COUSINS PROPERTIES INCORPORATED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2007
OR
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o |
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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: 0-3576
COUSINS PROPERTIES INCORPORATED
(Exact name of registrant as specified in its charter)
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GEORGIA
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58-0869052 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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191 Peachtree Street, Suite 3600, Atlanta, Georgia
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30303-1740 |
(Address of principal executive offices)
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(Zip Code) |
(404) 407-1000
(Registrants telephone number, including area code)
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.
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Class
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Outstanding at July 31, 2007 |
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Common Stock, $1 par value per share
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51,851,287 shares |
FORWARD-LOOKING STATEMENTS
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. These include, but are not
limited to, general and local economic conditions, local real estate conditions, the activity of
others developing competitive projects, the risks associated with development projects (such as
delay, cost overruns and leasing/sales risk of new properties), the cyclical nature of the real
estate industry, the financial condition of existing tenants, interest rates, the Companys ability
to obtain favorable financing or zoning, environmental matters, the effects of terrorism, the
ability of the Company to close properties under contract and other risks detailed from time to
time in the Companys filings with the Securities and Exchange Commission, including those
described in Item 1A in the Companys Annual Report on Form 10-K for the year ended December 31,
2006. The words believes, expects, anticipates, estimates and similar expressions are
intended to identify forward-looking statements. Although the Company believes that its plans,
intentions and expectations reflected in any forward-looking statements are reasonable, the Company
can give no assurance that such plans, intentions or expectations will be achieved. Such
forward-looking statements are based on current expectations and speak as of the date of such
statements. The Company undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of future events, new information or otherwise.
3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share and per share amounts)
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June 30, |
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December 31, |
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2007 |
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2006 |
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ASSETS |
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PROPERTIES: |
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Operating
properties, net of accumulated depreciation
of $123,650 and $115,723 in 2007 and 2006, respectively |
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$ |
575,116 |
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$ |
472,375 |
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Operating properties held-for-sale, net of accumulated depreciation
of $7,139 and $142 in 2007 and 2006, respectively |
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5,197 |
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1,470 |
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Land held for investment or future development |
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93,085 |
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101,390 |
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Projects under development |
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358,807 |
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300,382 |
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Residential lots under development |
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34,981 |
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27,624 |
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Total properties |
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1,067,186 |
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903,241 |
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CASH AND CASH EQUIVALENTS |
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16,913 |
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11,538 |
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RESTRICTED CASH |
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2,895 |
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2,824 |
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NOTES AND OTHER RECEIVABLES, net of allowance for
doubtful accounts of $680 and $501 in 2007 and 2006, respectively |
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33,958 |
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32,138 |
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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES |
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187,679 |
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181,918 |
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OTHER ASSETS |
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56,507 |
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65,094 |
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TOTAL ASSETS |
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$ |
1,365,138 |
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$ |
1,196,753 |
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LIABILITIES AND STOCKHOLDERS INVESTMENT |
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NOTES PAYABLE |
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$ |
477,971 |
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$ |
315,149 |
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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
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63,227 |
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55,538 |
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DEFERRED GAIN |
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170,909 |
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154,104 |
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DEPOSITS AND DEFERRED INCOME |
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3,301 |
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2,062 |
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TOTAL LIABILITIES |
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715,408 |
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526,853 |
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MINORITY INTERESTS |
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47,007 |
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43,985 |
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COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 3) |
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STOCKHOLDERS INVESTMENT: |
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Preferred stock, 20,000,000 shares authorized, $1 par value: |
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7.75% Series A cumulative redeemable preferred stock, $25 liquidation
preference; 4,000,000 shares issued and outstanding |
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100,000 |
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100,000 |
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7.50% Series B cumulative redeemable preferred stock, $25 liquidation
preference; 4,000,000 shares issued and outstanding |
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100,000 |
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100,000 |
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Common stock, $1 par value, 150,000,000 shares authorized, 54,734,951 and
54,439,310 shares issued in 2007 and 2006, respectively |
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54,735 |
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54,439 |
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Additional paid-in capital |
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344,828 |
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336,974 |
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Treasury stock at cost, 2,941,582 and 2,691,582 shares in 2007 and 2006,
respectively |
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(72,593 |
) |
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(64,894 |
) |
Cumulative undistributed net income |
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75,753 |
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99,396 |
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TOTAL STOCKHOLDERS INVESTMENT |
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602,723 |
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625,915 |
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TOTAL LIABILITIES AND STOCKHOLDERS INVESTMENT |
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$ |
1,365,138 |
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$ |
1,196,753 |
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See accompanying notes to condensed consolidated financial statements.
4
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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REVENUES: |
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Rental property revenues |
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$ |
25,499 |
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$ |
23,580 |
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$ |
49,629 |
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$ |
45,852 |
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Fee income |
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9,860 |
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7,755 |
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17,926 |
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16,136 |
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Multi-family residential unit sales |
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15,136 |
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21,715 |
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Residential lot and outparcel sales |
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1,476 |
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3,129 |
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2,902 |
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7,634 |
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Interest and other |
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840 |
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90 |
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4,519 |
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452 |
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37,675 |
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49,690 |
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74,976 |
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91,789 |
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COSTS AND EXPENSES: |
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Rental property operating expenses |
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11,341 |
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8,589 |
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21,358 |
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16,915 |
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General and administrative expenses |
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15,604 |
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13,476 |
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30,294 |
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27,051 |
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Depreciation and amortization |
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8,721 |
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7,655 |
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18,082 |
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15,340 |
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Multi-family residential unit cost of sales |
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12,377 |
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17,735 |
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Residential lot and outparcel cost of sales |
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1,085 |
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2,298 |
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2,293 |
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5,501 |
|
Interest expense |
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|
531 |
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4,880 |
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|
531 |
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8,494 |
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Loss on extinguishment of debt |
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2,764 |
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2,764 |
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Other |
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758 |
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|
481 |
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1,118 |
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935 |
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38,040 |
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52,520 |
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73,676 |
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94,735 |
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INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES,
MINORITY INTEREST AND INCOME FROM UNCONSOLIDATED JOINT VENTURES |
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(365 |
) |
|
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(2,830 |
) |
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1,300 |
|
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|
(2,946 |
) |
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BENEFIT (PROVISION) FOR INCOME TAXES FROM OPERATIONS |
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1,073 |
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(1,926 |
) |
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2,100 |
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(4,296 |
) |
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MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES |
|
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(842 |
) |
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|
(1,313 |
) |
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(1,704 |
) |
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(2,391 |
) |
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INCOME FROM UNCONSOLIDATED JOINT VENTURES |
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4,101 |
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8,404 |
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7,809 |
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20,527 |
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INCOME FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE
OF INVESTMENT PROPERTIES |
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3,967 |
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2,335 |
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9,505 |
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10,894 |
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GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE
INCOME TAX PROVISION |
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40 |
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61 |
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4,480 |
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|
866 |
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INCOME FROM CONTINUING OPERATIONS |
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|
4,007 |
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|
2,396 |
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|
13,985 |
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11,760 |
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DISCONTINUED OPERATIONS, NET OF APPLICABLE INCOME TAX
PROVISION: |
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Income (loss) from discontinued operations |
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|
200 |
|
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|
(2,202 |
) |
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|
278 |
|
|
|
451 |
|
Gain on sale of investment properties |
|
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|
135 |
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|
8,164 |
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|
326 |
|
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|
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|
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|
200 |
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(2,067 |
) |
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8,442 |
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|
777 |
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NET INCOME |
|
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4,207 |
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|
|
329 |
|
|
|
22,427 |
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|
12,537 |
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DIVIDENDS TO PREFERRED STOCKHOLDERS |
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(3,812 |
) |
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(3,812 |
) |
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(7,625 |
) |
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(7,625 |
) |
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NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS |
|
$ |
395 |
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|
$ |
(3,483 |
) |
|
$ |
14,802 |
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$ |
4,912 |
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PER SHARE INFORMATION BASIC: |
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Income (loss) from continuing operations |
|
$ |
0.01 |
|
|
$ |
(0.03 |
) |
|
$ |
0.13 |
|
|
$ |
0.08 |
|
Income (loss) from discontinued operations |
|
|
0.00 |
|
|
|
(0.04 |
) |
|
|
0.16 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
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|
Basic net income (loss) available to common stockholders |
|
$ |
0.01 |
|
|
$ |
(0.07 |
) |
|
$ |
0.29 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
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PER SHARE INFORMATION DILUTED: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.01 |
|
|
$ |
(0.03 |
) |
|
$ |
0.12 |
|
|
$ |
0.08 |
|
Income (loss) from discontinued operations |
|
|
0.00 |
|
|
|
(0.04 |
) |
|
|
0.16 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) available to common stockholders |
|
$ |
0.01 |
|
|
$ |
(0.07 |
) |
|
$ |
0.28 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
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|
CASH DIVIDENDS DECLARED PER COMMON SHARE |
|
$ |
0.37 |
|
|
$ |
0.37 |
|
|
$ |
0.74 |
|
|
$ |
0.74 |
|
|
|
|
|
|
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|
WEIGHTED AVERAGE SHARES |
|
|
51,825 |
|
|
|
50,385 |
|
|
|
51,772 |
|
|
|
50,377 |
|
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|
DILUTED WEIGHTED AVERAGE SHARES |
|
|
53,306 |
|
|
|
50,385 |
|
|
|
53,440 |
|
|
|
52,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2007 |
|
|
2006 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
22,427 |
|
|
$ |
12,537 |
|
Adjustments to reconcile net income to net cash flows provided by operating activities: |
|
|
|
|
|
|
|
|
Gain on sale of investment properties, net of income tax provision |
|
|
(12,644 |
) |
|
|
(1,192 |
) |
Loss on extinguishment of debt |
|
|
|
|
|
|
2,764 |
|
Depreciation and amortization |
|
|
18,227 |
|
|
|
24,512 |
|
Amortization of deferred financing costs |
|
|
513 |
|
|
|
536 |
|
Stock-based compensation |
|
|
2,752 |
|
|
|
3,309 |
|
Effect of recognizing rental revenues on a straight-line or market basis |
|
|
346 |
|
|
|
(2,053 |
) |
Income from unconsolidated joint ventures less than (in excess of) operating distributions |
|
|
(3,200 |
) |
|
|
1,160 |
|
Residential lot, outparcel and multi-family cost of sales, net of closing costs paid |
|
|
2,264 |
|
|
|
22,787 |
|
Residential lot, outparcel and multi-family acquisition and development expenditures |
|
|
(19,316 |
) |
|
|
(10,344 |
) |
Income tax benefit from stock options |
|
|
(780 |
) |
|
|
(286 |
) |
Minority interest in income of consolidated entities |
|
|
1,704 |
|
|
|
1,596 |
|
Changes in other operating assets and liabilities: |
|
|
|
|
|
|
|
|
Change in other receivables |
|
|
(1,839 |
) |
|
|
13,266 |
|
Change in accounts payable and accrued liabilities |
|
|
8,368 |
|
|
|
9,370 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
18,822 |
|
|
|
77,962 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from investment property sales |
|
|
21,280 |
|
|
|
1,522 |
|
Proceeds from venture formation |
|
|
19,338 |
|
|
|
163,339 |
|
Property acquisition and development expenditures |
|
|
(158,102 |
) |
|
|
(152,760 |
) |
Investment in unconsolidated joint ventures |
|
|
(4,363 |
) |
|
|
(5,583 |
) |
Distributions from unconsolidated joint ventures in excess of income |
|
|
1,805 |
|
|
|
7,740 |
|
Proceeds from (investment in) notes receivable, net |
|
|
2,259 |
|
|
|
(1,196 |
) |
Change in other assets, net |
|
|
(9,092 |
) |
|
|
(9,100 |
) |
Change in restricted cash |
|
|
(71 |
) |
|
|
1,448 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
(126,946 |
) |
|
|
5,410 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from credit and construction facilities |
|
|
413,300 |
|
|
|
628,801 |
|
Repayment of credit and construction facilities |
|
|
(253,200 |
) |
|
|
(642,436 |
) |
Payment of loan issuance costs |
|
|
(43 |
) |
|
|
(1,995 |
) |
Proceeds from other notes payable or construction loans |
|
|
4,003 |
|
|
|
8,726 |
|
Repayment of other notes payable or construction loans |
|
|
(1,281 |
) |
|
|
(21,168 |
) |
Common stock issued, net of expenses |
|
|
4,618 |
|
|
|
3,236 |
|
Purchase of treasury stock |
|
|
(7,699 |
) |
|
|
|
|
Income tax benefit from stock options |
|
|
780 |
|
|
|
286 |
|
Common dividends paid |
|
|
(38,445 |
) |
|
|
(37,548 |
) |
Preferred dividends paid |
|
|
(7,625 |
) |
|
|
(7,625 |
) |
Contributions from minority partners |
|
|
348 |
|
|
|
247 |
|
Distributions to minority partners |
|
|
(1,257 |
) |
|
|
(7,116 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
113,499 |
|
|
|
(76,592 |
) |
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
5,375 |
|
|
|
6,780 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
11,538 |
|
|
|
9,336 |
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
16,913 |
|
|
$ |
16,116 |
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
6
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2007
(UNAUDITED)
1. BASIS OF PRESENTATION AND NEW ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The condensed consolidated financial statements included herein include the accounts of
Cousins Properties Incorporated (Cousins) and its consolidated subsidiaries, including Cousins
Real Estate Corporation and its subsidiaries (CREC). All of the entities included in the
condensed consolidated financial statements are hereinafter referred to collectively as the
Company.
