COUSINS PROPERTIES
ANNUAL REPORT
2017
DEAR
SHAREHOLDERS,
2017 marked another year of significant performance for Cousins
Properties. The company further executed our stated long-term
strategy of simple platform, trophy assets and opportunistic
investments while providing strong financial results and
best-in-class customer service. In this letter, I will review the
strategy and where it has taken Cousins. I will then highlight
the strides we have made in 2017 and where we intend to go in
the future.
Our Strategy
In 2011, Cousins made a bet on urban Sun Belt office. We believed
in the emerging trend of companies and talent migrating to the
region and the push toward urbanization in these markets.
Therefore, we streamlined our business model to assemble a
portfolio of well-located, Class A office assets, in Sun Belt markets
where we believed our expertise and long-term relationships
provided a competitive advantage for Cousins.
Since that time, the Sun Belt has outperformed, both historically
and compared to the broader market. Population and job growth
continues to outpace the nation, fueling demand for high-quality
office space, and new supply remains manageable. Our 14.2 million
square foot trophy office portfolio is well-leased at 94% at year
end 2017, with modest near-term maturities and robust mark to
market opportunities.
“We outperformed on many
of our leasing, operating
and investment goals while
remaining steadfast in our
dedication to our customers.
I am also pleased to report Cousins is armed with one of the best
balance sheets in the REIT space today. Our conservative position
has provided us the opportunity to aggressively pursue targeted
acquisition opportunities, large-scale strategic transactions and
many successful development projects over the past seven years.
As a result, Cousins is a far simpler and more efficient company,
all while our equity market capitalization has increased almost
six-fold. I believe our long-term strategy, now tested and proven
successful, will continue to generate attractive returns for our
shareholders.
Our Performance
By almost any measure, 2017 was an exceptional year for Cousins.
We made significant progress on the ambitious business plan we
outlined for the company post-Parkway transactions while also
posting strong Funds From Operation (FFO) of $0.61 per share. At
the same time, we outperformed on many of our leasing, operating
and investment goals while remaining steadfast in our dedication
to our customers.
Specifically, the company accomplished the following during 2017:
•
•
•
For the third straight year, we signed more than two million
square feet of leases.
For the sixth straight year, we posted positive same property
growth on both a GAAP and cash basis.
For the fourth straight year, we posted an increase in second
generation net rent per square foot on a cash basis.
• We commenced operations on two development projects:
8000 Avalon in Atlanta, GA and Carolina Square in Chapel
Hill, NC.
• We reloaded the development pipeline, starting 120 West
Trinity in Decatur, GA and announcing 300 Colorado, our
100% pre-leased office tower in Austin, TX.
• We sold $607 million in non-core assets and land, exiting the
Orlando and Miami office markets.
•
Finally, we significantly reduced leverage as our net debt to
EBITDA decreased from 5.22 times at the start of the year to
3.75 times at year end 2017.
Our Future
Moving forward into 2018, substantial value creation exists in
both Cousins’ operating portfolio and development pipeline. Our
focus remains dedicated to executing the many embedded growth
opportunities within our current portfolio including the lease up
of vacant space, expanding and renewing existing customers and
rolling rents to market.
Furthermore, we plan to take advantage of the extended
development phase of the current cycle. We have approximately
one million square feet of office, already 100% leased, delivering in
2018. In addition to our current developments underway, we look
to further invest in our core Sun Belt markets by securing strategic
land sites to bolster our land bank. We want to be prepared if
another build-to-suit opportunity surfaces while also positioning
Cousins with options to be first out of the ground during the
next cycle.
Finally, in closing this year’s letter, I want to express my sincere
appreciation to my fellow teammates. From senior management
to our field operations staff, I believe the experience, quality and
depth of our talent is exceptional. Cousins’ strength has always
come from its people. We seek the best talent in the industry,
individuals who also share in the core principles and values which
have provided Cousins its solid foundation for the last 60 years.
To our shareholders, on behalf of everyone at Cousins, we thank
you for your ongoing support and loyalty throughout the years.
When I step back and reflect on how far we have come together,
I could not be more excited and optimistic about our current
position and the opportunities ahead.
Respectfully,
Larry L. Gellerstedt III
Chairman of the Board of Directors
and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
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)
Georgia
(State or other jurisdiction
of incorporation or organization)
3344 Peachtree Road NE, Suite 1800, Atlanta, Georgia
(Address of principal executive offices)
58-0869052
(I.R.S. Employer
Identification No.)
30326-4802
(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 class
Common Stock ($1 par value)
Name of Exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate 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
Non-accelerated filer (Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Emerging growth 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, 2017, the aggregate market value of the common stock of Cousins Properties Incorporated held by non-affiliates was
$3,615,199,650 based on the closing sales price as reported on the New York Stock Exchange. As of February 1, 2018, 419,989,466
shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s proxy statement for the annual stockholders meeting to be held on April 24, 2018 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
1
3
12
12
16
16
16
17
18
20
35
36
37
37
39
39
39
40
40
40
41
46
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 the Annual Report on
Form 10-K for the year ended December 31, 2017 and as
itemized herein. These forward-looking statements include
information about possible or assumed future results of the
business and our 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:
–
–
–
–
–
–
–
–
our business and financial strategy;
future financing;
future acquisitions and dispositions of operating assets;
future acquisitions of land;
future development and redevelopment opportunities;
future dispositions of land and other non-core assets;
future issuances and repurchases of common stock;
projected operating results;
– market and industry trends;
–
–
–
–
–
future distributions;
projected capital expenditures;
interest rates;
Inc.
the impact of the transactions involving us, Parkway
Properties,
Inc.
(“New Parkway”), including future financial and
operating results, plans, objectives, expectations and
intentions; and
(“Parkway”) and Parkway,
all statements that address operating performance,
events, or developments that we expect or anticipate
will occur in the future — including statements relating
to creating value for stockholders.
statements
forward-looking
Any
are based upon
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:
–
–
the availability and terms of capital;
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, investments, or dispositions;
the potential dilutive effect of common stock or
operating partnership unit issuances;
the availability of buyers and pricing with respect to the
disposition of assets;
risks and uncertainties related to national and local
economic conditions, the real estate industry, and the
commercial real estate markets in which we operate,
particularly in Atlanta, Charlotte, Austin, and Phoenix
where we have high concentrations of our lease revenue;
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, the ability to lease newly
developed and/or recently acquired space, and the risk
of declining leasing rates;
the adverse change in the financial condition of one or
more of our major tenants;
volatility in interest rates and insurance rates;
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;
any failure to continue to qualify for taxation as a real
estate investment trust and meet regulatory requirements;
risks associated with
litigation resulting from the
transactions with Parkway and from liabilities or
transactions
contingent
with Parkway;
liabilities assumed
the
in
risks associated with any errors or omissions in
financial or other information of Parkway that has been
previously provided to the public;
–
potential changes to state, local, or federal regulations
applicable to our business;
– material changes in the dividend rates on securities
or the ability to pay dividends on common shares or
other securities;
–
–
potential changes to the tax laws impacting REITs and
real estate in general; and
those additional risks and factors discussed in reports
filed with the Securities and Exchange Commission by
the Company.
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”). Cousins conducts substantially all of its business
through Cousins Properties LP (“CPLP”), a Delaware
limited partnership. Cousins owns approximately 98% of
CPLP, and CPLP is consolidated with Cousins for financial
reporting purposes. CPLP also owns Cousins TRS Services
LLC (“CTRS”), a taxable entity which owns and manages
its own real estate portfolio and performs certain real estate
related services for other parties. Cousins, CPLP, their
subsidiaries, 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 type and geographical area. For
financial information related to each of our operating
segments, see note 18 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 ownership of the premier urban office
portfolio in the Sunbelt markets, with a particular focus
on Georgia, Texas, North Carolina, Florida, and Arizona.
This strategy is based on a disciplined approach to capital
allocation that includes value-add acquisitions, selective
development projects, and timely dispositions of non-core
assets. This strategy is also based on a simple, flexible,
and low-leveraged balance sheet that allows us to pursue
investment opportunities at the most advantageous points in
the cycle. To implement this strategy, we leverage our strong
local operating platforms within each of our major markets.
2017 Activities During 2017, we repositioned our
portfolio of properties by reducing exposure in Atlanta and
strategically exiting the Orlando and South Florida markets.
During the year, we commenced two new development
projects and completed two new development projects. At
year-end, we had five development projects in process; our
share of the total expected costs of these projects totaled
$491 million. We also improved our balance sheet by issuing
common equity, repaying four mortgage loans assumed in
the merger with Parkway Properties, Inc. (“Parkway”) with
above market interest rates, and closing a private placement
of unsecured debt. The following is a summary of our
significant 2017 activities:
I N V E S T M E N T AC T I V I T Y
–
Purchased American Airlines’ 25.4%
in
the 111 West Rio Building for a purchase price of
$19.6 million.
interest
– Completed the development and commenced operations
of Avalon 8000 in Atlanta, Georgia, a 224,000 square
foot office building in Atlanta, Georgia.
– Completed the development and commenced operations
of Carolina Square, a mixed-use project in Chapel Hill,
North Carolina, that contains 158,000 square feet of
office space, 44,000 square feet of retail space, and
246 apartment units. The project is owned in a joint
venture in which we hold a 50% interest.
– Commenced construction of 120 West Trinity, a
mixed-use project in Atlanta, Georgia that will contain
33,000 square feet of office space, 19,000 square feet of
retail space, and 330 apartments. This project is being
developed in a joint venture in which we hold a 20%
interest, and the project is expected to be completed
in 2019.
– Continued development of 864 and 858 Spring Street,
two buildings in Atlanta, Georgia totaling 763,000
square feet that will become the world headquarters
of NCR. Phase I was completed in January of 2018,
and Phase II is expected to be completed in the fourth
quarter of 2018.
– Continued development of Dimensional Place, a
282,000 square foot building in Charlotte, North
Carolina that will become the East Coast headquarters
of Dimensional Fund Advisors. This project is being
developed in a 50-50 joint venture with Dimensional and
expected to be completed in the fourth quarter of 2018.
1
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED – Commenced development activities on 300 Colorado, a
309,000 square foot office tower in Austin, Texas. The
302,000 square foot office portion is 100% leased to
Parsley Energy, and the retail portion is 100% leased to
Del Frisco’s. 300 Colorado will be developed in a joint
venture in which we hold a 50% interest.
D I S P O S I T I O N AC T I V I T Y
–
Sold the American Cancer Society Center, a 996,000
square foot office building in Atlanta, Georgia, for gross
proceeds of $166 million.
–
–
–
Sold Emory Point, a mixed-use project in Atlanta,
Georgia, for gross proceeds of $199 million. Emory
Point was held by joint ventures in which we held
75% interests.
Exited the Orlando market by selling our three Orlando
properties containing 1.0 million square feet in a single
transaction for gross proceeds of $208.1 million.
Sold the Company’s 20% interest in Courvoisier Centre
JV, LLC to our joint venture partner in transaction
that valued the Company’s interest in the property at
$33.9 million.
F I N A N C I N G AC T I V I T Y
–
Issued 25 million shares of common stock generating in
gross proceeds of $212.9 million.
– Closed a $350 million private placement of senior
unsecured debt, which was drawn in two tranches. The
first tranche of $100 million was drawn in April 2017,
has a ten-year maturity, and a fixed annual interest rate
of 4.09%. The second tranche of $250 million was
drawn in July 2017, has an eight-year maturity, and a
fixed annual interest rate of 3.91%.
– Repaid four mortgage notes totaling $359 million that
were assumed in the Parkway merger.
P O R T FO L I O AC T I V I T Y
–
Leased or renewed 2.2 million square feet of office space.
–
–
Increased second generation net rent per square foot by
19.6% on a GAAP basis and 6.9% on a cash basis.
Increased same property net operating income by 4.4%
on a GAAP basis and 5.3% on a cash basis.
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.
We typically manage this potential
liability 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.
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 3344 Peachtree Road NE, Suite 1800, Atlanta,
Georgia 30326-4802. On December 31, 2017, we employed
261 people.
2
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT Available Information We make available free of
charge on the “Investor Relations” page of our website,
www.cousinsproperties.com our 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
3344 Peachtree Road NE, Suite 1800, Atlanta, Georgia
30326-4802, Attention: Investor Relations or 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.
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 costs, 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:
–
–
–
–
–
changes
economic climate;
in
the national,
regional, and
local
local real estate conditions such as an oversupply
of rentable space or a reduction in demand for
rentable space;
the attractiveness of our properties to tenants or buyers;
competition from other available properties;
changes in market rental rates and related concessions
granted to tenants including, but not limited to, free
rent, and tenant improvement allowances;
–
–
–
uninsured losses as a result of casualty events;
the need to periodically repair, renovate, and re-lease
properties; and
changes in federal and state income tax laws as they
affect real estate companies and real estate investors.
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 downsize 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 rates, financing availability,
law changes, and governmental regulations (including those
governing usage, zoning, and taxes) may adversely affect our
financial condition.
3
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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 if we 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 want 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,
2017, our top 20 tenants represented 31% of our annualized
base rental revenues with no single tenant accounting for
more than 6% of our annualized base rental revenues. 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. These events could have a
significant adverse impact on our results of operations or
financial condition.
For the three months ended December 31, 2017, 33.9% of our
net operating income for properties owned as of December
31, 2017 was derived from the metropolitan Atlanta area,
22.4% was derived from the metropolitan Charlotte area,
and 19.7% was derived from the metropolitan Austin
area. Any adverse economic conditions impacting Atlanta,
Charlotte, or Austin could adversely affect our overall results
of operations and financial condition.
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, or our joint venture partners
where applicable, 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.
4
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT Joint venture structure risks. Similar to other real estate
companies, we have interests in various joint ventures
(including partnerships and limited liability companies) and
may in the future invest in real estate through such structures.
Our venture partners may have rights to take actions
over which we have no control, or the right to withhold
approval of actions that we propose, either of which could
adversely affect our interests in the related joint ventures,
and in some cases, our overall financial condition and
results of operations. These structures involve participation
by other parties whose interests and rights may not be the
same as ours. For example, a venture partner might have
economic and/or other business interests or goals which are
incompatible with our business interests or goals and that
venture partner may be in a position to take action contrary
to our interests. In addition, such venture partners may
default on their obligations, which could have an adverse
impact on the financial condition and operations of the
joint venture. Such defaults may result in our fulfilling their
obligations that may, in some cases, require us to contribute
additional capital to the ventures. Furthermore, the success
of a project may be dependent upon the expertise, business
judgment, diligence, and effectiveness of our venture
partners in matters that are outside our control. Thus, the
involvement of venture partners could adversely impact the
development, operation, ownership, 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”), unsecured debt, non-
recourse mortgages, construction loans, the sale of assets,
joint venture equity, the issuance of common stock, and
the issuance of units of CPLP. 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 Facility. Terms and conditions available in the
marketplace for unsecured 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 ratio. Our
continued ability to borrow under our Credit Facility is
subject to compliance with these covenants.
– Unsecured debt. Terms and conditions available in the
marketplace for unsecured debt vary over time. The
availability of unsecured debt may vary based upon
the lending environment with financial institutions.
Unsecured debt generally contains restrictive covenants
that may place limitations on our ability to conduct
our business similar to those placed upon us by our
Credit Facility.
5
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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 issuances 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. 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
common stock when we need capital.
– Operating partnership units. The issuance of units
of CPLP in connection with property, portfolio, or
business acquisitions could be dilutive to our earnings
per share and could have an adverse effect on the per
share trading price of our common stock.
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:
–
–
–
–
–
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 our exposure to floating interest rates;
limiting our ability to compete with other companies
who have less leverage, as we may be less capable of
responding to adverse economic and industry conditions;
restricting us from making strategic acquisitions,
developing
on
business opportunities;
capitalizing
properties,
or
– Non-recourse mortgages. The availability of non-recourse
is dependent upon various conditions,
mortgages
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. If a property is
mortgaged to secure payment of indebtedness and we are
unable to make the mortgage payments, the lender may
foreclose. 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, potentially generating
defaults on other debt.
– Asset sales. Real estate markets tend to experience
market cycles. Because of such cycles, the potential
terms and conditions of sales, including prices, may be
unfavorable for extended periods of time. In addition,
our status as a REIT limits our ability to sell properties,
which may affect our ability to liquidate an investment.
As a result, our ability to raise capital through asset
sales could be limited. In addition, mortgage financing
on an asset may prohibit prepayment and/or impose
a prepayment penalty upon the sale of that property,
which may decrease the proceeds from a sale or
refinancing or make the sale or refinancing impractical.
– Construction loans. Construction loans generally relate
to specific assets under construction and fund costs
above an initial equity amount deemed acceptable
by 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 funding. Construction loans frequently require a
portion of the loan to be recourse to us. In addition,
construction loans generally require a completion
guarantee by the borrower and may require a limited
payment guarantee from the Company. There may
be times when construction loans 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.
–
Joint ventures. Joint ventures, including partnerships
or limited liability companies, tend to be complex
arrangements, and there are only a limited number of
6
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT restricting the way in which we conduct our business due
to financial and operating covenants in the agreements
governing our existing and future indebtedness;
Our degree of leverage could limit our ability to obtain
the market price of
additional
our securities.
financing or affect
–
–
–
–
exposing us to potential events of default (if not cured
or waived) under covenants contained in our debt
instruments that could have a material adverse effect on
our business, financial condition, and operating results;
increasing our vulnerability to a downturn in general
economic conditions; and
limiting our ability to react to changing market
conditions in our industry.
The impact of any of these potential adverse consequences
could have a material adverse effect on our results of
operations, financial condition, and liquidity.
Covenants contained
in our Credit Facility, senior
unsecured notes, term loans and mortgages could restrict
our operational flexibility, which could adversely affect our
results of operations.
loan
Our Credit Facility, senior unsecured notes, and our
unsecured term
impose financial and operating
covenants on us. These covenants may be modified from
time to time, but covenants of this type typically include
restrictions and limitations on our ability to incur debt,
as well as limitations on the amount of our secured debt,
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 provisions on the Credit Facility,
senior unsecured notes, and term loan may affect business
decisions on other debt.
Some of our mortgages contain customary negative
covenants, including limitations on our ability, without
the lender’s prior consent, to further mortgage that specific
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.
Total debt as a percentage of either total asset value or
total market capitalization and total debt as a multiple of
annualized EBITDA 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.
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 operating property acquisitions.
Operating property acquisitions contain inherent risks.
These risks may include:
–
–
–
–
–
–
–
–
difficulty
existing tenants;
in
leasing vacant space or renewing
costs
the
redeveloping acquisitions;
and
timing
of
repositioning
or
the acquisitions may fail to meet internal projections or
otherwise fail to perform as expected;
the acquisitions may be in markets that are unfamiliar
to us and could present additional unforeseen
business challenges;
the timing of acquisitions may not match the timing of
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
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 acquisitions;
7
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED –
–
the diversion of our management’s attention away from
other business concerns; and
the exposure to any undisclosed or unknown issues,
expenses, or potential liabilities relating to acquisitions.
In addition, we may acquire properties subject to liabilities
with no or limited recourse against the prior owners or other
third parties. As a result, if a liability were asserted against us
based upon ownership of those properties, we might have to
pay substantial sums to settle or contest it, which might not
be fully covered by owner’s title insurance policies or other
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.
We face risks associated with the development of real estate.
Development activities contain certain
inherent risks.
Although we seek to minimize risks from commercial
development through various management controls and
procedures, development risks cannot be eliminated. Some
of the key factors affecting development of commercial
property are as follows:
– 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.
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 cost
of building materials. We attempt to mitigate the risk
of unanticipated increases in construction costs on our
–
8
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 a 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 a
construction loan to us.
– 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 generally
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:
–
–
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
–
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 developed under-
performing 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
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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.
– Competition. We compete for tenants in major U.S.
markets by highlighting our locations, rental rates,
services, reputation, and the design and condition of
our facilities. As the competition for tenants is intense,
we may be required to provide rent abatements, incur
charges for tenant improvements and other concessions,
or we may not be able to lease vacant space in a
timely manner.
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 impact 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
or organizations 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:
–
–
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 any significant tenant industry
concentration;
–
–
–
–
–
–
–
–
–
–
–
–
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, Austin,
Charlotte, Tampa, and Phoenix.
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.
9
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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 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:
–
–
–
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 2017 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.
Certain property
prohibited transactions.
transfers may be characterized as
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 a 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.
We may face risks in connection with Section 1031 exchanges.
If a transaction’s gain that is intended to qualify as a
Section 1031 deferral is later determined to be taxable, we
may face adverse consequences, and if the laws applicable to
such transactions are amended or repealed, we may not be
able to dispose of properties on a tax-deferred basis.
Recent changes to the U.S. tax laws could have a negative
impact on real estate in general and our business operations,
financial condition and earnings.
