
Post Oak
Central
Terminus
200
$ 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
2013
$
2,846
30,159
—
—
33,005
—
—
(8,018)
—
(8,018)
632
17,096
338
—
18,066
(1,026)
(1,026)
(9,374)
—
(9,374)
995
26,968
—
—
27,963
—
—
(14,792)
—
(14,792)
1,512
14,355
—
—
15,867
—
—
(9,273)
—
(9,273)
816
Congress
Avenue
Texas
Acquisition
6,817
86,391
3,500
—
—
96,708
89
8,222
—
2,403
10,714
—
—
(2,820)
(1,981)
(4,801)
$ 306,563
586,150
114,220
—
—
1,006,933
4,959
117,630
2,958
—
125,547
—
—
(47,170)
(2,508)
(49,678)
Total net assets acquired
$345,389
$211,973
$ 230,924
$ 150,851
$ 102,621
$ 1,082,802
F-13
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED See note 6 for a schedule of the timing of amortization of
the intangible assets and liabilities and the weighted average
amortization periods.
supplemental pro
following unaudited
forma
The
information is presented for acquisitions 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
Revenues
Income from continuing operations
Net income
Net income available to common stockholders
Per share information:
Basic
Diluted
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 below. 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.
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, 2015 and 2014, 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
2015
2014
$
414
(414)
11,767
(939)
$
414
(414)
11,961
(1,229)
$ 10,828
$ 10,732
At December 31, 2015 and 2014, 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, 2015 and
2014. 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.
F-14
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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, 2015 and 2014.
The information included in the summary of operations table is for the years ended December 31, 2015, 2014, and 2013
(in thousands).
SUMMARY OF FINANCIAL POSITION:
2015
2014
2015
2014
2015
2014
2015
2014
Total Assets
Total Debt
Total Equity (Deficit)
Company’s Investment
Terminus Office Holdings
EP I LLC
EP II LLC
Charlotte Gateway Village, LLC
HICO Victory Center LP
Carolina Square Holdings LP
CL Realty, L.L.C.
HICO Avalon LLC
Temco Associates, LLC
Wildwood Associates
Crawford Long - CPI, LLC
Other
58,029
12,735
35,530
$ 277,444 $ 288,415 $ 211,216 $ 213,640 $ 56,369 $ 62,830 $ 29,110
21,502
19,118
11,190
9,138
6,782
3,515
1,245
977
(1,122)(1)
(22,021)(1)
—
24,172
24,331
104,336
— 13,229
— 12,085
7,662
—
1,646
—
—
5,133
— 16,354
(46,238)
—
26,671
24,969
92,808
10,450
—
7,042
—
6,709
16,389
(45,762)
979
85,228
42,772
130,272
10,450
—
7,264
—
6,910
16,400
29,946
1,411
83,115
70,704
123,531
13,532
15,729
7,872
2,107
5,284
16,419
29,143
—
58,029
40,910
17,536
—
—
—
—
—
—
74,286
—
75,000
—
$ 32,323
22,905
19,905
11,218
7,572
—
3,546
—
3,027
(1,106)(1)
(21,931)(1)
2
$ 644,880 $ 619,068 $ 401,977 $ 394,934 $ 219,079 $ 203,085 $ 79,434
$ 77,461
SUMMARY OF OPERATIONS:
2015
2014
2013
2015
2014
2013
2015
2014
2013
Total Revenues
Net Income (Loss)
Company’s Share of Net
Income (Loss)
Terminus Office Holdings
EP I LLC
EP II LLC
Charlotte Gateway Village, LLC
HICO Victory Center LP
CL Realty, L.L.C.
HICO Avalon LLC
Temco Associates, LLC
Wildwood Associates
Crawford Long - CPI, LLC
Other
$ 40,250 $ 39,531 $ 33,109 $ 2,789
3,177
(638)
12,737
204
424
(40)
2,358
(120)
2,820
—
12,049
—
33,903
—
1,573
—
2,155
3,329
11,945
4,841
8,261
—
33,281
—
1,603
—
630
—
11,829
48,394
12,558
1,264
33,724
262
855
—
9,485
—
12,291
—
$
663
2,583
—
11,645
—
1,069
—
495
(1,704)
2,775
7,831
$
(408) $ 1,395
2,197
100
(466)
—
1,183
10,693
102
—
220
1,027
(23)
—
2,351
96
(59)
(151)
1,416
2,827
(14)
58,710
$
308
1,937
—
1,176
—
542
—
(6)
2,097
1,407
3,807
$
(182)
75
—
1,176
—
524
—
(12)
(75)
1,372
64,447
(1) Negative balances are included in deferred income on the consolidated balance sheets.