Cousins has elected to be taxed as a real estate investment trust (REIT) and intends to,
among other things, distribute 100% of its federal taxable income to stockholders, thereby
eliminating any liability for federal income taxes. Therefore, the results included herein do not
include a federal income tax provision for Cousins. CREC operates as a taxable REIT subsidiary and
is taxed separately from Cousins as a C-Corporation. Accordingly, the condensed consolidated
statements of income include a provision for CRECs income taxes.
The condensed consolidated financial statements are unaudited and were prepared by the Company
in accordance with accounting principles generally accepted in the United States of America
(GAAP) for interim financial information and in accordance with the rules and regulations of the
Securities and Exchange Commission (the SEC). In the opinion of management, these financial
statements reflect all adjustments necessary (which adjustments are of a normal and recurring
nature) for the fair presentation of the Companys financial position as of June 30, 2007 and
results of operations for the three and six month periods ended June 30, 2007 and 2006. Results of
operations for the three and six months ended June 30, 2007 are not necessarily indicative of
results expected for the full year. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to
the rules and regulations of the SEC. These condensed financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2006. The accounting policies
employed are materially the same as those shown in Note 2 to the consolidated financial statements
included in such Form 10-K.
In periods prior to the fourth quarter of 2006, the Company recorded reimbursements of salary
and benefits of on-site employees pursuant to management agreements with third parties and
unconsolidated joint ventures as reductions of general and administrative expenses. In the fourth
quarter of 2006, the Company determined that these amounts should be recorded as revenues in
accordance with Emerging Issues Task Force (EITF) No. 99-19 and, accordingly, began recording
these reimbursements in Fee Income on the Condensed Consolidated Statements of Income. Prior
periods have been revised to conform to this new presentation. As a result, Fee Income and General
and Administrative Expenses have increased by $3.6 million and $7.2 million in the three and six
months ended June 30, 2006, respectively, when compared to amounts previously reported.
New Accounting Pronouncement
Effective January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainties in Income Taxes (FIN 48). FIN 48 prescribes
a recognition threshold and measurement attribute for recognizing tax return positions in the
financial statements as those which are more-likely-than-not to be sustained upon examination by
the taxing authority. FIN 48 also provides guidance on derecognition, classification, interest and
penalties,
7
accounting for income tax uncertainties in interim periods and the level of disclosures
associated with any recorded income tax uncertainties. The Company believes that all of its
material income tax filing positions and deductions would be sustained upon audit under current tax
laws and regulations. Therefore, the Company recorded no reserves and no cumulative effect
adjustment in the financial statements in conjunction with the adoption of FIN 48, and there was no
impact on the Companys financial position, results of operations or cash flows.
2. CASH FLOWS SUPPLEMENTAL INFORMATION
The following table summarizes supplemental information related to cash flows ($ in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2007 |
|
|
2006 |
|
Interest paid, net of amounts capitalized |
|
$ |
|
|
|
$ |
4,914 |
|
Income taxes paid, net of refunds |
|
|
110 |
|
|
|
5,988 |
|
|
Non-Cash Transactions |
|
|
|
|
|
|
|
|
Transfer from operating properties to land |
|
|
2,392 |
|
|
|
7,250 |
|
Transfer from projects under development to operating properties |
|
|
80,730 |
|
|
|
|
|
Transfer from other assets to projects under development |
|
|
15,491 |
|
|
|
|
|
Transfer from other assets to operating properties |
|
|
136 |
|
|
|
|
|
Change in accrued expenditures excluded from development and acquisition expenditures |
|
|
441 |
|
|
|
9,420 |
|
Transfer from land to operating properties |
|
|
2,868 |
|
|
|
|
|
Transfer from land to projects under development |
|
|
18,997 |
|
|
|
4,783 |
|
Transfer from operating properties to operating properties held-for-sale |
|
|
5,197 |
|
|
|
|
|
Transfer from projects under development to land |
|
|
|
|
|
|
1,486 |
|
SAB 51 gain, net of tax, recorded in investment in
joint ventures and additional paid-in capital |
|
|
|
|
|
|
453 |
|
Transfer related to venture formation: |
|
|
|
|
|
|
|
|
Projects under development to investment in joint venture |
|
|
|
|
|
|
3,980 |
|
Operating properties to investment in joint venture |
|
|
|
|
|
|
16,019 |
|
Transfer from other assets to land |
|
|
|
|
|
|
228 |
|
3. NOTES PAYABLE, INTEREST EXPENSE AND COMMITMENTS AND CONTINGENCIES
The following table summarizes the terms and amounts of the notes payable outstanding at June
30, 2007 and December 31, 2006 ($ in thousands):
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
Outstanding at |
|
|
|
Interest |
|
|
Period |
|
|
Final |
|
|
June 30, |
|
|
December 31, |
|
Description |
|
Rate |
|
|
(Years) |
|
|
Maturity |
|
|
2007 |
|
|
2006 |
|
Credit
facility (a maximum of $400,000), unsecured |
|
LIBOR + |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8% to 1.3% |
|
|
4/N/A |
|
|
|
3/7/10 |
|
|
$ |
267,300 |
|
|
$ |
128,200 |
|
Construction
facility (a maximum of $100,000), unsecured |
|
LIBOR + |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8% to 1.3% |
|
|
4/N/A |
|
|
|
3/7/10 |
|
|
|
85,700 |
|
|
|
64,700 |
|
333/555 North Point Center East
mortgage note |
|
|
7.00 |
% |
|
|
10/25 |
|
|
|
11/1/11 |
|
|
|
29,223 |
|
|
|
29,571 |
|
Meridian Mark Plaza mortgage note |
|
|
8.27 |
% |
|
|
10/28 |
|
|
|
9/1/10 |
|
|
|
23,403 |
|
|
|
23,602 |
|
100/200 North Point Center East
mortgage note (see discussion below) |
|
|
5.39 |
% |
|
|
5/30 |
|
|
|
6/1/12 |
|
|
|
25,000 |
|
|
|
22,365 |
|
The Points at Waterview mortgage note |
|
|
5.66 |
% |
|
|
10/25 |
|
|
|
1/1/16 |
|
|
|
18,003 |
|
|
|
18,183 |
|
600 University Park Place mortgage note |
|
|
7.38 |
% |
|
|
10/30 |
|
|
|
8/10/11 |
|
|
|
13,073 |
|
|
|
13,168 |
|
Lakeshore Park Plaza mortgage note |
|
|
6.78 |
% |
|
|
10/25 |
|
|
|
11/1/08 |
|
|
|
8,936 |
|
|
|
9,082 |
|
King Mill Project I member loan
(a maximum of $2,849) |
|
|
9.00 |
% |
|
|
3/N/A |
|
|
|
8/30/08 |
|
|
|
2,702 |
|
|
|
2,625 |
|
King Mill Project I second member loan
(a maximum of $2,349) |
|
|
9.00 |
% |
|
|
3/N/A |
|
|
|
6/26/09 |
|
|
|
1,860 |
|
|
|
1,815 |
|
Jefferson Mill Project member loan
(a maximum of $3,156) |
|
|
9.00 |
% |
|
|
3/N/A |
|
|
|
9/13/09 |
|
|
|
2,405 |
|
|
|
1,432 |
|
Other miscellaneous notes |
|
Various |
|
Various |
|
Various |
|
|
366 |
|
|
|
406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
477,971 |
|
|
$ |
315,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had $267.3 million drawn on its unsecured credit facility as of June 30, 2007
and, net of $1.1 million reserved for outstanding letters of credit, the Company had $131.6 million
available for future borrowings under this facility. The Company had $85.7 million drawn on its
construction facility as of June 30, 2007, with $14.3 million available for future borrowings under
this facility.
On June 1, 2007, the Company refinanced its non-recourse mortgage note payable secured by the
100 and 200 North Point Center East office buildings. The new $25 million non-recourse mortgage
note payable has an interest rate of 5.39% and a maturity date of June 1, 2012. This note replaced
the former non-recourse mortgage note payable on these properties, which was due to mature on
August 1, 2007 and had an interest rate of 7.86%.
On July 9, 2007, the Company entered into a $100 million bridge loan with a bank. The bridge
loan matures on October 9, 2007, with an option to extend to January 9, 2008, and bears an interest
rate of LIBOR plus 0.75%. The bridge loan contains financial and operating covenants that are
identical to those of its credit facility.
For the three and six months ended June 30, 2007 and 2006, interest expense was recorded as
follows ($ in thousands):
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Incurred |
|
$ |
7,086 |
|
|
$ |
9,774 |
|
|
$ |
13,178 |
|
|
$ |
18,429 |
|
Capitalized
|
|
|
(6,555 |
) |
|
|
(4,894 |
) |
|
|
(12,647 |
) |
|
|
(9,935 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expensed |
|
$ |
531 |
|
|
$ |
4,880 |
|
|
$ |
531 |
|
|
$ |
8,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2007, the Company had outstanding letters of credit and performance bonds of $20.6
million. The Company has several projects under development and redevelopment for which it
estimates total future funding commitments of $498.7 million at June 30, 2007. Additionally, the
Company has future obligations as a lessor of office, retail and industrial space to fund
approximately $4.3 million of tenant improvements as of June 30, 2007. As a lessee, the Company
has future obligations under ground and office leases of approximately $16.8 million at June 30,
2007.
4. EARNINGS PER SHARE
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. Net income
per share-diluted is calculated as net income available to common stockholders divided by the
diluted weighted average number of common shares outstanding during the period. Diluted weighted
average number of common shares is calculated to reflect the potential dilution under the treasury
stock method that would occur if stock options, restricted stock or other contracts to issue common
stock were exercised and resulted in additional common shares outstanding. The numerator used in
the Companys per share calculations is the same for both basic and diluted net income per share.
Weighted average shares-basic and weighted average shares-diluted were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June
30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Weighted average shares-basic |
|
|
51,825 |
|
|
|
50,385 |
|
|
|
51,772 |
|
|
|
50,377 |
|
Dilutive potential common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
1,437 |
|
|
|
|
|
|
|
1,629 |
|
|
|
1,481 |
|
Restricted stock |
|
|
44 |
|
|
|
|
|
|
|
39 |
|
|
|
161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares-diluted |
|
|
53,306 |
|
|
|
50,385 |
|
|
|
53,440 |
|
|
|
52,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive options not included |
|
|
940 |
|
|
|
2,540 |
|
|
|
892 |
|
|
|
895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Because the Company reported a net loss available to common stockholders for the three months
ended June 30, 2006, the effect of all outstanding options on per share earnings was anti-dilutive,
and these options were excluded from the calculation of weighted average shares-diluted.
5. STOCK-BASED COMPENSATION
The Company adopted Statement of Financial Accounting Standard (SFAS) No. 123(R),
Share-Based Payment, on January 1, 2006, using the modified prospective method. SFAS 123(R)
requires that companies recognize as compensation expense the grant date fair value of share-based
awards over the required service period of the awards. The Company has several types of
stock-based compensation stock options, restricted stock and restricted stock units which are
described in Note 7 of Notes to Consolidated Financial Statements in the Companys Annual Report
on Form
10
10-K for the year ended December 31, 2006. The Company uses the Black-Scholes model to
value its new stock option grants under SFAS 123(R) and recognizes compensation expense in general
and administrative expense in the Condensed Consolidated Statements of Income over the related
awards vesting period. A portion of share-based payment expense is capitalized to projects under
development in accordance with SFAS No. 67. SFAS 123(R) also requires the Company to estimate
forfeitures in calculating the expense related to stock-based compensation, and to reflect the
benefits of tax deductions in excess of recognized compensation cost to be reported as both a
financing cash inflow and an operating cash outflow.