An act to provide for reconciliation pursuant to titles II
and V of the concurrent resolution on the budget for fiscal
year 2018 commonly known as Tax Cuts and Jobs Act
(the “Act”), which generally takes effect for taxable years
beginning on or after January 1, 2018 (subject to certain
exceptions), makes many significant changes to the U.S.
federal income tax laws that will profoundly impact the
taxation of individuals and corporations (including both
regular C corporations and corporations that have elected
to be taxed as REITs). A number of changes that affect
noncorporate taxpayers will expire at the end of 2025 unless
Congress acts to extend them. These changes will impact us
and our shareholders in various ways, some of which are
adverse or potentially adverse compared to prior law. To
date, the IRS has issued only limited guidance with respect
to certain of the new provisions, and there are numerous
interpretive issues that will require guidance. It is highly
likely that technical corrections legislation will be needed
to clarify certain aspects of the new law and give proper
effect to Congressional intent. There can be no assurance,
however, that technical clarifications or changes needed to
prevent unintended or unforeseen tax consequences will be
enacted by Congress in the near future. Additional changes
to tax laws are likely to continue to occur in the future, and
we cannot assure investors that any such changes will not
adversely affect the taxation of our stockholders. Any such
changes could have an adverse effect on an investment in
shares or on the market value or the resale potential of our
properties. Investors are urged to consult with their own tax
advisor with respect to the impact of recent legislation on
ownership of shares and the status of legislative, regulatory,
or administrative developments and proposals, and their
potential effect on ownership of shares.
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.
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.
11
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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.
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 6 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, 2017:
Operating Properties
Rentable
Square Feet
Financial
Statement
Presentation
Company’s
Ownership
Interest
End of
Period
Leased
Weighted
Average
Occupancy (1)
Company’s Share
% of
Total Net
Operating
Income (2)
Property
Level Debt
($000) (3)
Annualized
Base Rents (6)
OFFICE PROPERTIES
Northpark (4)
Promenade
1,528,000
Consolidated
100% 86.3%
777,000
Consolidated
100% 94.1%
One Buckhead Plaza
461,000
Consolidated
100% 89.6%
3344 Peachtree
3350 Peachtree
Terminus 100
484,000
Consolidated
100% 91.7%
413,000
Consolidated
100% 86.2%
660,000 Unconsolidated
50% 93.7%
Two Buckhead Plaza
210,000
Consolidated
100% 91.0%
Terminus 200
3348 Peachtree
566,000 Unconsolidated
50% 94.1%
258,000
Consolidated
100% 87.1%
80.5%
93.9%
91.3%
88.5%
93.0%
88.9%
83.2%
94.0%
90.1%
6.8% $
—
5.4% 102,071
3.7%
2.8%
2.7%
—
—
—
2.5% 61,922
2.4%
—
2.2% 39,644
2.0%
—
Meridian Mark Plaza
160,000
Consolidated
100% 100.0%
100.0%
1.5% 23,970
Emory University Hospital
Midtown Medical Office Tower
8000 Avalon
ATLANTA
Hearst Tower
Fifth Third Center
NASCAR Plaza
Gateway Village (4)
CHARLOTTE
San Jacinto Center
One Eleven Congress
Colorado Tower
12
358,000 Unconsolidated
50% 99.5%
224,000
Consolidated
90% 94.1%
96.6%
14.9%
1.4% 35,523
0.5%
—
6,099,000
90.5%
84.6% 33.9% 263,130
966,000
Consolidated
100% 98.9%
698,000
Consolidated
100% 98.8%
394,000
Consolidated
100% 98.7%
1,061,000 Unconsolidated
50% 99.4%
98.6%
96.3%
98.4%
99.4%
9.7%
—
6.7% 145,974
3.7%
2.3%
—
—
3,119,000
98.9%
98.2% 22.4% 145,974
395,000
Consolidated
100% 94.4%
519,000
Consolidated
100% 87.8%
99.3%
83.8%
5.3%
4.8%
—
—
373,000
Consolidated
100% 100.0%
100.0%
4.7% 119,165
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT Rentable
Square Feet
Financial
Statement
Presentation
Company’s
Ownership
Interest
End of
Period
Leased
Weighted
Average
Occupancy (1)
Company’s Share
% of
Total Net
Operating
Income (2)
Property
Level Debt
($000) (3)
Annualized
Base Rents (6)
435,000
Consolidated
100% 95.2%
173,000
Consolidated
100% 97.1%
93.7%
78.3%
3.8% 82,742
1.1%
—
1,895,000
94.1%
91.0% 19.7% 201,907
789,000
Consolidated
100% 96.2%
264,000
Consolidated
100% 98.6%
91.6%
98.2%
225,000
Consolidated
100% 100.0%
100.0%
8.0%
2.7%
1.9%
1,278,000
97.3%
96.6% 12.6%
253,000
Consolidated
100% 93.1%
205,000
Consolidated
100% 99.7%
86.8%
92.7%
97.9%
1.6% 22,729
1.5%
—
1,682,000
96.5%
92.5% 10.4% 22,729
—
—
—
—
—
OFFICE PROPERTIES
816 Congress
Research Park V
AUSTIN
Hayden Ferry (4)
Tempe Gateway
111 West Rio
PHOENIX
The Pointe
Harborview Plaza
TAMPA
Corporate Center (4)
1,224,000
Consolidated
100% 96.7%
7.3%
Carolina Square Office (5)
CHAPEL HILL
158,000 Unconsolidated
158,000
50% 74.8%
74.8%
11.6%
11.6%
0.2% 10,873
0.2% 10,873
TOTAL OFFICE PROPERTIES
14,231,000
94.1%
79.1% 99.2% $ 644,613
$ 331,713
Other Properties
Carolina Square Retail (5)
44,000 Unconsolidated
50% 81.5%
49.7%
0.1%
3,028
Carolina Square Apartments
(246 Units) (5)
CHAPEL HILL
266,000 Unconsolidated
310,000
50% 91.1%
89.7%
71.2%
60.5%
0.7% 18,305
0.8% 21,333
TOTAL OTHER PROPERTIES
310,000
89.7%
60.5%
0.8% $ 21,333
$
2,557
TOTAL PROPERTIES
14,541,000
100.0% $ 665,946
$ 334,270
(1) Weighted average occupancy represents an average of the square footage occupied during the year.
(2) The Company’s share of net operating income for the three months ended December 31, 2017.
(3) The Company’s share of property specific mortgage debt, net of unamortized loan costs, as of December 31, 2017.
(4) Contains multiple buildings that are grouped together for reporting purposes.
(5) The Company’s share of Carolina Square debt has been allocated to office, retail, and apartments based on their relative square footages.
(6) Annualized base rent 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. Included in this amount is $18.6 million of annualized base rent for tenants in a free rent period.
13
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Office Lease Expirations (1)
As of December 31, 2017, our leases expire as follows:
Year of Expiration
2018
2019
2020
2021
2022
2023
2024
2025
2026 & Thereafter
Total
Square Feet
Expiring % of Leased Space
Annual Contractual
Rents ($000’s) (2)
% of Total Annual
Contractual Rents
Annual Contractual
Rent/Sq. Ft. (2)
777,011
892,339
871,998
1,315,069
1,472,160
1,076,065
945,557
1,352,057
3,335,996
6.5%
7.4%
7.3%
10.9%
12.2%
8.9%
7.9%
11.2%
27.7%
12,038,252
100.0%
$ 21,006
26,841
28,110
40,888
44,626
36,944
34,525
44,389
108,721
$ 386,050
5.4%
7.0%
7.3%
10.6%
11.6%
9.6%
8.9%
11.5%
28.1%
100.0%
$ 27.03
30.08
32.24
31.09
30.31
34.33
36.51
32.83
32.59
$ 32.07
(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.
Development Pipeline (1)
As of December 31, 2017, we had the following projects under development ($ in thousands):
Project
Type Metropolitan Area
Company’s
Ownership
Interest
Actual or
Projected
Start Date
Number of
Square Feet/
Apartment
Units
Estimated
Project
Cost (1)
Company’s
Share of
Estimated
Project Costs
Project Cost
Incurred to
Date
Company’s
Share of
Project Costs
Incurred to
Date
Percent
Leased
Initial
Occupancy (2) /
Estimated
Stabilization (3)
Office
864 Spring Street
(NCR Phase I)
858 Spring Street
Atlanta, GA
(NCR Phase II)
Dimensional Place Office Charlotte, NC
Atlanta, GA
Office
Office
Retail
100% 4Q16
50% 4Q16
260,000
266,000
16,000
100% 3Q15
503,000 $219,000 $ 219,000 $ 212,628 $ 212,628 100% 1Q18 (5) / 1Q18
120,000
94,000
120,000
47,000
68,354
53,199
68,354 100%
26,600
4Q18 / 4Q18
120 West Trinity Mixed
Atlanta, GA
20% 1Q17
85,000
17,000
18,066
3,613
Office
Retail
Apartments
33,000
19,000
330
300 Colorado (4) Office
Austin, TX
50% 4Q18
175,000
87,500
—
—
Office
Retail
Total
302,000
7,000
$693,000 $ 490,500 $ 352,247 $ 311,195
100%
—%
4Q18 / 4Q18
4Q18 / 4Q18
—%
—%
—%
1Q19 / 1Q20
1Q19 / 1Q20
1Q19 / 1Q20
100%
100%
1Q21 / 1Q21
1Q21 / 1Q21
(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.
14
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT (2) The quarter within which the Company estimates the first tenant will take occupancy.
(3) Stabilization is the earlier of the quarter within which the Company estimates it will achieve 90% economic occupancy or one year from
initial occupancy.
(4) The budget is not finalized, and it is subject to change. In January 2018, the joint venture acquired the land for this project, and
construction is expected to commence December 2018.
(5) Initial occupancy took place on January 1, 2018.
Land Holdings
As of December 31, 2017, we owned the following land holdings, either directly, or indirectly, through joint ventures:
Wildwood Office Park
North Point
The Avenue Forsyth-Adjacent Land
10000 Avalon
GEORGIA
Padre Island
Victory Center
TEXAS
Corporate Center
FLORIDA
TOTAL LAND HELD (ACRES)
TOTAL LAND HELD (COST BASIS)
Other Investments
Metropolitan
Area
Company’s
Ownership
Interest
Total
Developable
Land (Acres)
Type
Company’s
Share (Acres)
Atlanta Commercial
Atlanta Commercial
Atlanta Commercial
Atlanta Commercial
Corpus Christi Residential
Dallas Commercial
50%
100%
100%
75%
50%
75%
Tampa Commercial
100%
22
12
10
3
47
15
3
18
7
7
72
52
$ 47,902
$ 23,254
The Company owns a leasehold interest in the air rights over the approximately 365,000 square foot CNN Center parking
facility in Atlanta, Georgia, adjoining the headquarters of Turner Broadcasting System, Inc. and Cable News Network.
The air rights are developable for additional parking or for certain other uses. The Company’s net carrying value of this
interest is $0.
15
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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.
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
M. Colin Connolly
Gregg D. Adzema
John S. McColl
Pamela F. Roper
John D. Harris, Jr.
61
41
52
55
44
58
Chairman of the Board, Chief Executive Officer
President, Chief Operating Officer
Executive Vice President, Chief Financial Officer
Executive Vice President
Executive Vice President, General Counsel and Corporate Secretary
Senior Vice President, Chief Accounting Officer, Treasurer and Assistant Secretary
16
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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 named
Chairman of the Board and CEO in July of 2017. From
July 2009 to July 2017, Mr. Gellerstedt served as President
and Chief Executive Officer and Director. 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. Connolly was appointed President and Chief Operating
Officer in July 2017. From July 2016 to July 2017,
Mr. Connolly served as Executive Vice President and Chief
Operating Officer. From December 2015 to July 2016,
Mr. Connolly served as Executive Vice President and Chief
Investment Officer.
P A R T I I
Mr. Adzema was appointed Executive Vice President and
Chief Financial Officer in November 2010. Prior to joining
the Company, Mr. Adzema served as Chief Investment
Officer of Hayden Harper Inc., an investment advisory and
hedge fund company, from October 2009 to November 2010.
Mr. McColl was appointed Executive Vice President in
December 2011. From February 2010 to December 2011,
Mr. McColl served as Executive Vice President-Development,
Office Leasing and Asset Management. From May 1997 to
February 2010, Mr. McColl served as Senior Vice President.
Ms. Roper was appointed Executive Vice President, General
Counsel and Corporate Secretary in February 2017. From
October 2012 to February 2017, Ms. Roper served as Senior
Vice President, General Counsel and Corporate Secretary.
From February 2008 to October 2012, Ms. Roper served
as Senior Vice President, Associate General Counsel and
Assistant Secretary.
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.
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 cash dividends declared per common share were
as follows:
High
Low
Dividends
Payment Date(s)
2017 Quarters
2016 Quarters
First
Second
Third
Fourth
First
Second
Third
Fourth
$ 8.82
$ 9.10
$ 9.45
$ 9.63
$10.43
$11.07
$11.40
$10.50
$ 7.87
$ 7.81
$ 8.59
$ 8.87
$ 7.53
$10.00
$10.02
$ 7.09
$0.120
$0.060
$0.060
$0.060
$0.080
$0.080
$0.080
$ —
1/19/2017
4/13/2017
7/13/2017 10/2/2017 1/12/2018 2/22/2016 5/27/2016
9/6/2016
—
We declared and paid our fourth quarter 2016 common dividend in January 2017 in the amount of $0.06 per share.
H O L D E R S
Our common stock trades on the New York Stock Exchange
(ticker symbol CUZ). On February 1, 2018, there were 1,821
stockholders of record of our common stock.
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
There were no purchases of common stock by the Company
during the fourth quarter of 2017.
17
2017 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, 2012 and the reinvestment of all dividends.
(cid:55)(cid:50)(cid:55)(cid:36) (cid:47) (cid:3) (cid:53) (cid:40) (cid:55) (cid:56) (cid:53) (cid:49) (cid:3) (cid:51) (cid:40) (cid:53) (cid:41)(cid:50) (cid:53) (cid:48) (cid:36) (cid:49) (cid:38) (cid:40)
e
u
l
a
V
x
e
d
n
I
200
180
160
140
120
100
80
12/31/12
12/31/13
12/31/14
12/31/15
12/31/16
12/31/17
Cousins Properties Incorporated
FTSE NAREIT Equity Index
NYSE Composite Index
SNL US REIT Office 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
12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017
100.00
100.00
100.00
100.00
125.57
126.28
102.47
106.57
142.90
134.81
133.35
134.34
121.82
129.29
137.61
135.52
156.41
144.73
149.33
151.24
174.80
171.83
157.14
155.31
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. Prior year disclosures have been restated for discontinued operations as described in
note 3 of the consolidated financial statements.
18
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT
Revenues:
Rental property revenues
Fee income
Other
Expenses:
Rental property operating expenses
Reimbursed expenses
General and administrative expenses
Interest expense
Depreciation and amortization
Acquisition and merger costs
Other
Gain (loss) on extinguishment of debt
Income (loss) from continuing operations before benefit for
income taxes, income from unconsolidated joint ventures, and
gain on sale of investment properties
Benefit for income taxes from operations
Income from unconsolidated joint ventures
Income (loss) from continuing operations before gain on sale of
investment properties
Gain on sale of investment properties
Income from continuing operations
Income from discontinued operations:
Income from discontinued operations
Gain (loss) on sale from discontinued operations
Income 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
For the Years Ended December 31,
2017
2016
2015
2014
2013
(in thousands, except per share amounts)
$ 446,035
8,632
11,518
466,185
$ 249,814
8,347
1,050
259,211
$ 196,244
7,297
828
204,369
$ 164,123
12,519
919
177,561
$ 122,672
10,891
4,681
138,244
163,882
3,527
27,523
33,524
196,745
1,661
1,796
428,658
2,258
39,785
—
47,115
86,900
133,059
219,959
—
—
—
219,959
(3,684)
216,275
—
—
96,908
3,259
25,592
26,650
97,948
24,521
5,888
280,766
(5,180)
(26,735)
—
10,562
(16,173)
77,114
60,941
19,163
—
19,163
80,104
(995)
79,109
—
—
82,545
3,430
16,918
22,735
71,625
299
1,181
198,733
—
5,636
—
8,302
13,938
80,394
94,332
31,848
(551)
31,297
125,629
(111)
125,518
—
—
76,963
3,652
19,784
20,983
62,258
1,130
3,729
188,499
—
(10,938)
20
11,268
350
12,536
12,886
20,764
19,358
40,122
53,008
(1,004)
52,004
(3,530)
(2,955)
58,949
5,215
21,986
19,091
47,131
3,626
4,167
160,165
—
(21,921)
23
67,325
45,427
61,288
106,715
8,625
11,489
20,114
126,829
(5,068)
121,761
(2,656)
(10,008)
$
$
$
$
45,519
$ 109,097
0.02
0.22
0.30
$
$
$
0.62
0.76
0.18
Net income available to common stockholders
$ 216,275
$
79,109
$ 125,518
Net income from continuing operations attributable to controlling
interest per common share - basic and diluted
Net income 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)
$
$
$
0.52
0.52
0.30
$
$
$
0.24
0.31
0.24
$
$
$
0.44
0.58
0.32
$ 4,204,619
$ 1,093,228
$ 2,771,973
$ 4,171,607
$ 1,380,920
$ 2,455,557
$ 2,595,320
$ 718,810
$ 1,683,415
$ 2,664,295
$ 789,309
$ 1,673,458
$ 2,270,493
$ 627,381
$ 1,457,401
Common shares outstanding (at year-end)
420,021
393,418
211,513
216,513
189,666
19
2017 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
The following discussion and analysis should be read
in conjunction with the selected financial data and the
consolidated financial statements and notes.
Overview of 2017 Performance and Company and
Industry Trends
Our strategy is to create value for our stockholders through
ownership of the premier urban office portfolio in Sunbelt
markets, with a particular focus on Georgia, Texas, North
Carolina, Florida, and Arizona. This strategy is based on a
disciplined approach to capital allocation including value-
add acquisition of assets, selective development projects,
and timely disposition of non-core assets. This strategy is
also based on a simple, flexible and low-leveraged balance
sheet that allows us to pursue acquisitions and development
opportunities at the most advantageous points in the cycle.
To implement this strategy, we leverage our strong local
operating platforms within each of our markets.
2 01 7 AC T I V I T Y
During 2017, we repositioned our portfolio of properties
by reducing overall exposure to Atlanta and by strategically
exiting Orlando and South Florida. During the year, we
commenced two new development projects and completed
two projects. At year-end, we had five development projects
in process; our share of the total expected costs of these
projects totaled $491 million. We also improved our balance
sheet by issuing common equity, repaying four mortgage
loans assumed in the merger with Parkway Properties, Inc.
(“Parkway”) at above market interest rates, and closing a
private placement of unsecured debt. In January 2018, we
expanded borrowing capacity under our Credit Facility
from $500 million to $1 billion and extended the maturity
date from 2019 to 2023. At year-end, we had cash balances
(including restricted cash) of $205.7 million, no amounts
outstanding under our Credit Facility, and our net debt-to-
EBITDA ratio was 3.75.
In 2017, we leased or renewed approximately 2.2 million
square feet of office space. The weighted average net effective
rent per square foot, representing base rent less operating
expense reimbursements and leasing costs, for new or
renewed non-amenity leases with terms greater than one
year was $22.64 per square foot. Cash basis net effective
rent per square foot increased 6.9% on spaces that had 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. Our same property net
operating income for the year increased by 4.4% on a GAAP
basis and 5.3% on a cash basis. The same property leasing
percentage increased slightly to 92.6% at year-end.
M A R K E T CO N D I T I O N S
We believe that the Sunbelt region, and in particular the five
Sunbelt markets in which we operate, possess some of the
most attractive economic and real estate fundamentals in the
nation. Accelerated job growth, steady office absorption,
positive rent growth, and historically low levels of new
supply continue to support the healthy office fundamentals
and we believe that we are well positioned to benefit and
ultimately outperform in the current real estate environment.
Our Atlanta portfolio totals 6.1 million square feet,
represented 33.9% of our Net Operating Income for the
fourth quarter of 2017 and was 90.5% leased at December 31,
2017. In addition, we had three projects under development
in Atlanta totaling 815,000 square feet at December 31,
2017, two of which are 100% leased and one of which
became operational in January 2018. Job growth in Atlanta
for the year ended December 31, 2017 was 2.1%, above the
national average, and construction as a percentage of the
total market square footage was a restrained 3.4% at year
end. Our portfolio is well located in the Midtown, Buckhead
and Central Perimeter submarkets with direct access to mass
transit. We believe that the job growth combined with the
relatively low levels of new construction activity position our
portfolio well within our submarkets.
Our Charlotte portfolio totals 3.1 million square feet,
represented 22.4% of our Net Operating Income for the
fourth quarter of 2017 and was 98.9% leased at December
31, 2017. In addition, we have one project under development
totaling 282,000 square feet that is 100% leased. Job growth
in Charlotte for the year ended December 31, 2017 was 1.7%
and construction as a percentage of the total market square
footage was a reasonable 5.0%. Our portfolio is located in
20
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT
the Uptown submarket where rents have increased to new
market highs. While job growth over the past year was only
slightly above the national average, Charlotte ranks third in
the country for the highest rate of population growth over the
last ten years. Strong demand and favorable economics have
spurred a higher level of new development this cycle across
the market, specifically in Uptown where approximately
850,000 square feet is currently under construction.
