1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the
quarterly period ended September 30,
2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from..............to..............
Commission file number 0-3576
COUSINS PROPERTIES INCORPORATED
(Exact name of registrant as specified in its charter)
Georgia 58-0869052
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2500 Windy Ridge Parkway
Atlanta, Georgia 30339-5683
(Address of principal executive offices) (Zip Code)
(770) 955-2200
(Registrant's 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 X No
------ ----
As of October 28, 2002, there were 48,667,631 shares of the registrant's common
stock, par value $1 per share, outstanding.
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share amounts)
September 30, December 31,
2002 2001
------------- ------------
(Unaudited)
ASSETS
- ------
PROPERTIES:
Operating properties, net of accumulated
depreciation of $143,320 as of September 30,
2002 and $105,795 as of December 31, 2001 $ 764,176 $ 765,398
Operating property held for sale, net of
accumulated depreciation of $381 as of
September 30, 2002 and $244 as of
December 31, 2001 5,607 5,721
Land held for investment or future development 17,579 15,294
Projects under construction 151,244 140,833
Residential lots under development 15,779 12,520
---------- ----------
Total properties 954,385 939,766
CASH AND CASH EQUIVALENTS, at cost which
approximates market 10,522 10,556
NOTES AND OTHER RECEIVABLES 47,422 44,533
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 183,986 185,397
OTHER ASSETS, including goodwill of $15,612
in 2002 and 2001 37,216 36,377
---------- ----------
TOTAL ASSETS $1,233,531 $1,216,629
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
NOTES PAYABLE $ 646,390 $ 585,275
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 34,365 31,762
DEPOSITS AND DEFERRED INCOME 2,898 2,422
---------- ----------
TOTAL LIABILITIES 683,653 619,459
---------- ----------
DEFERRED GAIN 104,543 107,676
MINORITY INTERESTS 26,980 26,821
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' INVESTMENT:
Common stock, $1 par value, authorized
150,000,000 shares; issued 50,822,113
shares at September 30, 2002 and 50,106,100
shares at December 31, 2001 50,822 50,106
Additional paid-in capital 286,634 276,268
Treasury stock at cost, 2,154,782 in 2002 and
681,000 shares in 2001 (52,195) (17,465)
Unearned compensation (2,904) (3,580)
Cumulative undistributed net income 135,998 157,344
---------- ----------
TOTAL STOCKHOLDERS' INVESTMENT 418,355 462,673
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
INVESTMENT $1,233,531 $1,216,629
========== ==========
The accompanying notes are an integral part of these consolidated balance
sheets.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2002 2001 2002 2001
---- ---- ---- ----
REVENUES:
Rental property revenues $43,778 $36,887 $126,211 $107,629
Development income 918 1,715 3,076 4,977
Management fees 2,308 2,104 6,950 5,549
Leasing and other fees 1,802 1,413 3,655 3,703
Residential lot and outparcel sales 2,481 1,653 7,036 5,560
Interest and other 1,070 1,408 3,319 4,532
------- ------- -------- --------
52,357 45,180 150,247 131,950
------- ------- -------- --------
INCOME FROM UNCONSOLIDATED JOINT
VENTURES 6,880 5,804 20,511 16,949
------- ------- -------- --------
COSTS AND EXPENSES:
Rental property operating expenses 12,777 11,253 36,225 31,842
General and administrative expenses 6,322 7,266 20,589 20,129
Depreciation and amortization 15,649 11,190 40,903 32,721
Stock appreciation right (credit)
expense (7) (128) 27 (265)
Residential lot and outparcel cost
of sales 2,414 1,464 5,827 4,817
Interest expense 9,511 6,845 27,600 20,566
Property taxes on undeveloped land 198 140 548 481
Other 1,325 1,011 3,588 3,063
------- ------- -------- --------
48,189 39,041 135,307 113,354
------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND GAIN ON
SALE OF INVESTMENT PROPERTIES AND
EXTRAORDINARY LOSS 11,048 11,943 35,451 35,545
PROVISION (BENEFIT) FOR INCOME TAXES
FROM CONTINUING OPERATIONS 196 (311) 1,370 (1,024)
------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE
GAIN ON SALE OF INVESTMENT PROPERTIES
AND EXTRAORDINARY LOSS 10,852 12,254 34,081 36,569
GAIN ON SALE OF INVESTMENT PROPERTIES,
NET OF APPLICABLE INCOME TAX
PROVISION 1,028 1,031 3,100 20,453
------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY LOSS 11,880 13,285 37,181 57,022
EXTRAORDINARY LOSS - - 3,501 -
------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS 11,880 13,285 33,680 57,022
------- ------- -------- --------
INCOME FROM DISCONTINUED OPERATIONS 130 102 317 290
------- ------- -------- --------
NET INCOME $12,010 $13,387 $ 33,997 $ 57,312
======= ======= ======== ========
WEIGHTED AVERAGE SHARES 49,584 49,386 49,525 49,248
======= ======= ======== ========
BASIC NET INCOME PER SHARE:
Income from continuing operations
before extraordinary loss $ .24 $ .27 $ .75 $ 1.16
Extraordinary loss - - .07 -
Income from discontinued operations - - .01 -
------- ------- -------- --------
Basic net income per share $ .24 $ .27 $ .69 $ 1.16
======= ======= ======== ========
DILUTED WEIGHTED AVERAGE SHARES 50,152 50,445 50,275 50,349
======= ======= ======== ========
DILUTED NET INCOME PER SHARE:
Income from continuing operations
before extraordinary loss $ .24 $ .27 $ .74 $ 1.13
Extraordinary loss - - .07 -
Income from discontinued operations - - .01 .01
------- ------- -------- --------
Diluted net income per share $ .24 $ .27 $ .68 $ 1.14
======= ======= ======== ========
CASH DIVIDENDS DECLARED PER SHARE $ .37 $ .34 $ 1.11 $ 1.02
======= ======= ======== ========
The accompanying notes are an integral part of these consolidated statements.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(UNAUDITED)
($ in thousands)
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations before gain on sale
of investment properties and extraordinary loss $ 34,081 $ 36,569
Adjustments to reconcile income from continuing
operations before gain on sale of investment
properties and extraordinary loss to net cash
provided by operating activities of continuing
operations:
Depreciation and amortization, net of minority
interest's share 40,903 32,625
Amortization of unearned compensation 471 787
Stock appreciation right expense (credit) 27 (265)
Cash charges to expense accrual for stock
appreciation rights (288) (389)
Effect of recognizing rental revenues on a
straight-line basis (1,391) (2,005)
Income from unconsolidated joint ventures (20,511) (16,949)
Operating distributions from unconsolidated
joint ventures 27,602 18,916
Residential lot and outparcel cost of sales 4,694 3,719
Changes in other operating assets and liabilities:
Change in other receivables (529) 728
Change in accounts payable and accrued liabilities 2,045 (4,547)
-------- --------
Net cash provided by operating activities of continuing
operations 87,104 69,189
-------- --------
Net cash provided by operating activities of
discontinued operations 454 433
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment properties, net of
applicable income tax provision 3,100 20,453
Adjustments to reconcile gain on sale of investment
properties to net cash provided by sales activities:
Cost of sales - 35,910
Deferred income recognized (3,092) (3,095)
Non-cash gain on disposition of leasehold interests - (236)
Property acquisition and development expenditures (57,380) (112,142)
Investment in unconsolidated joint ventures, including
interest capitalized to equity investments (5,680) (26,379)
(Investment in) collection of notes receivable, net (977) 1,934
Net cash paid in acquisition of business - (2,126)
Change in other assets, net (2,391) (8,514)
-------- --------
Net cash used in investing activities (66,420) (94,195)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility 201,480 209,493
Repayment of credit facility (218,429) (175,961)
Proceeds from other notes payable 150,000 45,000
Repayment of other notes payable (71,936) (4,218)
Dividends paid (55,343) (50,371)
Common stock sold, net of expenses 11,287 11,909
Common stock repurchases (34,730) (12,475)
Extraordinary loss (3,501) -
-------- --------
Net cash (used in) provided by financing activities (21,172) 23,377
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (34) (1,196)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,556 1,696
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,522 $ 500
======== ========
The accompanying notes are an integral part of these consolidated statements.