The Company expensed approximately $1.2 million for each of the three months ended June 30,
2007 and 2006, and $2.8 million and $2.6 million for the six months ended June 30, 2007 and 2006,
respectively, for stock-based compensation, after the effect of capitalization to projects under
development and income tax benefit. As of June 30, 2007, the Company had $16.7 million of total
unrecognized compensation cost related to stock-based compensation, which will be recognized over a
weighted average period of 2.6 years.
The Company estimates the fair value of each option grant on the date of grant using the
Black-Scholes option-pricing model. The risk free interest rate utilized in the Black-Scholes
calculation is the interest rate on U.S. Government Bonds and Notes having the same life as the
estimated life of the Companys option awards. Expected life of the options granted was computed
using historical data reflecting actual hold periods plus an estimated hold period for unexercised
options outstanding using the mid-point between 2007 and the expiration date. Expected volatility
is based on the historical volatility of the Companys stock over a period relevant to the related
stock option grant. The assumed dividend yield is based on the annual dividend rate for regular
dividends at the time of grant. Below are the Black-Scholes inputs used to calculate the
weighted-average fair value of 2007 option grants:
|
|
|
|
|
Assumptions: |
|
|
|
|
Risk free interest rate |
|
4.62% |
Expected life |
|
6.60 years |
Expected volatility |
|
21.10% |
Expected dividend yield |
|
4.67% |
|
|
|
|
|
Result: |
|
|
|
|
Weighted-average fair value of options granted |
|
$ 5.09 |
The following table summarizes stock option activity during the six months ended June 30,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Weighted- |
|
|
Aggregate |
|
|
Average |
|
|
|
Number of |
|
|
Average |
|
|
Intrinsic |
|
|
Remaining |
|
|
|
Options |
|
|
Exercise |
|
|
Value |
|
|
Contractual |
|
|
|
(in thousands) |
|
|
Price |
|
|
(in thousands) |
|
|
Life (years) |
|
Outstanding at December 31, 2006 |
|
|
6,117 |
|
|
$ |
23.27 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
54 |
|
|
|
32.67 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(307 |
) |
|
|
16.36 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(45 |
) |
|
|
30.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007 |
|
|
5,819 |
|
|
$ |
23.67 |
|
|
$ |
43,537 |
|
|
|
6.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007 |
|
|
3,843 |
|
|
$ |
20.03 |
|
|
$ |
42,717 |
|
|
|
5.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised during the three and six months ended June
30, 2007 was $0.2 million and $6.2 million, respectively.
11
The following table summarizes restricted stock activity during the six months ended June 30,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
Number of |
|
|
Average |
|
|
|
Shares |
|
|
Grant Date |
|
|
|
(in thousands) |
|
|
Fair Value |
|
Non-vested stock at December 31, 2006 |
|
|
164 |
|
|
|
$30.39 |
|
Vested |
|
|
(8 |
) |
|
|
30.44 |
|
Forfeited |
|
|
(3 |
) |
|
|
31.06 |
|
|
|
|
|
|
|
|
Non-vested stock at June 30, 2007 |
|
|
153 |
|
|
|
$30.37 |
|
|
|
|
|
|
|
|
Restricted stock units (RSU) are accounted for as liability awards under SFAS 123(R) and
employees are paid cash based upon the value of the Companys stock upon vesting. The following
table summarizes RSU activity for the six months ended June 30, 2007 (in thousands):
|
|
|
|
|
Outstanding at December 31, 2006 |
|
|
477 |
|
Granted |
|
|
5 |
|
Vested |
|
|
(3 |
) |
Forfeited |
|
|
(8 |
) |
|
|
|
|
Outstanding at June 30, 2007 |
|
|
471 |
|
|
|
|
|
6. PROPERTY TRANSACTIONS
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, requires that
the gains and losses from the disposition of certain real estate assets and the related historical
results of operations of certain disposed of or held-for-sale assets be included in a separate
section, discontinued operations, in the statements of income for all periods presented. SFAS No.
144 also requires that assets and liabilities of held-for-sale properties, as defined, be
separately categorized on the balance sheet in the period that they are deemed held-for-sale.
In the second quarter of 2007, the Company executed a contract to sell 3301 Windy Ridge
Parkway, a 107,000 square foot office building in Atlanta, Georgia, and the Company determined that
this property met the requirements of a held-for-sale property under SFAS No. 144. The Companys
basis in this building was classified as held-for-sale on the June 30, 2007 Condensed Consolidated
Balance Sheet, and there are no significant liabilities or other assets related to this property.
3301 Windy Ridge Parkway was sold in July 2007 for a sales price of $16.1 million and an estimated
gain of approximately $10 million.
In 2006, the Company sold seven of its 12 stand-alone retail sites under ground leases near
North Point Mall in suburban Atlanta, Georgia. The remaining five sites closed in the first quarter
of 2007. The Companys basis in the five sites sold in 2007 was separately classified as
held-for-sale on the December 31, 2006 Condensed Consolidated Balance Sheet, and there are no
significant liabilities or other assets associated with this project. Also in 2006, the Company
sold Frost Bank Tower, a 531,000 square foot office building in Austin, Texas and The Avenue of the
Peninsula, a 374,000 square foot retail center in Rolling Hills Estates, California. The
operations of all of these projects are included in discontinued operations in the accompanying
Condensed Consolidated Statements of Income.
The following details the components of income from discontinued operations ($ in thousands):
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Rental property revenues |
|
$ |
358 |
|
|
$ |
6,218 |
|
|
$ |
769 |
|
|
$ |
12,390 |
|
Other revenues |
|
|
7 |
|
|
|
771 |
|
|
|
42 |
|
|
|
3,092 |
|
Rental property operating expenses |
|
|
(179 |
) |
|
|
(3,157 |
) |
|
|
(388 |
) |
|
|
(5,859 |
) |
Depreciation and amortization |
|
|
14 |
|
|
|
(6,034 |
) |
|
|
(145 |
) |
|
|
(9,172 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
200 |
|
|
$ |
(2,202 |
) |
|
$ |
278 |
|
|
$ |
451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gain on sale of the applicable properties included in Discontinued Operations is as
follows ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
North Point Ground Leases |
|
$ |
|
|
|
$ |
|
|
|
$ |
8,164 |
|
|
$ |
|
|
Other |
|
|
|
|
|
|
135 |
|
|
|
|
|
|
|
326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
135 |
|
|
$ |
8,164 |
|
|
$ |
326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In July 2007, the Company purchased approximately 71 acres of land in Kansas City,
Missouri for approximately $21.4 million. The Company is developing an approximately 680,000
square foot retail center on this land, Tiffany Springs MarketCenter.
7. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Company describes its investments in unconsolidated joint ventures in Note 6 to its Annual
Report on Form 10-K for the year ended December 31, 2006. The following table summarizes balance
sheet financial data of unconsolidated joint ventures in which the Company had ownership interests
as of June 30, 2007 and December 31, 2006 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's |
|
|
|
Total Assets |
|
|
Total Debt |
|
|
Total Equity |
|
|
Investment |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
CP Venture IV LLC entities |
|
$ |
366,592 |
|
|
$ |
352,798 |
|
|
$ |
38,759 |
|
|
$ |
39,364 |
|
|
$ |
306,602 |
|
|
$ |
294,169 |
|
|
$ |
18,297 |
|
|
$ |
18,610 |
|
CP Venture LLC entities |
|
|
117,318 |
|
|
|
118,861 |
|
|
|
|
|
|
|
|
|
|
|
115,878 |
|
|
|
117,716 |
|
|
|
5,047 |
|
|
|
5,157 |
|
Charlotte Gateway Village, LLC |
|
|
176,883 |
|
|
|
178,784 |
|
|
|
139,345 |
|
|
|
144,654 |
|
|
|
35,067 |
|
|
|
32,912 |
|
|
|
10,485 |
|
|
|
10,502 |
|
TRG Columbus Development Venture, Ltd. |
|
|
241,576 |
|
|
|
154,281 |
|
|
|
103,704 |
|
|
|
76,861 |
|
|
|
67,802 |
|
|
|
55,724 |
|
|
|
32,215 |
|
|
|
27,619 |
|
CL Realty, L.L.C. |
|
|
125,752 |
|
|
|
117,820 |
|
|
|
3,883 |
|
|
|
5,357 |
|
|
|
111,449 |
|
|
|
108,316 |
|
|
|
69,619 |
|
|
|
66,979 |
|
Temco Associates |
|
|
64,431 |
|
|
|
66,001 |
|
|
|
3,512 |
|
|
|
3,746 |
|
|
|
59,145 |
|
|
|
60,786 |
|
|
|
30,543 |
|
|
|
31,223 |
|
Crawford Long CPI, LLC |
|
|
43,340 |
|
|
|
42,524 |
|
|
|
51,987 |
|
|
|
52,404 |
|
|
|
(11,109 |
) |
|
|
(10,664 |
) |
|
|
(4,295 |
) |
|
|
(4,037 |
) |
CF Murfreesboro Associates |
|
|
100,422 |
|
|
|
54,356 |
|
|
|
60,250 |
|
|
|
21,428 |
|
|
|
21,698 |
|
|
|
21,698 |
|
|
|
12,172 |
|
|
|
11,975 |
|
Palisades West, LLC |
|
|
27,531 |
|
|
|
26,987 |
|
|
|
|
|
|
|
|
|
|
|
25,244 |
|
|
|
25,072 |
|
|
|
12,694 |
|
|
|
11,959 |
|
Ten Peachtree Place Associates |
|
|
26,369 |
|
|
|
27,312 |
|
|
|
28,614 |
|
|
|
28,849 |
|
|
|
(2,912 |
) |
|
|
(1,796 |
) |
|
|
(2,961 |
) |
|
|
(2,411 |
) |
Wildwood Associates |
|
|
21,777 |
|
|
|
21,816 |
|
|
|
|
|
|
|
|
|
|
|
21,634 |
|
|
|
21,730 |
|
|
|
(1,433 |
) |
|
|
(1,385 |
) |
CSC Associates, L.P. |
|
|
1,846 |
|
|
|
2,998 |
|
|
|
|
|
|
|
|
|
|
|
392 |
|
|
|
1,410 |
|
|
|
196 |
|
|
|
706 |
|
Pine Mountain Builders, LLC |
|
|
4,833 |
|
|
|
3,999 |
|
|
|
1,608 |
|
|
|
614 |
|
|
|
2,454 |
|
|
|
2,347 |
|
|
|
1,363 |
|
|
|
1,191 |
|
Handy Road Associates, LLC |
|
|
5,263 |
|
|
|
5,349 |
|
|
|
3,204 |
|
|
|
3,204 |
|
|
|
1,987 |
|
|
|
2,133 |
|
|
|
2,129 |
|
|
|
2,209 |
|
CPI/FSP I, L.P. |
|
|
3,286 |
|
|
|
3,307 |
|
|
|
|
|
|
|
|
|
|
|
3,166 |
|
|
|
3,190 |
|
|
|
1,608 |
|
|
|
1,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,327,219 |
|
|
$ |
1,177,193 |
|
|
$ |
434,866 |
|
|
$ |
376,481 |
|
|
$ |
758,497 |
|
|
$ |
734,743 |
|
|
$ |
187,679 |
|
|
$ |
181,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes income statement financial data of unconsolidated joint
ventures in which the Company had ownership interests, for the six months ended June 30, 2007 and
2006 ($ in thousands):
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys Share of |
|
|
|
Total Revenues |
|
|
Net Income (Loss) |
|
|
Net Income (Loss) |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
CP Venture IV LLC entities |
|
$ |
16,311 |
|
|
$ |
158 |
|
|
$ |
2,139 |
|
|
$ |
12 |
|
|
$ |
662 |
|
|
$ |
28 |
|
CP Venture LLC entities |
|
|
10,740 |
|
|
|
11,460 |
|
|
|
5,931 |
|
|
|
4,190 |
|
|
|
615 |
|
|
|
509 |
|
Charlotte Gateway Village, LLC |
|
|
15,399 |
|
|
|
15,282 |
|
|
|
2,761 |
|
|
|
2,445 |
|
|
|
588 |
|
|
|
588 |
|
TRG Columbus Development Venture, Ltd. |
|
|
45,628 |
|
|
|
40,278 |
|
|
|
13,153 |
|
|
|
11,604 |
|
|
|
4,228 |
|
|
|
4,426 |
|
CL Realty, L.L.C. |
|
|
5,037 |
|
|
|
12,121 |
|
|
|
3,553 |
|
|
|
7,219 |
|
|
|
1,195 |
|
|
|
3,421 |
|
Temco Associates |
|
|
3,595 |
|
|
|
31,066 |
|
|
|
359 |
|
|
|
9,839 |
|
|
|
196 |
|
|
|
4,645 |
|
Crawford Long CPI, LLC |
|
|
5,337 |
|
|
|
5,277 |
|
|
|
753 |
|
|
|
553 |
|
|
|
352 |
|
|
|
253 |
|
Palisades West, LLC |
|
|
181 |
|
|
|
|
|
|
|
172 |
|
|
|
|
|
|
|
56 |
|
|
|
|
|
Ten Peachtree Place Associates |
|
|
3,240 |
|
|
|
3,544 |
|
|
|
159 |
|
|
|
427 |
|
|
|
87 |
|
|
|
255 |
|
Wildwood Associates |
|
|
3 |
|
|
|
|
|
|
|
(95 |
) |
|
|
(97 |
) |
|
|
(48 |
) |
|
|
(49 |
) |
CSC Associates, L.P. |
|
|
(74 |
) |
|
|
26,404 |
|
|
|
(71 |
) |
|
|
10,929 |
|
|
|
(36 |
) |
|
|
5,483 |
|
Pine Mountain Builders, LLC |
|
|
1,711 |
|
|
|
10,008 |
|
|
|
107 |
|
|
|
1,123 |
|
|
|
13 |
|
|
|
436 |
|
Handy Road Associates, LLC |
|
|
4 |
|
|
|
133 |
|
|
|
(145 |
) |
|
|
(79 |
) |
|
|
(84 |
) |
|
|
(198 |
) |
CPI/FSP I, L.P. |
|
|
|
|
|
|
|
|
|
|
(25 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
Brad Cous Golf Venutre, Ltd. |
|
|
|
|
|
|
178 |
|
|
|
2 |
|
|
|
3,131 |
|
|
|
1 |
|
|
|
1,108 |
|
Other |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
93 |
|
|
|
(3 |
) |
|
|
(378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
107,112 |
|
|
$ |
155,914 |
|
|
$ |
28,753 |
|
|
$ |
51,389 |
|
|
$ |
7,809 |
|
|
$ |
20,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. OTHER ASSETS
At June 30, 2007 and December 31, 2006, Other Assets included the following
($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Investment in Verde Group, L.L.C. |
|
$ |
9,376 |
|
|
$ |
9,376 |
|
FF&E and leasehold improvements, net of accumulated depreciation