Our Austin portfolio totals 1.9 million square feet, represented
19.7% of our Net Operating Income for the fourth quarter
of 2017 and was 94.1% leased at December 31, 2017. In
addition, we have one project under development totaling
309,000 square feet that is 100% leased. Job growth in
Austin for the year ended December 31, 2017 was 2.7%
and construction as a percentage of the total market square
footage was 10.4%. Our portfolio is predominantly in the
central business district where new construction is less than
500,000 square feet and is 68% pre-leased. We believe that
our dominant presence in the downtown Austin submarket
combined with the job growth and low unemployment rate in
the city are favorable for our existing portfolio and the new
development project that is scheduled for delivery in 2021.
Our Phoenix portfolio totals 1.3 million square feet,
represented 12.6% of our Net Operating Income for
the fourth quarter of 2017 and was 97.3% leased at
December 31, 2017. Job growth in Phoenix for the year
ended December 31, 2017 was 2.2% and construction
as a percentage of the total market square footage was a
restrained 3.2%. Our portfolio is located in the high-growth
submarket of Tempe, in close proximity to Arizona State
University and its 80,000 students. With the job growth rate
steady and new supply limited, vacancy levels have decreased
and rental rates have increased.
Our Tampa portfolio totals 1.7 million square feet,
represented 10.4% of Net Operating Income for the fourth
quarter of 2017 and was 96.5% leased at December 31,
2017. Job growth in Tampa for the year ended December
31, 2017 was 2.3%, and construction as a percentage of the
total market square footage was 2.3%. In the Westshore
submarket, where our portfolio is located, Class A vacancy
has declined to 6.6%, and there are no office projects under
development. Metro-wide, the Tampa office market is
experiencing low vacancy rates, and Westshore continues
to command the top rents in the market, in part due to
Westshore’s proximity to the Tampa airport.
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, 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 we determine
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.
21
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Once a certain project is constructed and deemed substantially
complete and held for occupancy, carrying costs, such as real
estate taxes, interest, internal personnel costs, 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’s initial occupancy. Our judgment
of the date the project is substantially complete has a direct
impact on our operating expenses and net income for
the period.
Real Estate Property Acquisitions. Upon acquisition
of an operating property, we record the acquired tangible
and intangible assets and assumed liabilities at fair value at
the acquisition date. Fair value is based on estimated cash
flow projections that utilize available market information
and discount and/or capitalization rates as appropriate.
Estimates of future cash flows are based on a number of
factors including historical operating results, known and
anticipated trends, and market and economic conditions.
The acquired assets and assumed liabilities for an acquired
operating property generally include, but are not limited to:
land, buildings, and identified tangible and intangible assets
and liabilities associated with in-place leases, including tenant
improvements, leasing costs, value of above-market and
below-market leases, and value of acquired in-place 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. An identifiable intangible
asset or liability is recorded if there is an above-market or
below-market lease at an acquired property.
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
22
on a variety of considerations including, but not necessarily
limited to: (1) the value associated with avoiding the cost
of originating the acquired in-place leases; (2) the value
associated with lost revenue related to tenant reimbursable
operating costs estimated to be incurred during the assumed
lease-up period; and (3) the value associated with lost rental
revenue from existing leases during the assumed lease-up
period. Factors considered in performing these analyses
include an estimate of the carrying costs during the expected
lease-up periods, such as real estate taxes, insurance, and
other operating expenses, current market conditions, and
costs to execute similar leases, such as leasing commissions,
legal, and other related expenses.
The amounts recorded for above-market and in-place leases
are included in other assets on the balance sheets, and the
amounts for below-market leases are included in other
liabilities on the balance sheets. These amounts are amortized
on a straight-line basis as an adjustment to rental income
over the remaining term of the applicable leases.
significant
acquisitions
The determination of the fair value of the acquired tangible
and intangible assets and assumed liabilities of operating
judgment
requires
property
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.
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT The first step in this process is for us 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, we 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 we determine
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.
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
23
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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.
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 by considering, among other things, 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.
from
tenants
R E COV E R I E S F R O M T E N A N T S
for operating expenses are
Recoveries
determined on a calendar year and on a lease-by-lease basis.
The most common types of cost reimbursements in our
leases are utility expenses, building operating expenses, real
estate taxes, and insurance, for which the tenant pays its pro
rata share in excess of a base year amount, if applicable.
The computation of these amounts is complex and involves
numerous judgments, including the interpretation of 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 13, as are the accounting
policies by type of award. Compensation cost for all stock-
based awards requires measurement at estimated fair value
on the grant date, and compensation cost is recognized over
the service vesting period, which represents the requisite
service period. 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.
D I S C U S S I O N O F N E W ACCO U N T I N G
P R O N O U N C E M E N T S
In May 2014, the FASB issued ASU 2014-09 (“ASC 606”),
“Revenue from Contracts with Customers.” 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. ASU 2015-
14 (collectively with ASU 2014-09, “ASC 606”), “Revenue
from Contracts with Customers,” was subsequently issued
modifying the effective date to periods beginning after
December 15, 2017, with early adoption permitted for
periods beginning after December 15, 2016. The standard
allows for either “full retrospective” adoption, meaning
the standard is applied to all of the periods presented, or
“modified retrospective” adoption, meaning the standard
is applied only to the most recent period presented in the
financial statements. The Company adopted this guidance
using
the “modified retrospective” method effective
January 1, 2018. The classification of certain non-lease
components of revenue from leases may be impacted by
24
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT the new revenue standard upon the adoption of the new
leasing standard beginning January 1, 2019 (see below). The
Company has determined that the adoption of ASC 606 will
not require any material adjustments to the consolidated
financial statements but will result in additional disclosures
related to disaggregation of revenue streams beginning in the
first quarter of 2018.
In February 2016, the FASB issued ASU 2016-02, “Leases,”
which amends the existing standards for lease accounting by
requiring lessees to recognize most leases on their balance
sheets and making targeted changes to lessor accounting and
reporting. The new standard will require lessees to record
a right-of-use asset and a lease liability for all leases with a
term of greater than 12 months and classify such leases as
either finance or operating leases based on the principle of
whether or not the lease is effectively a financed purchase
of the leased asset by the lessee. This classification will
determine whether the lease expense is recognized based on
an effective interest method (finance leases) or on a straight-
line basis over the term of the lease (operating leases). Leases
with a term of 12 months or less will be accounted for similar
to existing guidance for operating leases. The new standard
requires lessors to account for leases using an approach that
is substantially equivalent to existing guidance for sales-type
leases, direct financing leases, and operating leases. ASU
2016-02 supersedes previous leasing standards. The guidance
is effective for the fiscal years beginning after December 15,
2018, with early adoption permitted. The Company expects
to adopt this guidance using the “modified retrospective”
method effective January 1, 2019, and is currently assessing
the potential impact of adopting the new guidance.
the FASB
In August 2016,
issued ASU 2016-15,
“Classification of Certain Cash Receipts and Cash Payments”
(“ASU 2016-15”) which updated ASC Topic 230, “Statement
of Cash Flows.” ASU 2016-15 clarifies guidance on the
classification of certain cash receipts and payments in the
statement of cash flows to reduce diversity in practice with
respect to (i) debt prepayment or debt extinguishment costs,
(ii) settlement of zero-coupon debt instruments or other debt
instruments with coupon interest rates that are insignificant
in relation to the effective interest rate of the borrowing,
(iii) contingent consideration payments made after a business
combination, (iv) proceeds from the settlement of insurance
claims, (v) proceeds from the settlement of corporate-
owned life insurance policies, including bank-owned life
insurance policies, (vi) distributions received from equity
method investees, (vii) beneficial interests in securitization
transactions, and (viii) separately identifiable cash flows and
application of the predominance principle. ASU 2016-15
is effective for interim and annual reporting periods in
fiscal years beginning after December 15, 2017, with early
adoption permitted. The Company adopted this standard
in the fourth quarter of 2017 with retrospective application
to the consolidated statements of cash flows. The Company
elected to use the nature of distributions approach, for
distributions from its equity method investments, under
which it classifies the distribution received on the basis of
the nature of the activity that generated the distribution.
The adoption of this new approach resulted in an increase
in net cash provided by operating activities and a decrease
in net cash provided by investing activities of $6.4 million
and $2.9 million for the years ended December 31, 2016 and
2015, respectively.
In November 2016, the FASB issued ASU 2016-18,
“Restricted Cash” (“ASU 2016-18”) which updated ASC
Topic 230, “Statement of Cash Flows.” ASU 2016-18
requires companies to include restricted cash and restricted
cash equivalents with cash and cash equivalents when
reconciling the beginning-of-period and end-of-period total
amounts shown on the statement of cash flows. This update
is effective for interim and annual reporting periods in
fiscal years beginning after December 15, 2017, with early
adoption permitted. The Company has early adopted this
standard in the fourth quarter of 2017, which resulted in an
increase in net cash provided by investing activities by $11.3
million for the year ended December 31, 2016 and a decrease
in net cash provided by operating and investing activities by
$263,000 and $475,000, respectively, for the year ended
December 31, 2015.
January 1, 2017,
Effective
the Company adopted
ASU 2016-09, “Improvements to Employee Share-Based
Payment Accounting.” Under this ASU, the additional paid-
in capital pool is eliminated, and an entity recognizes all
excess tax benefits and tax deficiencies as income tax expense
or benefit in the income statement. This ASU also eliminated
the requirement to defer recognition of an excess tax benefit
until all benefits are realized through a reduction to taxes
payable. In the first quarter of 2017, the Company changed
the treatment of excess tax benefits as operating cash flows
in the statement of cash flows. This ASU also stipulates that
cash payments to tax authorities in connection with shares
withheld to meet statutory tax withholding requirements
be presented as a financing activity in the statement of
cash flows. This ASU was adopted prospectively, prior
periods have not been restated to conform to the current
period presentation.
25
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED In January 2017, the FASB issued ASU 2017-01, “Clarifying
the Definition of a Business,” which provides a more
narrow definition of a business to be used in determining
the accounting treatment of an acquisition. As a result,
many acquisitions that previously qualified as business
combinations will be treated as asset acquisitions. For
asset acquisitions, acquisition costs may be capitalized,
and the purchase price may be allocated on a relative fair
value basis. ASU 2017-01 is effective prospectively for
the Company on January 1, 2018, with early adoption
permitted. The Company adopted this standard in 2017 and
expects that most of its future acquisitions will qualify as
asset acquisitions.
In February 2017, the FASB issued ASU No. 2017-05,
“Other Income - Gains and Losses from the Derecognition
of Nonfinancial Assets (Subtopic 610-20): Clarifying the
Scope of Asset Derecognition Guidance and Accounting
for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”).
ASU 2017-05 updates the definition of an “in substance
nonfinancial asset” and clarifies the derecognition guidance
for nonfinancial assets to conform with the new revenue
recognition standard. Among other things, ASU 2017-05
requires companies to recognize 100% of the gain on the
transfer of a nonfinancial asset to an entity in which it has a
noncontrolling interest. ASU 2017-05 is effective for interim
and annual reporting periods in fiscal years beginning after
December 15, 2017. The Company adopted this guidance
using
the “modified retrospective” method effective
January 1, 2018. As a result of the adoption of ASU 2017-05,
the Company recorded a cumulative effect from change
in accounting principle which credited distributions in
excess of cumulative net income by $24.3 million. This
cumulative effect adjustment resulted from the 2013 transfer
of a wholly-owned property to an entity in which it had a
noncontrolling interest.
In May 2017, FASB issued ASU 2017-09, “Scope of
Modification Accounting,” which amends
the scope
of modification accounting
for share-based payment
arrangements and provides guidance on the types of changes
to the terms or conditions of share-based payment awards
to which an entity would be required to apply modification
accounting under ASC 718. This update is effective for
interim and annual reporting periods in fiscal years beginning
after December 15, 2017, with early adoption permitted. The
Company adopted this standard on January 1, 2018. The
Company does not believe that the adoption of this standard
will have a material impact on its financial statements.
Results of Operations For The Three Years Ended
December 31, 2017
G E N E R A L
Our financial results for the three years ended December 31,
2017 have been significantly affected by the merger with
Parkway (the “Merger”) and the spin-off of the combined
companies’ Houston business to New Parkway (the “Spin-
Off”) (collectively, the “Parkway Transactions”) that
occurred in October 2016. Our financial results have also
been affected by various dispositions during the periods.
During 2015, we sold 2100 Ross, The Points at Waterview,
and three of our North Point properties (collectively, the
“2015 Dispositions”). During 2016, we sold 100 North Point
Center East and One Ninety One Peachtree (collectively, the
“2016 Dispositions”). During 2017, we sold the American
Cancer Society Center (the “ACS Center”), Bank of
America Center, Citrus Center, and One Orlando Centre
(collectively, the “2017 Dispositions”). Accordingly, our
historical financial statements may not be indicative of future
operating results.
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 2017 versus 2016 comparison
are from properties that were owned as of January 1, 2016
through December 31, 2017. Same Property amounts for the
2016 versus 2015 comparison are from properties that were
owned as of January 1, 2015 through December 31, 2016.
This information includes revenues and expenses of only
consolidated properties.
We use Net Operating Income (“NOI”), a non-GAAP
financial measure, to measure the 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 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
26
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT a result, we use 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 $129.2 million between the 2017 and 2016 periods as follows (dollars in thousands):
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,
2017
2016
$ Change
% Change
$ 142,087
303,948
$ 446,035
$ 135,371
114,443
$ 249,814
$
6,716
189,505
$ 196,221
$ 52,174
111,708
$ 163,882
$ 49,284
47,624
$ 96,908
$
2,890
64,084
$ 66,974
$ 89,913
192,240
$ 86,087
66,819
$
3,826
125,421
$ 282,153
$ 152,906
$ 129,247
5.0%
165.6%
78.5%
5.9%
134.6%
69.1%
4.4%
187.7%
84.5%
The increase in Same Property NOI was primarily driven
by increases in revenues as a result of higher occupancy at
816 Congress and Fifth Third Center, offset by a decrease in
occupancy at Northpark. Same Property operating expense
increased due to these higher occupancy levels. The increase
in Non-Same Property NOI is primarily due to the Parkway
Transactions offset by the 2017 and 2016 Dispositions.
NOI increased $39.2 million between the 2016 and 2015 periods as follows (dollars in thousands):
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,
2016
2015
$ Change
% Change
$ 71,802
178,012
$ 249,814
$ 69,012
127,232
$ 196,244
$ 30,783
66,125
$ 96,908
$ 30,402
52,143
$ 82,545
$ 2,790
50,780
$ 53,570
$
381
13,982
$ 14,363
$ 41,019
111,887
$ 38,610
75,089
$ 2,409
36,798
$ 152,906
$ 113,699
$ 39,207
4.0%
39.9%
27.3%
1.3%
26.8%
17.4%
6.2%
49.0%
34.5%
The increase in Same Property NOI was primarily driven by
increases in revenues as a result of higher occupancy at 816
Congress and Promenade. Same Property operating expense
increased due to these higher occupancy levels. The increase
in Non-Same Property NOI is primarily due to the Parkway
Transactions offset by the 2016 and 2015 Dispositions.
OT H E R I N CO M E
Other income increased $10.5 million between 2017 and
2016 primarily as a result of 2017 termination fees at
3350 Peachtree, NASCAR Plaza, Hayden Ferry, Fifth Third
Center, and Northpark.
F E E I N CO M E
Fee income increased $1.1 million (14.4%) between 2016 and
2015 as a result of the recognition of additional development
and leasing fees from joint venture properties.
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 increased $1.9 million
(7.5%) between 2017 and 2016 and increased $8.7 million
(51.3%) between 2016 and 2015 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.
27
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED I N T E R E S T E X P E N S E
Interest expense increased $6.9 million (25.8%) between
2017 and 2016 primarily as a result of the term loan that the
Company closed in late 2016 and the senior notes that the
Company closed in 2017, partially offset by the repayment
of five mortgage loans in 2017. Interest expense increased
$3.9 million (17.2%) between 2016 and 2015 primarily
as a result of mortgage loans assumed in the Parkway
Transactions and as a result of our obtaining new mortgage
loans on Colorado Tower and Fifth Third Center.
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 increased $98.8 million
(100.9%) between 2017 and 2016 and
increased
$26.3 million (36.8%) between 2016 and 2015 primarily
due to the Parkway Transactions.
ACQ U I S I T I O N A N D R E L AT E D CO S T S
Included in acquisition and related costs in 2017 and 2016
are the costs associated with the Parkway Transactions.
These costs included legal, accounting, and financial advisory
fees as well as the cost of due diligence work and the costs
of combining the operations of Parkway with the Company.
We do not expect to incur any material additional expenses
associated with the Parkway Transactions.
OT H E R E X P E N S E
Other expense decreased $4.1 million between 2017 and
2016 and increased $4.7 million between 2016 and 2015
primarily as a result of an impairment loss recorded on
residential land in 2016.
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 2017, 2016, and 2015 (in thousands):
Net operating income
Other income
Depreciation and amortization
Interest expense
Net gain on sales
Income from unconsolidated joint ventures
Net operating income increased $2.3 million (7.9%)
between 2017 and 2016 primarily due to a change in
the partnership structure at Gateway Village whereby
we began receiving 50% of cash flows versus a preferred
return, effective December 1, 2016, and the addition
of Courvoisier Centre JV, LLC, which was acquired in
the Merger. These increases were offset by the sale of
properties owned by EP I, LLC and EP II, LLC (“Emory
Point I and II”) in the second quarter of 2017 and the sale
of our interest in Courvoisier Centre JV, LLC in the fourth
quarter of 2017. Other income decreased $2.0 million
primarily due to lower termination fees in 2017, offset by
the sale of mineral rights at CL Realty. Net gain on sales
of $35.1 million in 2017 resulted from gains on the sales
of Emory Point I and II and of our interest in Courvoisier
Centre JV, LLC, offset by a loss on the purchase of the
remaining 25.4% interest in the 111 West Rio building
and the related consolidation of the building immediately
following the purchase.
Income from unconsolidated
increased
between 2016 and 2015 primarily due to an increase in net
operating income resulting from two unconsolidated joint
ventures acquired as a part of the Parkway Transactions and
joint ventures
Year Ended December 31,
2017
$ 31,053
2,062
(13,191)
(7,859)
35,050
2016
$ 28,784
4,106
(13,905)
(8,423)
—
2015
$ 24,335
787
(11,645)
(7,455)
2,280
$ 47,115
$ 10,562
$ 8,302
an increase in lease termination fees, offset by increases in
depreciation and amortization expense and interest expense
due to the Parkway Transactions.
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
Included in gain on sale of investment properties in 2017 are
gains recognized on the 2017 Dispositions. The combined
sales prices of the 2017 Dispositions represented a weighted
average capitalization rate of 7.3%. Included in gain on
sale of investment properties in 2016 are gains recognized
on the 2016 Dispositions as well as the sale of 20 acres of
commercial land in our Northpoint project. The combined
sales prices of the 2016 Dispositions represented a weighted
average capitalization rate of 6.7%. Included in gain on sale
of investment properties in 2015 are gains recognized on the
2015 Dispositions. The combined sales prices of the 2015
Dispositions represented a weighted average capitalization
rate of 6.5%. Capitalization rates are calculated by dividing
projected annualized NOI by the sales price.
D I S CO N T I N U E D O P E R AT I O N S
Discontinued operations contains the operations of Post Oak
Central and Greenway Plaza (the “Houston Properties”),
two of our properties that were included in the Spin-Off.
Because we decided to exit the Houston market in connection
28
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT with the Parkway Transactions, the Spin-Off represents a
strategic shift that has a significant impact on our operations.
As such, these properties qualify for discontinued operations
treatment. The operations of the Houston Properties have
been reclassified into discontinued operations for all periods
presented. Income from discontinued operations decreased
in 2016, compared to 2015, because the Spin-Off occurred
in October 2016.
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 S
Net income attributable to noncontrolling interests includes
the outside parties’ share of the net income of CPLP as well
as that of certain other consolidated entities.
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”)
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.