$ 110,689 $ 109,326 $ 137,107 $ 23,711
$ 25,357
$ 72,894
$ 8,302
$ 11,268
$ 67,325
F-15
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Terminus Office Holdings LLC (“TOH”) – TOH is a
50-50 joint venture between the Company and institutional
investors advised by J.P. Morgan Asset Management
(“JPM”), which owns and operates two office buildings in
Atlanta, Georgia. TOH has two non-recourse mortgage loans
totaling $211.2 million that mature on January 1, 2023. The
weighted average interest rate on these fixed rate loans is
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 $5.2 million at
December 31, 2015.
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, which owns the first phase of Emory
Point, 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 an outstanding
balance $58.0 million at December 31, 2015, and the loan
bears interest at LIBOR plus 1.75%. The assets of the venture
in the above table include a cash balance of $1.5 million at
December 31, 2015.
EP II LLC (“EP II”) – EP II is a joint venture between
the Company, with a 75% ownership interest, and Lion
Gables Realty Limited Partnership (“Gables”), with a 25%
ownership interest. The venture owns the second phase
of Emory Point. 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, $40.9 million
of which was outstanding at December 31, 2015. 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 $1.3 million at December 31, 2015.
F-16
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 31, 2026. 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 compounded return equal
to 11.46% on its capital contributions, second to BOA
until it receives an amount equal to the aggregate amount
distributed to the Company, and then 50% to each member.
After December 1, 2016, net income and cash flows are
allocated 50% to each member. Proceeds from capital
transactions are allocated first, to BOA in an amount not to
exceed $80.9 million, second 50% to each member until the
Company receives a 17% internal rate of return, and third,
80% to BOA and 20% to the Company. 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, 2015 of $17.5 million which will amortize
through the maturity date of December 1, 2016. The loan
has an interest rate of 6.41%. The assets of the venture in
the above table include a cash balance of $2.3 million at
December 31, 2015.
HICO Victory Center LP (“HICO”) – In 2014, HICO, a
joint venture between the Company and Hines Victory
Center Associates Limited Partnership (“Hines Victory”),
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 Victory 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, 2015 the Company accounted 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, 2015
includes its share of pre-development expenditures and its
share of land purchased by the venture. The assets of the
venture in the table above include a cash balance of $35,000
at December 31, 2015.
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT Carolina Square Holdings LP (“Carolina Square”) – In
2015, Carolina Square, a 50-50 joint venture between the
Company and NR 123 Franklin LLC (“Northwood Ravin”)
was formed for the purpose of developing and constructing
a mixed-use property in Chapel Hill, North Carolina
pursuant to a ground lease. Upon formation, each partner
contributed $1.7 million in cash towards pre-development
costs. Carolina Square also entered into a construction
loan agreement, secured by the project, which is expected
to provide up to $79.8 million to fund future construction
costs. The loan bears interest at LIBOR plus 1.90% and
matures on May 1, 2018. The Company and Northwood
Ravin will each guarantee 12.5% of the outstanding loan
amount and guarantee completion of the project. As of
December 31, 2015, there is no outstanding balance on this
construction loan. The assets of the venture in the table above
include a cash balance of $103,000 at December 31, 2015.
CL Realty, L.L.C. (“CL Realty”) – CL Realty is a 50-50
joint venture between the Company and Forestar Realty
Inc. (“Forestar”), that owns 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 $326,000 at December 31, 2015.
HICO Avalon LLC (“HICO Avalon”) – In 2015, HICO
Avalon, a joint venture between the Company and Hines
Avalon Investor LLC (“Hines Avalon”) was formed for
the purpose of acquiring and potentially developing an
office building in Alpharetta, Georgia. Pursuant to the joint
venture agreement, all pre-development expenditures, other
than land, are funded 75% by Cousins and 25% by Hines.