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
1. BASIS OF PRESENTATION
- --------------------------
The Consolidated Financial Statements include the accounts of Cousins
Properties Incorporated ("Cousins"), its majority owned partnerships and wholly
owned subsidiaries, Cousins Real Estate Corporation ("CREC") and its
subsidiaries and CREC II Inc. ("CREC II") and its subsidiaries. All of the
entities included in the 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 distribute 100% of its federal taxable income to
stockholders, thereby eliminating any liability for future corporate federal
income taxes. Therefore, the results included herein do not include a federal
income tax provision for Cousins. However, CREC and its subsidiaries and CREC II
and its subsidiaries are taxed separately from Cousins as regular corporations.
Accordingly, the Consolidated Statements of Income include a provision (benefit)
for CREC and CREC II's income taxes.
The Consolidated Financial Statements were prepared by the Company
without audit, but in the opinion of management reflect all adjustments
necessary (which adjustments are of a normal and recurring nature) for the fair
presentation of the Company's financial position as of September 30, 2002 and
results of operations for the three and nine month periods ended September 30,
2002 and 2001. Results of operations for the interim 2002 period are not
necessarily indicative of results expected for the full year. While certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission, the Company believes that
the disclosures herein are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the Consolidated Financial Statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001. The
accounting policies employed are the same as those shown in Note 1 to the
Consolidated Financial Statements included in such Form 10-K.
2. SUPPLEMENTAL INFORMATION CONCERNING CASH FLOWS
- ---------------------------------------------------
Interest paid (net of $4,495,000 and $7,129,000 capitalized in 2002 and
2001, respectively) and income taxes (refunded) paid were as follows for the
nine months ended September 30, 2002 and 2001 ($ in thousands):
2002 2001
------- -------
Interest paid $26,607 $21,576
Income taxes (refunded) paid $(1,358) $ 272
During the nine months ended September 30, 2002, approximately
$26,836,000 was transferred from Projects Under Construction to Operating
Properties.
3. NOTES PAYABLE AND INTEREST EXPENSE
- ---------------------------------------
At September 30, 2002 and December 31, 2001, notes payable included the following ($ in thousands):
September 30, 2002 December 31, 2001
------------------------------------ -------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
------- -------------- ----- ------- -------------- -----
Floating Rate Credit Facility
and Floating Rate Debt $136,867 $ 6,866 $143,733 $153,816 $ 7,614 $161,430
Other Debt
(primarily non-recourse
fixed rate mortgages) 509,523 261,566 771,089 431,459 268,299 699,758
-------- -------- -------- -------- -------- --------
$646,390 $268,432 $914,822 $585,275 $275,913 $861,188
======== ======== ======== ======== ======== ========
For the three and nine months ended September 30, 2002, interest expense was recorded as follows ($ in thousands):
Three Months Ended Nine Months Ended
September 30, 2002 September 30, 2002
------------------------------------ ----------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
------- -------------- ----- ------- -------------- -----
Interest Expensed $ 9,511 $4,793 $14,304 $27,600 $14,479 $42,079
Interest Capitalized 1,365 - 1,365 4,495 - 4,495
------- ------ ------- ------- ------- -------
$10,876 $4,793 $15,669 $32,095 $14,479 $46,574
======= ====== ======= ======= ======= =======
During the first nine months of 2002, interest was capitalized related
to the Company's and the Company's share of unconsolidated joint venture
projects under construction which had an average balance of approximately $91
million.
As discussed in Note 6 to the Company's consolidated financial
statements included in this report, CSC completed a $150 million non-recourse
mortgage note payable on the Bank of America Plaza building. Pursuant to the
loan agreement, CSC must maintain all of the insurance required under the loan
agreement with insurance companies having certain claims paying ability ratings.
In July 2002, the claims paying ability rating of CSC's insurance carrier was
downgraded to a level immediately below that required by the loan agreement.
The Company notified the lender of such downgrading. The lender is not
requiring that CSC obtain replacement insurance at this time, but has reserved
the right to require CSC to do so at a later time. Based upon discussions
with the lender, the Company believes that CSC will be required to replace a
portion of the insurance coverage now provided by CSC's current insurance
carrier upon the renewal of the policy as of January 1, 2003.
On the advice of its insurance consultants, the Company believes that
the insurance coverage currently required under the loan agreement is available
from insurance companies that meet the minimum claims paying ability rating
requirements under the loan agreement. If required to provide insurance from a
carrier with the required rating, there can be no assurance, however, that such
insurance can be obtained, or if obtainable, that such insurance can be obtained
without significant additional cost to CSC. Pursuant to the loan agreement, the
lender permits insurance to be issued by insurance companies with a lower claims
paying ability rating under certain circumstances, including obtaining written
confirmation from the rating agencies that the ratings of any securities issued
or to be issued as the result of a securitization of this mortgage note payable
will not be qualified, downgraded or withdrawn as a result of such lower claims
paying ability rating. There can be no assurance that if requested, the rating
agencies would approve a reduction in the claims paying ability rating of
insurance companies. In the event that CSC is required to obtain insurance from
an insurance company with the required rating and cannot obtain such insurance,
and, in the further event that the rating agencies will not confirm that the
rating of the related securities will not be qualified, downgraded or withdrawn
due to the use of an insurance company with a lower rating, CSC could ultimately
be in default under the loan agreement and related documents.
4. EARNINGS PER SHARE DATA
- ---------------------------
Weighted average shares and diluted weighted average shares are as
follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
2002 2001 2002 2001
---- ---- ---- ----
Weighted average shares 49,584 49,386 49,525 49,248
Dilutive potential common shares 568 1,059 750 1,101
------ ------ ------ ------
Diluted weighted average shares 50,152 50,445 50,275 50,349
====== ====== ====== ======
Anti-dilutive options not included 2,168 990 964 990
====== ====== ====== ======
5. NEW ACCOUNTING PRONOUNCEMENTS
- ---------------------------------
In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets". Under the provisions of SFAS No. 142, there will be no
amortization of goodwill and other intangible assets that have indefinite useful
lives. Instead, these assets must be tested for impairment upon the adoption of
SFAS No. 142 and annually thereafter. The Company has goodwill totaling
approximately $15.6 million which is subject to SFAS No. 142. The Company
adopted SFAS No. 142 effective January 1, 2002 and completed its initial
impairment test of this goodwill in the first quarter of 2002, which resulted in
no impairment. Amortization expense recorded related to this goodwill was
approximately $181,000 and $473,000 for the three and nine months ended
September 30, 2001, respectively. Had amortization expense not been recorded in
2001, diluted net income per share would have been $.27 and $1.15 for the three
and nine month 2001 periods, respectively.
In August 2001, SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," was issued, which the Company adopted effective
January 1, 2002. SFAS No. 144 addresses financial accounting and reporting for
the impairment of long-lived assets and long-lived assets to be disposed of.
This statement supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and establishes
criteria beyond that previously specified in SFAS No. 121 to determine when a
long-lived asset is to be considered as held for sale. The Company believes that
the impairment provisions of SFAS No. 144 are similar to SFAS No. 121, and the
adoption had no impact on the Company's financial statements. SFAS No. 144 also
requires that the gains and losses from the disposition of certain real estate
assets and the related historical operating results be included in a separate
line item, Income from Discontinued Operations, in the Consolidated Statements
of Income for all periods presented. In the normal course of business, the
Company recycles invested capital by disposing of existing assets and
redeploying the proceeds in order to enhance total returns to stockholders.
In the third quarter 2002, the Company determined that Salem Road
Station, a 67,000 square foot retail neighborhood center, which is under firm
contract to be sold, met the criteria of a qualifying disposition in accordance
with SFAS No. 144. The Company anticipates that Salem Road Station will be sold
to an unrelated third party in the fourth quarter 2002. The Company reclassified
the carrying amount of Salem Road Station to an Operating Property Held for Sale
for all periods presented in the accompanying Consolidated Balance Sheets.