(computed
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, 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 available to common
stockholders to FFO is as follows for the years ended
December 31, 2017, 2016, and 2015 (in thousands, except
per share information):
Net Income Available to Common Stockholders
Depreciation and amortization of real estate assets:
Consolidated properties
Share of unconsolidated joint ventures
Discontinued properties
Partners’ share of real estate depreciation
(Gain) loss on sale of depreciated properties:
Consolidated properties
Share of unconsolidated joint ventures
Discontinued properties
Non-controlling interest related to unit holders
Funds From Operations
Per Common Share — Diluted:
Net Income Available
Funds From Operations
Weighted Average Shares — Diluted
Year Ended December 31,
2017
2016
2015
$ 216,275
$ 79,109
$ 125,518
194,869
13,191
—
(23)
(133,043)
(35,050)
—
3,681
96,583
13,904
47,345
(3,564)
(73,533)
—
—
784
70,003
11,645
63,791
—
(78,759)
—
551
—
$ 259,900
$ 160,628
$ 192,749
$
$
0.52
0.61
$
$
0.31
0.63
$
$
0.58
0.89
423,297
256,023
215,979
29
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Net Operating Income
Company management evaluates the performance of its
property portfolio in part based on NOI. NOI represents
rental property revenues 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.
The following reconciles NOI to Net Income each of the periods presented (in thousands):
Net income
Fee income
Other income
Reimbursed expenses
General and administrative expenses
Interest expense
Depreciation and amortization
Acquisition and transaction costs
Other expenses
(Gain) loss on extinguishment of debt
Income from unconsolidated joint ventures
Gain on sale of investment properties
Income from discontinued operations
Year Ended December 31,
2017
2016
2015
$ 219,959
(8,632)
(11,518)
3,527
27,523
33,524
196,745
1,661
1,796
(2,258)
(47,115)
(133,059)
—
$ 80,104
(8,347)
(1,050)
3,259
25,592
26,650
97,948
24,521
5,888
5,180
(10,562)
(77,114)
(19,163)
$125,629
(7,297)
(828)
3,430
16,918
22,735
71,625
299
1,181
—
(8,302)
(80,394)
(31,297)
Net Operating Income
$ 282,153
$152,906
$113,699
Liquidity and Capital Resources
Our primary short-term and long-term liquidity needs
include the following:
–
–
–
–
–
property and land acquisitions;
expenditures on development projects;
building improvements, tenant improvements, and
leasing costs;
principal and interest payments on indebtedness; and
operating partnership distributions and common
stock dividends.
We may satisfy these needs with one or more of the following:
net cash from operations;
proceeds from the sale of assets;
borrowings under our credit facilities;
proceeds from mortgage notes payable;
proceeds from construction loans;
–
–
–
–
–
30
–
–
–
proceeds from unsecured loans;
proceeds from offerings of debt or equity securities; 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 and liquidity that enables us to
be positioned for future growth. Our conservative balance
sheet was a factor in our ability to complete the Parkway
Transactions. Our net debt to EBITDA ratio at December 31,
2017 was 3.75, and as of December 31, 2016, it was 5.22.
As of December 31, 2017, we had no amounts outstanding
under our Credit Facility and $1 million drawn under our
letters of credit, with the ability to borrow an additional
$499 million under our Credit Facility. We also had
$205.7 million in cash, cash equivalents, and restricted cash
on hand and available for future investment at December 31,
2017. Subsequent to year end, we closed a new revolving
Credit Facility under which we may borrow up to $1 billion
that replaced the existing Credit Facility. On January 22,
2018, the Term Loan was amended to make the financial
covenants consistent with those of the New Credit Facility.
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT
Contractual Obligations and Commitments
At December 31, 2017, we were subject to the following contractual obligations and commitments (in thousands):
Contractual Obligations:
Company debt:
Mortgage notes payable
Unsecured Senior Notes
Interest commitments (1)
Term Loan
Ground leases
Other operating leases
Unsecured Credit Facility
Total contractual obligations
Commitments:
Total
Less than
1 Year
1-3 Years
3-5 Years
More than
5 years
$ 498,764
350,000
204,645
250,000
207,450
833
—
$ 9,347
—
31,876
—
2,321
348
—
$ 66,876
—
61,359
—
4,660
383
—
$108,300
—
51,588
250,000
4,748
102
—
$314,241
350,000
59,822
—
195,721
—
—
$1,511,692
$43,892
$133,278
$414,738
$919,784
Unfunded development and tenant improvement commitments
Performance bonds
Letters of credit
$
46,832
2,498
1,000
$44,563
2,498
1,000
$
2,269
—
—
$
— $
—
—
Total commitments
$
50,330
$48,061
$
2,269
$
— $
—
—
—
—
(1)
Interest on variable rate obligations is based on rates effective as of December 31, 2017.
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.
OT H E R M O R TG AG E LOA N I N FO R M AT I O N
In 2017, we had the following mortgage loan activity:
– Repaid in full, without penalty, the $128.0 million
One Eleven Congress mortgage note.
– Repaid in full, without penalty, the $101.0 million
San Jacinto Center mortgage note.
– Repaid in full, without penalty, the $52.0 million
Two Buckhead Plaza mortgage note.
– Repaid in full, without penalty, the $77.9 million
3344 Peachtree mortgage note.
– Used the proceeds from the sale of the ACS Center to
repay in full, without penalty, the $127.0 million ACS
Center mortgage note.
In 2016, we had the following mortgage loan activity:
–
Entered into a $120.0 million non-recourse mortgage
loan secured by Colorado Tower, a 373,000 square foot
office building in Austin, Texas. The mortgage bears
interest at a fixed annual rate of 3.45% and matures
September 1, 2026.
– Entered into a $150.0 million non-recourse mortgage
loan secured by Fifth Third Center, a 698,000 square
foot office building in Charlotte, North Carolina. The
mortgage bears interest at a fixed annual rate of 3.37%
and matures October 1, 2026.
– Repaid in full the $98.1 million 191 Peachtree Tower
mortgage loan in connection with a sale of the building
and paid a $3.7 million prepayment penalty.
– Assumed $635.2 million of mortgage debt in connection
with the Merger at a weighted average stated interest
rate of 5.2%.
– Repaid $251.9 million of the assumed mortgage debt,
which included the legal defeasance of a $20.2 million
mortgage loan.
Our existing mortgage debt is primarily non-recourse, fixed-
rate mortgage loans 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 mortgage loans at maturity or repay the
mortgage loans with proceeds from other financings. As of
December 31, 2017, the weighted average interest rate on
our consolidated debt was 3.61%.
31
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED C R E D I T FAC I L I T Y I N FO R M AT I O N
Our $500 million Credit Facility was scheduled to mature
in May 2019. Interest on the Credit Facility was based
on the London Interbank Offered Rate (“LIBOR”) plus
a spread, based on our leverage ratio, as defined in the
Credit Facility. At December 31, 2017, we had no amounts
drawn on the facility and a total available borrowing
capacity of $499 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 included 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 Credit Facility contained 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 included certain financial covenants
(as defined in the agreement) that required, 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%.
On January 3, 2018, we entered into a Fourth Amended
and Restated Credit Agreement (the “New Credit Facility”)
under which we may borrow up to $1 billion if certain
conditions are satisfied. The New Credit Facility recasts the
Credit Facility by:
–
–
Increasing the size from $500 million to $1 billion;
Extending the maturity date from May 28, 2019 to
January 3, 2023;
– Reducing certain per annum variable interest rate
spreads and other fees;
–
Providing for the expansion of the facility by an
additional $500 million for total availability of
$1.5 billion, subject to receipt of additional commitments
from lenders and other customary conditions;
– Decreasing the minimum spread over LIBOR from
1.10% to 1.05%;
– Removing the $90 million investment entity cap;
– Removing the Unsecured Debt Limit removed and
replacing it with an unsecured leverage ratio limit;
– Removing
the minimum
shareholder’s
equity
requirement;
– Decreasing the Consolidated Unencumbered Interest
coverage ratio from 2.0 to 1.75; and
– Removing the Consolidated Secured Recourse debt
limitation and replacing it with maintaining a Secured
Leverage Ratio of 40% or less.
U N S E C U R E D S E N I O R N OT E S
In 2017, we closed a $350 million private placement of
senior unsecured notes, which were funded in two tranches.
The first tranche of $100 million was funded in April 2017,
has a 10-year maturity, and has a fixed annual interest rate
of 4.09%. The second tranche of $250 million was funded
in July 2017, has an 8-year maturity, and has a fixed annual
interest rate of 3.91%. We used the proceeds from the
private placement to repay mortgages that were set to mature
during 2017.
T E R M LOA N
During 2016, we obtained a $250 million Term Loan that
matures on December 2, 2021. The Term Loan contains
financial covenants substantially consistent with those of
the Credit Facility. The Term Loan bears interest at the
London Interbank Offered Rate (“LIBOR”) plus a spread,
based on our leverage ratio, as defined in the Term Loan.
On January 22, 2018, the Term Loan was amended to make
the financial covenants consistent with those of the New
Credit Facility.
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 as well as
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, depositary shares or the issuance of CPLP
limited partnership units. In January 2017, 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.
32
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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, including restricted
cash, were $205.7 million, $51.3 million, and $6.3 million
at December 31, 2017, 2016, and 2015, respectively.
The following table sets forth the changes in cash flows
(in thousands):
Year Ended December 31,
2017
2016
2015
2017 to 2016
Change
2016 to 2015
Change
Net cash provided by operating activities
$ 211,649
$ 117,702
$ 154,302
$ 93,947
$ (36,600)
Net cash provided by investing activities
112,110
465,849
35,103
(353,739)
430,746
Net cash used in financing activities
(169,335)
(538,537)
(188,140)
369,202
(350,397)
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 $93.9 million
between the 2017 and 2016 periods primarily as a result of
the operations related to the properties added in the Parkway
Transactions, offset by the loss of operating cash flow from
assets sold in 2016 and 2017. Cash provided by operating
activities decreased $36.6 million between the 2016 and
2015 periods primarily as a result of payment of expenses
associated with the Parkway Transactions and the timing of
payment of property expenses.
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 decreased
$353.7 million between the 2017 and 2016 periods
primarily from a decrease in cash provided by investment
property sales, an increase in cash used in development and
tenant improvement expenditures, and cash and restricted
cash acquired in the merger with Parkway in 2016. These
decreases were offset by an increase in cash generated from
unconsolidated joint ventures. Cash flows from investing
activities increased $430.7 million between the 2016 and
2015 periods primarily from an increase in cash provided
by investment property sales and in cash and restricted cash
acquired in the merger with Parkway in 2016.
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 $369.2 million
between the 2017 and 2016 periods as a result of an increase
in net debt repayments, a decrease in distributions to
noncontrolling interest holders, and a decrease in distributions
to Parkway, Inc. in connection with the Spin-Off, offset by
proceeds from a common stock issuance in 2017. Cash flows
from financing activities decreased $350.4 million between
2016 and 2015 periods primarily as a result of an increase
in payments to noncontrolling interest holders and cash
distributed to New Parkway in connection with the Spin-Off.
C A P I TA L E X P E N D I T U R E S
We incur capital expenditures related to our real estate assets
that include the acquisition of properties, the development
of new properties, the 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 expenditures included
in this line item for the years ended December 31, 2017,
2016 and 2015 are as follows (in thousands):
Projects under development
Operating properties—building improvements
Operating properties—leasing costs
Land held for investment
Capitalized interest
Capitalized salaries
Accrued capital expenditures adjustment
2017
2016
2015
$173,698
103,332
32,689
—
8,303
7,918
(5,965)
$109,760
30,718
50,030
—
4,696
6,248
(7,918)
$ 52,015
83,615
28,052
8,098
3,579
7,146
2,483
Total property acquisition, development and tenant asset expenditures
$319,975
$193,534
$184,988
33
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED
Capital expenditures increased $126.4 million between
December 31, 2017 and 2016 primarily due to an increase
in projects under development, building
improvement
expenditures, and
leasing costs. Capital expenditures
increased $8.5 million between 2016 and 2015 primarily due
to an increase in projects under development and leasing costs,
offset by a decrease in building improvement expenditures.
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 2017, 2016 and 2015 were as follows:
New leases
Renewal leases
Expansion leases
2017
2016
2015
$7.49
$4.03
$6.10
$3.88
$5.90
$2.15
$6.31
$5.51
$6.32
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 2017.
D i v i d e n d s
We paid cash dividends on our common stock of
$99.2 million, $50.5 million, and $69.2 million in 2017,
2016, and 2015, respectively. We funded these dividends
with cash provided by operating activities. We declared and
paid our fourth quarter 2016 dividend in the amount of
$0.06 per share in January 2017, which partially accounts for
the increase in common dividends paid in 2017 as compared
to 2016 and which accounts for the decrease in common
dividends paid in 2016 as compared to 2015. 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 our common
dividend in light of current and projected future cash provided
by operating activities 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 common dividends paid. In general, common
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 common dividends if leverage is above
that amount. We routinely monitor the status of our common
dividend payments in light of the Credit Facility covenants.
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 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 6 to
our consolidated financial statements. 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 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, 2017, our unconsolidated joint
ventures had aggregate outstanding indebtedness to third
parties of $338.6 million. These loans are 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.
We guarantee 12.5% of the loan amount related to the
Carolina Square construction loan, which has a lending
capacity of $79.8 million, and $64.4 million outstanding as
of December 31, 2017.
34
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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
attempt to mitigate this risk by limiting our debt exposure
in total and our maturities in any one year and weighting
more towards fixed-rate debt in our portfolio. The fixed rate
debt obligations limit the risk of fluctuating interest rates.
At December 31, 2017, we had $848.8 million of fixed
rate debt outstanding at a weighted average interest rate of
3.86%. At December 31, 2016, we had $994.7 million of
fixed rate debt outstanding at a weighted average interest
rate of 4.87%. The amount of fixed-rate debt outstanding
decreased and the weighted average interest rate decreased
from 2016 to 2017 as a result of the 2017 repayment of loans
assumed in the Parkway Transactions, which had higher
interest rates. These loans were replaced with unsecured
senior notes that closed in 2017 and have lower interest rates.
See note 9 of the notes to consolidated financial statements
included in this Annual Report on Form 10-K for additional
information regarding 2017 debt activity.
At December 31, 2017, we had $250.0 million of variable
rate debt outstanding, which consisted of the Credit Facility
with no outstanding balance at an interest rate of 2.66% and
a $250.0 million term loan with an interest rate of 2.76%.
As of December 31, 2016, we had $384.0 million of variable
rate debt outstanding, which consisted of $134.0 million
of the Credit Facility at a weighted average interest rate
of 1.87% and a $250.0 million term loan with a weighted
average interest rate of 1.97%. Based on our average
variable rate debt balances in 2017, interest incurred would
have increased by $3.1 million in 2017 if these interest rates
had been 1% higher.
The following table summarizes our market risk associated
with notes payable as of December 31, 2017. It includes
the principal maturing, an estimate of the weighted average
interest rates on those expected principal maturity dates
and the fair values of the Company’s fixed and variable
rate notes payable. Fair value was calculated by discounting
future principal payments at estimated rates at which similar
loans could have been obtained at December 31, 2017. The
information presented below should be read in conjunction
with note 9 of notes to consolidated financial statements
included in this Annual Report on Form 10-K. We did not have
a significant level of notes receivable at December 31, 2017,
and the table does not include information related to
notes receivable.
($ in thousands)
2018
2019
2020
2021
2022
Thereafter
Total
Estimated
Fair Value
Notes Payable:
Fixed Rate
Average Interest Rate
Variable Rate
Average Interest Rate (1)
$9,347
$33,051
$33,824
$ 11,258
$97,043
$664,241
$848,764
$845,534
3.92%
$ — $
—
3.95%
—
—
$
5.27%
—
—
3.73%
$250,000
$
2.76%
4.21%
—
—
$
3.74%
—
—
3.86%
$250,000
$250,000
2.76%
(1) Interest rates on variable rate notes payable are equal to the variable rates in effect on December 31, 2017.
35
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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
public accounting
included on pages F-1
through F-33.
firm are
The following selected quarterly financial information
(unaudited) for the years ended December 31, 2017 and
2016 should be read in conjunction with the consolidated
financial statements and notes thereto included herein (in
thousands, except per share amounts):
2017
Revenues
Income from unconsolidated joint ventures
Gain (loss) on sale of investment properties
Income from continuing operations
Net income
Net income available to common stockholders
Basic and diluted net income per common share
2016
Revenues
Income from unconsolidated joint ventures
Gain (loss) on sale of investment properties
Income from continuing operations
Discontinued operations
Net income
Net income available to common stockholders
Basic and diluted net income per common share
Quarters
First
Second
Third
Fourth
(Unaudited)
$ 119,879
581
(70)
4,858
4,858
4,751
0.01
$
$ 119,035
40,320
119,832
170,945
170,945
168,089
0.40
$
$ 113,159
2,461
(33)
12,285
12,285
12,067
0.03
$
$ 114,112
3,753
13,330
31,871
31,871
31,368
0.07
$
Quarters
First
Second
Third
Fourth
(Unaudited)
$ 48,305
1,784
(246)
242
7,523
7,765
7,765
0.04
$
$ 48,672
1,527
—
2,920
8,737
11,657
11,657
0.06
$
$ 47,942
1,834
14,190
14,694
8,101
22,796
22,796
0.11
$
$ 114,292
5,418
63,169
43,085
(5,198)
37,887
36,892
0.10
$
The above quarterly information may not sum to full year
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 2016 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 2017 and 2016, our quarterly results varied as a
result of the timing of the sales of assets, which generated
gains within quarters of each year and as a result of the
effects of the Parkway Transactions. These gains were
recorded within gain (loss) on sale of investment properties,
income (loss) from discontinued operations and income from
unconsolidated joint ventures.
36
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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
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
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, 2017.
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, 2017. Deloitte &
Touche LLP, our independent registered public accounting
firm, issued an opinion on the effectiveness of our internal
control over financial reporting as of December 31, 2017,
which follows this report of management.
37
2017 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
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting
of Cousins Properties Incorporated and subsidiaries (the
“Company”) as of December 31, 2017, based on criteria
established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). In our opinion, the
Company maintained, in all material respects, effective
internal control over financial reporting as of December 31,
2017, based on criteria established in Internal Control -
Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements and
financial statement schedule as of and for the year ended
December 31, 2017, of the Company and our report dated
February 7, 2018, expressed an unqualified opinion on those
consolidated financial statements and financial statement
schedule.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards
of the PCAOB. 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.
Definition and Limitations of Internal Control over
Financial Reporting
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external 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 its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
February 7, 2018
38
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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 ,
E X E C U T I V E O F F I C E R S A N D
C O R P O R A T E G O V E R N A N C E
The information required by Items 401, 405, 406, and 407
of Regulation S-K is presented in item X in part I above
and is included under the captions “Proposal 1 - Election
of Directors” and “Section 16(a) Beneficial Ownership
Reporting Compliance” in the Proxy Statement relating to
the 2018 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 2017.
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 2018 Annual Meeting of the Registrant’s
Stockholders is incorporated herein by reference.
39
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED
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
2018 Annual Meeting of the Registrant’s Stockholders is
incorporated herein by reference.
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 2018 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 2018 Annual Meeting of the
Registrant’s Stockholders has fee information for fiscal years
2017 and 2016 and is incorporated herein by reference.
40
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT
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, 2017 and 2016
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016, and 2015
Consolidated Statements of Equity for the Years Ended December 31, 2017, 2016, and 2015
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015
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, 2017
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.
Exhibits
2.1
2.2
2.3
2.4
Agreement and Plan of Merger, dated April 28, 2016, by and among Parkway Properties, Inc., Parkway Properties LP,
Cousins Properties Incorporated and Clinic Sub Inc., filed as Exhibit 2.1 to the Registrant’s Current Form on Form 8-K
filed on April 29, 2016, and incorporated herein by reference.
Separation, Distribution and Transition Services Agreement, dated as of October 5, 2016, by and among the Registrant,
Cousins Properties LP, Clinic Sub Inc., Parkway Properties, Inc., Parkway Properties LP, Parkway Properties General
Partners, Inc., Parkway, Inc. and Parkway Operating Partnership LP., filed as Exhibit 2.1 to the Registrant’s Current Form
on Form 8-K filed on October 6, 2016, and incorporated herein by reference.
Tax Matters Agreement, dated as of October 5, 2016, by and among the Registrant, Cousins Properties LP, Clinic Sub Inc.,
Parkway Properties, Inc., Parkway Properties LP, Parkway Properties General Partners, Inc., Parkway, Inc. and Parkway
Operating Partnership LP., filed as Exhibit 2.2 to the Registrant’s Current Form on Form 8-K filed on October 6, 2016,
and incorporated herein by reference.
Employee Matters Agreement, dated as of October 5, 2016, by and among the Registrant, Cousins Properties LP, Clinic
Sub Inc., Parkway Properties, Inc., Parkway Properties LP, Parkway Properties General Partners, Inc., Parkway, Inc. and
Parkway Operating Partnership LP., filed as Exhibit 2.3 to the Registrant’s Current Form on Form 8-K filed on October 6,
2016, and incorporated herein by reference.
41
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED
3.1
3.1.1
3.1.2
3.1.3
3.1.4
3.1.5
3.2
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.
Articles of Amendment to Restated and Amended Articles of Incorporation of Cousins, as amended October 6, 2016, filed
as Exhibit 3.1 and 3.1.1 to the Registrant’s Current Form on Form 8-K filed on October 7, 2016, and incorporated herein
by reference.