If the project moves forward and HICO Avalon acquires
land and commences construction, the acquisition of land
and subsequent development expenditures will be funded
90% by Cousins and 10% by Hines. As of December 31,
2015, the Company accounted for its investment in HICO
Avalon under the equity method as it does not currently
control the activities of the venture. If the project moves to
commence construction, 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
Avalon will own up to 10%. Additionally, Cousins will
have unilateral control over the operational aspects of the
venture, and the Company expects to consolidate the venture
at that time. The Company’s investment in HICO Avalon at
December 31, 2015 includes only its share of pre-development
expenditures. The assets of the venture in the table above
include a cash balance of $5,000 at December 31, 2015.
Temco Associates, LLC (“Temco”) – Temco is a 50-50
joint venture between the Company and Forestar, that owns
various parcels of land and a golf course. The assets of the
venture in the above table include a cash balance of $205,000
at December 31, 2015.
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, 2015, 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 $74.3 million 3.5% fixed rate mortgage note,
which matures on June 1, 2023. The assets of the venture
in the above table include a cash balance of $762,000 at
December 31, 2015.
Other – In 2013, the Company sold its interests in CP Venture
Five LLC, CP Venture Two LLC, and CF Murfreesboro
Associates. In 2014, the Company sold its interests in Cousins
Watkins LLC. Results of operations of these investments,
including the gains recognized upon disposition, are included
in Other in the table above.
At December 31, 2015, the Company’s unconsolidated joint
ventures had aggregate outstanding indebtedness to third
parties of $402.0 million. These loans are generally mortgage
or construction loans, most of which are non-recourse to the
Company, except as described above. In addition, in certain
instances, the Company provides “non-recourse carve-out
guarantees” on these non-recourse loans.
The Company recognized $6.0 million, $5.4 million, and
$8.0 million of development, leasing, and management
fees, including salary and expense reimbursements, from
unconsolidated joint ventures in 2015, 2014 and 2013,
respectively. See note 2, fee income, for a discussion of the
accounting treatment for fees and reimbursements from
unconsolidated joint ventures.
F-17
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 6. INTANGIBLE ASSETS
At December 31, 2015 and 2014, intangible assets included the following (in thousands):
In-place leases, net of accumulated amortization
of $88,035 and $62,302 in 2015 and 2014, respectively
Above-market tenant leases, net of accumulated amortization
of $15,423 and $13,748 in 2015 and 2014, respectively
Goodwill
2015
2014
$112,937
$ 147,360
8,031
3,647
12,017
3,867
$124,615
$ 163,244
Intangible assets, other than goodwill, mainly relate to
the acquisitions in 2015, 2014, and 2013 (see note 3).
Aggregate net amortization expense related to intangible
assets and liabilities was $23.7 million, $32.7 million, and
$16.9 million for the years ended December 31, 2015,
2014, and 2013, respectively. Over the next five years and
thereafter, aggregate amortization of these intangible assets
and liabilities is anticipated to be as follows (in thousands):
2016
2017
2018
2019
2020
Thereafter
Below
Market Rents
Above
Market Ground
Lease
Above
Market Rents
In Place
Leases
Total
$ (9,020)
(8,569)
(7,793)
(7,314)
(5,427)
(18,969)
$
(55)
(55)
(55)
(55)
(55)
(2,225)
$ 1,843
1,384
1,305
883
734
1,882
$ 23,510 $ 16,278
12,653
10,220
7,158
5,541
9,526
19,893
16,763
13,644
10,289
28,838
$(57,092)
$(2,500)
$ 8,031
$112,937 $ 61,376
Weighted average remaining lease term
9 years
48 years
7 years
7 years
Goodwill relates entirely to the Company’s office assets.
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, 2015
and 2014 (in thousands):
Beginning Balance
Allocated to property sales
Ending Balance
7. OTHER ASSETS
At December 31, 2015 and 2014, other assets included the following (in thousands):
FF&E and leasehold improvements, net of accumulated depreciation
of $22,572 and $19,137 in 2015 and 2014, respectively
Lease inducements, net of accumulated amortization
of $6,865 and $5,475 in 2015 and 2014, respectively
Prepaid expenses and other assets
Predevelopment costs and earnest money
Loan closing costs, net of accumulated amortization
of $3,388 and $2,286 in 2015 and 2014, respectively
2015
$ 3,867
(220)
$ 3,647
2014
$ 4,131
(264)
$ 3,867
2015
2014
$13,523
$10,590
13,306
4,408
1,780
12,245
3,428
1,789
5,455
6,878
$38,472
$34,930
F-18
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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 that the Company
determines are probable of future development.