Additionally, the results of operations for Salem Road Station were reclassified
as Income from Discontinued Operations in the accompanying Consolidated
Statements of Income for all periods presented. The following table details the
adjustments made to the Consolidated Statements of Income ($ in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
2002 2001 2002 2001
---- ---- ---- ----
Rental property revenues 186 177 567 548
Rental property operating expenses 33 23 113 115
Depreciation and amortization 23 52 137 143
--- --- --- ---
Income from discontinued operations 130 102 317 290
=== === === ===
In April 2002, SFAS No. 145, "Rescission of SFAS Nos. 4, 44 and 64,
Amendment of SFAS No. 13, and Technical Corrections," was issued. SFAS No. 145,
which will be effective for the Company January 1, 2003, among other things,
eliminates the requirement that all gains and losses from the extinguishment of
debt be aggregated and, if material, classified as an extraordinary item.
However, a gain or loss arising from such an event or transaction would continue
to be classified as an extraordinary item if the event or transaction is both
unusual in nature and infrequent in occurrence per the criteria in Accounting
Principles Board ("APB") No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." As part of the
transition guidance, although net income would not be affected, gains and losses
from debt extinguishment in prior periods that do not meet the criteria in APB
No. 30 cannot be treated as extraordinary items for all periods presented. The
Company anticipates that the previously recognized extraordinary item will be
reclassified to recurring operations upon adoption of SFAS No. 145.
6. REFINANCING OF BANK OF AMERICA PLAZA
- -----------------------------------------
On February 22, 2002, CSC Associates, L.P. ("CSC"), a 50% owned joint
venture, completed a $150 million non-recourse mortgage note payable with an
interest rate of 6.9575% and a maturity of March 1, 2012. This non-recourse
mortgage note payable is secured by CSC's interest in the Bank of America Plaza
building and related leases and agreements. CSC loaned the $150 million proceeds
of the non-recourse mortgage note payable to the Company under a non-recourse
loan (the "Cousins Loan") secured by the Company's interest in CSC under the
same payment terms as those of the non-recourse mortgage note payable. The
Company paid all costs of issuing the non-recourse mortgage note payable and the
Cousins Loan, including a $750,000 fee to an affiliate of Bank of America
Corporation.
On March 15, 2002, $65,873,925 of the proceeds from this financing was
used to pay off in full the existing collateralized non-recourse mortgage notes
("existing mortgage notes"). The $65,873,925 included $65,525,710 for the payoff
of the principal balance as of February 15, 2002 (the last payment date of the
existing mortgage notes) and $348,215 for accrued interest from February 15,
2002 through March 14, 2002. The existing non-recourse loan to CSC, which was
secured by the Company's interest in CSC under the same payment terms as those
of the existing mortgage notes, was also repaid in full.
In connection with the prepayment in full of the existing mortgage
notes, the Company paid a prepayment premium in the amount of $2,871,925. This
prepayment premium of $2,871,295, along with the unamortized balance of closing
costs paid by the Company related to the existing mortgage notes in the amount
of $629,278, were expensed as an Extraordinary Item in the accompanying
Consolidated Statements of Income.
7. REPORTABLE SEGMENTS
- -----------------------
The Company has three reportable segments: Office Division, Retail
Division and Land Division. The Office Division and Retail Division develop,
lease and manage office buildings and retail centers, respectively. The Land
Division owns various tracts of strategically located land which are being held
for investment or future development. The Land Division also develops
single-family residential communities which are parceled into lots and sold to
various home builders.
The management of the Company evaluates the performance of its
reportable segments based on Funds From Operations ("FFO"). The Company
calculates its FFO using the National Association of Real Estate Investment
Trusts ("NAREIT") definition of FFO adjusted to (i) eliminate the recognition of
rental revenues on a straight-line basis and (ii) reflect stock appreciation
right expense on a cash basis. The Company believes its FFO presentation more
properly reflects its operating results. The Company's reportable segments are
broken down based on what 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 notations (100%) and (JV) used in the following tables indicate
wholly owned and unconsolidated joint ventures, respectively, and all amounts
are in thousands.
Three Months Ended Office Retail Land Unallocated
September 30, 2002 Division Division Division and Other Total
- ------------------ -------- -------- -------- --------- -----
Rental property revenues (100%) $34,694 $ 8,945 $ - $ 26 $43,665
Rental property revenues (JV) 20,012 658 - - 20,670
Development income, management
fees and leasing and other fees (100%) 4,532 408 88 - 5,028
Development income, management
fees and leasing and other fees (JV) - - - - -
Other income (100%) - - 2,481 1,070 3,551
Other income (JV) - - 430 - 430
--------------------------------------------------------
Total revenues 59,238 10,011 2,999 1,096 73,344
--------------------------------------------------------
Rental property operating expenses (100%) 10,732 2,270 - - 13,002
Rental property operating expenses (JV) 6,152 165 - - 6,317
Other expenses (100%) 4,738 1,594 3,188 10,793 20,313
Other expenses (JV) - - 15 3,295 3,310
--------------------------------------------------------
Total expenses 21,622 4,029 3,203 14,088 42,942
--------------------------------------------------------
Consolidated funds from operations 37,616 5,982 (204) (12,992) 30,402
--------------------------------------------------------
Depreciation and amortization (100%) (12,248) (2,884) - (1) (15,133)
Depreciation and amortization (JV) (4,248) (235) - - (4,483)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 299 - - - 299
Effect of the recognition of rental
revenues on a straight-line basis (JV) (110) - - - (110)
Adjustment to reflect stock appreciation
right expense on an accrual basis - - - 7 7
Gain on sale of investment properties, net
of applicable income tax provision 471 557 - - 1,028
--------------------------------------------------------
Net income 21,780 3,420 (204) (12,986) 12,010
--------------------------------------------------------
Provision for income taxes from continuing operations - - - 196 196
--------------------------------------------------------
Income from operations before taxes $21,780 $ 3,420 $ (204) $(12,790) $12,206
========================================================
Nine Months Ended Office Retail Land Unallocated
September 30, 2002 Division Division Division and Other Total
- ------------------ -------- -------- -------- --------- -----
Rental property revenues (100%) $ 97,920 $ 27,388 $ - $ 79 $ 125,387
Rental property revenues (JV) 58,285 1,919 - - 60,204
Development income, management
fees and leasing and other fees (100%) 12,146 1,200 335 - 13,681
Development income, management
fees and leasing and other fees (JV) - - - - -
Other income (100%) - - 7,036 3,319 10,355
Other income (JV) - - 1,882 - 1,882
----------------------------------------------------------
Total revenues 168,351 30,507 9,253 3,398 211,509
----------------------------------------------------------
Rental property operating expenses (100%) 30,586 6,658 - 5 37,249
Rental property operating expenses (JV) 17,614 486 - - 18,100
Other expenses (100%) 14,176 4,704 7,641 33,965 60,486
Other expenses (JV) - - 40 9,942 9,982
----------------------------------------------------------
Total expenses 62,376 11,848 7,681 43,912 125,817
----------------------------------------------------------
Consolidated funds from operations 105,975 18,659 1,572 (40,514) 85,692
----------------------------------------------------------
Depreciation and amortization (100%) (30,439) (9,010) - (4) (39,453)
Depreciation and amortization (JV) (12,615) (712) - - (13,327)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 1,391 - - - 1,391
Effect of the recognition of rental
revenues on a straight-line basis (JV) (166) - - - (166)
Adjustment to reflect stock appreciation
right expense on an accrual basis - - - 261 261
Gain on sale of investment properties, net
of applicable income tax provision 1,418 1,682 - - 3,100
Extraordinary loss - - - (3,501) (3,501)
----------------------------------------------------------
Net income 65,564 10,619 1,572 (43,758) 33,997
----------------------------------------------------------
Provision for income taxes from continuing operations - - - 1,370 1,370
----------------------------------------------------------
Income from operations before taxes $ 65,564 $ 10,619 $ 1,572 $(42,388) $ 35,367
==========================================================
Total assets $854,425 $266,938 $29,104 $83,064 $1,233,531
==========================================================
Investment in unconsolidated joint ventures $155,069 $ 16,443 $12,474 $ - $ 183,986
==========================================================
Reconciliation to Consolidated Revenues
- ---------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
2002 2001 2002 2001
---- ---- ---- ----
Rental property revenues (100%) $43,665 $36,656 $125,387 $106,182
Rental property revenues from
discontinued operations (100%) (186) (177) (567) (548)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 299 408 1,391 1,995