of $9,746 and $16,429 as of June 30, 2007 and December 31, 2006,
respectively |
|
|
12,750 |
|
|
|
8,665 |
|
Predevelopment costs and earnest money |
|
|
13,189 |
|
|
|
22,924 |
|
Prepaid expenses and other assets |
|
|
6,818 |
|
|
|
6,531 |
|
Intangible Assets: |
|
|
|
|
|
|
|
|
Goodwill |
|
|
5,602 |
|
|
|
5,602 |
|
Above market leases, net of accumulated amortization of $3,886 and $1,447
as of June 30, 2007 and December 31, 2006, respectively |
|
|
6,968 |
|
|
|
9,407 |
|
In-place leases, net of accumulated amortization of $1,243 and $472 as of
as of June 30, 2007 and December 31, 2006, respectively |
|
|
1,804 |
|
|
|
2,589 |
|
|
|
|
|
|
|
|
|
|
$ |
56,507 |
|
|
$ |
65,094 |
|
|
|
|
|
|
|
|
Goodwill relates entirely to the Office/Multi-Family reportable segment. Other
intangible assets relate primarily to the 2006 acquisitions of the interests in 191 Peachtree Tower
and Cosmopolitan Center. In conjunction with these acquisitions, the Company also acquired
intangible liabilities for below market leases and an above market ground lease, which are recorded
within Accounts Payable and Accrued Liabilities on the Condensed Consolidated Balance Sheets.
Above and below market leases are amortized into rental revenues over the remaining lease terms.
In-place leases are amortized into depreciation and amortization expense also over remaining lease
terms. The aggregate amortization of these intangible assets and liabilities was $1.5 and $3.1
million for the three and six months ended June 30, 2007, respectively. There was no amortization
expense recorded for intangibles for the three and six months ended June 30, 2006. Aggregate
amortization of these intangible assets and liabilities is anticipated to be as follows ($ in
thousands):
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below Market Leases |
|
|
Above Market Leases |
|
|
In Place Leases |
|
|
Total |
|
|
|
|
Remainder of 2007 |
|
$ |
(87 |
) |
|
$ |
2,316 |
|
|
$ |
492 |
|
|
$ |
2,721 |
|
2008 |
|
|
(161 |
) |
|
|
4,142 |
|
|
|
865 |
|
|
|
4,846 |
|
2009 |
|
|
(138 |
) |
|
|
185 |
|
|
|
108 |
|
|
|
155 |
|
2010 |
|
|
(136 |
) |
|
|
185 |
|
|
|
83 |
|
|
|
132 |
|
2011 |
|
|
(120 |
) |
|
|
124 |
|
|
|
64 |
|
|
|
68 |
|
Thereafter |
|
|
(808 |
) |
|
|
16 |
|
|
|
192 |
|
|
|
(600 |
) |
|
|
|
|
|
$ |
(1,450 |
) |
|
$ |
6,968 |
|
|
$ |
1,804 |
|
|
$ |
7,322 |
|
|
|
|
9. REPORTABLE SEGMENTS
The Company has four reportable segments: Office/Multi-Family, Retail, Land, and Industrial.
The Office/Multi-family division develops, leases and manages owned and third-party owned office
buildings and invests in and/or develops for-sale multi-family real estate products. The Retail
and Industrial divisions develop, lease and manage retail and industrial centers, respectively.
The Land Division owns various tracts of land that are held for investment or future development.
The Land Division also develops single-family residential communities that are parceled into lots
and sold to various homebuilders or sold as undeveloped tracts of land. The Companys reportable
segments are categorized based on the type of product the division provides. The divisions are
managed separately because each product they provide has separate and distinct development issues,
leasing and/or sales strategies and management issues. The divisions also match the manner in
which the chief operating decision maker reviews results and information and allocates resources.
The unallocated and other category in the following table includes general corporate overhead costs
not specific to any segment, interest expense, as financing decisions are not generally made at the
reportable segment level, income taxes and preferred dividends.
Company management evaluates the performance of its reportable segments in part based on funds
from operations available to common stockholders (FFO). FFO is a supplemental operating
performance measure used in the real estate industry. The Company calculated FFO using the
National Association of Real Estate Investment Trusts (NAREIT) definition of FFO, which is net
income available to common stockholders (computed in accordance with GAAP), excluding extraordinary
items, cumulative effect of change in accounting principle and gains or losses from sales of
depreciable property, plus depreciation and amortization of real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.
FFO is used by industry analysts, investors and the Company as a supplemental measure of an
equity REITs operating performance. Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably over time. Since real estate
values instead have historically risen or fallen with market conditions, many industry investors
and analysts have considered presentation of operating results for real estate companies that use
historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a
supplemental measure of a REITs operating performance that excludes historical cost depreciation,
among other items, from GAAP net income. Management believes that 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. In addition to Company management evaluating the operating
performance of its reportable segments based on FFO results, management uses FFO and FFO per share,
along with other
measures, to assess performance in connection with evaluating and granting incentive
compensation to its officers and employees.
15
In periods prior to the second quarter of 2007, the Company presented segment net income in
its segment footnote, as well as a breakout of assets, investment in joint ventures and capital
expenditures made. Management does not utilize these measures when analyzing its segments or when
making resource allocation decisions, and therefore this information is no longer provided by
segment. FFO is reconciled to net income on a total company basis.
The following tables summarize the operations of the Companys reportable segments for the
three and six months ended June 30, 2007 and 2006.
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office/Multi- |
|
|
|
|
|
|
Land |
|
|
Industrial |
|
|
Unallocated |
|
|
|
|
Three
Months Ended June 30, 2007 (in thousands) |
|
Family Division |
|
|
Retail Division |
|
|
Division |
|
|
Division |
|
|
and Other |
|
|
Total |
|
Rental property revenues continuing |
|
$ |
18,345 |
|
|
$ |
6,527 |
|
|
$ |
|
|
|
$ |
627 |
|
|
$ |
|
|
|
$ |
25,499 |
|
Rental property revenues discontinued |
|
|
317 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
358 |
|
Residential lot and outparcel sales |
|
|
|
|
|
|
|
|
|
|
1,476 |
|
|
|
|
|
|
|
|
|
|
|
1,476 |
|
Fee income |
|
|
7,584 |
|
|
|
1,454 |
|
|
|
255 |
|
|
|
567 |
|
|
|
|
|
|
|
9,860 |
|
Other income continuing |
|
|
49 |
|
|
|
726 |
|
|
|
|
|
|
|
43 |
|
|
|
22 |
|
|
|
840 |
|
Other income discontinued |
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
Total revenues from consolidated entities |
|
|
26,295 |
|
|
|
8,755 |
|
|
|
1,731 |
|
|
|
1,237 |
|
|
|
22 |
|
|
|
38,040 |
|
|
Rental property operating expenses continuing |
|
|
(9,312 |
) |
|
|
(1,934 |
) |
|
|
|
|
|
|
(95 |
) |
|
|
|
|
|
|
(11,341 |
) |
Rental property operating expenses discontinued |
|
|
(203 |
) |
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(179 |
) |
Residential lot and outparcel cost of sales |
|
|
|
|
|
|
|
|
|
|
(1,085 |
) |
|
|
|
|
|
|
|
|
|
|
(1,085 |
) |
Third party leasing and management direct operating expenses |
|
|
(4,879 |
) |
|
|
(87 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,966 |
) |
General and administrative expenses |
|
|
(1,025 |
) |
|
|
(2,493 |
) |
|
|
(918 |
) |
|
|
(132 |
) |
|
|
(6,070 |
) |
|
|
(10,638 |
) |
Other expenses continuing |
|
|
(54 |
) |
|
|
40 |
|
|
|
(134 |
) |
|
|
(610 |
) |
|
|
(1,289 |
) |
|
|
(2,047 |
) |
|
|
|
Total costs and expenses |
|
|
(15,473 |
) |
|
|
(4,450 |
) |
|
|
(2,137 |
) |
|
|
(837 |
) |
|
|
(7,359 |
) |
|
|
(30,256 |
) |
Provision for income taxes from operations
continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,073 |
|
|
|
1,073 |
|
|
Minority interest in income from consolidated subsidiaries |
|
|
(238 |
) |
|
|
(637 |
) |
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
(842 |
) |
Funds from operations from unconsolidated joint ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated joint venture revenue less operating expenses |
|
|
1,743 |
|
|
|
1,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,910 |
|
Residential lot and outparcel sales, net |
|
|
|
|
|
|
|
|
|
|
1,235 |
|
|
|
|
|
|
|
|
|
|
|
1,235 |
|
Multi-family residential sales, net |
|
|
1,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,676 |
|
Other joint venture income, net |
|
|
128 |
|
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(718 |
) |
|
|
(641 |
) |
|
|
|
Funds from operations from unconsolidated joint ventures |
|
|
3,547 |
|
|
|
1,167 |
|
|
|
1,184 |
|
|
|
|
|
|
|
(718 |
) |
|
|
5,180 |
|
|
Gain on sale of undepreciated investment properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,812 |
) |
|
|
(3,812 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common stockholders |
|
$ |
14,131 |
|
|
$ |
4,835 |
|
|
$ |
778 |
|
|
$ |
433 |
|
|
$ |
(10,794 |
) |
|
|
9,383 |
|
|
|
|
Real estate depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,963 |
) |
Discontinued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
Unconsolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,089 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,038 |
) |
|
Gain on sale of depreciated investment properties, net of applicable
income tax provision: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
Unconsolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain on sale of depreciated investment properties, net
of applicable income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office/Multi- |
|
|
|
|
|
|
Land |
|
|
Industrial |
|
|
Unallocated |
|
|
|
|
Six
Months Ended June 30, 2007 (in thousands) |
|
Family Division |
|
|
Retail Division |
|
|
Division |
|
|
Division |
|
|
and Other |
|
|
Total |
Rental property revenues continuing |
|
$ |
35,782 |
|
|
$ |
12,834 |
|
|
$ |
|
|
|
$ |
1,013 |
|
|
$ |
|
|
|
$ |
49,629 |
|
Rental property revenues discontinued |
|
|
625 |
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
769 |
|
Residential lot and outparcel sales |
|
|
|
|
|
|
|
|
|
|
2,902 |
|
|
|
|
|
|
|
|
|
|
|
2,902 |
|
Fee income |
|
|
14,285 |
|
|
|
2,705 |
|
|
|
365 |
|
|
|
567 |
|
|
|
4 |
|
|
|
17,926 |
|
Other income continuing |
|
|
3,475 |
|
|
|
864 |
|
|
|
6 |
|
|
|
84 |
|
|
|
90 |
|
|
|
4,519 |
|
Other income discontinued |
|
|
|
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
|
Total revenues from consolidated entities |
|
|
54,167 |
|
|
|
16,589 |
|
|
|
3,273 |
|
|
|
1,664 |
|
|
|
94 |
|
|
|
75,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental property operating expenses continuing |
|
|
(17,415 |
) |
|
|
(3,798 |
) |
|
|
|
|
|
|
(145 |
) |
|
|
|
|
|
|
(21,358 |
) |
Rental property operating expenses discontinued |
|
|
(408 |
) |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(388 |
) |
Residential lot and outparcel cost of sales |
|
|
|
|
|
|
|
|
|
|
(2,293 |
) |
|
|
|
|
|
|
|
|
|
|
(2,293 |
) |
Third party leasing and management direct
operating expenses |
|
|
(9,499 |
) |
|
|
(164 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,663 |
) |
General and administrative expenses |
|
|
(2,149 |
) |
|
|
(4,502 |
) |
|
|
(1,596 |
) |
|
|
(252 |
) |
|
|
(12,132 |
) |
|
|
(20,631 |
) |
Other expenses continuing |
|
|
(136 |
) |
|
|
(82 |
) |
|
|
(227 |
) |
|
|
(674 |
) |
|
|
(1,789 |
) |
|
|
(2,908 |
) |
|
|
|
Total costs expense |
|
|
(29,607 |
) |
|
|
(8,526 |
) |
|
|
(4,116 |
) |
|
|
(1,071 |
) |
|
|
(13,921 |
) |
|
|
(57,241 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes from operations
continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,100 |
|
|
|
2,100 |
|
|
Minority interest in income from consolidated subsidiaries |
|
|
(542 |
) |
|
|
(1,228 |
) |
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
(1,704 |
) |
|
Funds from operations from unconsolidated joint ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated joint venture revenue less
operating expense |
|
|
3,493 |
|
|
|
2,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,764 |
|
Residential lot and outparcel sales, net |
|
|
|
|
|
|
|
|
|
|
1,642 |
|
|
|
|
|
|
|
|
|
|
|
1,642 |
|
Multi-family residential sales, net |