8. NOTES PAYABLE
The following table summarizes the terms of notes payable outstanding at December 31, 2015 and 2014 (in thousands):
Description
Post Oak Central mortgage note
The American Cancer Society Center mortgage note
Promenade mortgage note
191 Peachtree Tower mortgage note
Credit Facility, unsecured
816 Congress mortgage note
Meridian Mark Plaza mortgage note
The Points at Waterview
Interest Rate
Maturity
2015
2014
4.26%
6.45%
4.27%
3.35%
1.53%
3.75%
6.00%
5.66%
2020 $181,770 $185,109
131,083
2017
110,946
2022
100,000
2018
140,200
2019
85,000
2024
2020
25,408
— 14,598
—
129,342
108,203
100,000
92,000
85,000
24,978
$721,293 $792,344
C R E D I T FAC I L I T Y
The Company has a $500 million senior unsecured line
of credit (the “Credit Facility”) that matures on May 28,
2019. The Credit Facility may be expanded to $750 million
at the election of the Company, subject to the receipt
of additional commitments from the lenders and other
customary conditions.
The Credit 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
amount equal to $1.0 billion, plus a portion of the net cash
proceeds from certain equity issuances. The Credit Facility
also contains customary representations and warranties and
affirmative and negative covenants, as well as customary
events of default. The amounts outstanding under the Credit
Facility may be accelerated upon the occurrence of any
events of default.
The interest rate applicable to the Credit 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 Credit 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 Credit Facility. The pricing spreads and the facility fee
under the Credit Facility are as follows:
Leverage Ratio
≤ 30%
>30% but ≤ 35%
>35% but ≤ 40%
>40% but ≤ 45%
>45% but ≤ 50%
>50%
Applicable % Spread for LIBOR
Applicable % Spread for Base Rate
Annual Facility Fee %
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%
At December 31, 2015, 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 $407.0 million at December 31, 2015, and the Credit
Facility is recourse to the Company.
F-19
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED OT H E R D E BT I N FO R M AT I O N
In 2015, the Company prepaid, without penalty, the
$14.2 million The Points at Waterview mortgage note. The
note was scheduled to mature on January 1, 2016.
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 $675.7 million were
pledged as security on the $629.3 million mortgage notes
payable. As of December 31, 2015, the weighted average
maturity of the Company’s consolidated debt was 4.5 years.
At December 31, 2015 and 2014, the estimated fair value
of the Company’s notes payable was $738.1 million
and $835.4 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, 2015 and 2014. 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, 2015, 2014, and 2013,
interest was recorded as follows (in thousands):
2015
2014
2013
Total interest incurred
Interest capitalized
$34,302
(3,579)
$31,862
(2,752)
$22,227
(518)
Total interest expense
$30,723
$29,110
$21,709
D E BT M AT U R I T I E S
Future principal payments due on the Company’s notes
payable at December 31, 2015 are as follows (in thousands):
2016
2017
2018
2019
2020
Thereafter
F-20
$ 10,070
138,195
105,734
101,447
195,022
170,825
$ 721,293
9. COMMITMENTS AND CONTINGENCIES
CO M M I T M E N T S
The Company had a total of $82.4 million in future
obligations under leases to fund tenant improvements and
in other future construction obligations at December 31,
2015. The Company had outstanding letters of credit and
performance bonds totaling $1.9 million at December 31,
2015. The Company recorded lease expense of $2.0 million,
$1.3 million, and $1.1 million in 2015, 2014, and 2013,
respectively. The Company has future lease commitments
under ground
totaling
leases and operating
$144.9 million over weighted average remaining terms of
85.6 and 2.2 years, respectively. Amounts due under these
lease commitments are as follows (in thousands):
leases
2016
2017
2018
2019
2020
Thereafter
$
1,784
1,736
1,696
1,657
1,659
136,404
$ 144,936
L I T I G AT 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.