Development income, management fees
and leasing and other fees (100%) 5,028 5,232 13,681 14,229
Residential lot and outparcel sales 2,481 1,653 7,036 5,560
Interest and other 1,070 1,408 3,319 4,532
--------------------- ----------------------
Total consolidated revenues $52,357 $45,180 $150,247 $131,950
===================== ======================
Three Months Ended Office Retail Land Unallocated
September 30, 2001 Division Division Division and Other Total
- ------------------ -------- -------- -------- --------- -----
Rental property revenues (100%) $28,334 $8,249 $ - $ 73 $36,656
Rental property revenues (JV) 17,159 620 - 15 17,794
Development income, management
fees and leasing and other fees (100%) 4,956 194 82 - 5,232
Development income, management
fees and leasing and other fees (JV) - - - - -
Other income (100%) - - 1,653 1,408 3,061
Other income (JV) - - 438 - 438
--------------------------------------------------------
Total revenues 50,449 9,063 2,173 1,496 63,181
--------------------------------------------------------
Rental property operating expenses (100%) 9,499 2,146 - (18) 11,627
Rental property operating expenses (JV) 4,962 124 - 7 5,093
Other expenses (100%) 5,428 1,809 1,979 7,171 16,387
Other expenses (JV) - - 1 3,463 3,464
--------------------------------------------------------
Total expenses 19,889 4,079 1,980 10,623 36,571
--------------------------------------------------------
Consolidated funds from operations 30,560 4,984 193 (9,127) 26,610
--------------------------------------------------------
Depreciation and amortization (100%) (8,263) (2,668) - (1) (10,932)
Depreciation and amortization (JV) (3,833) (239) - - (4,072)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 408 - - - 408
Effect of the recognition of rental
revenues on a straight-line basis (JV) 197 - - - 197
Adjustment to reflect stock appreciation
right expense on an accrual basis - - - 145 145
Gain on sale of investment properties, net
of applicable income tax provision 475 556 - - 1,031
--------------------------------------------------------
Net income 19,544 2,633 193 (8,983) 13,387
--------------------------------------------------------
Benefit for income taxes from continuing operations - - - (311) (311)
--------------------------------------------------------
Income from operations before taxes $19,544 $2,633 $ 193 $(9,294) $13,076
========================================================
Nine Months Ended Office Retail Land Unallocated
September 30, 2001 Division Division Division and Other Total
- ------------------ -------- -------- -------- ----------- -----
Rental property revenues (100%) $ 81,129 $ 24,797 $ - $ 256 $ 106,182
Rental property revenues (JV) 52,942 1,822 - 14 54,778
Development income, management
fees and leasing and other fees (100%) 13,048 925 256 - 14,229
Development income, management
fees and leasing and other fees (JV) 1,050 - - - 1,050
Other income (100%) - - 5,560 4,532 10,092
Other income (JV) - - 1,330 25 1,355
----------------------------------------------------------
Total revenues 148,169 27,544 7,146 4,827 187,686
----------------------------------------------------------
Rental property operating expenses (100%) 26,180 6,648 - 42 32,870
Rental property operating expenses (JV) 15,563 453 - 7 16,023
Other expenses (100%) 15,184 5,905 6,380 21,105 48,574
Other expenses (JV) - - 25 12,645 12,670
----------------------------------------------------------
Total expenses 56,927 13,006 6,405 33,799 110,137
----------------------------------------------------------
Consolidated funds from operations 91,242 14,538 741 (28,972) 77,549
----------------------------------------------------------
Depreciation and amortization (100%) (24,347) (7,447) - (4) (31,798)
Depreciation and amortization (JV) (11,499) (665) - - (12,164)
Effect of the recognition of rental
revenues on a straight-line basis (100%) 1,995 - - - 1,995
Effect of the recognition of rental
revenues on a straight-line basis (JV) 623 - - - 623
Adjustment to reflect stock appreciation
right expense on an accrual basis - - - 654 654
Gain on sale of investment properties, net
of applicable income tax provision 1,660 18,784 9 - 20,453
----------------------------------------------------------
Net income 59,674 25,210 750 (28,322) 57,312
----------------------------------------------------------
Benefit for income taxes from continuing operations - - - (1,024) (1,024)
----------------------------------------------------------
Income from operations before taxes $ 59,674 $ 25,210 $ 750 $(29,346) $ 56,288
==========================================================
Total assets $839,371 $263,890 $17,892 $71,740 $1,192,893
==========================================================
Investment in unconsolidated joint ventures $161,009 $ 17,032 $ 9,819 $ - $ 187,860
==========================================================
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Three and Nine Months Ended
September 30, 2002 and 2001
Critical Accounting Policies:
- -----------------------------
A critical accounting policy is one which is both important to the
portrayal of a company's financial condition and results of operations and
requires significant judgment or complex estimation processes. As the Company is
in the business of developing, owning and managing office and retail real estate
properties and developing single-family residential communities which are
parceled into lots and sold to various home builders, its critical accounting
policies relate to cost capitalization, depreciation and amortization,
impairment of long-lived assets and residential lot sales profit recognition.
The Company expenses predevelopment costs incurred on a potential
project until it becomes probable that the project will go forward. After a
project becomes probable, all subsequently incurred predevelopment costs, as
well as interest, real estate taxes, and certain internal personnel and
associated costs directly related to the project under development are
capitalized. If the decision is made to not commence development of a project
that had been deemed probable, all previously capitalized costs are expensed.
From the date a project receives its certificate of occupancy and for one year
thereafter, the Company continues capitalizing interest, real estate taxes and
certain internal personnel and associated costs directly related to the project
under development based on the portion of the project which remains under
construction.
When a project is completed and placed in service, it is depreciated on
a straight-line basis over its estimated useful life. Projects which the Company
developed are depreciated over 30 to 40 years and projects which the Company
acquired are depreciated over 15 to 30 years. Leasehold improvements are
amortized over the lesser of the applicable lease term or the estimated useful
life of the asset.
As required by accounting principles generally accepted in the United
States, the Company periodically evaluates its real estate assets to determine
if there has been any impairment in their carrying values and records impairment
losses if the undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amounts or if there are other indicators of
impairment. At September 30, 2002, the Company did not own any real estate
assets that were impaired.
In its determination of the gross profit percentages to be applied to
its residential lot sales in order to calculate the profits to be recognized on
these sales, the Company utilizes several estimates. Gross profit percentages
are calculated based on the estimated lot sales prices divided by the estimated
costs of the development. The Company must estimate the prices of the lots to be
sold, the costs to complete the development of the residential community and the
time period over which the lots, once completed, will be ultimately be sold.
Results of Operations:
- ----------------------
Rental Property Revenues and Operating Expenses. Rental property
revenues increased approximately $6,891,000 and $18,582,000 in the three and
nine month 2002 periods, respectively. Rental property revenues from the
Company's office portfolio increased approximately $6,251,000 and $16,187,000 in
the three and nine month 2002 periods, respectively. 55 Second Street became
partially operational for financial reporting purposes in February 2002 which
contributed approximately $4,621,000 and $11,522,000 in the three and nine month
2002 periods, respectively, to the increase. Additionally, rental property
revenues from 101 Second Street increased approximately $1,411,000 and
$2,277,000 in the three and nine month 2002 periods, respectively, primarily due
to the recognition of termination fees paid to effect the early termination of
several tenants' leases. In August 2002, the Company entered into a termination
agreement with Arthur Andersen which terminated its 148,000 square foot lease at
101 Second Street. The result of the termination agreement with Arthur Andersen
will not have a material impact on rental property revenues in 2002. However,
there will be no economic benefit to the Company or its rental property revenues
from the Arthur Andersen lease in 2003 and beyond. In September 2002, the
Company leased approximately 88,000 square feet of the former Arthur Andersen
space. While the Company is hopeful, there is no guarantee that the remainder of
the space will be leased in the near future. In addition, the San Francisco
market continues to be a difficult leasing market. Due to these uncertainties
the Company cannot currently estimate the result of its efforts to re-lease the
101 Second Street building and the resulting impact on rental property revenues
in 2003 and beyond.