|
|
3,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,965 |
|
Other joint venture income, net |
|
|
263 |
|
|
|
4 |
|
|
|
(192 |
) |
|
|
|
|
|
|
(1,433 |
) |
|
|
(1,358 |
) |
|
|
|
Funds from operations from
unconsolidated joint venture |
|
|
7,721 |
|
|
|
2,275 |
|
|
|
1,450 |
|
|
|
|
|
|
|
(1,433 |
) |
|
|
10,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of undepreciated investment
properties continuing |
|
|
|
|
|
|
4,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,376 |
|
Gain on sale of undepreciated investment
properties discontinued |
|
|
|
|
|
|
8,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,164 |
|
Preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,625 |
) |
|
|
(7,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common stockholders |
|
$ |
31,739 |
|
|
$ |
21,650 |
|
|
$ |
607 |
|
|
$ |
659 |
|
|
$ |
(20,785 |
) |
|
|
33,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,823 |
) |
Discontinued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(145 |
) |
Unconsolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate depreciation and
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,138 |
) |
|
Gain on sale of depreciated investment
properties, net of applicable income
tax provision: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
Unconsolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain on sale of depreciated
investment properties, net of applicable
income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
Reconciliation to Consolidated Revenues |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Total revenues from consolidated entities for segment reporting |
|
$ |
38,040 |
|
|
$ |
56,679 |
|
|
$ |
75,787 |
|
|
$ |
107,271 |
|
Less: revenues from discontinued operations |
|
|
(365 |
) |
|
|
(6,989 |
) |
|
|
(811 |
) |
|
|
(15,482 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated revenues |
|
$ |
37,675 |
|
|
$ |
49,690 |
|
|
$ |
74,976 |
|
|
$ |
91,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office/Multi- |
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
Unallocated |
|
|
|
|
Three
Months Ended June 30, 2006 (in thousands) |
|
Family Division |
|
|
Retail Division |
|
|
Land Division |
|
|
Division |
|
|
and Other |
|
|
Total |
|
Rental property revenues continuing |
|
$ |
13,450 |
|
|
$ |
10,130 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
23,580 |
|
Rental property revenues discontinued |
|
|
3,881 |
|
|
|
2,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,218 |
|
Residential lot and outparcel sales |
|
|
|
|
|
|
110 |
|
|
|
2,747 |
|
|
|
272 |
|
|
|
|
|
|
|
3,129 |
|
Multi-family residential unit sales |
|
|
15,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,136 |
|
Fee income |
|
|
7,150 |
|
|
|
336 |
|
|
|
269 |
|
|
|
|
|
|
|
|
|
|
|
7,755 |
|
Other income continuing |
|
|
(109 |
) |
|
|
107 |
|
|
|
35 |
|
|
|
|
|
|
|
57 |
|
|
|
90 |
|
Other income discontinued |
|
|
|
|
|
|
771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
771 |
|
|
|
|
Total revenues from consolidated entities |
|
|
39,508 |
|
|
|
13,791 |
|
|
|
3,051 |
|
|
|
272 |
|
|
|
57 |
|
|
|
56,679 |
|
|
Rental property operating expenses continuing |
|
|
(5,584 |
) |
|
|
(3,005 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,589 |
) |
Rental property operating expenses discontinued |
|
|
(2,314 |
) |
|
|
(843 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,157 |
) |
Residential lot and outparcel cost of sales |
|
|
|
|
|
|
(103 |
) |
|
|
(1,978 |
) |
|
|
(217 |
) |
|
|
|
|
|
|
(2,298 |
) |
Multi-family residential unit cost of sales |
|
|
(12,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,377 |
) |
Third party leasing and management direct operating expenses |
|
|
(3,659 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,659 |
) |
General and administrative expenses |
|
|
(2,232 |
) |
|
|
(742 |
) |
|
|
(520 |
) |
|
|
(70 |
) |
|
|
(6,186 |
) |
|
|
(9,750 |
) |
Other expenses continuing |
|
|
(99 |
) |
|
|
(346 |
) |
|
|
(100 |
) |
|
|
(3 |
) |
|
|
(5,748 |
) |
|
|
(6,296 |
) |
|
|
|
Total costs and expenses |
|
|
(26,265 |
) |
|
|
(5,039 |
) |
|
|
(2,598 |
) |
|
|
(290 |
) |
|
|
(11,934 |
) |
|
|
(46,126 |
) |
|
Provision for income taxes from operations
continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,926 |
) |
|
|
(1,926 |
) |
|
Minority interest in income from consolidated subsidiaries |
|
|
(955 |
) |
|
|
(358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,313 |
) |
|
Funds from operations from unconsolidated joint ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated joint venture revenue less operating expenses |
|
|
5,638 |
|
|
|
498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,136 |
|
Residential lot and outparcel sales, net |
|
|
|
|
|
|
|
|
|
|
2,076 |
|
|
|
|
|
|
|
|
|
|
|
2,076 |
|
Multi-family residential sales, net |
|
|
2,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,552 |
|
Other joint venture income, net |
|
|
73 |
|
|
|
|
|
|
|
260 |
|
|
|
|
|
|
|
(682 |
) |
|
|
(349 |
) |
|
|
|
Funds from operations from unconsolidated joint ventures |
|
|
8,263 |
|
|
|
498 |
|
|
|
2,336 |
|
|
|
|
|
|
|
(682 |
) |
|
|
10,415 |
|
|
Gain on sale of undepreciated investment properties |
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
(5 |
) |
Preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,812 |
) |
|
|
(3,812 |
) |
|
|
|
Funds from operations available to common stockholders,
excluding loss on extinguishment of debt |
|
|
20,551 |
|
|
|
8,892 |
|
|
|
2,784 |
|
|
|
(18 |
) |
|
|
(18,297 |
) |
|
|
13,912 |
|
|
|
|
|
Loss on extinguishment of debt |
|
|
|
|
|
|
(2,764 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,764 |
) |
|
Funds from operations available to common stockholders |
|
$ |
20,551 |
|
|
$ |
6,128 |
|
|
$ |
2,784 |
|
|
$ |
(18 |
) |
|
$ |
(18,297 |
) |
|
|
11,148 |
|
|
|
|
|
Real estate depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,787 |
) |
Discontinued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,034 |
) |
Unconsolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,012 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,833 |
) |
|
Gain on sale of depreciated investment properties, net of applicable
income tax provision: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
Discontinued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135 |
|
Unconsolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain on sale of depreciated investment properties, net
of applicable income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(3,483 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office/Multi- |
|
|
|
|
|
|
Land |
|
|
Industrial |
|
|
Unallocated and |
|
|
|
|
Six
Months Ended June 30, 2006 (in thousands) |
|
Family Division |
|
|
Retail Division |
|
|
Division |
|
|
Division |
|
|
Other |
|
|
Total |
|
Rental property revenues continuing |
|
$ |
27,105 |
|
|
$ |
18,747 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
45,852 |
|
Rental property revenues discontinued |
|
|
7,531 |
|
|
|
4,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,390 |
|
Residential lot and outparcel sales |
|
|
|
|
|
|
110 |
|
|
|
7,251 |
|
|
|
273 |
|
|
|
|
|
|
|
7,634 |
|
Multi-family residential unit sales |
|
|
21,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,715 |
|
Fee income |
|
|
14,166 |
|
|
|
618 |
|
|
|
1,352 |
|
|
|
|
|
|
|
|
|
|
|
16,136 |
|
Other income continuing |
|
|
(204 |
) |
|
|
521 |
|
|
|
55 |
|
|
|
|
|
|
|
80 |
|
|
|
452 |
|
Other income discontinued |
|
|
2,300 |
|
|
|
792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,092 |
|
|
|
|
Total revenues from consolidated entities |
|
|
72,613 |
|
|
|
25,647 |
|
|
|
8,658 |
|
|
|
273 |
|
|
|
80 |
|
|
|
107,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental property operating expenses continuing |
|
|
(11,194 |
) |
|
|
(5,721 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,915 |
) |
Rental property operating expenses discontinued |
|
|
(4,120 |
) |
|
|
(1,739 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,859 |
) |
Residential lot and outparcel cost of sales |
|
|
|
|
|
|
(103 |
) |
|
|
(5,181 |
) |
|
|
(217 |
) |
|
|
|
|
|
|
(5,501 |
) |
Multi-family residential unit cost of sales |
|
|
(17,735 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,735 |
) |
Third party leasing and management direct operating expenses |
|
|
(7,470 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,470 |
) |
General and administrative expenses |
|
|
(4,334 |
) |
|
|
(1,316 |
) |
|
|
(1,194 |
) |
|
|
(33 |
) |
|
|
(12,608 |
) |
|
|
(19,485 |
) |
Other expenses continuing |
|
|
(223 |
) |
|
|
(696 |
) |
|
|
(197 |
) |
|
|
(7 |
) |
|
|
(10,091 |
) |
|
|
(11,214 |
) |
|
|
|
Total costs and expenses |
|
|
(45,076 |
) |
|
|
(9,575 |
) |
|
|
(6,572 |
) |
|
|
(257 |
) |
|
|
(22,699 |
) |
|
|
(84,179 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes from operations
continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,296 |
) |
|
|
(4,296 |
) |
|
Minority interest in income from consolidated subsidiaries |
|
|
(1,932 |
) |
|
|
(459 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,391 |
) |
|
Funds from operations from unconsolidated joint ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated joint venture revenue less operating expenses |
|
|
11,199 |
|
|
|
973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,172 |
|
Residential lot and outparcel sales, net |
|
|
|
|
|
|
|
|
|
|
4,163 |
|
|
|
|
|
|
|
|
|
|
|
4,163 |
|
Multi-family residential sales, net |
|
|
4,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,298 |
|
Other joint venture income, net |
|
|
120 |
|
|
|
90 |
|
|
|
4,075 |
|
|
|
|
|
|
|
(1,375 |
) |
|
|
2,910 |
|
|
|
|
Funds from operations from unconsolidated joint ventures |
|
|
15,617 |
|
|
|
1,063 |
|
|
|
8,238 |
|
|
|
|
|
|
|
(1,375 |
) |
|
|
23,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of undepreciated investment properties |
|
|
|
|
|
|
|
|
|
|
735 |
|
|
|
|
|
|
|
|
|
|
|
735 |
|
Preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,625 |
) |
|
|
(7,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common stockholders,
excluding loss on extinguishment of debt |
|
|
41,222 |
|
|
|
16,676 |
|
|
|
11,059 |
|
|
|
16 |
|
|
|
(35,915 |
) |
|
|
33,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
|
|
|
|
|
(2,764 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,764 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common stockholders |
|
$ |
41,222 |
|
|
$ |
13,912 |
|
|
$ |
11,059 |
|
|
$ |
16 |
|
|
$ |
(35,915 |
) |
|
|
30,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,651 |
) |
Discontinued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,172 |
) |
Unconsolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,893 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of depreciated investment properties, net of applicable
income tax provision: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131 |
|
Discontinued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
326 |
|
Unconsolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain on sale of depreciated investment properties, net
of applicable income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview:
Cousins Properties Incorporated (the Company) is a real estate development company with
experience in the development, leasing, financing and management of office, retail and industrial
properties in addition to residential land development. In addition, the Company has experience
with the development and sale of multi-family products. As of June 30, 2007, the Company held
interests directly or through joint ventures in 25 office properties totaling 7.7 million square
feet, 14 retail properties totaling 4.7 million square feet, four industrial properties totaling
2.0 million square feet and 833 developed residential land lots held for sale. These interests
include office, retail, and industrial projects under development or redevelopment totaling 6.2
million square feet. The Company also had an interest in two condominium projects under
development which contain 671 units. The Company had 24 residential communities under development
directly or through joint ventures in which approximately 10,750 lots remain to be developed and/or
sold. In addition, the Company owned directly or through joint ventures approximately 9,100 acres
of land.