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 10. STOCKHOLDERS’ EQUITY
In 2015, the Board of Directors of the Company authorized
the repurchase of up to $100 million of its outstanding
common shares. The plan expires on September 8, 2017. The
repurchases may be executed in the open market, through
private negotiations, or in other transactions permitted
under applicable law. The timing, manner, price and amount
of any repurchases will be determined by the Company in
its discretion and will be subject to economic and market
conditions, stock price, applicable
legal requirements
and other factors. The share repurchase program may be
suspended or discontinued at any time.
Under this plan, through December 31, 2015, the Company
has repurchased 5.2 million shares of its common stock for
a total cost of $47.8 million, including broker commissions.
The share repurchases were funded from cash on hand,
borrowings under the Company’s Credit Facility, and
proceeds from the sale of assets. The repurchased shares
were recorded as treasury shares on the consolidated
balance sheet.
Subsequent to year-end, through January 31, 2016, the
Company has repurchased 193,000 shares of its common
stock for a total cost of $1.6 million.
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.
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 stockholders by $3.5 million (non-cash), which
represents the original issuance costs applicable to the
shares redeemed.
Ownership Limitations — In order to minimize the risk
that the Company will not meet one of the requirements
for qualification as a REIT, the Company’s 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 2015,
2014, and 2013 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
2015
2014
2013
$69,196
(94)
$64,510
(110)
$37,200
(98)
(731)
(2,182)
(470)
34
731
2,182
Dividends applied to meet current year REIT distribution requirements
$68,405
$62,949
$38,814
Tax Status of Distributions — The following summarizes the components of the taxability of the Company’s distributions for
the years ended December 31, 2015, 2014, and 2013:
Common:
Series A Preferred:
Series B Preferred:
Total
Distributions
Per Share
Ordinary
Dividends
Long-Term
Capital Gain
Unrecaptured
Section 1250
Gain (A)
Cash
Liquidation
Distributions
2015
2014
2013
$ 0.320000
$0.161738
$0.158262
$0.097271
$ 0.300000
$ 0.180000
$0.281564
$0.170355
$0.018436
$0.009645
$0.018436
$0.009457
$
$
$
—
—
—
2013
$25.968750
$0.966882
$0.001868
$
— $25.000000
2014
2013
$25.776040
$ 1.875000
$0.467750
$1.774673
$0.001000
$0.100327
$0.001000
$0.098519
$25.307290
—
$
(A) Represents a portion of the dividend allocated to long-term capital gain.
F-21
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED the date of grant and 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 a term equal to 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 2015, 2014, and 2013, 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
2015, 2014, and 2013, $15,000, $140,000 and $226,000,
respectively, was recognized as compensation expense.
The Company does not anticipate recognizing any future
compensation expense related to stock options outstanding
at December 31, 2015. During 2015, total cash proceeds
from the exercise of options equaled $185,000. As of
December 31, 2015, the intrinsic value of the options
outstanding and exercisable was $888,000. 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, 2015 and 2014, the weighted-average
contractual lives for the options outstanding and exercisable
were 2.3 years and 2.8 years, respectively.
leases
11. 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, 2015 future minimum rents to be received
by consolidated entities under existing non-cancelable leases
are as follows (in thousands):
2016
2017
2018
2019
2020
Thereafter
$ 217,863
219,458
217,711
202,868
174,144
639,051
$ 1,671,095
12. 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, 2015,
2,426,451 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 C K O P T I O N S
At December 31, 2015, the Company had 1,763,316 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
F-22
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT The following is a summary of stock option activity for the years ended December 31, 2015, 2014, and 2013:
Outstanding at December 31, 2012
Exercised
Forfeited/Expired
Outstanding at December 31, 2013
Exercised
Forfeited/Expired
Outstanding at December 31, 2014
Exercised
Forfeited/Expired
Outstanding at December 31, 2015
Options Exercisable at December 31, 2015
Number of
Options
(000s)
Weighted Average
Exercise Price Per Option
4,437
(283)
(1,076)
3,078
(206)
(661)
2,211
(23)
(425)
1,763
1,763
$ 21.74
8.12
21.98
22.90
8.26
28.18
22.69
8.02
21.98
22.05
$ 22.05
R E S T R I C T E D S TO C K
In 2015, 2014, and 2013, the Company issued 165,922,
137,591, and 159,782 shares of restricted stock to
employees, which vest ratably over three years from the
issuance date. In 2015, 2014, and 2013, the Company
also issued 78,985, 55,293, and 50,085 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
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
$1.5 million, $1.8 million, and $1.8 million in 2015, 2014,
and 2013, respectively.