Also contributing to the increase in rental property revenues from the
office division was an increase of approximately $1,640,000 in the nine month
2002 period from Cerritos Corporate Center - Phase II, due to the building
becoming partially operational for financial reporting purposes in June 2001,
and an increase of approximately $418,000 in the nine month 2002 period from the
3301 Windy Ridge Parkway Building, due to the renewal of the single tenant's
lease at a higher rental rate beginning May 2001. Furthermore, rental property
revenues from 1900 Duke Street, which became partially operational for financial
reporting purposes in October 2000, increased approximately $384,000 in the nine
month 2002 period, and rental property revenues from Meridian Mark Plaza
increased approximately $397,000 in the nine month 2002 period, as its average
economic occupancy increased from 94% in 2001 to 98% in 2002. The increase in
rental property revenues in the nine month 2002 period was partially offset by a
decrease of approximately $1,260,000 from The Points at Waterview, as its
average economic occupancy decreased from 86% in 2001 to 49% in 2002.
Rental property revenues from the Company's retail portfolio increased
approximately $696,000 and $2,591,000 in the three and nine month 2002 periods,
respectively. Rental property revenues increased approximately $199,000 and
$2,104,000 in the three and nine month 2002 periods, respectively, from The
Avenue Peachtree City due both to the property becoming partially operational
for financial reporting purposes in March 2001 and to the recognition of a
termination fee of approximately $719,000 in the nine month 2002 period.
Approximately all of the square feet terminated at The Avenue Peachtree City has
been re-leased. Rental property revenues increased approximately $245,000 and
$1,071,000 in the three and nine month 2002 periods, respectively, from The
Avenue of the Peninsula, as its average economic occupancy for the nine month
period increased from 72% in 2001 to 79% in 2002. Additionally, rental property
revenues from Mira Mesa MarketCenter increased approximately $194,000 and
$301,000 in the three and nine month 2002 periods, respectively, primarily due
to an expansion of the center in March 2002. Rental property revenues from
Presidential MarketCenter increased approximately $163,000 in the nine month
2002 period, as its average economic occupancy increased from 93% in 2001 to 98%
in 2002. Rental property revenues decreased approximately $989,000 in the nine
month 2002 period from the February 2001 sale of Colonial Plaza MarketCenter,
which partially offset the increase in rental property revenues in the nine
month 2002 period.
Rental property operating expenses increased approximately $1,524,000
and $4,383,000 in the three and nine month 2002 periods, respectively, due to
the aforementioned office buildings and retail center becoming partially
operational for financial reporting purposes. The increase in rental property
operating expenses in the nine month 2002 period was partially offset by
decreases in rental property operating expenses of approximately $244,000 from
the aforementioned sale of Colonial Plaza MarketCenter and approximately
$380,000 from the aforementioned decrease in average economic occupancy at The
Points at Waterview.
Development Income. Development income decreased approximately $797,000
and $1,901,000 in the three and nine month 2002 periods, respectively.
Development income decreased approximately $244,000 and $765,000 in the three
and nine month 2002 periods, respectively, from CPI/FSP I, L.P., as construction
of Austin Research Park Buildings III and IV was completed. Development fees
also decreased approximately $165,000 and $405,000 in the three and nine month
periods, respectively, from Crawford Long - CPI, LLC, as construction of the
Emory Crawford Long Medical Office Tower was substantially completed in February
2002. Furthermore, development income from tenant construction fees decreased
approximately $433,000 and $403,000 in the three and nine month 2002 periods,
respectively, primarily due to a tenant construction fee received from a tenant
at Inforum in 2001. Additionally, development income decreased approximately
$215,000 in the nine month 2002 period from 285 Venture, LLC, as construction of
1155 Perimeter Center West was completed, and approximately $409,000 in the nine
month 2002 period from the third party development of the Turner Tower. The
decrease in development income was partially offset by an increase in
development income of approximately $234,000 in the nine month 2002 period from
third party retail predevelopment advisory services for a center in Albuquerque,
New Mexico.
Management Fees. Management fees increased approximately $204,000 and
$1,401,000 in the three and nine month 2002 periods, respectively. Management
fees increased approximately $84,000 and $1,211,000 in the three and nine month
2002 periods, respectively, from Cousins Properties Services LP ("CPS").
Effective March 1, 2001, CREC II purchased the remaining 25% interest in CPS at
which point the operations of CPS were consolidated, whereas the operations had
been previously accounted for using the equity method of accounting and
therefore recognized as joint venture income. Approximately $269,000 and
$882,000 of the increase in CPS in the three and nine month 2002 periods,
respectively, was from the Concourse Corporate Center in Atlanta, Georgia, of
which CPS commenced management in October 2001. Management fees also increased
approximately $116,000 in the nine month 2002 period from Crawford Long - CPI,
LLC, due to the aforementioned Emory Crawford Long Medical Office Tower becoming
partially operational for financial reporting purposes in February 2002.
Leasing and Other Fees. Leasing and other fees increased approximately
$389,000 in the three month 2002 period and decreased approximately $48,000 in
the nine month 2002 period. Leasing and other fees increased approximately
$382,000 and $283,000 in the three and nine month 2002 periods, respectively,
from Wildwood Associates, primarily due to the renewal of a significant tenant's
lease. Leasing and other fees also increased approximately $185,000 and $454,000
in the three and nine month 2002 periods, respectively, from Ten Peachtree Place
Associates due to the lease-up of the Ten Peachtree Place building. Leasing and
other fees from CPS increased by approximately $237,000 and $493,000 in the
three and nine month 2002 periods, respectively, primarily due to leasing at
6565 MacArthur and the Concourse Corporate Center, of which CPS commenced
management in May 2001 and October 2001, respectively. Partially offsetting the
increase in leasing and other fees in the three month 2002 period and
contributing to the net decrease in the nine month 2002 period were decreases of
approximately $587,000 and $1,130,000 in the three and nine month 2002 periods,
respectively, from CPI/FSP I, L.P., as leasing fees were recognized for the
lease-up of Austin Research Park Buildings III and IV in 2001.
Residential Lot and Outparcel Sales and Cost of Sales. Residential lot
and outparcel sales increased approximately $828,000 and $1,476,000 in the three
and nine month 2002 periods, respectively. Residential lots sold increased from
29 lots in the three month 2001 period to 50 lots in the three month 2002 period
and increased from 104 lots in the nine month 2001 period to 146 lots in the
nine month 2002 period.
Residential lot and outparcel cost of sales increased approximately
$950,000 and $1,010,000 in the three and nine month 2002 periods, respectively,
due to the aforementioned increases in the number of lots sold. The increase in
cost of sales in the three month 2002 period was greater than the corresponding
increase in sales in the three month 2002 period and the increase in cost of
sales in the nine month 2002 period was less than the corresponding increase in
sales in the nine month 2002 period, both due to fluctuations during 2002 of the
gross profit percentages used to calculate the cost of sales of lot sales in
certain of the residential developments.
Interest and Other Income. Interest and other income decreased
approximately $338,000 and $1,213,000 in the three and nine month 2002 periods,
respectively, primarily due to interest income recognized in the 2001 periods
from the $18.6 million note receivable from Charlotte Gateway Village, LLC
("Gateway") that was repaid in full in November 2001.
Income from Unconsolidated Joint Ventures. (All amounts reflect the
Company's share of joint venture income.) Income from unconsolidated joint
ventures increased approximately $1,076,000 and $3,562,000 in the three and nine
month 2002 periods, respectively.
Income from Wildwood Associates increased approximately $532,000 in the
nine month 2002 period. This increase is primarily due to an increase in income
before depreciation, amortization and interest expense of approximately $354,000
in the nine month 2002 period from the 3200 Windy Hill Road Building, as its
average economic occupancy increased from 99% in 2001 to 100% in 2002 and its
tenant mix changed.
Income from Temco Associates increased approximately $537,000 in the
nine month 2002 period. The increase is mainly due to an increase in lot sales
in its Bentwater residential development from 200 lots in the nine month 2001
period to 236 lots in the nine month 2002 period.
Income from CPI/FSP I, L.P. increased approximately $513,000 and
$1,489,000 in the three and nine month 2002 periods, respectively, as Austin
Research Park Buildings III and IV became partially operational for financial
reporting purposes in June 2001 and September 2001, respectively.