Bylaws of the Registrant, as amended and restated December 4, 2012, filed as Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K filed on December 7, 2012, and incorporated herein by reference.
10(a)(i)*
Cousins Properties Incorporated 1999 Incentive Stock Plan, as amended and restated, approved by the Stockholders on
May 6, 2008, filed as Annex B to the Registrant’s Proxy Statement dated April 13, 2008, and incorporated herein by
reference.
10(a)(ii)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan, filed as Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K dated December 9, 2005, and incorporated herein by reference.
10(a)(iii)*
Amendment No. 1 to Cousins Properties Incorporated 2005 Restricted Stock Unit Plan, filed as Exhibit 10(a)(iii) to the
Registrant’s Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by reference.
10(a)(iv)*
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)(v)*
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)(vi)*
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)(vii)*
10(a)(viii)*
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)(ix)*
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.
42
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 10(a)(x)*
Amendment Number 6 to the Cousins Properties Incorporated 2005 Restricted Stock Unit Plan filed as Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K dated May 12, 2009, and incorporated herein by reference.
10(a)(xi)*
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)(xii)*
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)(xiii)*
10(a)(xiv)*
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.
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)(xv)*
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)(xvi)*
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)(xvii)*
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)(xviii)*
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)(xix)*
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)(xx)*
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)(xxi)*
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)(xxii)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan — Form of Restricted Stock Unit Certificate for 2016-
2018 Performance Period, filed as Exhibit 10(a)(xxxiv) to the Registrant’s Form 10-K for the year ended December 31,
2015, 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)(xxxv)
to the Registrant’s Form 10-K for the year ended December 31, 2015, and incorporated herein by reference.
10(a)(xxiv)*
Form of Amendment Number One to Change in Control Severance Agreement, filed as Exhibit 10(a)(xxxvi) to the
Registrant’s Form 10-K for the year ended December 31, 2015, and incorporated herein by reference.
10(a)(xxv)*
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan — Form of Restricted Stock Unit Certificate for 2017-
2019 Performance Period, filed as Exhibit 10(a)(xxxvii) to the Registrant’s Form 10-K for the year ended December 31,
2016, and incorporated herein by reference.
43
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 10(a)(xxvi)*
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Stock Grant Certificate, filed as Exhibit 10(a)(xxxviii)
to the Registrant’s Form 10-K for the year ended December 31, 2016, and incorporated herein by reference.
10(a)(xxvii)*
Form of New Change in Control Severance Agreement, filed as Exhibit 10.1 to the Registrant’s Current Report on Form
10-Q filed on July 27, 2017, and incorporated herein by reference.
10(a)(xxviii)*
Form of Amendment Number One to Change in Control Severance Agreement, filed as Exhibit 10.2 to the Registrant’s
Current Report on Form 10-Q filed on July 27, 2017, and incorporated herein by reference.
10(a)(xxix)*
Form of Amendment Number Three to Change in Control Severance Agreement, filed as Exhibit 10.2 to the Registrant’s
Current Report on Form 10-Q filed on July 27, 2017, and incorporated herein by reference.
10(a)(xxx)*†
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan — Form of Restricted Stock Unit Certificate for 2017-
2020 Performance Period.
10(a)(xxxi)*†
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan — Form of Restricted Stock Unit Certificate for 2018-
2020 Performance Period.
10(a)(xxxii)*†
Cousins Properties Incorporated 2009 Incentive Stock Plan – Form of Stock Grant Certificate.
10(a)(xxxiii)*†
Cousins Properties Incorporated 2005 Restricted Stock Unit Plan — Form of Restricted Stock Unit Certificate for 2017-
2020 Performance Period.
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.
First Amendment to Third Amended and Restated Credit Agreement, dated as of June 6, 2016, among the Registrant, the
co-borrowers from time to time party thereto, the lenders party thereto, and Bank of America, N.A., as administrative
agent, filed as Exhibit 10.1 to the Registrant’s Current Form on Form 8-K filed on June 7, 2016, and incorporated herein
by reference.
Agreement of Limited Partnership of Cousins Properties LP., filed as Exhibit 10.1 to the Registrant’s Current Form on
Form 8-K filed on October 7, 2016, and incorporated herein by reference.
Stockholders Agreement, dated April 28, 2016, by and among Cousins Properties Incorporated, TPG VI Pantera Holdings,
L.P. and TPG VI Management, LLC, filed as Exhibit 10.1 to the Registrant’s Current Form on Form 8-K filed on April 29,
2016, and incorporated herein by reference.
Second Amendment to Third Amended and Restated Credit Agreement, dated as of December 1, 2016, among the
Registrant, the co-borrowers from time to time party thereto, the lenders party thereto, and Bank of America, N.A., as
administrative agent, filed as Exhibit 10(1) to the Registrant’s Form 10-K for the year ended December 31, 2016, and
incorporated herein by reference.
10(g)
10(h)
10(i)
10(j)
10(k)
10(l)
44
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 10(m)
10(n)†
11
21†
23†
31.1†
31.2†
32.1†
32.2†
101†
Term Loan Agreement, dated as of December 2, 2016, among the Registrant, the co-borrowers from time to time party
thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent, filed as Exhibit 10(m) to the
Registrant’s Form 10-K for the year ended December 31, 2016, and incorporated herein by reference.
Fourth Amended and Restated Credit Agreement dated as of January 3, 2018, among Cousins Properties LP, as the Borrower,
Cousins Properties Incorporated, as the Parent and a Guarantor, Certain Consolidated Entities of The Parent From Time
to Time Designated by the Parent as Guarantors Hereunder, collectively, with the Borrower, as the Borrower Parties,
Certain Consolidated Entities of The Parent From Time to Time Designated by the Parent as Guarantors Hereunder, as
Guarantors, JPMORGAN CHASE BANK, N.A., as Syndication Agent, a Swing Line Lender and an L/C Issuer, BANK OF
AMERICA, N.A., as Administrative Agent, a Swing Line Lender and an L/C Issuer, SUNTRUST BANK, as Documentation
Agent, a Swing Line Lender and an L/C Issuer, and The Other Lenders Party Hereto WELLS FARGO BANK, NATIONAL
ASSOCIATION, PNC BANK, NATIONAL ASSOCIATION, U.S. BANK NATIONAL ASSOCIATION, CITIZENS
BANK, NATIONAL ASSOCIATION and MORGAN STANLEY SENIOR FUNDING, INC., as Co-Documentation
Agents. J.P. MORGAN CHASE BANK, N.A., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
and SUNTRUST ROBINSON HUMPHREY, INC., as Joint Lead Arrangers and Joint Bookrunners, filed as Exhibit 10(n).
Computation of Per Share Earnings. Data required by SFAS No. 128, “Earnings Per Share,” is provided in note 16 of notes
to consolidated financial statements included in this Annual Report on Form 10-K, and incorporated herein by reference.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
The following financial information for the Registrant, formatted in XBRL (Extensible Business Reporting Language): (i)
the condensed consolidated balance sheets, (ii) the condensed consolidated statements of operations, (iii) the condensed
consolidated statements of equity, (iv) the condensed consolidated statements of cash flows, and (v) the notes to condensed
consolidated financial statements.
*
†
Indicates a management contract or compensatory plan or arrangement.
Filed herewith.
45
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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 27, 2018
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.
Capacity
Chief Executive Officer and
Chairman of the Board
(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
Director
Date
February 7, 2018
February 7, 2018
February 7, 2018
February 7, 2018
February 7, 2018
February 7, 2018
February 7, 2018
Lead Independent Director
February 7, 2018
Director
Director
February 7, 2018
February 7, 2018
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/ Charles T. Cannada
Charles T. Cannada
/s/ Edward M. Casal
Edward M. Casal
/s/ Robert M. Chapman
Robert M. Chapman
/s/ Lillian C. Giornelli
Lillian C. Giornelli
/s/ S. Taylor Glover
S. Taylor Glover
/s/ Donna W. Hyland
Donna W. Hyland
Brenda J. Mixson
46
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT
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, 2017 and 2016
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016, and 2015
Consolidated Statements of Equity for the Years Ended December 31, 2017, 2016, and 2015
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
2017 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
We conducted our audits in accordance with the standards
of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
February 7, 2018
We have served as the Company’s auditor since 2002.
To the Stockholders and Board of Directors of
Cousins Properties Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance
sheets of Cousins Properties Incorporated and subsidiaries
(the “Company”) as of December 31, 2017 and 2016, the
related consolidated statements of operations, stockholders’
equity, and cash flows for each of the three years in the
period ended December 31, 2017, the related notes and the
financial statement schedule listed in the Index at Item 15
(collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company
as of December 31, 2017 and 2016, and the results of its
operations and its cash flows for each of the three years in
the period ended December 31, 2017, in conformity with
accounting principles generally accepted in the United States
of America.
We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control
over financial reporting as of December 31, 2017, based
on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report
dated February 7, 2018, expressed an unqualified opinion
on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
F-2
COUSINS PROPERTIES INCORPORATED 2017 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 $275,977 and $215,856 in 2017 and 2016,
respectively
Projects under development
Land
Cash and cash equivalents
Restricted cash
Notes and accounts receivable, net of allowance for doubtful accounts of $535 and $1,167 in 2017
and 2016, respectively
Deferred rents receivable
Investment in unconsolidated joint ventures
Intangible assets, net of accumulated amortization of $104,931 and $53,483 in 2017 and 2016, respectively
Other assets
Total assets
LIABILITIES:
$ 4,204,619 $ 4,171,607
Notes payable
Accounts payable and accrued expenses
Deferred income
Intangible liabilities, net of accumulated amortization of $28,960 and $12,227 in 2017 and 2016, respectively
Other liabilities
Total liabilities
Commitments and contingencies
EQUITY:
Stockholders’ investment:
Preferred stock, $1 par value, 20,000,000 shares authorized, 6,867,357 shares issued and outstanding in
2017 and 2016
Common stock, $1 par value, 700,000,000 shares authorized, 430,349,620 and 403,746,938 shares issued
in 2017 and 2016, respectively
Additional paid-in capital
Treasury stock at cost, 10,329,082 shares in 2017 and 2016
December 31,
2017
2016
280,982
4,221
$ 3,332,619 $ 3,432,522
162,387
4,221
3,617,822 3,599,130
35,687
15,634
148,929
56,816
14,420
58,158
101,414
186,206
20,854
27,683
39,464
179,397
245,529
29,083
$ 1,093,228 $ 1,380,920
109,278
33,304
89,781
44,084
1,379,508 1,657,367
137,909
37,383
70,454
40,534
6,867
6,867
430,350
403,747
3,604,776 3,407,430
(148,373)
(1,121,647) (1,214,114)
2,771,973 2,455,557
(148,373)
53,138
58,683
2,825,111 2,514,240
$ 4,204,619 $ 4,171,607
F-3
Distributions in excess of cumulative net income
Total stockholders’ investment
Nonredeemable noncontrolling interests
Total equity
Total liabilities and equity
See notes to consolidated financial statements.
2017 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
EXPENSES:
Rental property operating expenses
Reimbursed expenses
General and administrative expenses
Interest expense
Depreciation and amortization
Acquisition and transaction costs
Other
Gain (loss) on extinguishment of debt
Income (loss) from continuing operations before unconsolidated joint ventures and gain (loss) on
sale of investment properties
Income from unconsolidated joint ventures
Income (loss) from continuing operations before gain on sale of investment properties
Gain on sale of investment properties
Income from continuing operations
Income from discontinued operations:
Income from discontinued operations
Loss on sale from discontinued operations
Income from discontinued operations
Net income
Net income attributable to noncontrolling interests
Net income available to common stockholders
PER COMMON SHARE INFORMATION — BASIC:
Income from continuing operations for common stockholders
Income from discontinued operations for common stockholders
Net income available to common stockholders
PER COMMON SHARE INFORMATION — DILUTED:
Income from continuing operations for common stockholders
Income from discontinued operations for common stockholders
Net income available to common stockholders
Weighted average shares — basic
Weighted average shares — diluted
Dividends declared per common share
See notes to consolidated financial statements.
F-4
Year Ended December 31,
2017
2016
2015
$446,035
8,632
11,518
466,185
$249,814
8,347
1,050
259,211
$196,244
7,297
828
204,369
163,882
3,527
27,523
33,524
196,745
1,661
1,796
428,658
2,258
39,785
47,115
86,900
133,059
219,959
96,908
3,259
25,592
26,650
97,948
24,521
5,888
280,766
(5,180)
(26,735)
10,562
(16,173)
77,114
60,941
82,545
3,430
16,918
22,735
71,625
299
1,181
198,733
—
5,636
8,302
13,938
80,394
94,332
— 19,163
—
—
— 19,163
80,104
(995)
$ 79,109
219,959
(3,684)
$216,275
31,848
(551)
31,297
125,629
(111)
$ 125,518
$
$
$
$
0.52
$
0.24
$
0.44
—
0.52
$
0.07
0.31
0.52
$
—
0.52
$
0.24
0.07
0.31
0.14
0.58
0.44
0.14
0.58
$
$
$
415,610
253,895
215,827
423,297
256,023
215,979
$
0.30
$
0.24
$
0.32
COUSINS PROPERTIES INCORPORATED 2017 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 , exce p t p e r s h a re d at a )
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, 2014
$ — $ 220,083 $1,720,972 $ (86,840)
$ (180,757) $ 1,673,458
$
— $ 1,673,458
125,518
125,518
111
125,629
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
—
—
—
—
—
—
—
—
173
—
—
—
—
—
—
(245)
1,473
—
—
—
24
—
—
—
—
(47,790)
—
—
—
—
—
—
(69,196)
—
(72)
1,473
—
(47,790)
(69,196)
24
BALANCE DECEMBER 31, 2015
— 220,256
1,722,224
(134,630)
(124,435)
1,683,415
—
—
(111)
—
—
—
—
(72)
1,473
(111)
(47,790)
(69,196)
24
1,683,415
Net income
Securities issued in merger
—
—
—
6,867
183,207
1,683,076
Noncontrolling interest in assets acquired
in merger
Common stock issuance pursuant to stock
based compensation
Spin-off of New Parkway
Amortization of stock options and restricted
stock, net of forfeitures
Common stock redemption by unit holders
Contributions from nonredeemable
noncontrolling interests
Distributions to nonredeemable
noncontrolling interests
Repurchase of common stock
Common dividends ($0.24 per share)
—
—
—
—
—
—
—
—
—
—
280
—
(35)
39
—
—
—
—
—
224
—
1,683
223
—
—
—
—
—
—
—
—
—
—
—
—
—
(13,743)
79,109
79,109
995
80,104
—
—
—
1,873,150
76,858
1,950,008
—
504
292,337
292,337
—
504
(1,118,240)
(1,118,240)
(22,821)
(1,141,061)
—
—
—
—
—
1,648
262
—
—
(13,743)
(50,548)
—
(262)
1,648
—
4,126
4,126
(292,550)
(292,550)
—
—
(13,743)
(50,548)
—
(50,548)
BALANCE DECEMBER 31, 2016
6,867
403,747
3,407,430
(148,373)
(1,214,114)
2,455,557
58,683
2,514,240
Net income
Common stock offering, net of issuance costs
Common stock issued pursuant to stock
based compensation
Spin-off of Parkway, Inc.
Common stock redemption by unit holders
Amortization of stock options and restricted
stock, net of forfeitures
Contributions from nonredeemable
noncontrolling interest
Distributions to nonredeemable
noncontrolling interest
Common dividends ($0.30 per share)
—
—
—
—
—
—
—
—
—
—
—
25,000
186,774
403
—
1,203
(279)
—
8,865
(3)
1,986
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
216,275
—
—
545
—
—
—
—
216,275
211,774
124
545
3,684
—
—
—
10,068
(10,068)
219,959
211,774
124
545
—
1,983
—
1,983
—
—
2,646
2,646
(1,807)
(1,807)
(124,353)
(124,353)
—
(124,353)
BALANCE DECEMBER 31, 2017
$6,867
$ 430,350 $3,604,776 $(148,373)
$(1,121,647) $ 2,771,973
$ 53,138
$ 2,825,111
See notes to consolidated financial statements.
F-5
2017 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
(Gain) loss on extinguishment of debt
Depreciation and amortization, including discontinued operations
Amortization of deferred financing costs and premium/discount on notes payable
Stock-based compensation expense, net of forfeitures
Effect of non-cash adjustments to rental revenues
Income from unconsolidated joint ventures
Operating distributions from unconsolidated joint ventures
Other
Changes in other operating assets and liabilities:
Change in other receivables and other assets, net
Change in operating liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment property sales
Proceeds from sale of interest in unconsolidated joint venture
Property acquisition, development, and tenant asset expenditures
Investment in unconsolidated joint ventures
Purchase of tenant-in-common interest
Distributions from unconsolidated joint ventures
Cash and restricted cash acquired in merger with Parkway Properties, Inc.
Investments in marketable securities
Change in notes receivable and other assets
Net cash provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility
Repayment of credit facility
Proceeds from notes payable
Repayment of notes payable
Cash distributed to Parkway, Inc.
Payment of deferred financing costs
Common stock issued, net of expenses
Repurchase of common stock
Common dividends paid
Contributions from noncontrolling interests
Distributions to nonredeemable noncontrolling interests
Other
Year Ended December 31,
2017
2016
2015
$ 219,959
$ 80,104
$ 125,629
(133,059)
(2,258)
196,745
(2,139)
2,994
(40,410)
(47,115)
11,065
—
(77,114)
5,180
145,293
(1,595)
2,152
(25,873)
(10,562)
14,184
4,526
(79,843)
—
135,462
1,423
1,473
(26,475)
(8,302)
11,664
(263)
11,456
(5,589)
2,156
(20,749)
(10,937)
4,471
211,649
117,702
154,302
370,944
12,514
(319,975)
(20,080)
(13,382)
75,506
—
—
6,583
622,643
—
(193,534)
(28,531)
—
949
93,753
(21,190)
(8,241)
225,307
—
(184,988)
(9,985)
—
4,651
—
—
118
112,110
465,849
35,103
589,300
(723,300)
350,000
(495,913)
—
(2,074)
211,521
—
(99,151)
2,646
(1,807)
(557)
716,800
(674,800)
870,000
(907,300)
(192,755)
—
—
(13,743)
(50,548)
4,126
(286,122)
(4,195)
355,900
(404,100)
—
(22,851)
—
—
8
(47,790)
(69,196)
—
(111)
—
Net cash used in financing activities
(169,335)
(538,537)
(188,140)
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD
154,424
51,321
45,014
6,307
1,265
5,042
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD
$ 205,745
$ 51,321
$
6,307
See notes to consolidated financial statements.
F-6
COUSINS PROPERTIES INCORPORATED 2017 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”). Cousins
conducts substantially all of its business through Cousins
Properties, LP (“CPLP”). Cousins owns approximately 98%
of CPLP and consolidates CPLP. CPLP owns Cousins TRS
Services LLC (“CTRS”) a taxable entity which owns and
manages its own real estate portfolio and performs certain
real estate related services for other parties.
Cousins, CPLP, 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, Arizona, Florida, and North Carolina.
As of December 31, 2017, the Company’s portfolio of real
estate assets consisted of interests in 14.2 million square feet
of office space and 310,000 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
transactions and balances have been eliminated
in
consolidation. The Company presents its financial statements
in accordance with accounting principles generally accepted
in the United States (“GAAP”) as outlined in the Financial
Accounting Standard Board’s Accounting Standards
Codification (the “Codification” or “ASC”). The Codification
is the single source of authoritative accounting principles
applied by nongovernmental entities in the preparation of
financial statements in conformity with GAAP.
For the three years ended December 31, 2017, 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.
In 2017, the Company transferred the right to sell a
building to a special purpose entity to facilitate a potential
Section 1031 exchange under the Internal Revenue Code of
1986, as amended (the “Code”), and the special purpose
entity sold the building and retained the proceeds therefrom.
To realize the tax deferral available under the Section 1031
exchange, the Company must complete the Section 1031
exchange, and take title to the to-be-exchanged building
within 180 days of the disposition date. The Company has
determined that this entity is a VIE, and the Company is the
primary beneficiary. Therefore, the Company consolidates
this entity. As of December 31, 2017, this VIE had total assets
of $56.7 million, no significant liabilities, and no significant
cash flows. In addition, the Company considers CPLP to be a
VIE with the Company as the primary beneficiary.
Recently Issued Accounting Standards: In May 2014, the
FASB issued ASU 2014-09 (“ASC 606”), “Revenue from
Contracts with Customers.” 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. ASU 2015-14 (collectively
with ASU 2014-09, “ASC 606”), “Revenue from Contracts
with Customers,” was subsequently issued modifying the
effective date to periods beginning after December 15, 2017,
with early adoption permitted for periods beginning after
December 15, 2016. The standard allows for either “full
retrospective” adoption, meaning the standard is applied
to all of the periods presented, or “modified retrospective”
adoption, meaning the standard is applied only to the most
recent period presented in the financial statements. The
Company adopted this guidance using the “modified
retrospective” method effective January 1, 2018. The
classification of certain non-lease components of revenue
from leases may be impacted by the new revenue standard
upon the adoption of the new leasing standard beginning
January 1, 2019 (see below). The Company has determined
that the adoption of ASC 606 will not require any material
adjustments to the consolidated financial statements but will
result in additional disclosures related to disaggregation of
revenue streams beginning in the first quarter of 2018.