As of December 31, 2015, the Company had recorded
$1.8 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
1.8 years. The total fair value of the restricted stock which
vested during 2015 was $2.0 million. The following table
summarizes restricted stock activity for the years ended
December 31, 2015, 2014, and 2013:
Number of
Shares
(000s)
Weighted-Average
Grant Date
Fair Value
Non-vested restricted stock at December 31, 2012
Granted
Vested
Forfeited
Non-vested restricted stock at December 31, 2013
Granted
Vested
Forfeited
Non-vested restricted stock at December 31, 2014
Granted
Vested
Forfeited
Non-vested restricted stock at December 31, 2015
703
160
(361)
(52)
450
138
(236)
(10)
342
166
(210)
(5)
293
$ 7.55
8.91
7.50
8.24
8.00
10.75
8.00
9.48
9.08
11.06
8.41
10.68
$10.65
F-23
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED R E S T R I C T E D S TO C K U N I T S
During 2015, 2014, and 2013, the Company awarded two
types of performance-based RSUs to key employees: one
based on the total stockholder return of the Company, as
defined, relative to that of office peers included in the SNL
US Office REIT Index (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. Both of these RSUs are to be settled in cash
with payment dependent upon the attainment of required
service, market, and performance criteria. 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,
2015 are 241,370, 159,745, and 160,107 related to the
2015, 2014, and 2013 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
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 in cash 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 as of December 31, 2015, 2014, and 2013 (in
thousands):
Outstanding at December 31, 2012
Granted
Exercised
Forfeited
Outstanding at December 31, 2013
Granted
Exercised
Forfeited
Outstanding at December 31, 2014
Granted
Exercised
Forfeited
Outstanding at December 31, 2015
782
196
(94)
(129)
755
205
(150)
(14)
796
244
(191)
(6)
843
The Company estimates future expense for all types of
RSUs outstanding at December 31, 2015 to be $2.0 million
(using stock prices and estimated target percentages as
of December 31, 2015), which will be recognized over a
weighted-average period of 1.2 years. During 2015, total
cash paid for all types of RSUs and related dividend payments
was $4.4 million.
During 2015, 2014, and 2013, $67,000, $5.4 million, and
$5.3 million, respectively, was recognized as compensation
expense related to RSUs for employees and directors.
OT H E R LO N G -T E 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 to be settled in cash
if the Company’s stock price achieved a specified level of
growth at the testing dates and a service requirement is met.
This award was 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.
This award expired in 2014 with no amounts paid to key
employees thereunder.
F-24
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 13. 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 $639,000, $592,000, and $422,000 to the
Retirement Savings Plan for the 2015, 2014, and 2013 plan
years, respectively.
14. INCOME TAXES
On December 31, 2014, CREC merged into Cousins and Cousins formed CTRS. Amounts included in the following table for
2015 reflect the benefit (provision) of CTRS and the amounts for 2014 and 2013 reflect the benefit (provision) for CREC.
Current tax benefit:
Federal
State
Deferred tax benefit:
Federal
State
Benefit for income taxes from operations
2015
2014
2013
$ — $ —
20
20
—
—
—
—
—
—
—
$ —
23
23
—
—
—
$ — $20
$23
The net income tax benefit differs from the amount computed by applying the statutory federal income tax rate to CTRS’
income before taxes for the year ended December 31, 2015, and to CREC’s income before taxes for the years ended 2014 and
2013 as follows ($ in thousands):
Federal income tax benefit (expense)
State income tax benefit (expense), net of federal income tax effect
Valuation allowance
State deferred tax adjustment
2015
2014
2013
Amount Rate
Amount
Rate
Amount
Rate
$ 778
90
(833)
(35)
35% $(1,124)
(125)
1,644
(375)
4%
(37)%
(2)%
(35)% $(1,287)
(147)
(361)
1,818
(4)%
50%
(11)%
(35)%
(4)%
(10)%
49%
Benefit applicable to income (loss) from continuing operations
$ —
—% $
20
—% $
23
—%
On December 31, 2014, CREC merged into Cousins and
Cousins contributed some of the assets and contracts that
were previously owned by CREC to 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 tax effect of significant
temporary differences representing deferred tax assets and
liabilities of CTRS as of December 31, 2015 and 2014 are as
follows (in thousands):
Income from unconsolidated joint ventures
Federal and state tax carryforwards
Total deferred tax assets
Valuation allowance
Net deferred tax asset
2015
2014
$
928
680
1,608
(1,608)
$ 2,441
—
2,441
(2,441)
$ —
$ —
F-25
2015 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, 2015 and 2014 the deferred tax asset of
CTRS equaled $1.6 million and $2.4 million, respectively,
with a valuation allowance placed against the full amount of
each. The conclusion that a valuation allowance should be
recorded as of December 31, 2015 and 2014 was based the
lack of evidence that CTRS, could generate future taxable
income to realize the benefit of the deferred tax assets.