Income from Gateway increased approximately $203,000 and $611,000 in
the three and nine month 2002 periods, respectively. The Company recognizes an
11.46% current preferred return on its equity in Gateway, which increased from
$3,200,000 to $10,556,000 in November 2001.
Income from Crawford Long - CPI, LLC increased approximately $367,000
and $673,000 in the three and nine month 2002 periods, respectively, as the
Emory Crawford Long Medical Office Tower became partially operational for
financial reporting purposes in February 2002.
Income from Ten Peachtree Place Associates decreased approximately
$273,000 and $834,000 in the three and nine month 2002 periods, respectively, as
its average economic occupancy for the nine month period decreased from 100% in
2001 to 16% in 2002.
Income from CSC Associates, L.P. increased approximately $247,000 and
$547,000 in the three and nine month 2002 periods, respectively, due to an
increase in rental revenues from a tenant whose increase in rental rate did not
require straight-lining under SFAS No. 13.
General and Administrative Expenses. General and administrative
expenses decreased approximately $944,000 in the three month 2002 period and
increased approximately $460,000 in the nine month 2002 period. Contributing to
the decrease in the three month 2002 period and partially offsetting the
increase in the nine month 2002 period was a decrease in general and
administrative expenses resulting from the capitalization of additional general
and administrative expenses to offset the partial elimination of certain
development and leasing fees from joint ventures. Also contributing to the three
month 2002 decrease and partially offsetting the nine month 2002 increase was a
decrease of approximately $186,000 and $266,000, respectively, in leasing
commission expense. The increase in the nine month 2002 period was primarily
attributable to the aforementioned consolidation of CPS and partially to an
increase in moving expenses.
Depreciation and Amortization. Depreciation and amortization increased
approximately $4,459,000 and $8,182,000 in the three and nine month 2002
periods, respectively, due to the aforementioned office buildings and retail
center becoming partially operational for financial reporting purposes. The
increases were also due to write-offs of unamortized tenant improvements and
leasing commissions related to certain tenants who effected early terminations
of their lease obligations.
Interest Expense. Interest expense increased approximately $2,666,000
and $7,034,000 in the three and nine month 2002 periods, respectively. Interest
expense before capitalization increased to approximately $10,876,000 and
$32,095,000 in the three and nine month 2002 periods, respectively, from
approximately $9,244,000 and $27,695,000 in the three and nine month 2001
periods, respectively, due to higher average debt levels. The Company completed
four non-recourse mortgages in 2001: Presidential MarketCenter in May 2001, 600
University Park Place in July 2001 and 333 John Carlyle/1900 Duke Street and
333/555 North Point Center East in November 2001. Also contributing to the
increase in interest expense was a decrease of approximately $1,034,000 and
$2,634,000 in the three and nine month 2002 periods, respectively, in interest
capitalized to projects under development (a reduction of interest expense) to
approximately $1,365,000 and $4,495,000 in the three and nine month 2002
periods, respectively, from approximately $2,399,000 and $7,129,000 in the three
and nine month 2001 periods, respectively, due to a lower level of projects
under development in 2002.
Other Expenses. Other expenses increased approximately $314,000 and
$525,000 in the three and nine month 2002 periods, respectively. The increase in
other expenses in the three and nine month 2002 periods was mainly due to an
increase of approximately $348,000 and $361,000, respectively, in predevelopment
expense.
Provision(Benefit) for Income Taxes from Continuing Operations. The
benefit for income taxes from continuing operations decreased approximately
$507,000 and $2,394,000 to a provision for income taxes from continuing
operations in the three and nine month 2002 periods, respectively. The decrease
in the benefit for income taxes from continuing operations in the three month
2002 period was primarily due to a decrease in the loss before income taxes and
gain on sale of investment properties from CREC II and its subsidiaries. This
decrease was primarily due to an increase in income from CPS. The decrease in
the benefit for income taxes from continuing operations in the nine month 2002
period was primarily due to an increase in income before income taxes and gain
on sale of investment properties from CREC and its subsidiaries. This increase
was primarily due to increases in income from residential lot sales, net of cost
of sales, income from Temco Associates, leasing fees and a decrease in general
and administrative expenses. The increase in income before income taxes and gain
on sale of investment properties from CREC and its subsidiaries was partially
offset by a decrease in development income and an increase in interest expense.
The decrease in the benefit for income taxes from continuing operations in the
nine month 2002 period was also due to a decrease in the loss before income
taxes and gain on sale of investment properties from CREC II and its
subsidiaries. The decrease was mainly due to increased income from CPS.
Gain on Sale of Investment Properties. Gain on sale of investment
properties decreased approximately $17,353,000 in the nine month 2002 period.
The 2002 gain included the amortization of deferred gain from CP Venture LLC
($3.1 million) (see Note 5 of "Notes to Consolidated Financial Statements" in
the Company's Annual Report on Form 10-K for the year ended December 31, 2001).
The 2001 gain included the following: the February 2001 sale of Colonial Plaza
MarketCenter ($17.1 million), the February 2001 disposition of leasehold
interests in Summit Green ($.2 million) and the amortization of deferred gain
from CP Venture LLC ($3.1 million) (see Note 5 of "Notes to Consolidated
Financial Statements" in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001).
Extraordinary Loss. The Company recognized an extraordinary loss of
approximately $3,501,000 in the nine month 2002 period due to the refinancing of
the CSC Associates, L.P. non-recourse mortgage note payable (see Note 6 to the
Company's consolidated financial statements included in this report).
Liquidity and Capital Resources:
- --------------------------------
Financial Condition. The Company's adjusted debt (including its pro
rata share of unconsolidated joint venture debt) was 42% of total market
capitalization at September 30, 2002. Adjusted debt is defined as the Company's
debt and the Company's pro rata share of unconsolidated joint venture debt as
disclosed in Note 4 of "Notes to Consolidated Financial Statements" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001,
excluding the Gateway debt as it is fully exculpated debt which is supported by
a long-term lease to Bank of America Corporation. The Company had $137 million
drawn on its $275 million revolving credit facility as of September 30, 2002.
The Company has development and acquisition projects in various
planning stages. The Company currently intends to finance these projects, as
well as the completion of projects currently under construction, using its
existing credit facility (increasing the credit facility as required), long-term
non-recourse financing on the Company's unleveraged projects, joint ventures,
project sales and other financings as market conditions warrant. In September
1996, the Company filed a shelf registration statement with the Securities and
Exchange Commission ("SEC") for the offering from time to time of up to $200
million of common stock, warrants to purchase common stock and debt securities,
of which approximately $132 million remains available at September 30, 2002.
The Company from time to time evaluates opportunities and strategic
alternatives, including but not limited to joint ventures, mergers and
acquisitions and new private or publicly-owned entities created to hold existing
assets and acquire new assets. These alternatives may also include sales of
single or multiple assets when the Company perceives opportunities to capture
value and redeploy proceeds or distribute proceeds to stockholders. The
Company's consideration of these alternatives is part of its ongoing strategic
planning process. There can be no assurance that any such alternative, if
undertaken and consummated, would not materially adversely affect the Company or
the market price of the Company's common stock.
Cash Flows. Net cash provided by operating activities of continuing
operations increased approximately $17.9 million in the nine month 2002 period.
Operating distributions from unconsolidated joint ventures increased
approximately $8.7 million in 2002, which contributed to the increase in net
cash provided by operating activities. The increase in operating distributions
from unconsolidated joint ventures was mainly due to increases in operating
distributions of approximately $6.5 million from Wildwood Associates and
approximately $2.4 million from CPI/FSP I, L.P. Depreciation and amortization
increased approximately $8.3 million due to the aforementioned office buildings
and retail center becoming partially operational for financial reporting
purposes and the write-off of unamortized tenant improvements and leasing
commissions related to certain tenants who effected early terminations of their
lease obligations. Changes in other operating assets and liabilities increased
approximately $5.3 million, which also contributed to the increase in net cash
provided by operating activities. Income from unconsolidated joint ventures
increased approximately $3.6 million and income from continuing operations
before gain on sale of investment properties and extraordinary loss decreased
approximately $2.5 million, both of which partially offset the increase in net
cash provided by operating activities.