In February 2016, the FASB issued ASU 2016-02, “Leases,”
which amends the existing standards for lease accounting by
requiring lessees to recognize most leases on their balance
F-7
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED sheets and making targeted changes to lessor accounting and
reporting. The new standard will require lessees to record a
right-of-use asset and a lease liability for all leases with a term
of greater than 12 months and classify such leases as either
finance or operating leases based on the principle of whether
or not the lease is effectively a financed purchase of the
leased asset by the lessee. This classification will determine
whether the lease expense is recognized based on an effective
interest method (finance leases) or on a straight-line basis
over the term of the lease (operating leases). Leases with a
term of 12 months or less will be accounted for similar to
existing guidance for operating leases. The new standard
requires lessors to account for leases using an approach that
is substantially equivalent to existing guidance for sales-type
leases, direct financing leases, and operating leases. ASU
2016-02 supersedes previous
leasing standards. The
guidance is effective for the fiscal years beginning after
December 15, 2018, with early adoption permitted. The
Company expects to adopt this guidance using the “modified
retrospective” method effective January 1, 2019, and is
currently assessing the potential impact of adopting the
new guidance.
the FASB
issued ASU 2016-15,
In August 2016,
“Classification of Certain Cash Receipts and Cash Payments”
(“ASU 2016-15”) which updated ASC Topic 230, “Statement
of Cash Flows.” ASU 2016-15 clarifies guidance on the
classification of certain cash receipts and payments in the
statement of cash flows to reduce diversity in practice with
respect to (i) debt prepayment or debt extinguishment costs,
(ii) settlement of zero-coupon debt instruments or other debt
instruments with coupon interest rates that are insignificant
in relation to the effective interest rate of the borrowing,
(iii) contingent consideration payments made after a business
combination, (iv) proceeds from the settlement of insurance
claims, (v) proceeds from the settlement of corporate-owned
life insurance policies, including bank-owned life insurance
policies, (vi) distributions received from equity method
investees,
securitization
transactions, and (viii) separately identifiable cash flows and
application of the predominance principle. ASU 2016-15 is
effective for interim and annual reporting periods in fiscal
years beginning after December 15, 2017, with early adoption
permitted. The Company adopted this standard in the
fourth quarter of 2017 with retrospective application to the
consolidated statements of cash flows. The Company elected
to use the nature of distributions approach for distributions
from its equity method investments, under which it classifies
the distribution received on the basis of the nature of the
(vii) beneficial
interests
in
activity that generated the distribution. The adoption of this
new approach resulted in an increase in net cash provided
by operating activities and a decrease in net cash provided
by investing activities of $6.4 million and $2.9 million for
the years ended December 31, 2016 and 2015, respectively.
In November 2016, the FASB issued ASU 2016-18,
“Restricted Cash”
(“ASU 2016-18”) which updated
ASC Topic 230, “Statement of Cash Flows.” ASU 2016-18
requires companies to include restricted cash and restricted
cash equivalents with cash and cash equivalents when
reconciling the beginning-of-period and end-of-period total
amounts shown on the statement of cash flows. This update
is effective for interim and annual reporting periods in
fiscal years beginning after December 15, 2017, with early
adoption permitted. The Company has early adopted this
standard in the fourth quarter of 2017, which resulted in
an increase in net cash provided by investing activities by
$11.3 million for the year ended December 31, 2016 and
a decrease in net cash provided by operating and investing
activities by $263,000 and $475,000, respectively, for the
year ended December 31, 2015.
January 1, 2017,
the Company adopted
Effective
ASU 2016-09, “Improvements to Employee Share-Based
Payment Accounting.” Under this ASU, the additional
paid-in capital pool is eliminated, and an entity recognizes all
excess tax benefits and tax deficiencies as income tax expense
or benefit in the income statement. This ASU also eliminated
the requirement to defer recognition of an excess tax benefit
until all benefits are realized through a reduction to taxes
payable. In the first quarter of 2017, the Company changed
the treatment of excess tax benefits as operating cash flows
in the statement of cash flows. This ASU also stipulates that
cash payments to tax authorities in connection with shares
withheld to meet statutory tax withholding requirements
be presented as a financing activity in the statement of
cash flows. This ASU was adopted prospectively, prior
periods have not been restated to conform to the current
period presentation.
In January 2017, the FASB issued ASU 2017-01, “Clarifying
the Definition of a Business,” which provides a more narrow
definition of a business to be used in determining the accounting
treatment of an acquisition. As a result, many acquisitions that
previously qualified as business combinations will be treated as
asset acquisitions. For asset acquisitions, acquisition costs may
be capitalized, and the purchase price may be allocated on a
relative fair value basis. ASU 2017-01 is effective prospectively
for the Company on January 1, 2018, with early adoption
F-8
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT permitted. The Company adopted this standard in 2017 and
expects that most of its future acquisitions will qualify as
asset acquisitions.
In February 2017, the FASB issued ASU No. 2017-05,
“Other Income - Gains and Losses from the Derecognition
of Nonfinancial Assets (Subtopic 610-20): Clarifying the
Scope of Asset Derecognition Guidance and Accounting
for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”).
ASU 2017-05 updates the definition of an “in substance
nonfinancial asset” and clarifies the derecognition guidance
for nonfinancial assets to conform with the new revenue
recognition standard. Among other things, ASU 2017-05
requires companies to recognize 100% of the gain on the
transfer of a nonfinancial asset to an entity in which it has a
noncontrolling interest. ASU 2017-05 is effective for interim
and annual reporting periods in fiscal years beginning after
December 15, 2017. The Company adopted this guidance
using the “modified retrospective” method effective on
January 1, 2018. As a result of the adoption of ASU 2017-05,
the Company recorded a cumulative effect from change
in accounting principle which credited distributions in
excess of cumulative net income by $24.3 million. This
cumulative effect adjustment resulted from the 2013 transfer
of a wholly-owned property to an entity in which it had a
noncontrolling interest.
In May 2017, FASB issued ASU 2017-09, “Scope of
Modification Accounting,” which amends
the scope
of modification accounting
for share-based payment
arrangements and provides guidance on the types of changes
to the terms or conditions of share-based payment awards
to which an entity would be required to apply modification
accounting under ASC 718, “Compensation—Stock
Compensation.” This update is effective for interim and
annual reporting periods in fiscal years beginning after
December 15, 2017, with early adoption permitted. The
Company adopted this standard on January 1, 2018.
Adoption of the standard did not have a material impact on
the Company’s financial statements.
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 or those that
are distributed to stockholders in a spin-off, the Company
records impairment losses if the fair value of the asset or
disposal group 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 and records an
impairment loss.
Acquisition of Real Estate Assets: 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.
F-9
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED The fair value of land is derived from comparable sales of
land within the same submarket and/or region. The fair
value of buildings and improvements, tenant improvements,
and leasing costs are based upon current market replacement
costs and other relevant market rate information.
The fair value of the above-market or below-market
component of an acquired in-place lease is based upon the
present value (calculated using a market discount rate) of the
difference between (i) the contractual rents to be paid pursuant
to the lease over its remaining term and (ii) management’s
estimate of the rents that would be paid using fair market
rental rates and rent escalations at the date of acquisition over
the remaining term of the lease. The amounts recorded for
above-market and below-market ground leases are included
in intangible liabilities and intangible assets, respectively, and
are amortized on a straight-line basis into rental property
revenues 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: Assets held for sale or disposals
representing strategic shifts in operations are reflected in
discontinued operations. During 2015, there were no held
for sale assets or disposals that represented a strategic shift
in operations. During 2016, the Company completed a
spin-off as described in note 3. The Company considered
this disposition to be a strategic shift in operations and
reclassified the historical operations of the assets included in
the spin-off into discontinued operations on the consolidated
statements of operations. During 2017, there were no assets
held for sale 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
over which it 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.
F-10
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT interests.
In cases where
N O N CO N T R O L L I N G I N T E R E S T
The Company consolidates CPLP and certain joint ventures
in which it owns a controlling interest. 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
the entity’s
documents contain a provision requiring the Company to
purchase the partner’s share of the venture at a certain value
upon demand or at a future date, the Company records the
partner’s share of the entity in redeemable noncontrolling
interests on the balance sheets. The outside partners’ interests
in CPLP are redeemable into shares of cash or common stock
of the Company in the Company’s sole discretion. Therefore,
noncontrolling interests associated with CPLP are considered
nonredeemable noncontrolling interests. The noncontrolling
partners’ share of all consolidated entities’ income is reflected
in net income attributable to noncontrolling interest on the
statements of operations.
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 2017,
2016, and 2015, the Company recognized $67.2 million,
$90.2 million, and $93.3 million, respectively, in revenues,
including discontinued operations, from tenants related to
operating expenses.
to all
The Company makes valuation adjustments
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 its investment in unconsolidated joint ventures
when fees are paid to the Company by a joint venture in
which the Company has an ownership interest. See note 6
for more information related to fee income recognized from
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. 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.
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 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.
F-11
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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 13, as are the
accounting policies by type of award. The Company
recognizes compensation expense, net of
forfeitures,
arising from share-based payment arrangements granted
to employees and directors in general and administrative
expense in the statements of operations over the related
awards’ vesting period, which may be accelerated under the
Company’s retirement feature.
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
plus noncontrolling interests in CPLP 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 the outside units in CPLP were converted
into the Company’s common stock and 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. 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
Cash and cash equivalents include unrestricted 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.
R E S T R I C T E D C A S H
Restricted Cash includes escrow accounts held by lenders to
pay real estate taxes, earnest money paid in connection with
future acquisitions, and proceeds from property sales held by
qualified intermediaries for potential like-kind exchanges in
accordance with Section 1031 of the Code.
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. TRANSACTIONS WITH PARKWAY
PROPERTIES, INC.
On October 6, 2016, pursuant to the Agreement and Plan of
Merger, dated April 28, 2016, (as amended or supplemented
from time to time, the “Merger Agreement”), by and
among Cousins, Parkway Properties, Inc. (“Parkway”) and
subsidiaries of Cousins and Parkway, Parkway merged with
and into a wholly-owned subsidiary of the Company (the
“Merger”), with this subsidiary continuing as the surviving
corporation of the Merger. In accordance with the terms and
conditions of the Merger Agreement, each outstanding share
of Parkway common stock and each outstanding share of
Parkway limited voting stock was converted into 1.63 shares
of Cousins common stock or limited voting preferred
stock, respectively.
On October 7, 2016, pursuant to the Merger Agreement
and the Separation, Distribution and Transition Services
Agreement, dated as of October 5, 2016 , by and among
Cousins, Parkway, Parkway, Inc. (“New Parkway”), and
certain other parties thereto, Cousins distributed pro rata
to its common and limited voting preferred stockholders,
including legacy Parkway common and limited voting
stockholders, all of the outstanding shares of common
and limited voting stock, respectively, of New Parkway, a
newly-formed entity that included the combined businesses
relating to the ownership of real properties in Houston, Texas
and certain other businesses of Parkway (the “Spin-Off”). In
the Spin-Off, Cousins distributed one share of New Parkway
common or limited voting stock for every eight shares of
common or limited voting preferred stock of Cousins held of
record as of the close of business on October 6, 2016. New
Parkway became an independent public company.
The acquisition was accounted for using the acquisition method
of accounting in accordance with Accounting Standards
Codification, or ASC 805, “Business Combinations,” with the
Company as the accounting acquirer, which requires, among
other things, that the assets acquired and liabilities assumed
be recognized at their acquisition date fair value. The total
value of the transaction was based on the closing stock price
of the Company’s common stock on October 5, 2016, the day
immediately prior to the closing of the Merger, of $10.19 per
share. Based on the shares issued in the transaction and on the
units of CPLP effectively issued to the outside unit holders in
F-12
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT the transaction, the total fair value of the assets and liabilities
assumed in the Merger was $2.0 billion. The Company
incurred $1.7 million and $24.5 million in expenses related
to the Merger during the years ended December 31, 2017 and
2016, respectively.
Management engaged a third party valuation specialist to
assist with the fair value assessment, which included an
allocation of the purchase price. The third party used cash
flow analysis as well as an income approach and a cost
approach to determine the fair value of assets acquired.
The final purchase price was allocated as follows (in thousands):
Real estate assets
Cash
Restricted cash
Notes and other receivables
Investment in unconsolidated joint ventures
Intangible assets
Other assets
Notes payable
Accounts payable and accrued expenses
Intangible liabilities
Other liabilities
Nonredeemable noncontrolling interests (excluding CPLP)
Total purchase price
The allocation of fair value of assets acquired and
liabilities assumed has changed by an immaterial amount
from the allocation previously reported. The changes
were based on information about the assets and liabilities
obtained subsequent to the prior reporting date through
October 6, 2017, one year after the closing date of the
Merger. The changes did not have a significant impact on the
purchase price allocation, the consolidated balance sheet, or
the consolidated results of operations. The Merger accounted
for $68.7 million of consolidated revenue and $9.0 million
in consolidated net income as reported for 2016.
Revenues
Income from continuing operations
Net income
Net income available to common stockholders
Per share information:
Basic
Diluted
$3,429,895
63,193
30,560
35,945
68,432
329,894
10,491
3,968,410
1,473,810
133,839
106,480
11,936
292,337
2,018,402
$1,950,008
supplemental pro
following unaudited
The
forma
information presented is based upon the Company’s historical
consolidated statements of operations, adjusted as if the
Merger had occurred on January 1, 2015. This 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.
2016
2015
(unaudited, in thousands,
except per share amounts)
$ 732,117
179,625
174,117
166,375
$ 855,318
237,909
237,323
208,574
$
$
0.42
0.41
$
$
0.53
0.53
F-13
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED As a result of the Spin-Off, the historical results of operations
of the Company’s properties that were contributed to New
Parkway have been presented as discontinued operations in
the consolidated statements of operations and comprehensive
income. The above pro forma information is presented prior
to the discontinued operations reclassification. Discontinued
operations include transaction costs of $6.3 million incurred
in 2016 as a result of the Spin-Off.
The following is a summary of the assets and liabilities
transferred to New Parkway as part of the Spin-Off
(in thousands):
Real estate assets
Cash
Notes and other receivables
Intangible assets
Other assets
Notes payable
Accounts payable and accrued expenses
Intangible liabilities
Other liabilities
Noncontrolling interest
Net assets in Spin-off to New Parkway
$1,696,080
192,755
43,752
143,294
6,669
2,082,550
803,769
56,055
59,424
22,241
941,489
22,821
$1,118,240
The following table includes a summary of discontinued operations of the Company for the years ended December 31, 2016
and 2015. There were no dispositions that met this criteria in 2017.
2016
2015
$136,927
(58,336)
288
(6,022)
(47,345)
(6,349)
$ 19,163
$
—
$ 42,604
$176,828
(73,630)
450
(7,988)
(63,791)
(21)
$ 31,848
$
(551)
$ 76,395
$ (30,067)
$ (55,085)
Rental property revenues
Rental property operating expenses
Other revenues
Interest expense
Depreciation and amortization
Other expenses
Income from discontinued operations
Loss on sale of discontinued operations, net
Cash provided by operating activities
Cash used in investing activities
F-14
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 4. REAL ESTATE TRANSACTIONS
D I S P O S I T I O N S
The Company sold the following properties in 2017, 2016, and 2015 ($ in thousands):
Property
Property Type
Location
Square Feet
Sales Price
2017
American Cancer Society Center
Bank of America Center, One Orlando Centre, and Citrus Center
2016
Post Oak Central
Greenway Plaza
191 Peachtree
Two Liberty Place
Lincoln Place
The Forum
100 North Point Center East
2015
2100 Ross
200, 333, and 555 North Point Center East
The Points at Waterview
(1) Properties distributed to New Parkway in the Spin-Off.
Office
Office
Office
Office
Office
Office
Office
Office
Office
Office
Office
Office
Atlanta, GA
Orlando, FL
996,000
1,038,000
$ 166,000
$ 208,100
Houston, TX
Houston, TX
Atlanta, GA
Philadelphia, PA
Miami, FL
Atlanta, GA
Atlanta, GA
1,280,000
4,348,000
1,225,000
941,000
140,000
220,000
129,000
(1)
(1)
$ 267,500
$ 219,000
$80,000
$ 70,000
$ 22,000
Dallas, TX
Atlanta, GA
Dallas, TX
844,000
411,000
203,000
$ 131,000
$ 70,300
$ 26,800
The Company sold the properties noted above in 2017, 2016, and 2015 as part of its ongoing investment strategy of exiting
non-core markets and recycling investment capital to fund investment activity.
5. NOTES AND ACCOUNTS RECEIVABLE
At December 31, 2017 and 2016, 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
$
2017
465
—
14,490
(535)
$
2016
3,921
(414)
24,929
(753)
$ 14,420
$ 27,683
At December 31, 2017 and 2016, 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, 2017 and
2016. 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-15
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 6. 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,
2017 and 2016. The information included in the summary of
operations table is for the years ended December 31, 2017,
2016, and 2015 (in thousands).
SUMMARY OF FINANCIAL POSITION
2017
2016
2017
2016
2017
2016
2017
2016
Total Assets
Total Debt
Total Equity (Deficit)
Company’s Investment
Terminus Office Holdings
DC Charlotte Plaza LLLP
Carolina Square Holdings LP
Charlotte Gateway Village, LLC
HICO Victory Center LP
HICO Avalon II, LLC
CL Realty, L.L.C.
AMCO 120 WT Holdings, LLC
Temco Associates, LLC
EP II LLC
EP I LLC
Courvoisier Centre JV, LLC
111 West Rio Building
Wildwood Associates
Crawford Long - CPI, LLC
Other
23,741
53,791
106,580
124,691
14,403
6,379
8,287
18,066
4,441
277
521
$ 261,999 $ 268,242 $ 203,131 $ 207,545 $ 48,033
— 42,853
—
33,648
64,412
— 121,386
—
— 14,401
—
—
6,303
—
8,127
—
—
— 16,354
—
4,337
—
—
180
— 44,969
319
— 58,029
—
— 106,500
— 12,852
—
— 16,297
—
(44,815)
71,047
—
—
17,940
66,922
119,054
14,124
—
8,047
10,446
4,368
67,754
78,537
— 172,197
59,399
—
16,351
16,337
27,523
27,362
—
—
72,822
—
$ 49,476
17,073
34,173
116,809
13,869
—
7,899
9,136
4,253
21,743
18,962
69,479
32,855
16,314
(45,928)
—
$ 24,898
22,293
19,384
14,568
9,752
4,931
2,980
1,664
875
44
25
—
—
(1,151) (1)
(21,323) (1)
—
$ 25,686
8,937
18,325
11,796
9,506
—
3,644
184
829
17,606
18,551
11,782
52,206
(1,143) (1)
(21,866) (1)
345
$ 643,134 $ 930,904 $ 338,590 $ 526,458 $ 267,423
$ 366,113
$ 78,940
$ 156,388
SUMMARY OF OPERATIONS
2017
2016
2015
2017
2016
2015
2017
2016
2015
Total Revenues
Net Income (Loss)
Company's Share of Net
Income (Loss)
$
EP I LLC
EP II LLC
Charlotte Gateway Village, LLC
Terminus Office Holdings
Crawford Long - CPI, LLC
CL Realty, L.L.C.
Courvoisier Centre JV, LLC
Carolina Square Holdings LP
HICO Victory Center LP
Temco Associates, LLC
DC Charlotte Plaza LLLP
HICO Avalon II, LLC
AMCO 120 WT Holdings, LLC
Wildwood Associates
111 West Rio Building
Other
1,264
33,724
40,250
12,291
855
4,123 $ 12,239 $ 12,558 $45,115
13,008
2,644
9,528
26,465
6,307
43,959
3,171
12,079
2,964
2,668
— (1,750)
15,106
(532)
—
2,701
431
262
429
123
9,485
192
2
—
2
(69)
—
—
58
—
—
(116)
—
—
—
—
—
—
—
—
5,376
34,156
42,386
12,113
567
3,968
58
383
1,343
47
—
—
—
4,219
—
$ 2,294
(1,187)
14,536
4,608
2,743
237
(489)
9
376
440
45
—
—
(140)
3,926
—
$ 3,177
(638)
12,737
2,789
2,820
424
—
—
204
2,358
—
—
—
(120)
—
(40)
$28,667
9,756
4,764
3,153
1,572
536
521
522
225
46
1
—
—
(58)
(2,590)
—
$ 1,684
(878)
2,194
2,303
1,372
128
(93)
—
187
502
24
—
—
(70)
2,906
303
$ 2,197
(466)
1,183
1,395
1,416
220
—
—
102
2,351
—
—
—
(59)
—
(37)
(1) Negative balances are included in deferred income on the consolidated balance sheets.