15. 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, 2015, 2014, and 2013 (in thousands):
Weighted average shares—basic
Dilutive potential common shares—stock options
Weighted average shares—diluted
Weighted average anti-dilutive stock options
2015
2014
2013
215,827
152
204,216
244
144,255
165
215,979
204,460
144,420
1,128
1,553
2,208
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.
16. CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
Supplemental information related to cash flows, including significant non-cash activity affecting the consolidated statements
of cash flows, for the years ended December 31, 2015, 2014, and 2013 is as follows (in thousands):
Interest paid, net of amounts capitalized
Income taxes paid
Non-Cash Transactions:
2015
2014
2013
$ 29,337
2
$28,840
4
$21,216
90
Transfer from projects under development to operating properties
Transfer from operating properties and related assets to real estate assets and other assets held for sale
Transfer from operating properties and related liabilities to liabilities of real estate assets held for sale
Change in accrued property acquisition, development, and tenant asset expenditures
Transfer from other assets to projects under development
Transfer from land to projects under development
121,709
7,246
1,347
(2,483)
—
—
—
—
—
(531)
—
5,185
25,629
24,554
—
1,559
3,062
—
17. REPORTABLE SEGMENTS
The Company’s segments are based on the method of internal
reporting which classifies operations by property type and
geographical area. The segments by property type are: Office,
Mixed Use, and Other. The segments by geographical region
are: Atlanta, Houston, Austin, Charlotte, and Other. In 2014
and 2013, the Company’s reportable segments were Office,
Retail, Land and Other. In 2014, the Company sold the
remaining stand-alone retail properties, completing a strategic
shift to focus on office properties. In conjunction, segment
reporting has been adjusted to reflect the current Company
profile and internal reporting. 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 geographical location. Prior period information
has been revised to reflect the change in segment reporting.
Each segment includes both consolidated operations and the
Company’s share of joint venture operations.
F-26
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT Company management evaluates the performance of its
reportable segments in part based on net operating income
(“NOI”). NOI represents rental property expenses less
rental property operating expenses. NOI is not a measure
of cash flows or operating results as measured by GAAP,
is not indicative of cash available to fund cash needs and
should not be considered an alternative to cash flows as a
measure of liquidity. All companies may not calculate NOI
in the same manner. The Company considers NOI to be
an appropriate supplemental measure to net income as it
helps both management and investors understand the core
operations of the Company’s operating assets. NOI excludes
corporate general and administrative expenses, interest
expense, depreciation and amortization, impairments, gains/
loss on sales of real estate, and other non-operating items.
Segment net income, amount of capital expenditures, and
total assets are not presented in the following tables because
management does not utilize these measures when analyzing
its segments or when making resource allocation decisions.