Net cash used in investing activities decreased approximately $27.8
million in the nine month 2002 period. The decrease in net cash used in
investing activities was primarily due to a decrease of approximately $54.8
million in property acquisition and development expenditures, as a result of the
Company having a lower level of projects under development in the nine month
2002 period. Investment in unconsolidated joint ventures decreased approximately
$20.7 million, which also contributed to the decrease in net cash used in
investing activities. This decrease was primarily due to a decrease in
contributions of approximately $12.3 million to CPI/FSP I, L.P., as construction
of Austin Research Park Buildings III and IV was completed in 2001, a decrease
in contributions of approximately $8.3 million to Crawford Long - CPI, LLC in
2002, as construction of the Emory Crawford Long Medical Office Tower was
substantially completed in February 2002, and a decrease in contributions of
approximately $1.1 million to 285 Venture, LLC, as construction of 1155
Perimeter Center West was completed in 2001. The decrease in investment in
unconsolidated joint ventures was partially offset by an increase in
contributions of approximately $2.1 million to Ten Peachtree Place Associates in
2002. The decrease in net cash paid in acquisition of business of approximately
$2.1 million, which resulted from the acquisition of the remaining 25% interest
in CPS in the first quarter of 2001, and a decrease in change in other assets,
net, of approximately $6.1 million, both further contributed to the decrease in
net cash used in investing activities. Net cash provided by sales activities
decreased approximately $53.0 million due primarily to the sale of Colonial
Plaza MarketCenter in February 2001, which partially offset the decrease in net
cash used in investing activities. Investment in, net of collection of, notes
receivable decreased approximately $2.9 million, which also partially offset the
decrease in net cash used in investing activities.
Net cash provided by financing activities decreased approximately $44.5
million in the nine month 2002 period to net cash used in financing activities.
The decrease in net cash provided by financing activities was primarily
attributable to a decrease in net amounts drawn on the credit facility of
approximately $50.5 million. Also contributing to the decrease in net cash
provided by financing activities was an increase of approximately $67.7 million
in repayment of other notes payable and an increase in extraordinary loss of
approximately $3.5 million, both due to the refinancing of Bank of America Plaza
(see Note 6 to the Company's consolidated financial statements included in this
report). Also contributing to the decrease in net cash provided by financing
activities to net cash used in financing activities was an increase of $22.3
million of common stock repurchases. An increase in the dividends paid per share
to $1.11 in 2002 from $1.02 in 2001 also contributed to the decrease in net cash
provided by financing activities as dividends paid increased approximately $5.0
million. The increase in proceeds from other notes payable of approximately
$105.0 million due to the aforementioned refinancing of Bank of America Plaza
(see Note 6 to the Company's consolidated financial statements included in this
report) partially offset the decrease in net cash provided by financing
activities.
Item 3. Quantitative and Qualitative Disclosure About Market Risk:
- -------------------------------------------------------------------
There has been no material change in the Company's market risk related
to its notes payable and notes receivable from that disclosed in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001.
Item 4. Controls and Procedures:
- ---------------------------------
Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision of the Company's Chief
Executive Officer and Chief Financial Officer and with the participation of
the Company's management, including the of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company required to be included in the Company's
periodic Securities and Exchange Commission filings. No significant changes were
made in the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
Supplemental Information:
- -------------------------
Square Feet Expiring:
- ---------------------
As of October 28, 2002, the Company's office portfolio included
thirty-six commercial office buildings, excluding all buildings currently under
construction and/or in lease-up and One Ninety One Peachtree Tower, as it is
less than 10% owned by the Company. The weighted average remaining lease term of
these office buildings was approximately 9 years as of October 28, 2002. Most of
the Company's leases in these buildings provide for pass through of operating
expenses and base rents which escalate over time. The leases expire as follows:
2011
&
2002 2003 2004 2005 2006 2007 2008 2009 2010 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
OFFICE
- ------
Consolidated:
- -------------
Square Feet
Expiring (a) 44,072 137,577 157,592 357,128 351,771 156,725 341,993 554,319 276,062 1,484,315 3,861,554(b)
% of Leased
Space 1% 4% 4% 9% 9% 4% 9% 14% 7% 39% 100%
Annual Base
Rent (c) 750,327 2,897,691 3,044,949 6,773,977 5,583,642 3,369,649 7,206,046 9,619,917 7,037,926 42,307,692 88,591,816
Annual Base
Rent/Sq.
Ft. (c) 17.03 21.06 19.32 18.97 15.87 21.50 21.07 17.35 25.49 28.50 22.94
Joint Venture:
- --------------
Square Feet
Expiring (a) 167,212 283,206 385,538 463,595 603,587 698,753 168,103 451,698 162,569 3,727,882 7,112,143(d)
% of Leased
Space 2% 4% 5% 8% 9% 10% 2% 6% 2% 52% 100%
Annual Base
Rent (c) 2,879,440 4,802,931 6,967,246 8,367,932 10,921,523 17,024,532 2,995,182 10,161,312 3,879,362 82,815,194 150,814,654
Annual Base
Rent/Sq.
Ft. (c) 17.22 16.96 18.07 18.05 18.09 24.36 17.82 22.50 23.86 22.22 21.21
Total (including only Company's % share of Joint Venture Properties):
- ---------------------------------------------------------------------
Square Feet
Expiring (a) 129,258 277,010 407,020 554,521 631,089 483,472 414,007 750,780 330,258 3,351,796 7,329,211
% of Leased
Space 2% 4% 5% 7% 9% 7% 6% 10% 4% 46% 100%
Annual Base
Rent (c) 2,219,985 5,263,283 7,472,458 10,385,106 10,641,253 11,497,553 8,500,082 14,186,435 8,434,304 83,717,604 162,318,063
Annual Base
Rent/Sq.
Ft. (c) 17.17 19.00 18.36 18.73 16.86 23.78 20.53 18.90 25.54 24.98 22.15
(a) Where a tenant has the option to cancel its lease without penalty, the lease
expiration date used in the table above reflects the cancellation option date
rather than the lease expiration date.
(b) Rentable square feet leased as of October 28, 2002 out of approximately
4,097,000 total rentable square feet. (c) Annual base rent excludes the
operating expense reimbursement portion of the rent payable. If the lease
does not provide for pass
through of such operating expense reimbursements, an estimate of operating
expenses is deducted from the rental rate shown. The base rental rate shown
is the estimated rate in the year of expiration. Amounts disclosed are in
dollars.
(d) Rentable square feet leased as of October 28, 2002 out of approximately
7,473,000 total rentable square feet.
As of October 28, 2002, the Company's medical office portfolio included
five medical office properties, excluding the property currently under
construction and in lease-up. The weighted average remaining lease term of these
medical office buildings was approximately 8 years as of October 28, 2002. Most
of the Company's leases in the buildings provide for pass through of operating
expenses and base rents which escalate over time. The leases expire as follows:
2011
&
2002 2003 2004 2005 2006 2007 2008 2009 2010 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
MEDICAL OFFICE
- --------------
Consolidated:
- -------------
Square Feet Expiring 0 35,388 42,448 23,723 9,210 32,538 35,571 126,756 10,535 144,744 460,913(a)
% of Leased Space 0% 8% 9% 5% 2% 7% 8% 28% 2% 31% 100%
Annual Base Rent (b) 0 676,258 795,146 409,956 155,269 650,954 812,145 2,576,478 202,799 3,614,807 9,893,812
Annual Base
Rent/Sq. Ft. (b) 0 19.11 18.73 17.28 16.86 20.01 22.83 20.33 19.25 24.97 21.47
Joint Venture:
Square Feet Expiring 0 0 0 3,445 0 24,756 0 0 0 40,503 68,704(c)
% of Leased Space 0% 0% 0% 5% 0% 36% 0% 0% 0% 59% 100%
Annual Base Rent (b) 0 0 0 56,498 0 422,558 0 0 0 772,392 1,251,448
Annual Base
Rent/Sq. Ft. (b) 0 0 0 16.40 0 17.07 0 0 0 19.07 18.22
Total (including only Company's % share of Joint Venture Properties):
- ---------------------------------------------------------------------
Square Feet Expiring 0 35,388 42,448 24,119 9,210 35,385 35,571 126,756 10,535 149,402 468,814
% of Leased Space 0% 8% 9% 5% 2% 7% 8% 27% 2% 32% 100%
Annual Base Rent (b) 0 676,258 795,146 416,453 155,269 699,549 812,145 2,576,478 202,799 3,703,632 10,037,729
Annual Base
Rent/Sq. Ft. (b) 0 19.11 18.73 17.27 16.86 19.77 22.83 20.33 19.25 24.79 21.41
(a) Rentable square feet leased as of October 28, 2002 out of approximately
512,000 total rentable square feet.