$110,664 $116,855 $110,689 $77,944
$27,398
$23,711
$47,115
$ 10,562
$ 8,302
F-16
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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 $203.1 million that mature on January 1, 2023. The
weighted average interest rate on these fixed rate loans is
4.68%. Operating cash flows and proceeds from capital
transactions of TOH are allocated to the partners equally
until JPM receives an agreed upon return, after which the
Company may receive an additional promoted interest. The
assets of the venture in the above table include a cash balance
of $7.4 million at December 31, 2017.
DC Charlotte Plaza LLLP (“Charlotte Plaza”) – Charlotte
Plaza is a 50-50 joint venture between the Company and
Dimensional Fund Advisors (“DFA”) formed to develop
DFA’s 282,000 square foot regional headquarters building
in Charlotte, North Carolina. Capital contributions and
distributions of cash flow are made equally in accordance
with each partner’s partnership interest. The assets of the
venture in the above table include a cash balance of $611,000
at December 31, 2017.
Carolina Square Holdings LP (“Carolina Square”) – Carolina
Square is a 50-50 joint venture between the Company and
NR 123 Franklin LLC (“Northwood Ravin”) formed for the
purpose of developing and constructing a mixed-use property
in Chapel Hill, North Carolina. Carolina Square also entered
into a construction loan agreement, secured by the project,
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, 2017, the outstanding
balance of the construction loan was $64.4 million. The
assets of the venture in the table above include a cash balance
of $1.5 million at December 31, 2017.
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. Through December 1, 2016,
Gateway’s net income or loss and cash distributions were
allocated to the members as follows: first to the Company
so that it received a cumulative compounded return equal
to 11.46% on its capital contributions, second to BOA
until it received 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 until the Company receives a 17%
internal rate of return; thereafter, cash flows are allocated
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 had a fully-amortizing, non-recourse mortgage
loan which matured on December 1, 2016. The assets of the
venture in the above table include a cash balance of $12.1
million at December 31, 2017.
HICO Victory Center LP (“HICO”) – HICO is a joint
venture between the Company and Hines Victory Center
Associates Limited Partnership (“Hines Victory”), 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
funded 75% of the cost of land while Hines Victory funded
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 own
at least 90% of the venture and Hines will own up to 10%.
As of December 31, 2017, 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 assets
of the venture in the table above include a cash balance of
$230,000 at December 31, 2017.
HICO Avalon II, LLC (“AVALON II”) – In 2017, Avalon
II, a joint venture between the Company and Hines Avalon
II Investor, LLC (“Hines II”) was formed for the purpose
of acquiring and potentially developing an office building in
Alpharetta, Georgia. Pursuant to the joint venture agreement,
all predevelopment expenditures are funded 75% by Cousins
and 25% by Hines II. The Company has accounted for its
investment in Avalon II using the equity method as the
Company does not currently control the activities of the
venture. 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 own
90% of the venture and Hines II will own 10%. Additionally,
Cousins will have control over the operational aspects of the
venture, and the Company expects to consolidate the venture
at this time. The assets of the venture in the table above
include a cash balance of $114,000 at December 31, 2017.
F-17
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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 a parcel of land in Texas. The assets
of the venture in the above table include a cash balance of
$741,000 at December 31, 2017.
AMCO 120 WT Holdings, LLC (“Cousins AMCO”) –
Cousins AMCO is a joint venture between the Company,
with a 20% interest, and affiliates of AMLI Residential
(“AMLI”), with an 80% interest, formed to develop 120
West Trinity, a mixed-use property in Decatur, Georgia.
The property is expected to contain approximately 30,000
square feet of office space, 10,000 square feet of retail space
and 330 apartment units. Initial contributions to the joint
venture for the purchase of land were funded entirely by
AMLI. Subsequent contributions are funded in proportion to
the members’ percentage interests. The Company accounts
for its investment in this joint venture under the equity
method as it does not currently control the activities of the
venture. The assets of the venture in the above table include
a cash balance of $1,000 at December 31, 2017.
Temco Associates, LLC (“Temco”) – Temco is a 50-50 joint
venture between the Company and Forestar, that owns a golf
course in Georgia. The assets of the venture in the above
table include a cash balance of $261,000 at December 31,
2017.
EP I LLC (“EP I”) and EP II LLC (“EP II”) – EP I and EP II are
joint ventures between the Company, with a 75% ownership
interest, and Lion Gables Realty Limited Partnership
(“Gables”), with a 25% ownership interest, which owned
Emory Point, a mixed-use property in Atlanta, Georgia.
In 2017, EP I and EP II sold Emory Point for a combined
gross sales price of $199.0 million. After repayment of debt,
the Company received a distribution of $70.0 million and
recognized a gain of $37.9 million, which is recorded in
income from unconsolidated joint ventures. The assets of
the ventures in the above table include a cash balance of
$751,000 at December 31, 2017.
Courvoisier Centre JV, LLC (“Courvoisier”) – Courvoisier
was a joint venture between the Company, with a 20%
interest, and Spanish Key LLC, with an 80% interest, that
owned Courvoisier Centre, a 343,000 square foot, two-
building office property in Miami, Florida. In 2017, the
Company sold its 20% interest in Courvoisier Centre
for $12.6 million and recognized a gain of $716,000 in a
transaction that valued its interest in the property at $33.9
million, prior to deduction for existing mortgage debt.
Cousins W Rio Salado, LLC (“111 West Rio”) – 111 West
Rio, a wholly-owned subsidiary of the Company, owned
a 74.6% interest in the American Airlines Building, a
225,000 square foot office building located in the Tempe
submarket of Phoenix, Arizona. American Airlines owned
the remaining 25.4% interest in the building. In 2017, the
Company purchased American Airlines’ interest in the
building for $19.6 million. As a result, the Company changed
its accounting for the 111 West Rio building from the equity
method to the consolidated method. Upon consolidation, the
Company recognized a $3.5 million loss and recorded this
amount in income from unconsolidated joint ventures.
Wildwood Associates (“Wildwood”) – Wildwood is a 50-50
joint venture between the Company and IBM which owns
22 acres of undeveloped land in the Wildwood Office Park
in Atlanta, Georgia. At December 31, 2017, the Company’s
investment in Wildwood was a credit balance of $1.2 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. The assets of the venture in the above table
include a cash balance of $74,000 at December 31, 2017.
Crawford Long—CPI, LLC (“Crawford Long”) – Crawford
Long is a 50-50 joint venture between the Company and
Emory University that 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 $71.0 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 $1.6 million at
December 31, 2017.
Austin 300 Colorado Project, LP (“300 Colorado”) – In
2018, 300 Colorado, a joint venture between the Company,
3C Block 28 Partners, LP (“3CB”), and 3C RR Xylem,
LP (“3CRR”) was formed for the purpose of developing a
309,000 square foot office building in Austin, Texas. The
Company owns a 50% interest in the venture, 3CB owns
a 34.5% interest, and 3CRR owns a 15.5% interest. Upon
formation, 3CB and 3CRR contributed land for use by the
joint venture in the development project, the Company
contributed $6.0 million in cash, and 300 Colorado assumed
a ground lease for an additional parcel of land.
F-18
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT At December 31, 2017, the Company’s unconsolidated
joint ventures had aggregate outstanding indebtedness to
third parties of $338.6 million. These loans are 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 $7.2 million, $7.4 million, and
$6.0 million of development, leasing, and management
fees, including salary and expense reimbursements, from
unconsolidated joint ventures in 2017, 2016, and 2015,
respectively. See note 2, fee income, for a discussion of the
accounting treatment for fees and reimbursements from
unconsolidated joint ventures.
7. INTANGIBLE ASSETS
At December 31, 2017 and 2016, intangible assets included the following (in thousands):
In-place leases, net of accumulated amortization of $91,548 and
$46,899 in 2017 and 2016, respectively
Above-market tenant leases, net of accumulated amortization of $13,038 and
$6,515 in 2017 and 2016, respectively
Below-market ground lease, net of accumulated amortization of $345 and
$69 in 2017 and 2016, respectively
Goodwill
2017
2016
$139,548
$185,251
26,917
40,260
18,067
1,674
18,344
1,674
$186,206
$245,529
Aggregate net amortization expense related to intangible
assets and liabilities was $42.4 million, $24.0 million, and
$23.7 million for the years ended December 31, 2017,
2016, and 2015, respectively. Over the next five years and
thereafter, aggregate amortization of these intangible assets
and liabilities is anticipated to be as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
Below
Market Rents
Above
Market Ground
Lease
Below
Market Ground
Lease
Above Market
Rents
In Place
Leases
Total
$(13,464)
(11,914)
(10,817)
(9,036)
(6,402)
(17,056)
$
(46)
(46)
(46)
(46)
(46)
(1,535)
$
481
464
449
435
421
15,817
$ 6,364
5,438
4,537
3,444
2,348
4,786
$ 33,455 $ 26,790
20,505
15,816
11,542
7,850
31,575
26,563
21,693
16,745
11,529
29,563
$(68,689)
$(1,765)
$ 18,067
$26,917
$139,548 $ 114,078
Weighted average remaining lease term
4 years
38 years
66 years
4 years
5 years
14 years
The following is a summary of goodwill activity for the years ended December 31, 2017 and 2016 (in thousands):
Beginning Balance
Allocated to property sales and Spin-Off
Ending Balance
2017
2016
$ 1,674
—
$ 3,647
(1,973)
$ 1,674
$ 1,674
F-19
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 8. OTHER ASSETS
At December 31, 2017 and 2016, other assets included the following (in thousands):
Furniture, fixtures and equipment, leasehold improvements, and other deferred costs, net of
accumulated depreciation of $21,925 and $23,135 in 2017 and 2016, respectively
Prepaid expenses and other assets
Lease inducements, net of accumulated amortization of $978 and
$1,278 in 2017 and 2016, respectively
Line of credit deferred financing costs, net of accumulated amortization of $3,119
and $2,264 in 2017 and 2016, respectively
Predevelopment costs and earnest money
2017
2016
$12,241
3,902
$15,773
8,432
3,126
2,517
1,213
372
2,182
179
$20,854
$29,083
inducements are
incentives paid to tenants
Lease
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
determined are probable of future development.
9. NOTES PAYABLE
The following table summarizes the terms of notes payable outstanding at December 31, 2017 and 2016 (in thousands):
Description
Term Loan, unsecured
Senior Notes, unsecured
Fifth Third Center
Colorado Tower
Promenade
Senior Notes, unsecured
816 Congress
Meridian Mark Plaza
The Pointe
Credit Facility, unsecured
One Eleven Congress
The American Cancer Society Center
San Jacinto
3344 Peachtree
Two Buckhead Plaza
Unamortized premium, net
Unamortized loan costs
Total Notes Payable
Interest Rate
Maturity *
2017
2016
2.76%
3.91%
3.37%
3.45%
4.27%
4.09%
3.75%
6.00%
4.01%
2.66%
6.08%
6.45%
6.05%
4.75%
6.43%
2021
2025
2026
2026
2022
2027
2024
2020
2019
2019
2017
2017
2017
2017
2017
$ 250,000 $ 250,000
—
149,516
120,000
105,342
—
84,872
24,522
250,000
146,557
120,000
102,355
100,000
83,304
24,038
22,510
22,945
—
—
—
—
—
—
134,000
128,000
127,508
101,000
78,971
52,000
$1,098,764 $1,378,676
219
6,792
(5,755)
(4,548)
$1,093,228 $1,380,920
* Weighted average maturity of notes payable outstanding at December 31, 2017 was 6.7 years.
C R E D I T FAC I L I T Y
As of December 31, 2017, the Company had a $500 million
senior unsecured line of credit (the “Credit Facility”) that
was scheduled to mature on May 28, 2019. The Credit
Facility contained financial covenants that required, 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
F-20
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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
contained customary representations and warranties and
affirmative and negative covenants, as well as customary
events of default.
The interest rate applicable to the Credit Facility varied
according to the Company’s leverage ratio, and was, at the
election of the Company, determined based on either (1) the
current London Interbank Offered Rate (“LIBOR”) plus a
spread of between 1.10% and 1.45%, based on leverage
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 a spread of between 0.10%
and 0.45%, based on leverage. The Company also paid an
annual facility fee on the total commitments under the Credit
Facility of between 0.15% and 0.30% based on leverage.
At December 31, 2017, the Credit Facility’s spread over
LIBOR was 1.1%. The amount that the Company had
available to be drawn under the Credit Facility was a
defined calculation based on the Company’s unencumbered
assets and other factors. The total available borrowing
capacity under the Credit Facility was $499.0 million at
December 31, 2017.
N E W C R E D I T FAC I L I T Y
On January 3, 2018, the Company entered into a Fourth
Amended and Restated Credit Agreement (the “New Credit
Facility”) under which the Company may borrow up to
$1 billion if certain conditions are satisfied.
The New Credit Facility recasts the Credit Facility by:
–
–
Increasing the size from $500 million to $1 billion;
Extending the maturity date from May 28, 2019 to
January 3, 2023;
– Reducing certain per annum variable interest rate
spreads and other fees;
–
Providing for the expansion of the New Facility by
an additional $500 million for total availability of
$1.5 billion, subject to receipt of additional commitments
from lenders and other customary conditions;
– Decreasing the minimum spread over LIBOR 1.10%
to 1.05%;
– Removing the $90 million investment entity cap;
– Removing the Unsecured Debt Limit and replacing it
with an unsecured leverage ratio limit;
– Removing the Minimum Shareholder’s Equity requirement;
– Decreasing the Consolidated Unencumbered Interest
Coverage ratio from 2.0 to 1.75; and
– Removing the Consolidated Secured Recourse Debt
Limitation and replacing it with maintaining a Secured
Leverage Ratio of 40% or less.
The New Credit Facility did not change the other financial
covenants from those of the Credit Facility.
The interest rate applicable to the New 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 LIBOR plus the applicable spread 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 detailed below.
Fees on letters of credit issued under the New 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 New Credit Facility. The pricing spreads and the facility
fee under the New Credit Facility are as follows:
Leverage Ratio
≤ 35%
> 35% but ≤ 40%
> 40% but ≤ 45%
> 45% but ≤ 50%
> 50%
Applicable
% Spread for
LIBOR Loans
Applicable
% Spread for
Base Rate
Loans
1.05%
1.10%
1.20%
1.20%
1.45%
0.10%
0.15%
0.20%
0.20%
0.45%
Annual
Facility
Fee %
0.15%
0.20%
0.20%
0.25%
0.30%
The New Credit Facility also provides for alternative pricing
spreads and facility fees which would be available to the
Company on any date after it obtains an investment grade
credit rating.
T E R M LOA N
The Company has a $250 million unsecured term loan (the
“Term Loan”) that matures on December 2, 2021. Through
January 21, 2018, the Term Loan contained financial
covenants substantially consistent with those of the Credit
Facility. On January 22, 2018, the Term Loan was amended
to make the financial covenants consistent with those of the
New Credit Facility. The interest rate applicable to the Term
Loan 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
F-21
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED (“LIBOR”) plus a spread of between 1.20% and 1.70%, based
on leverage 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 a spread of between 0.00%
and 0.75%, based on leverage. At December 31, 2017, the
Term Loan’s spread over LIBOR was 1.2%.
U N S E C U R E D S E N I O R N OT E S
In 2017, the Company closed a $350 million private
placement of senior unsecured notes, which were funded in
two tranches. The first tranche of $100 million has a 10-year
maturity and has a fixed annual interest rate of 4.09%. The
second tranche of $250 million has an 8-year maturity and
has a fixed annual interest rate of 3.91%.
The senior unsecured notes contain 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 $1.9 billion, plus a portion
of the net cash proceeds from certain equity issuances. The
senior notes also contain customary representations and
warranties and affirmative and negative covenants, as well
as customary events of default.
M O R TG AG E LOA N I N FO R M AT I O N
In 2017, the Company repaid in full, without penalty,
the $128.0 million One Eleven Congress mortgage note,
the $101.0 million San Jacinto Center mortgage note, the
$52.0 million Two Buckhead Plaza mortgage note, and the
$77.9 million 3344 Peachtree mortgage note. In connection
with these repayments, the Company recorded gains on
extinguishment of debt of $2.6 million, which represented
the unamortized premium recorded on the notes at the time
of the Merger.
In 2017, the Company sold the ACS Center. A portion of the
proceeds from the sale were used to repay the $127.0 million
mortgage note on the associated property, and the Company
recorded a loss on extinguishment of debt of $376,000,
which represented the remaining unamortized loan costs and
other costs associated with repaying the debt.
In 2016, the Company had the following mortgage
loan activity:
–
Entered into a $120.0 million non-recourse mortgage
loan secured by Colorado Tower, a 373,000 square foot
office building in Austin, Texas. The mortgage bears
interest at a fixed annual rate of 3.45% and matures
September 1, 2026.
– Entered into a $150.0 million non-recourse mortgage
loan secured by Fifth Third Center, a 698,000 square
foot office building in Charlotte, North Carolina. The
mortgage bears interest at a fixed annual rate of 3.37%
and matures October 1, 2026.
– Repaid the $98.1 million 191 Peachtree Tower mortgage
loan in full in connection with a sale of the building and
paid a $3.7 million prepayment penalty.
As of December 31, 2017, the Company had $498.8 million
outstanding on six non-recourse mortgage notes. Assets with
depreciated carrying values of $585.7 million were pledged
as security on these mortgage notes payable.
OT H E R D E BT I N FO R M AT I O N
At December 31, 2017 and 2016, the estimated fair value
of the Company’s notes payable was $1.1 billion and
$1.4 billion, 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, 2017
and 2016. 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, 2017, 2016, and 2015,
interest was recorded as follows (in thousands):
2017
2016
2015
Total interest incurred
Interest capitalized
$42,767
(9,243)
$31,347
(4,697)
$26,314
(3,579)
Total interest expense
$33,524
$26,650
$22,735
D E BT M AT U R I T I E S
(including scheduled
Future principal payments due
amortization payments and payments due upon maturity) on
the Company’s notes payable at December 31, 2017 are as
follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
$
9,347
33,052
33,824
261,258
97,042
664,241
$ 1,098,764
F-22
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 10. COMMITMENTS AND CONTINGENCIES
CO M M I T M E N T S
The Company had a total of $46.8 million in future obligations
under leases to fund tenant improvements and other future
construction obligations at December 31, 2017. The
Company had outstanding letters of credit and performance
bonds totaling $3.5 million at December 31, 2017.
The Company recorded ground and operating lease expense
of $3.3 million, $2.4 million, and $2.0 million in 2017,
2016, and 2015, respectively. The Company has future
lease commitments under ground leases and operating leases
totaling $208.3 million over weighted-average remaining
terms of 77 and 2 years, respectively. Amounts due under
ground and operating lease commitments are as follows
(in thousands):
2018
2019
2020
2021
2022
Thereafter
$
2,669
2,569
2,474
2,453
2,396
195,721
$ 208,282
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.
11. STOCKHOLDERS’ EQUITY
In 2017, the Company issued 25.0 million shares of
common stock, resulting in gross proceeds to the Company
of $212.9 million. The Company recorded $1.1 million in
legal, accounting, and other expenses associated with the
issuance resulting in net proceeds of $211.8 million. The
Company used the net proceeds from this offering to reduce
indebtedness. During the year ended December 31, 2017,
certain holders of CPLP units redeemed 1,203,286 units
in exchange for shares of the Company’s common stock.
The aggregate value at the time of these transactions was
$10.1 million based upon the value of the Company’s
common stock at the time of the transactions.
In 2016, in connection with the Merger, the Company issued
6.9 million shares of limited voting preferred stock, par value
$1 per share. Each share of limited voting preferred stock is
“paired” with a limited partnership unit in CPLP. A share of
Cousins limited voting preferred stock will be automatically
redeemed by Cousins without consideration if such share’s
paired limited partnership unit in CPLP is transferred or
redeemed. Holders of the limited voting preferred stock are
entitled to one vote on the following matters only: the election
of directors, any proposed amendment of the Company’s
Articles of Incorporation, any merger or other business
combination of the Company, any sale of substantially all of
the Company’s assets, and any liquidation of the Company.
Holders of limited voting preferred stock are not entitled
to any dividends or distributions and the limited voting
preferred stock is not convertible into or exchangeable for
any other property or securities of the Company.
In 2015, the Board of Directors of the Company authorized
the repurchase of up to $100 million of its outstanding
common shares. The plan expired on September 8, 2017.
Under this plan, the Company repurchased 6.8 million
shares of its common stock for a total cost of $61.5 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 sheets.
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.