The Companys strategy is to produce stockholder returns by creating value through the
development of high quality, well-located office, retail, industrial, multi-family and residential
properties. The Company has developed substantially all of the real estate assets it owns. A key
element in the Companys strategy is to actively manage its portfolio of investment properties and,
at the appropriate times, to engage in timely and strategic dispositions, either by sale or through
contributions to ventures in which the Company retains an ownership interest. These timely
transactions seek to maximize the value of the assets the Company has created, generate capital for
additional development properties and return a portion of the value created to the Companys
stockholders.
Significant events during the three months ended June 30, 2007 included the following:
|
|
|
Commenced construction of 10 Terminus Place, a 32-story, 142-unit condominium project
at its Terminus project in the Buckhead district in Atlanta, Georgia; |
|
|
|
|
Commenced construction of Terminus 200, a 25-story, 565,000 square-foot office building
at its Terminus project in the Buckhead district of Atlanta; |
|
|
|
|
Purchased approximately 47 acres of land in Lancaster, Texas for a future industrial
project with our joint venture partner, Seefried Industrial Properties; |
|
|
|
|
Repurchased 250,000 shares of common stock. |
Results of Operations:
Rental Property Revenues. Rental property revenues increased approximately $1.9 million (8%)
and $3.8 million (8%) in the three and six month 2007 periods, respectively, compared to the same
2006 periods. These increases are discussed in detail below, but generally result from the
acquisition and operations of newly-developed office and industrial properties offset by revenue
lost on retail properties contributed to a venture and office properties sold.
Rental property revenues of the office portfolio increased approximately $4.9 million and $8.7
million in the three and six month 2007 periods, respectively, as a result of the following:
|
|
|
Increase of $4.3 million and $8.5 million in the three and six month 2007 periods,
respectively, related to the third quarter 2006 purchase of the interests in 191 Peachtree
Tower; |
21
|
|
|
Increase of $403,000 in both the three and six month 2007 periods due to the second
quarter 2007 opening of Terminus 100; |
|
|
|
|
Increase of $194,000 and $391,000 in the three and six month 2007 periods, respectively,
related to the third quarter 2006 purchase of Cosmopolitan Center; |
|
|
|
|
Increase of $950,000 and $1.3 million in the three and six month 2007 periods,
respectively, related to increased leasing at The Inforum, 200 North Point Center East, 600
University Park Place, and Lakeshore Park Plaza. |
|
|
|
|
Decrease of $1.0 million and $2.1 million in the three and six month 2007 periods,
respectively, related to 3100 Windy Hill Road, as the lease for the sole tenant in this
building expired in the fourth quarter of 2006. The Company is actively attempting to
re-lease this space, although there can be no guarantee of lease-up in the near term. |
Rental property revenues from the retail portfolio decreased approximately $3.6 million and
$5.9 million in the three and six month 2007 periods, respectively, as a result of the following:
|
|
|
Decrease of $6.4 million and $12.5 million in the three and six month 2007 periods,
respectively, related to the contribution of five retail properties to a venture with an
affiliate of The Prudential Insurance Company of America (PREI see Note 5 in the
Annual Report on Form 10-K for the year ended December 31, 2006). Upon venture formation,
the Company began accounting for the properties on the equity method; |
|
|
|
Increase of $379,000 and $1.1 million in the three and six month 2007 periods,
respectively, related to the lease up of The Avenue Carriage Crossing; |
|
|
|
Increase of $505,000 and $1.9 million for the three and six month 2007 periods,
respectively, related to the first quarter 2006 opening of San Jose MarketCenter; |
|
|
|
Increase of $1.9 million and $3.6 million for the three and six month 2007 periods,
respectively, related to the August 2006 opening of The Avenue Webb Gin. |
Rental property revenues from the Industrial Division increased approximately $627,000 and
$1.0 million for the three and six month 2007 periods, respectively, compared to the same 2006
periods, due to the third quarter 2006 opening of King Mill Distribution Park Building 3A and the
first quarter 2007 opening of the first building at Lakeside Ranch Business Park.
Rental Property Operating Expenses. Rental property operating expenses increased
approximately $2.8 million and $4.4 million in the three and six month 2007 periods, respectively,
compared to the same 2006 periods as a result of the following:
|
|
|
Increase of $3.6 million and $6.5 million in the three and six month 2007 periods,
respectively, related to the aforementioned openings or lease up of The Avenue Carriage
Crossing, San Jose MarketCenter, The Avenue Webb Gin, Terminus 100 and the two
industrial buildings, plus the purchase of Cosmopolitan Center and the interests in the
191 Peachtree Tower office building. |
|
|
|
|
Increase of approximately $733,000 and $1.1 million in the three and six month 2007
periods, respectively, due to the gross up of certain reimbursements from tenants at
Inforum. Prior to 2007, the Company reduced its rental property operating expenses for
certain reimbursements from tenants (mainly utility overage reimbursements). The
Company now records these reimbursements in both rental property revenues and rental
property operating expenses. |
|
|
|
|
Decrease of $1.6 million and $3.3 million, respectively, in the three and six month
2007 periods as a result of the aforementioned formation of the venture with PREI and
the commencement |
22
|
|
|
of equity method accounting for the five retail centers contributed to this
venture. |
Fee Income. Fee income increased approximately $2.1 million and $1.8 million in the three
and six month 2007 periods, respectively, compared to the same 2006 periods. These increases are
due to the following:
|
|
|
Increase of $1.5 million and $2.0 million in the three and six month 2007 periods,
respectively, related to salary and expense reimbursements for projects the Company
develops or manages for third parties. Certain expenditures of the Company are
reimbursed by these third parties, and this reimbursement is recognized in fee income. |
|
|
|
|
Increase of approximately $430,000 for both the three and six month 2007 periods
related to development fee income from the Palisades joint venture, in which the
Company is a 50% partner. |
|
|
|
|
Increase of approximately $240,000 and $479,000 for the three and six month 2007
periods, respectively, related to development fee income from the Murfreesboro joint
venture, in which the Company is also a 50% partner. |
|
|
|
|
Decrease of $1.0 million for the six month 2007 period due to lower development fee
income from the Temco Associates (Temco) joint venture from the 2006 sale of 855
acres of land at Temcos Seven Hills project. |
Multi-family Residential Unit Sales and Cost of Sales. Multi-family residential unit sales
decreased approximately $15.1 million and $21.7 million in the three and six month 2007 periods,
respectively, compared to the same 2006 periods. Cost of sales decreased approximately $12.4
million and $17.7 million between the same periods. These decreases relate to the 2006 closings of
all units in the 905 Juniper multi-family residential project.
Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales
decreased approximately $1.7 million and $4.7 million in three and six month 2007 periods,
respectively, compared to the same 2006 periods. Residential lot and outparcel cost of sales
decreased approximately $1.2 million and $3.2 million for the same periods. The Company recognized
$382,000 in outparcel sales in both the three and six month 2006 periods and $320,000 in outparcel
cost of sales for both the three and six month 2006 periods, compared to none in either category in
2007. Lot sales at the Companys consolidated residential projects decreased from 29 lots in the
second quarter of 2006 to 9 lots in the second quarter of 2007. For the year-to-date period, lots
sold decreased from 87 in 2006 to 34 in 2007. The mix of sales at the various developments between
years also affects the level of revenues and profits from residential lots. Consistent with
current market trends, the Company anticipates a continued decline in residential lot sales for
2007 when compared to those of 2006, both at consolidated projects and at residential developments
owned by Temco and CL Realty, L.L.C., entities in which the Company is a joint venture partner.
The Company cannot predict with any certainty when the residential market will recover. A
continued decline will have an adverse effect on lot revenues and net income.
Interest and Other. Interest and other income increased approximately $750,000 and $4.1
million in the three and six month 2007 periods, respectively, compared to the same 2006 periods.
The Company recognized $664,000 in the second quarter of 2007 from a lease termination fee at The
Avenue Webb Gin, and $3.6 million in the first quarter of 2007, mainly from a lease termination fee
at Inforum. A lease termination fee of $400,000 was recognized in the first quarter of 2006. The
change in these fees was the main contributor to the increase in interest and other income in 2007.
General and Administrative Expenses. General and administrative expenses increased
approximately $2.1 million and $3.2 million in the three and six month 2007 periods, respectively,
compared to the same 2006 periods. This increase is partially due to the following:
23
|
|
|
Increase of approximately $1.0 million and $1.4 million in the three and six month 2007
periods, respectively, in salaries and benefits and certain office expenses charged to
third party entities, for which the Company receives reimbursement. |
|
|
|
|
Increase of approximately $330,000 and $512,000 related to salaries and benefits, net of
amounts capitalized to projects under development, due to general salary increases between
2006 and 2007. |
|
|
|
|
Increase of approximately $400,000 in both the three and six month 2007 periods, mainly
due to an increase in legal fees. This increase was due partially to the timing of legal
bills and partially to increased fees due to additional work necessary to comply with new
SEC rules and regulations related to the proxy and other projects. |
Depreciation and Amortization. Depreciation and amortization increased approximately $1.1
million and $2.7 million in the three and six month 2007 periods, respectively, compared to the
same 2006 periods primarily as a result of the following:
|
|
|
Increase of approximately $3.0 million and $7.2 million in the three and six month 2007
periods, respectively, from the openings San Jose MarketCenter, The Avenue Webb Gin, the
two industrial properties, and Terminus 100, and the acquisitions of Cosmopolitan Center
and the ownership interests in 191 Peachtree Tower; |
|
|
|
|
Decrease of approximately $2.0 million and $4.0 million in the three and six month 2007
periods, respectively, for the five retail properties contributed to the venture with PREI. |
Interest Expense. Interest expense decreased approximately $4.3 million and $8.0 million in
the three and six month 2007 periods, respectively, compared to the same 2006 periods as a result
of the following:
|
|
|
Decrease of $2.5 million and $5.0 million in the three and six month 2007 periods,
respectively, related to the repayment of the mortgage note related to Bank of America
Plaza, which was sold in 2006; |
|
|
|
|
Decrease of $763,000 and $1.5 million in the three and six month 2007 periods,
respectively, related to the assumption of the mortgage note on The Avenue East Cobb by
the aforementioned venture with PREI; |
|
|
|
|
Decrease in interest expense of $1.7 million and $2.7 million for the three and six
month 2007 periods, respectively, related to an increase in capitalized interest to
projects under development due to higher weighted average expenditures on these projects
in 2007; |
|
|
|
|
Partially offsetting the decrease was an increase of $600,000 and $1.6 million for the
three and six month 2007 periods, respectively, related to the construction facility for
Terminus 100, which the Company entered into in March 2006, and under which amounts
borrowed have increased. |
Benefit (Provision) for Income Taxes from Operations. The provision for income taxes from
operations decreased approximately $3.0 million and $6.4 million from the three and six month 2006
periods to a benefit for income taxes for the three and six month 2007 periods. Operations at
Cousins Real Estate Corporation (CREC), the Companys taxable REIT subsidiary, decreased to a
loss before taxes between the 2006 and 2007 periods, mainly due to decreases in residential lot
sales, both at consolidated projects and from the Temco and CL Realty, L.L.C. (CL Realty)
residential joint ventures (discussed in the income from unconsolidated joint ventures section
below). Multi-family residential unit profits decreased in 2007 at the 50 Biscayne project, owned 50% by CREC
(discussed in the income from unconsolidated joint ventures section below), and at the 905 Juniper
project (as previously mentioned in the multi-family discussion) which also contributed to the
24
decrease in income taxes. In addition, interest expense on intercompany borrowings has increased,
which also contributed to the decrease in income taxes from operations.