(b) Annual base rent excludes the operating expense reimbursement portion of the
rent payable. If the lease does not provide for pass through of such
operating expense reimbursements, an estimate of operating expenses is
deducted from the rental rate shown. The base rental rate shown is the
estimated rate in the year of expiration.
Amounts disclosed are in dollars.
(c) Rentable square feet leased as of October 28, 2002 out of approximately
69,000 total rentable square feet.
As of October 28, 2002, the Company's retail portfolio included twelve
retail properties, excluding the property currently under construction and in
lease-up. The weighted average remaining lease term of these retail properties
was approximately 11 years as of October 28, 2002. Most of the major tenant
leases in these retail properties provide for pass through of operating expenses
and base rents which escalate over time. The leases expire as follows:
2011
&
2002 2003 2004 2005 2006 2007 2008 2009 2010 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
RETAIL
- ------
Consolidated:
- -------------
Square Feet Expiring 7,378 11,884 76,953 130,950 90,280 45,522 36,187 21,530 143,557 587,890 1,152,131(a)
% of Leased Space 1% 1% 7% 11% 8% 4% 3% 2% 12% 51% 100%
Annual Base Rent (b) 30,600 263,735 1,412,303 3,111,965 2,087,754 965,542 327,838 733,820 2,988,238 10,300,811 22,222,606
Annual Base
Rent/Sq. Ft. (b) 4.15 22.19 18.35 23.76 23.13 21.21 9.06 34.08 20.82 17.52 19.29
Joint Venture:
- --------------
Square Feet Expiring 0 20,011 34,343 86,802 178,400 85,968 40,358 65,446 140,895 1,200,037 1,852,260(c)
% of Leased Space 0% 1% 2% 5% 9% 5% 2% 3% 8% 65% 100%
Annual Base Rent (b) 0 313,945 717,124 1,558,926 2,639,475 1,887,378 751,247 800,764 2,104,236 16,772,187 27,545,282
Annual Base
Rent/Sq. Ft. (b) 0.00 15.69 20.88 17.96 14.80 21.95 18.61 12.24 14.93 13.98 14.87
Total (including only Company's % share of Joint Venture Properties):
- ---------------------------------------------------------------------
Square Feet Expiring 7,378 14,185 83,525 171,507 139,194 82,682 68,270 34,543 194,555 1,084,403 1,880,242
% of Leased Space 0% 1% 5% 9% 7% 4% 4% 2% 10% 58% 100%
Annual Base Rent (b) 30,600 299,838 1,555,547 3,990,369 3,165,275 1,845,130 934,553 963,467 4,081,380 17,767,268 34,633,427
Annual Base
Rent/Sq. Ft. (b) 4.15 21.14 18.62 23.27 22.74 22.32 13.69 27.89 20.98 16.38 18.42
(a) Gross leasable area leased as of October 28, 2002 out of approximately
1,217,000 total gross leasable area. (b) Annual base rent excludes the operating
expense reimbursement portion of the rent payable and any percentage rents due.
If the lease does not provide for pass through of such operating expense
reimbursements, an estimate of operating expenses is deducted from the rental
rate shown. The base rental rate shown is the estimated rate in the year of
expiration. Amounts disclosed are in dollars.
(c) Gross leasable area leased as of October 28, 2002 out of approximately
1,883,000 total gross leasable area.
Depreciation and amortization expense included the following components
for the three and nine months ended September 30, 2002 ($ in thousands):
Three Months Ended Nine Months Ended
September 30, 2002 September 30, 2002
----------------------------------- ------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Company Joint Ventures Total Company Joint Ventures Total
------- -------------- ----- ------- -------------- -----
Furniture, fixtures and equipment $ 539 $ 2 $ 541 $ 1,587 $ 7 $ 1,594
Specifically identifiable
intangible assets 7 - 7 20 - 20
Real estate related:
Building (including tenant
first generation) 14,635 4,155 18,790 38,012 12,442 50,454
Tenant second generation 604 215 819 1,715 591 2,306
------- ------ ------- ------- ------- -------
$15,785 $4,372 $20,157 $41,334 $13,040 $54,374
------- ------ ------- ------- ------- -------
Exclusive of new developments and purchases of furniture, fixtures and
equipment, the Company had the following capital expenditures during the three
and nine months ended September 30, 2002, including its share of unconsolidated
joint ventures ($ in thousands):
Three Months Ended Nine Months Ended
September 30, 2002 September 30, 2002
---------------------------- ----------------------------
Office Retail Total Office Retail Total
------ ------ ----- ------ ------ -----
Second generation related costs $3,384 $133 $3,517 $4,427 $181 $4,608
Building improvements 47 66 113 436 149 585
------ ---- ------ ------ ---- ------
$3,431 $199 $3,630 $4,863 $330 $5,193
====== ==== ====== ====== ==== ======
Additional supplemental financial and property information, including
Funds From Operations Summary and Supplemental Detail, a Portfolio Listing, a
Development Pipeline schedule and various other schedules are available on the
Company's web site, www.cousinsproperties.com, or via fax by calling the
Company's Investor Relations Department, (770) 857-2449.
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
Exhibit 3.1 Restated and Amended Articles
of Incorporation of the
Registrant, as amended August 9,
1999 (incorporated by reference
from the Company's quarterly
report on Form 10-Q for the
quarter ended June 30, 2002).
Exhibit 3.2 Bylaws of the Registrant, as
amended April 29, 1993
(incorporated by reference from
the Company's quarterly report on
Form 10-Q for the quarter ended
June 30, 2002).
Exhibit 11 Computation of Per Share
Earnings.*
Exhibit 99.1 Certification Pursuant to 18
U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification Pursuant to 18
U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) There were no reports on Form 8-K filed by the Registrant
during the quarter ended September 30, 2002.
* Data required by SFAS No. 128, "Earnings Per Share," is provided in Note 4 to
the consolidated financial statements in this report.
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.
COUSINS PROPERTIES INCORPORATED
/s/ Kelly H. Barrett
--------------------------------------------
Kelly H. Barrett
Senior Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
November 1, 2002
FORM OF CERTIFICATION
---------------------
I, Thomas D. Bell, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cousins
Properties Incorporated;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 1, 2002
/s/ Thomas D. Bell, Jr.
- -------------------------------------
Thomas D. Bell, Jr.
Vice Chairman of the Board, President
and Chief Executive Officer
FORM OF CERTIFICATION
---------------------
I, Kelly H. Barrett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cousins
Properties Incorporated;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 1, 2002
/s/ Kelly H. Barrett
- -------------------------------------------------
Kelly H. Barrett
Senior Vice President and Chief Financial Officer
Exhibit 99.1
------------
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in
connection with the Quarterly Report on Form 10-Q of Cousins Properties
Incorporated (the "Corporation") for the quarterly period ended September 30,
2002, as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), the undersigned, the Vice Chairman of the Board, President and
Chief Executive Officer of the Corporation, certifies that:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Corporation.
/s/ Thomas D. Bell, Jr.
- -------------------------------------
Thomas D. Bell, Jr.
Vice Chairman of the Board, President
and Chief Executive Officer
November 1, 2002
Exhibit 99.2
------------
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in
connection with the Quarterly Report on Form 10-Q of Cousins Properties
Incorporated (the "Corporation") for the quarterly period ended September 30,
2002, as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), the undersigned, the Senior Vice President and Chief Financial
Officer of the Corporation, certifies that:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Corporation.
/s/ Kelly H. Barrett
- -------------------------------------------------
Kelly H. Barrett
Senior Vice President and Chief Financial Officer
November 1, 2002