F-23
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED Distribution of REIT Taxable Income — The following reconciles dividends paid and dividends applied in 2017, 2016, and
2015 to meet REIT distribution requirements (in thousands):
Common and preferred dividends
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
Dividends in excess of current year REIT distribution requirements
Dividends applied to meet current year REIT distribution requirements
2017
2016
2015
$ 99,139 $1,077,179
(92)
(130)
69,162
(94)
—
—
(731)
—
—
—
(827,005)
$ 99,009 $ 250,082
—
—
68,337
Tax Status of Distributions — The following summarizes the components of the taxability of the Company’s distributions for
the years ended December 31, 2017, 2016, and 2015:
Common:
Total
Distributions
Per Share
Ordinary
Dividends
Long-Term
Capital Gain
Unrecaptured
Section 1250
Gain (1)
Nondividend
Distributions
AMT
Adjustment (2)
2017
2016
2015
$0.240000
$0.093312
$0.146688
$0.070522
$
—
$0.017756
$2.853075
$0.320000
$0.079661
$0.161738
$0.582778
$0.158262
$0.100934
$0.097271
$2.190636
—
$
$
$
—
—
(1) Represents a portion of the dividend allocated to long-term capital gain.
(2) The Company has apportioned certain 2017 alternative minimum tax adjustments to its shareholders. Individual taxpayers
should refer to Internal Revenue Service Form 6251, Alternative Minimum Tax - Individuals. Corporate taxpayers should
refer to Internal Revenue Service Form 4626, Alternative Minimum Tax - Corporations.
13. STOCK-BASED COMPENSATION
The Company maintains the 2009 Incentive Stock Plan (the
“2009 Plan”), which allows the Company to issue awards
of stock options, stock grants, or stock appreciation rights
to employees and directors. As of December 31, 2017,
1,012,303 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.
As a result of the Spin-Off, the number and strike price of
stock options, shares of restricted stock, and the number
of restricted stock units were adjusted to preserve the
intrinsic value of the awards immediately prior to the Spin-
leases
12. FUTURE MINIMUM RENTS
The Company’s
escalation
provisions and provisions requiring tenants to pay a pro
rata share of operating expenses. The leases typically include
renewal options and are classified and accounted for as
operating leases.
typically
contain
At December 31, 2017, future minimum rents to be received
by consolidated entities under existing non-cancelable leases
are as follows (in thousands):
$ 307,290
324,234
311,676
287,153
249,854
1,037,109
$ 2,517,316
2018
2019
2020
2021
2022
Thereafter
F-24
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT Off using an adjustment ratio based on the market price of
the Company’s stock prior to the Spin-Off and the market
price of the Company’s stock subsequent to the Spin-Off
pursuant to anti-dilution provisions of the 2009 Plan. Since
these adjustments were considered to be a modification
of the awards, the Company compared the fair value of
the awards immediately prior to the Spin-Off to the fair
value immediately after the Spin-Off to measure potential
incremental
stock-based compensation expense. The
adjustments did not result in an increase in the fair value of
the awards and, accordingly, the Company did not record
incremental stock-based compensation expense.
S TO C K O P T I O N S
At December 31, 2017, the Company had 928,608 stock
options outstanding to key employees and outside directors
pursuant to the 2009 Plan. The Company typically uses
authorized, unissued shares to provide shares for option
exercises. The stock options have a term of ten years from
the date of grant and have a vesting period of four years,
except director stock options, which vest immediately. In
2017, 2016, and 2015, there were no stock option grants to
employees or directors.
In 2016, in conjunction with the Merger, the Company
granted 672,375 options to former Parkway key executives.
These options vested immediately, and have a term of ten
years from the date of grant. The Company calculated the
fair value of these grants using the Black-Scholes option-
pricing model, which requires the Company to provide
certain inputs as follows:
– The risk-free interest rate utilized is the interest rate on
U.S. Treasury Strips or Bonds having the same life as the
estimated life of the Company’s option awards.
–
Expected life of the options granted is estimated
based on historical data reflecting actual hold
periods plus an estimated hold period for unexercised
options outstanding.
– Expected volatility is based on the historical volatility
of the Company’s stock over a period equal to the
estimated option life.
– The assumed dividend yield is based on the Company’s
expectation of an annual dividend rate for regular
dividends over the estimated life of the option.
The weighted average fair value of options granted was
$0.84 per option, and the Company computed the fair value
of options granted using the Black-Scholes option pricing
model with the following assumptions:
Risk-free interest rate
Assumed dividend yield
Assumed lives of option awards (in years)
Assumed volatility
1.37%
3.60%
6.4
23.23%
The Company recorded $565,000 to additional paid-
in capital for the fair value of the options granted as part
of the Merger. During 2017, 2016, and 2015, $0, $0 and
$15,000, respectively, was recognized as compensation
expense related to stock options. The Company does not
anticipate recognizing any future compensation expense
related to stock options outstanding. During 2017, total cash
proceeds from the exercise of options equaled $4.5 million.
As of December 31, 2017, the intrinsic value of the options
outstanding and exercisable was $2.7 million. The intrinsic
value is calculated using the exercise prices of the options
compared to the market value of the Company’s stock.
At December 31, 2017 and 2016, the weighted-average
contractual lives for the options outstanding and exercisable
were 2.3 years and 3.2 years, respectively.
F-25
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED The following is a summary of stock option activity for the years ended December 31, 2017, 2016, and 2015:
Outstanding at December 31, 2014
Exercised
Forfeited/Expired
Outstanding at December 31, 2015
Granted as a result of the Merger and Spin-Off
Exercised
Forfeited/Expired
Outstanding at December 31, 2016
Exercised
Forfeited/Expired
Outstanding at December 31, 2017
Options Exercisable at December 31, 2017
Number of
Options
(000s)
Weighted
Average
Exercise Price
Per Option
2,211
(23)
(425)
1,763
1,222
(2)
(721)
2,262
(577)
(756)
929
929
$ 22.69
8.02
21.98
22.05
11.78
8.35
27.24
10.82
7.51
18.47
$ 6.59
$ 6.59
R E S T R I C T E D S TO C K
In 2017, 2016, and 2015, the Company issued 308,289,
234,965, and 165,922 shares of restricted stock to
employees, which vest ratably over three years from the
issuance date. In 2017, 2016, and 2015, the Company
also issued 120,878, 72,771, and 78,985 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 $2.0
million, $1.6 million, and $1.5 million in 2017, 2016, and
2015, respectively.
As of December 31, 2017, the Company had recorded
$2.6 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 2017 was $2.0 million. The following table
summarizes restricted stock activity for the years ended
December 31, 2017, 2016, and 2015:
Non-vested restricted stock at December 31, 2014
Granted
Vested
Forfeited
Non-vested restricted stock at December 31, 2015
Granted
Granted as a result of the Spin-Off
Vested
Forfeited
Non-vested restricted stock at December 31, 2016
Granted
Vested
Forfeited
Non-vested restricted stock at December 31, 2017
F-26
Number of
Shares
(000s)
Weighted-Average
Grant Date
Fair Value
342
166
(210)
(5)
293
235
114
(141)
(30)
471
308
(214)
(8)
557
$ 9.08
11.06
8.41
10.68
10.65
8.62
7.57
8.54
9.77
7.57
8.63
7.50
6.53
$ 7.93
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT R E S T R I C T E D S TO C K U N I T S
During 2017, 2016, and 2015, 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,
2017 are 396,384, 391,684, and 295,472 related to the
2017, 2016, and 2015 grants, respectively.
In 2012, the Company also issued 281,532 performance-
based RSUs to a key employee. The payout of these awards
could have ranged 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 through 2016. This award was expensed using
a quarterly Monte Carlo valuation over the vesting period
until the fourth quarter of 2016, when it was adjusted to the
actual amount paid in 2017.
The following table summarizes the performance-based
RSU activity as of December 31, 2017, 2016, and 2015
(in thousands):
Outstanding at December 31, 2014
Granted
Vested
Forfeited
Outstanding at December 31, 2015
Granted
Granted as a result of the Spin-Off
Vested
Forfeited
Outstanding at December 31, 2016
Granted
Vested
Forfeited
Outstanding at December 31, 2017
796
244
(191)
(6)
843
312
308
(160)
(30)
1,273
399
(576)
(12)
1,084
During 2017 and 2016, the Company granted 264,723 and
28,938 time-vested RSUs, respectively, to key employees.
The vesting period for these awards is three years. The value
of each unit is equal to the fair market value of one share of
common stock. These RSUs are to be settled in cash with
payment dependent upon the attainment of the required
service criteria. Dividend equivalent units will be paid based
on the number of RSUs granted, with such payments made
concurrently with payment of common dividends.
The Company estimates future expense for all types of
RSUs outstanding at December 31, 2017 to be $4.9 million
(using stock prices and estimated target percentages as
of December 31, 2017), which will be recognized over a
weighted-average period of 1.2 years. During 2017, total
cash paid for all types of RSUs and related dividend payments
was $5.6 million.
F-27
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED During 2017, 2016, and 2015, $7.0 million, $6.4 million,
and $67,000, respectively, was recognized as compensation
expense related to RSUs for employees and directors.
14. RETIREMENT SAVINGS PLAN
The Company maintains a defined contribution plan (the
“Retirement Savings Plan”) pursuant to Section 401 of
the Internal Revenue Code (the “Code”) which covers
active regular employees. Employees are eligible under the
Retirement Savings Plan immediately upon hire, and pre-
tax contributions are allowed up to the limits set by the
Code. The Company has a match program of up to 3%
of an employee’s eligible pre-tax Retirement Savings Plan
contributions up to certain Code limits. Employees vest
in Company contributions over a three-year period. The
Company may change this percentage at its discretion,
and, in addition, the Company could decide to make
discretionary contributions in the future. The Company
contributed $764,000, $682,000, and $639,000 to the
Retirement Savings Plan for the 2017, 2016, and 2015 plan
years, respectively.
15. INCOME TAXES
The net income tax benefit differs from the amount computed
by applying the statutory federal income tax rate to CTRS’
income before taxes follows ($ in thousands):
Federal income tax benefit (expense)
State income tax benefit (expense), net of federal income tax effect
Change in deferred tax assets as a result of change in tax law
Valuation allowance
Other
2017
2016
2015
Amount
Rate
Amount
Rate
Amount
Rate
$ 47
5
(340)
283
5
35% $(1,159)
(132)
—
1,282
9
4%
(254)%
211%
4%
(35)%
(4)%
—%
39%
—%
$ 778
90
—
(833)
(35)
35%
4%
—%
(37)%
(2)%
Benefit applicable to income (loss) from continuing operations
$ —
—% $ —
—%
$ —
—%
The tax effect of significant temporary differences representing deferred tax assets and liabilities of CTRS as of December 31,
2017 and 2016 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
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.
2017
2016
$ 19
590
609
(609)
$(188)
514
326
(326)
$ —
$ —
As of December 31, 2017 and 2016 the deferred tax asset of
CTRS equaled $609,000 and $326,000, 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, 2017 and 2016 was based the
lack of evidence that CTRS, could generate future taxable
income to realize the benefit of the deferred tax assets.
F-28
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 16. EARNINGS PER SHARE
The following table sets forth the computation of the basic and diluted earnings per share of the Company’s consolidated
statements of operations for the years ended December 31, 2017, 2016 and 2015 (in thousands):
Earnings per common share - basic:
Numerator:
Income from continuing operations
Net income attributable to noncontrolling interests in the CPLP from continuing operations
Net income attributable to other noncontrolling interests from continuing operations
Income from continuing operations available for common stockholders
Income from discontinued operations
Net income available for common stockholders
Denominator:
Weighted average common shares - basic
Earnings per common share - basic:
Income from continuing operations available for common stockholders
Income from discontinued operations available for common stockholders
Net income available for common stockholders
Earnings per common share - diluted:
Numerator:
Income from continuing operations
Net income attributable to other noncontrolling interests from continuing operations
Income from continuing operations available for common stockholders
Income from discontinued operations available for common stockholders
Net income available for common stockholders before net income attributable to
noncontrolling interests in CPLP
Denominator:
Weighted average common shares - basic
Add:
Potential dilutive common shares - stock options
Weighted average units of CPLP convertible into common shares
Weighted average common shares - diluted
Earnings per common share - diluted:
Income from continuing operations available for common stockholders
Income from discontinued operations available for common stockholders
Net income available for common stockholders
Year Ended December 31
2017
2016
2015
$219,959
$ 60,941
$ 94,332
(3,681)
(3)
216,275
—
(784)
(211)
59,946
19,163
—
(111)
94,221
31,297
$216,275
$ 79,109
$125,518
415,610
253,895
215,827
$
$
0.52
—
0.52
$
$
0.24
0.07
0.31
$
$
0.44
0.14
0.58
$219,959
$ 60,941
$ 94,332
(3)
219,956
—
(211)
60,730
19,163
(111)
94,221
31,297
$219,956
$ 79,893
$125,518
415,610
253,895
215,827
312
7,375
178
1,950
152
—
423,297
256,023
215,979
$
$
0.52
—
0.52
$
$
0.24
0.07
0.31
$
$
0.44
0.14
0.58
F-29
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 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. For
the years ended December 31, 2017, 2016, and 2015, the
number of anti-dilutive stock options was 24,000, 762,000,
and 1,128,000, respectively.
17. 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, 2017, 2016, and 2015 is as follows (in thousands):
Interest paid, net of amounts capitalized
Income taxes paid
Non-Cash Transactions:
Transfer from investment in unconsolidated joint venture to operating properties
Transfer from projects under development to operating properties
Common stock dividends declared
Change in accrued property acquisition, development, and tenant asset expenditures
Non-cash assets and liabilities assumed in Merger
Non-cash assets and liabilities distributed in Spin-Off
Mortgage note payable legally defeased
Transfer from land held to projects under development
Transfer from investment in unconsolidated joint ventures to projects under development
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
2017
$30,572
—
$
2016
32,215
—
2015
$ 29,337
2
68,498
58,928
25,202
5,965
—
—
—
—
—
7,918
1,856,255
(948,306)
—
—
—
—
—
20,170
8,099
5,880
—
—
—
121,709
—
(2,483)
—
—
—
—
—
7,246
1,347
The following table provides a reconciliation of cash, cash equivalents, and restricted cash recorded on the balance sheet to
cash, cash equivalents, and restricted cash in the statements of cash flows:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash
Year Ended December 31,
2017
2016
2015
$148,929
56,816
$35,687
15,634
$2,003
4,304
$205,745
$51,321
$6,307
18. 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, Charlotte, Austin, Phoenix, Tampa,
Orlando, Houston, and Other. 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. Each segment includes both
consolidated operations and the Company’s share of joint
venture operations.
Company management evaluates the performance of its
reportable segments in part based on net operating income
(“NOI”). NOI represents rental property revenues 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
F-30
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT 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
interest expense,
general and administrative expenses,
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, 2017
Net Operating Income:
Atlanta
Charlotte
Austin
Phoenix
Tampa
Orlando
Other
Total Net Operating Income
Year ended December 31, 2016
Net Operating Income:
Atlanta
Houston
Austin
Charlotte
Tampa
Phoenix
Orlando
Other
Total Net Operating Income
Year ended December 31, 2015
Net Operating Income:
Houston
Atlanta
Charlotte
Austin
Other
Total Net Operating Income
Office
Mixed-Use
Other
Total
$109,706
62,708
58,648
34,074
29,426
13,029
1,632
$309,223
$3,278
—
—
—
—
—
705
$3,983
$ — $112,984
62,708
58,648
34,074
29,426
13,029
2,337
$ — $313,206
—
—
—
—
—
—
Office
Mixed-Use
Other
Total
$ 98,032
78,590
29,865
28,418
7,130
6,067
3,265
1,504
$252,871
$7,411
—
—
—
—
—
—
—
$7,411
$ — $105,443
78,590
29,865
28,418
7,130
6,067
3,265
1,504
$ — $260,282
—
—
—
—
—
—
—
Office
Mixed-Use
Other
Total
$103,210
93,438
16,164
15,294
7,104
$235,210
$ —
5,854
—
—
—
$5,854
$ — $103,210
99,292
16,164
15,294
7,272
$241,232
—
—
—
168
$168
F-31
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED The following reconciles Net Income to Net Operating Income for each of the periods presented (in thousands):
Net Income
Net operating income from unconsolidated joint ventures
Net operating income from discontinued operations
Fee income
Other income
Reimbursed expenses
General and administrative expenses
Interest expense
Depreciation and amortization
Acquisition and transaction costs
Other expenses
(Gain) loss on extinguishment of debt
Income from unconsolidated joint ventures
Gain on sale of investment properties
Income from discontinued operations
Year Ended December 31,
2017
2016
2015
$ 219,959
31,053
—
(8,632)
(11,518)
3,527
27,523
33,524
196,745
1,661
1,796
(2,258)
(47,115)
(133,059)
—
$ 80,104
28,785
78,591
(8,347)
(1,050)
3,259
25,592
26,650
97,948
24,521
5,888
5,180
(10,562)
(77,114)
(19,163)
$125,629
24,335
103,198
(7,297)
(828)
3,430
16,918
22,735
71,625
299
1,181
—
(8,302)
(80,394)
(31,297)
Net Operating Income
$ 313,206
$260,282
$241,232
Revenues by reportable segment, including a reconciliation to total revenues on the consolidated statements of operations for
years ended December 31, 2017, 2016, and 2015 are as follows (in thousands):
Year ended December 31, 2017
Office
Mixed-Use Other
Total
Revenues:
Atlanta
Austin
Charlotte
Orlando
Tampa
Phoenix
Other
Total segment revenues
Company’s share of rental property revenues from unconsolidated joint ventures
$ 176,190
100,939
91,434
24,862
47,402
46,186
3,021
490,034
43,999
$ 5,237
—
—
—
—
—
999
6,236
6,236
$— $ 181,427
100,939
91,434
24,862
47,402
46,186
4,020
—
—
—
—
—
—
—
—
496,270
50,235
Total rental property revenues
$ 446,035
$ — $— $ 446,035
F-32
COUSINS PROPERTIES INCORPORATED 2017 ANNUAL REPORT Year ended December 31, 2016
Office Mixed-Use Other
Total
Revenues:
Atlanta
Houston
Austin
Charlotte
Tampa
Phoenix
Orlando
Other
Total segment revenues
Company’s share of rental property revenues from unconsolidated joint ventures
Revenues included in discontinued operations
Total rental property revenues
$ 160,540
136,926
52,769
39,448
10,994
8,902
5,896
2,443
$ 13,043
—
—
—
—
—
—
—
417,918
13,043
31,177
13,043
136,927
—
$— $ 173,583
136,926
52,769
39,448
10,994
8,902
5,896
2,443
—
—
—
—
—
—
—
—
—
—
430,961
44,220
136,927
$ 249,814
$
— $— $ 249,814
Year ended December 31, 2015
Office Mixed-Use
Other
Total
Revenues:
Houston
Atlanta
Austin
Charlotte
Other
Total segment revenues
Company’s share of rental property revenues from unconsolidated joint ventures
Revenues included in discontinued operations
Total rental property revenues
$ 176,823
164,712
26,581
22,964
9,216
400,296
27,416
176,828
$ — $ — $ 176,823
174,687
—
26,581
—
22,964
—
9,408
192
9,975
—
—
—
9,975
9,975
—
192
410,463
—
—
37,391
176,828
$ 196,052
$ — $ 192
$ 196,244
F-33
2017 ANNUAL REPORT COUSINS PROPERTIES INCORPORATED 2017
DIRECTORS
Larry L. Gellerstedt III
Chairman of the Board of Directors
and Chief Executive Officer,
Cousins Properties
S. Taylor Glover
Lead Director of the Board of Directors,
Cousins Properties;
Chief Executive Officer,
Turner Enterprises, Inc.
Charles T. Cannada
Edward M. Casal
Chief Executive, Global Real Estate,
Aviva Investors Americas, LLC
Robert M. Chapman
Chief Executive Officer,
CenterPoint Properties Trust
Lillian C. Giornelli
Chairman, Chief Executive Officer and Trustee,
The Cousins Foundation, Inc.
Donna W. Hyland
President and Chief Executive Officer,
Children’s Healthcare of Atlanta
Brenda J. Mixson
Managing Director,
C-III Capital Partners, LLC
Thomas G. Cousins
Chairman Emeritus
EXECUTIVE
OFFICERS
Larry L. Gellerstedt III
Chairman of the Board of Directors
and Chief Executive Officer
M. Colin Connolly
President and Chief Operating Officer
Gregg D. Adzema
Executive Vice President
and Chief Financial Officer
John S. McColl
Executive Vice President
Pamela F. Roper
Executive Vice President, General Counsel
and Corporate Secretary
John D. Harris, Jr.
Senior Vice President, Chief Accounting Officer,
Treasurer and Assistant Corporate Secretary
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, 2017 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 3344 Peachtree
Road, NE, Suite 1800, Atlanta, Georgia 30326.
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
Vice President, Investor Relations
Telephone Number: 404.407.1898
Fax Number: 404.407.1899
marliquesinberry@cousinsproperties.com
3344 Peachtree Road NE, Suite 1800, Atlanta, GA 30326 | 404.407.1000 | cousins.com