Income from Unconsolidated Joint Ventures. Income from unconsolidated joint ventures
decreased approximately $4.3 million and $12.7 million in the three and six month 2007 periods,
respectively, compared to the same 2006 periods due to the following (All amounts discussed
reflect the Companys share of joint venture income based on its ownership interest in each joint
venture):
|
|
|
Income from CSC Associates, L.P. decreased approximately $2.8 million and $5.5 million
in the three and six month 2007 periods, respectively, due to the sale of Bank of America
Plaza in September 2006, the single asset of this venture. |
|
|
|
|
Income from TRG decreased approximately $825,000 and $198,000 in the three and six month
2007 periods, respectively. TRG recognizes income on its condominium units under contract
for sale using the percentage of completion method of accounting. Income fluctuates from
quarter to quarter depending on the pace of construction and the number of units for which
revenues are being recognized. The primary reason for the decrease between the 2007
periods compared to the 2006 periods is a slowdown in the pace of construction as this
project is nearing completion. There have been recent reports about softening in the
Miami, Florida condominium market. While this softening market could affect this project,
99% of the residential units are under non-cancelable contracts, and some of the units have
been re-sold in the secondary market for prices in excess of the original contract amount.
The Company anticipates commencing unit sales closings in the fourth quarter of 2007. |
|
|
|
|
Income from Temco decreased approximately $600,000 and $4.4 million in the three and six
month 2007 periods, respectively, compared to the same 2006 periods due to the sale of 855
acres of land at the ventures Seven Hills project in the first quarter of 2006, which
generated a gain to the Company of $3.2 million, and to a decrease in the number of lots
sold from 272 in the first half of 2006 to 45 in the same 2007 period. |
|
|
|
|
Income from CL Realty decreased approximately $301,000 and $2.2 million in the three and
six month 2007 periods, respectively, compared to the same 2006 periods due to a decrease
in lots sold from 484 in the first half of 2006 to 221 in the same 2007 period. |
|
|
|
|
Income from Brad Cous Golf Venture, Ltd. decreased approximately $1.1 million in the six
month 2007 period compared to the same 2006 period due to the sale of and resultant gain
from the Shops of World Golf Village, an 80,000 square foot retail project which this
venture owned. |
Gain on Sale of Investment Properties. The 2007 gain consisted primarily of the sale of
undeveloped land near the Companys Avenue Carriage Crossing project. The 2006 gain consisted
primarily of the sale of undeveloped land at the North Point/Westside project.
Discontinued Operations. Income from discontinued operations (including gain on sale of
investment properties) increased approximately $2.3 million and $7.7 million in the three and six
month 2007 periods, respectively, compared to the same 2006 periods. In the second quarter 2006,
The Avenue of the Peninsula terminated a lease and recorded a loss relating to the acceleration of
the amortization of the lease-related assets, compared to no loss from discontinued operations in
2007. The increase in the six month 2007 period is mainly the result of the gain recognized upon
the 2007 sale of the five sites under ground lease at the Companys North Point project, compared
to no sales in the same 2006 period.
Discussion of New Accounting Pronouncements. In November 2006, FASB ratified the consensus in
EITF No. 06-08, Applicability of the Assessment of a Buyers Continuing Investment
under FASB Statement No. 66, Accounting for Sales of Real Estate, for Sales of Condominiums
(EITF 06-08), which provides guidance for determining the adequacy of a buyers continuing
investment and the appropriate profit recognition in the sale of individual units in a condominium
25
project. EITF 06-08 requires that companies evaluate the adequacy of a buyers continuing
investment in recognizing condominium revenues on the percentage of completion method by applying
paragraph 12 of Statement No. 66 to the level and timing of deposits received on contracts for
condominium sales. This rule is effective for the Company on January 1, 2008, although earlier
adoption is permitted. The Company does not anticipate the impact of adopting EITF 06-08 will have
a material effect on its financial position or results of operations for current projects, but
anticipates that the accounting under EITF 06-08 will have a material effect on the timing of
revenue recognition for any future multi-family residential projects the Company undertakes.
Funds From Operations. The following table shows Funds From Operations Available to Common
Stockholders (FFO) and the related reconciliation to net income available to common stockholders
for the Company. The Company calculated FFO in accordance with the National Association of Real
Estate Investment Trusts (NAREIT) definition, which is net income available to common
stockholders (computed in accordance with accounting principles generally accepted in the United
States (GAAP)), excluding extraordinary items, cumulative effect of change in accounting
principle and gains or losses from sales of depreciable property, plus depreciation and
amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint
ventures to reflect FFO on the same basis.
FFO is used by industry analysts and investors as a supplemental measure of an equity REITs
operating performance. Historical cost accounting for real estate assets implicitly assumes that
the value of real estate assets diminishes predictably over time. Since real estate values instead
have historically risen or fallen with market conditions, many industry investors and analysts have
considered presentation of operating results for real estate companies that use historical cost
accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of
REIT operating performance that excludes historical cost depreciation, among other items, from GAAP
net income. The use of FFO, combined with the required primary GAAP presentations, has been
fundamentally beneficial, improving the understanding of operating results of REITs among the
investing public and making comparisons of REIT operating results more meaningful. Company
management evaluates the operating performance of its reportable segments and of its divisions
based in part on FFO. Additionally, the Company uses FFO and FFO per share, along with other
measures, to assess performance in connection with evaluating and granting incentive compensation
to its officers and employees. The reconciliation of net income available to common stockholders
to funds from operations is as follows ($ in thousands):
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Net Income (Loss) Available to Common Stockholders |
|
$ |
395 |
|
|
$ |
(3,483 |
) |
|
$ |
14,802 |
|
|
$ |
4,912 |
|
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated properties |
|
|
8,721 |
|
|
|
7,655 |
|
|
|
18,082 |
|
|
|
15,340 |
|
Discontinued properties |
|
|
(14 |
) |
|
|
6,034 |
|
|
|
145 |
|
|
|
9,172 |
|
Share of unconsolidated joint ventures |
|
|
1,089 |
|
|
|
2,016 |
|
|
|
2,170 |
|
|
|
4,078 |
|
Depreciation of furniture, fixtures and equipment and amortization
of specifically identifiable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated properties |
|
|
(758 |
) |
|
|
(868 |
) |
|
|
(1,259 |
) |
|
|
(1,689 |
) |
Share of unconsolidated joint ventures |
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
(8 |
) |
Gain on sale of investment properties, net of applicable
income tax provision: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
(40 |
) |
|
|
(61 |
) |
|
|
(4,480 |
) |
|
|
(866 |
) |
Discontinued properties |
|
|
|
|
|
|
(135 |
) |
|
|
(8,164 |
) |
|
|
(326 |
) |
Share of unconsolidated joint ventures |
|
|
(10 |
) |
|
|
(1 |
) |
|
|
34 |
|
|
|
(1,054 |
) |
Gain (loss) on sale of undepreciated investment properties |
|
|
|
|
|
|
(5 |
) |
|
|
12,540 |
|
|
|
735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds From Operations Available to Common Stockholders, as defined |
|
$ |
9,383 |
|
|
$ |
11,148 |
|
|
$ |
33,870 |
|
|
$ |
30,294 |
|
|
Loss on extinguishment of debt |
|
|
|
|
|
|
2,764 |
|
|
|
|
|
|
|
2,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds From Operations Available to Common Stockholders,
Excluding Loss on Extinguishment of Debt |
|
$ |
9,383 |
|
|
$ |
13,912 |
|
|
$ |
33,870 |
|
|
$ |
33,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity and Capital Resources:
Financial Condition.
The Company had a significant number of projects in its development pipeline at June 30,
2007 and does not expect the number of projects or the amounts invested in development projects
to decrease in the near term. The Company has one existing office building included in operating
properties on its Condensed Consolidated Balance Sheet that will require capital to effect
leasing and redevelopment activities. The Company also has a large amount of undeveloped land,
both consolidated and at unconsolidated joint ventures, which may progress into development
projects in the remainder of 2007. Additionally, the Company and its joint ventures sold a
significant number of operating properties in the last several years, some of which have been
replaced by the completion of properties previously under development. The Company intends to
obtain additional capital in the remainder of 2007 in order to fund development. Management
believes that this capital may be secured through one or more of the following alternatives:
additional borrowings, formations of joint ventures, capital transactions, and the selective and
strategic sale of mature operating properties or parcels of land held for investment. The
financial condition of the Company is discussed in further detail below.
At June 30, 2007, the Company was subject to the following contractual obligations and
commitments ($ in thousands):
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
|
After |
|
|
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
4-5 Years |
|
|
5 years |
|
Contractual Obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured notes payable and construction loans |
|
$ |
360,334 |
|
|
$ |
313 |
|
|
$ |
360,021 |
|
|
$ |
|
|
|
$ |
|
|
Mortgage notes payable |
|
|
117,637 |
|
|
|
2,041 |
|
|
|
12,486 |
|
|
|
87,213 |
|
|
|
15,897 |
|
Interest commitments under notes payable (1) |
|
|
93,440 |
|
|
|
30,093 |
|
|
|
51,639 |
|
|
|
8,669 |
|
|
|
3,039 |
|
Operating leases (ground leases) |
|
|
15,296 |
|
|
|
90 |
|
|
|
188 |
|
|
|
198 |
|
|
|
14,820 |
|
Operating leases (all other) |
|
|
1,493 |
|
|
|
428 |
|
|
|
800 |
|
|
|
228 |
|
|
|
37 |
|
|
|
|
Total Contractual Obligations |
|
$ |
588,200 |
|
|
$ |
32,965 |
|
|
$ |
425,134 |
|
|
$ |
96,308 |
|
|
$ |
33,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of Credit |
|
$ |
1,100 |
|
|
$ |
1,100 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Performance bonds |
|
|
19,450 |
|
|
|
18,683 |
|
|
|
767 |
|
|
|
|
|
|
|
|
|
Estimated Development Commitments |
|
|
498,693 |
|
|
|
295,626 |
|
|
|
196,945 |
|
|
|
6,122 |
|
|
|
|
|
Unfunded tenant improvements |
|
|
4,349 |
|
|
|
4,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commitments |
|
$ |
523,592 |
|
|
$ |
319,758 |
|
|
$ |
197,712 |
|
|
$ |
6,122 |
|
|
$ |
|
|
|
|
|
|
|
|
(1) |
|
Interest on variable rate obligations is based on rates effective as of June 30, 2007 |
The Company expects indebtedness to be the primary funding source for its contractual
obligations and commitments. The Companys credit facility can be expanded to $500 million under
certain circumstances, although the availability of the additional capacity is not guaranteed. As
of June 30, 2007, the Company had $267.3 million drawn on its $400 million credit facility. The
amount available under this credit facility is reduced by outstanding letters of credit, which were
approximately $1.1 million at June 30, 2007. The Companys interest rate on its credit facility is
variable based on LIBOR plus a spread based on certain of the Companys ratios and other factors.
As of June 30, 2007, the spread over LIBOR was 0.80%.
The Company also has a $100 million construction facility. While this facility is unsecured,
advances under the facility are to be used to fund the construction costs of the Terminus 100
project. As of June 30, 2007, the Company had $85.7 million drawn on its construction facility.
On June 1, 2007, the Company refinanced its non-recourse mortgage note payable secured by the
100 and 200 North Point Center East office buildings. The new $25 million non-recourse mortgage
note payable has an interest rate of 5.39% and a maturity date of June 1, 2012. This note replaced
the former non-recourse mortgage note payable on these properties, which was due to mature on
August 1, 2007 and had an interest rate of 7.86%.
The Companys mortgage debt is primarily non-recourse fixed-rate mortgage notes secured by
various real estate assets. In addition, many of the Companys non-recourse mortgages contain
covenants which, if not satisfied, could result in acceleration of the maturity of the debt. The
Company expects that it will either refinance the non-recourse mortgages at maturity or repay the
mortgages with proceeds from other financings.