Information on the Company’s segments along with a
reconciliation of NOI to net income available to common
stockholders is as follows (in thousands):
Year ended December 31, 2015
Net Operating Income:
Houston
Atlanta
Austin
Charlotte
Other
Total Net Operating Income
Net operating income from unconsolidated joint ventures
Net operating loss from discontinued operations
Fee income
Other income
General and administrative expenses
Reimbursed expenses
Interest expense
Depreciation and amortization
Other expenses
Income from unconsolidated joint ventures
Loss from discontinued operations
Gain on sale of investment properties
Net income attributable to noncontrolling interests
Net income available to common stockholders
Office
Mixed-Use
Other
Total
$ 103,210
93,438
15,294
16,164
7,104
$ —
5,854
—
—
—
$ —
—
—
—
168
$ 103,210
99,292
15,294
16,164
7,272
$ 235,210
$5,854
$ 168
241,232
(24,335)
14
7,297
1,278
(17,099)
(3,430)
(30,723)
(135,416)
(1,299)
8,302
(586)
80,394
(111)
$ 125,518
F-27
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Year ended December 31, 2014
Net Operating Income:
Houston
Atlanta
Austin
Charlotte
Other
Total Net Operating Income
Net operating income from unconsolidated joint ventures
Net operating income from discontinued operations
Fee income
Other income
General and administrative expenses
Reimbursed expenses
Interest expense
Depreciation and amortization
Other expenses
Preferred share original issuance costs
Dividends to preferred stockholders
Income from unconsolidated joint ventures
Income from discontinued operations
Gain on sale of investment properties
Net income attributable to noncontrolling interests
Net income available to common stockholders
Year ended December 31, 2013
Net Operating Income:
Houston
Atlanta
Austin
Charlotte
Other
Total Net Operating Income
Net operating income from unconsolidated joint ventures
Net operating income from discontinued operations
Fee income
Other income
General and administrative expenses
Reimbursed expenses
Interest expense
Depreciation and amortization
Other expenses
Preferred share original issuance costs
Dividends to preferred stockholders
Income from unconsolidated joint ventures
Income from discontinued operations
Gain on sale of investment properties
Net income attributable to noncontrolling interests
Net income available to common stockholders
F-28
Office
Mixed-Use
Other
Total
$ 100,816
73,434
6,992
6,839
18,470
$ —
5,727
—
—
—
$ —
—
—
—
3,395
$ 100,816
79,161
6,992
6,839
18,470
$ 206,551
$5,727
$3,395
215,673
(25,897)
(1,800)
12,519
4,954
(19,969)
(3,652)
(29,110)
(140,018)
(4,654)
(3,530)
(2,955)
11,268
21,158
12,536
(1,004)
$
45,519
Office
Mixed-Use
Other
Total
$ 40,199
62,211
4,029
1,208
14,856
$ —
3,511
—
—
—
$
—
—
—
—
12,066
$ 40,199
65,722
4,029
1,208
26,922
$ 122,503
$3,511
$ 12,066
138,080
(27,768)
(6,390)
10,891
5,430
(22,460)
(5,215)
(21,709)
(76,277)
(11,154)
(2,656)
(10,008)
67,325
14,788
61,288
(5,068)
$ 109,097
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT 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 10, 2016
2015 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED
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 10, 2016
COUSINS PROPERTIES INCORPORATED 2015 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 .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, 2015, 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 10, 2016
2015 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 . 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, 2015, 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 10, 2016
COUSINS PROPERTIES INCORPORATED 2015 ANNUAL REPORT
2015 DIRECTORS
S. Taylor Glover
Non-executive Chairman of the Board of Directors, Cousins Properties
Incorporated; President and Chief Executive Officer, Turner Enterprises, Inc.
Robert M. Chapman
Chief Executive Officer, CenterPoint Properties Trust
Tom G. Charlesworth
Former Chief Investment Officer, Chief Financial Officer and General Counsel,
Cousins Properties Incorporated
Larry L. Gellerstedt III
President and Chief Executive Officer, Cousins Properties Incorporated
Lillian C. Giornelli
Chairman, Chief Executive Officer and Trustee, The Cousins Foundation, Inc.
James H. Hance, Jr.
Former Vice Chairman, Bank of America Corporation
Donna W. Hyland
President and Chief Executive Officer, Children’s Healthcare of Atlanta
R. Dary Stone
President and Chief Executive Officer, R.D. Stone Interests
Thomas G. Cousins
Chairman Emeritus
EXECUTIVE OFFICERS
Larry L. Gellerstedt III
President and Chief Executive Officer
Gregg D. Adzema
Executive Vice President and Chief Financial Officer
M. Colin Connolly
Executive Vice President and Chief Investment Officer
John S. McColl
Executive Vice President
John D. Harris, Jr.
Senior Vice President, Chief Accounting Officer,
Treasurer and Assistant Corporate Secretary
Pamela F. Roper
Senior Vice President, General Counsel and Corporate Secretary
Cousins Properties Incorporated 2015 Annual Report
Shareholder INFORMATION
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, 2015 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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191 Peachtree Street NE, Suite 500, Atlanta, GA 30303-1740 | 404.407.1000 | cousinsproperties.com