As of June 30, 2007, the weighted average interest rate on the Companys consolidated debt was
6.38%, and the Companys consolidated debt to total market capitalization ratio was 21.9%.
As
part of its strategy to raise additional capital for development
projects, the Company has initiated a process that includes amending its existing credit facility to
provide additional capacity by increasing the maximum amount of the facility and expanding the
borrowing base of the facility. Management also has begun the process of obtaining long-term
mortgage financing on three of its existing properties. Management
expects the mortgage financing to be approximately $400 million for
the three properties and expects to close on these
financings in the third and fourth quarters of 2007. However, there can be no assurance that the
Company will be able to amend its existing credit facility or close any or all of these loans.
In order to bridge any potential gap in the timing of its need for additional capital and the
closing of the financings noted above, in July 2007, the Company closed a $100 million bridge loan
that matures on October 9, 2007 with an option to extend to January 9, 2008. The loan bears
interest
28
at LIBOR plus 0.75% and contains the same financial and operating covenants as its
existing line of credit.
The Company may also generate capital through the issuance of securities that includes, but is
not limited to, preferred stock under an existing shelf registration statement. As of June 30,
2007, the Company had approximately $100 million available for issuance under this registration
statement.
Over the long term, the Company will continue to actively manage its portfolio of income
producing properties and strategically sell assets to capture value for stockholders and to recycle
capital for future development activities. The Company will continue to utilize indebtedness to
fund future commitments and expects to place long-term permanent mortgages on selected assets as
well as utilize construction facilities for other development assets. The Company may enter into
additional joint venture arrangements to help fund future developments and may enter into
additional structured transactions with third parties. While the Company does not foresee the need
to issue common equity in the future, it will evaluate all public equity sources and select the
most appropriate options as capital is required.
The Companys business model is highly dependent upon raising capital to meet development
obligations. If one or more sources of capital are not available when required, the Company may be
forced to raise capital on potentially unfavorable terms which could have an adverse effect on the
Companys financial position or results of operations.
Cash Flows.
Cash Flows from Operating Activities. Cash flows provided by operating activities
decreased $59.1 million between the six months ended June 30, 2006 and the corresponding 2007
period. The primary reason for the decrease was a decrease in cash flows from properties that were
sold or contributed to ventures in 2006, including Frost Bank Tower, Bank of America Plaza and the
properties contributed to the venture with PREI. These decreases were partially offset by cash
flows from the 191 Peachtree acquisition in 2006. Another reason for the decrease in cash flows
from operating activities was lower sales of consolidated multi-family and residential projects.
The Company completed construction and sold all of the units in its 905 Juniper multi-family
residential project during 2006. The Company began construction of another multi-family project in
the second quarter of 2007, 10 Terminus Place, but none of these unit sales have closed, thereby
causing a decrease in proceeds from multi-family sales and an increase in development and
acquisition expenditures. In addition, there was a 2007 decrease in distributions in excess of
income from unconsolidated joint ventures, mainly due to decreased distributions from residential
joint ventures, which also contributed to the decrease in cash flows from operations
Cash Flows from Investing Activities. Net cash provided by investing activities
decreased $132.4 million between the six months ended June 30, 2006 and the corresponding 2007.
This decrease is mainly the result of lower proceeds from venture formation, as the Company formed
the venture with PREI in June 2006. In addition, the Company had higher property acquisition and
development expenditures in the 2007 period and received lower capital distributions from joint
ventures. Partially offsetting the investing activities cash flow change was higher proceeds
received in 2007 compared to 2006 for investment property sales, due to the 2007 sale of the North
Point ground leased parcels and the sale of land adjacent to The Avenue Carriage Crossing.
Cash Flows from Financing Activities. Cash flows from financing activities increased
$190.1 million between the six months ended June 30, 2006 and the corresponding 2007 period. The
primary reason for the increase was higher net borrowings under the Companys credit and
construction facilities over the first half of 2006 by approximately $173.7 million, mainly due to
increased development and acquisition costs. Also contributing to the increase was the repayment
in 2006 of the 905 Juniper construction loan. Partially offsetting the increase was the purchase
of treasury shares of $7.7 million in 2007, compared to none in 2006.
29
During the six months ended June 30, 2007, the Company paid common and preferred dividends of
$46.1 million which it funded with cash provided by operating activities and with proceeds from
investment property sales and the venture formation. During the 2006 period, the Company paid
common and preferred dividends of $45.2 million which it funded with cash provided by operating
activities. For the foreseeable future, the Company intends to fund its quarterly
distributions to common and preferred stockholders with cash provided by operating activities,
a portion of proceeds from investment property sales and a portion of distributions from
unconsolidated joint ventures in excess of income.
Off Balance Sheet Arrangements
The Company has a number of off balance sheet joint ventures with varying structures. At June
30, 2007, the Companys unconsolidated joint ventures had aggregate outstanding indebtedness to
third parties of approximately $463.1 million of which the Companys share was $198.6 million.
These loans are generally mortgage or construction loans most of which are non-recourse to the
Company. In certain instances, the Company provides non-recourse carve-out guarantees on these
non-recourse loans.
One of the Companys ventures, CF Murfreesboro, which is constructing a retail center, has a
$131 million construction loan that matures on July 20, 2010, of which the venture has drawn
approximately $60.3 million. The Company guarantees 20% of the amount outstanding under the
construction loan, which equals approximately $12.0 million at June 30, 2007. The retail center
under construction serves as collateral against the loan, and the Company is liable for 20% of any
difference between the proceeds from the sale of the retail center and the amounts due under the
loan in the event of default. The Company has not recorded a liability as of June 30, 2007, as it
estimates no obligation is or will be required. The unconsolidated joint ventures also had
performance bonds which the Company guarantees totaling approximately $1.6 million at June 30,
2007.
Several of these ventures are involved in the active acquisition and development of real
estate. As capital is required to fund the acquisition and development of this real estate, the
Company must fund its share of the costs not funded by operations or outside financing. Based on
the nature of the activities conducted in these ventures, management cannot estimate with any
degree of accuracy amounts that the Company may be required to fund in the short or long-term.
However, management does not believe that additional funding of these ventures will have a material
adverse effect on its financial condition or results of operation.
Critical Accounting Policies
There has been no material change in the Companys critical accounting policies from those
disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2006.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the Companys market risk related to its notes payable
and notes receivable from that disclosed in the Companys Annual Report on Form 10-K for the year
ended December 31, 2006.
Item 4. Controls and Procedures
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 SECs rules and forms, and that such information
is accumulated and communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management necessarily applied its judgment in assessing the costs and benefits of such controls
and
30
procedures, which, by their nature, can provide only reasonable assurance regarding
managements control objectives. We also have investments in certain unconsolidated entities. As
we do not always control or manage these entities, our disclosure controls and procedures with
respect to such entities are necessarily more limited than those we maintain with respect to our
consolidated subsidiaries.
As of the end of the period covered by this quarterly 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 pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based
upon the foregoing, the Chief Executive Officer along with the Chief Financial Officer concluded
that our disclosure controls and procedures are effective at providing reasonable assurance that
all material information required to be included in our Exchange Act reports is reported in a
timely manner. 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to routine actions for negligence and other claims and administrative
proceedings arising in the ordinary course of business, some of which are expected to be covered by
liability insurance and all of which collectively are not expected to have a material impact on the
financial condition or results of operations of the Company.
Item 1A. Risk Factors
There has been no material change in the Companys risk factors from those outlined in Item 1A
in the Companys Annual Report on Form 10-K for the year ended December 31, 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table contains information about the Companys purchases of its equity
securities during the second quarter of 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PURCHASES RELATED TO OPTIONS |
|
|
|
TREASURY STOCK PURCHASES |
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
Maximum Number |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
|
|
|
|
of Shares That May |
|
|
|
Total Number of |
|
|
Average Price Paid |
|
|
|
Part of Publicly |
|
|
Average Price |
|
|
Yet Be Purchased |
|
|
|
Shares Purchased (1) |
|
|
Per Share (1) |
|
|
|
Announced Plan (2) |
|
|
Paid Per Share |
|
|
Under Plan (2) |
|
April 1-30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
5,000,000 |
|
May 1-31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000,000 |
|
June 1-30 |
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
30.79 |
|
|
|
4,750,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
$ |
30.79 |
|
|
|
4,750,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
There were no purchases of equity securities during the second quarter of 2007 related to
remittances of shares of stock for option exercises or taxes due thereon. |
|
(2) |
|
On May 9, 2006, the Board of Directors of the Company authorized a stock repurchase plan,
which expires May 9, 2009, of up to 5,000,000 shares of the Companys common stock. The
Company purchased 250,000 shares under this plan in the second quarter of 2007. |
Item 3. Defaults Upon Senior Securities
None.
31
Item 4. Submission of Matters to a Vote of Security Holders
The Companys Annual Meeting of Stockholders was held on May 14, 2007. The following
proposals were adopted by the stockholders of the Company at the annual meeting:
|
(i) |
|
The election of nine Directors. |
The vote on the above was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Withheld |
|
|
|
For |
|
|
Authority |
|
Thomas D. Bell, Jr. |
|
|
48,945,583 |
|
|
|
380,494 |
|
Erskine B. Bowles |
|
|
49,101,505 |
|
|
|
224,572 |
|
James D. Edwards |
|
|
49,245,753 |
|
|
|
80,324 |
|
Lillian C. Giornelli |
|
|
49,080,003 |
|
|
|
246,074 |
|
S. Taylor Glover |
|
|
47,546,322 |
|
|
|
1,779,755 |
|
James H. Hance, Jr. |
|
|
49,115,957 |
|
|
|
210,120 |
|
William B. Harrison, Jr. |
|
|
49,137,183 |
|
|
|
188,894 |
|
Boone A. Knox |
|
|
48,307,453 |
|
|
|
1,018,624 |
|
William Porter Payne |
|
|
48,815,115 |
|
|
|
510,962 |
|
|
(ii) |
|
A proposal to approve an amendment to the 1999 Incentive Stock
Plan to increase the number of shares of common stock available under the 1999
Incentive Stock Plan by 900,000 shares. |
|
|
|
|
The vote on the above was: |
|
|
|
|
|
For |
|
|
32,348,433 |
|
Against |
|
|
7,394,222 |
|
Abstain |
|
|
331,969 |
|
Broker Non-Votes |
|
|
9,251,453 |
|
|
(iii) |
|
A proposal to ratify the appointment of Deloitte & Touche LLP
as the Companys independent registered public accounting firm for the fiscal
year ending December 31, 2007. |
|
|
|
|
The vote on the above was: |
|
|
|
|
|
For |
|
|
48,880,218 |
|
Against |
|
|
417,749 |
|
Abstain |
|
|
28,110 |
|
Item 5. Other Information
None.
32
Item 6. Exhibits
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
Restated and Amended Articles of Incorporation of
the Registrant, as amended August 9, 1999, filed as Exhibit 3.1 to the
Registrants Form 10-Q for the quarter ended June 30, 2002, and
incorporated herein by reference. |
|
|
|
|
|
|
|
|
|
|
3.1.1 |
|
|
Restated and Amended Articles of Incorporation
of the Registrant, as amended December 15, 2004, filed as Exhibit
3(a)(I) to Registrants Form 10-K for the year ended December 31, 2004,
and incorporated herein by reference. |
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3.2 |
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Bylaws of the Registrant, as amended April 29,
1993, filed as Exhibit 3.2 to the Registrants Form 10-Q for the quarter
ended June 30, 2002, and incorporated herein by reference. |
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10.1 |
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Form of Indemnification Agreement, filed as
Exhibit 10.1 to the Registrants Form 8-K on June 20, 2007 and
incorporated herein by reference. |
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10.2 |
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Cousins Properties Incorporated 1999 Incentive Stock Plan, as amended and restated, approved by the stockholders on May 14, 2007, filed as Annex B to the Companys proxy statement dated April 13, 2007, an incorporated herein by reference. |
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11 |
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Computation of Per Share Earnings* |
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31.1 |
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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. |
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31.2 |
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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. |
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32.1 |
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Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
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Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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* |
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Data required by SFAS No. 128, Earnings Per Share, is provided in Note 4 to the condensed
consolidated financial statements included in this report. |
33
SIGNATURES
Pursuant to the requirements 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.
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COUSINS PROPERTIES INCORPORATED
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/s/ James A. Fleming
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James A. Fleming |
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Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial
Officer) |
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August 9, 2007
34