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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission file number 2-20111
COUSINS PROPERTIES INCORPORATED
A GEORGIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 58-0869052
2500 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
TELEPHONE: 770-955-2200
Name of exchange on which registered: New York Stock Exchange
Securities registered pursuant to Section 12(b)of the Act: Common Stock ($1
Par Value)
Securities registered pursuant to Section 12(g) of the Act: None
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of March 11, 1998, 31,528,348 common shares were outstanding; and the
aggregate market value of the common shares of Cousins Properties Incorporated
held by nonaffiliates was $691,462,109.
[OBJECT OMITTED]DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated by reference into the
designated Part of this Form 10-K:
Registrant's Proxy Statement Part III, Items 10, 11, 12 and 13
dated March 27, 1998
Registrant's Annual Report to Part II, Items 5, 6, 7 and 8
Stockholders for the year
ended December 31, 1997
PART I
------
Item 1. Business
- --------------------
Corporate Profile
Cousins Properties Incorporated (the "Registrant" or "Cousins") is a
Georgia corporation, which since 1987 has elected to be taxed as a real estate
investment trust ("REIT"). Cousins Real Estate Corporation ("CREC"), a taxable
entity consolidated with the Registrant, owns, develops, and manages a portion
of the Company's real estate portfolio. Cousins MarketCenters, Inc. ("CMC") is a
subsidiary of CREC which develops retail shopping centers. The Registrant,
together with CREC, CMC and their other consolidated entities, is hereafter
referred to as the "Company."
Cousins is an Atlanta-based, fully integrated, self administered equity
real estate investment trust. The Company has extensive experience in the real
estate industry, including the acquisition, financing, development, management
and leasing of properties. Cousins has been a public company since 1962, and its
common stock trades on the New York Stock Exchange. The Company owns a portfolio
of well-located, high-quality retail, office, medical office and land
development projects and holds several tracts of strategically located
undeveloped land. The strategies employed to achieve the Company's investment
goals include the development of properties which are substantially precommitted
to quality tenants; maintaining high levels of occupancy within owned
properties; the selective sale of assets and the acquisition of quality
income-producing properties at attractive prices. The Company also seeks to be
opportunistic and take advantage of normal real estate business cycles.
Unless otherwise indicated, the notes referenced in the discussion
below are the "Notes to Consolidated Financial Statements" included in the
financial section of the Registrant's 1997 Annual Report to Stockholders.
Brief Description of Company Investments
Office. As of March 15, 1998, the Company owns, directly and
indirectly, equity interests of at least 50% (excluding One Ninety One Peachtree
Tower) in the following twenty-two commercial office buildings:
Company's
Metropolitan Rentable Ownership Percent
Property Description Area Square Feet Interest Leased
-------------------- ------------ ----------- -------- -------
101 Independence Center Charlotte, NC 522,000 100% 93%
First Union Tower Greensboro, NC 319,000 100% 93%
3100 Windy Hill Road Atlanta, GA 188,000 100% 100%
Grandview II Birmingham, AL 150,000 100% (b) 64% (a)
Carlyle I Alexandria, VA 150,000 100% 58% (a)
615 Peachtree Street Atlanta, GA 147,000 100% 73%
333 North Point Center East Atlanta, GA 129,000 100% 41% (a)
200 North Point Center East Atlanta, GA 129,000 100% 100%
100 North Point Center East Atlanta, GA 128,000 100% 100%
3301 Windy Ridge Parkway Atlanta, GA 106,000 100% 100%
NationsBank Plaza Atlanta, GA 1,260,000 50% 95%
3200 Windy Hill Road Atlanta, GA 685,000 50% 98%
2300 Windy Ridge Parkway Atlanta, GA 634,000 50% 98%
The Pinnacle Atlanta, GA 424,000 50% 33% (a)
2500 Windy Ridge Parkway Atlanta, GA 313,000 50% 98%
Two Live Oak Center Atlanta, GA 278,000 50% 88% (a)
4200 Wildwood Parkway Atlanta, GA 260,000 50% 100%
Ten Peachtree Place Atlanta, GA 259,000 50% 100%
John Marshall-II Washington, D.C. 224,000 50% 100%
4300 Wildwood Parkway Atlanta, GA 150,000 50% 100%
4100 Wildwood Parkway Atlanta, GA 100,000 50% 100%
One Ninety One Peachtree Tower Atlanta, GA 1,215,000 9.8% 93%
---------
7,770,000
=========
(a) Under construction or in lease-up.
(b) This project is actually owned in a venture in which a portion of
the upside is shared with the other venturer. See "Major
Properties" - "Office Properties Under Construction" - "Grandview
II" where discussed.
The weighted average leased percentage of these office buildings
(excluding all properties currently under construction or in lease-up and One
Ninety One Peachtree Tower as it is less than 50% owned by the Company) was
approximately 97% as of March 15, 1998 and the leases expire as follows:
2007
&
1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
OFFICE
- ------
Consolidated:
- -------------
Square Feet
Expiring (d) 57,641 68,621 271,192 260,923 31,287 121,574 96,477 0 209,869 322,592 1,440,176(b)
% of Leased Space 4% 5% 19% 18% 2% 8% 7% 0% 15% 22% 100%
Annual Base
Rent (a) 625,859 1,136,727 3,448,141 3,913,709 471,674 1,111,963 1,518,170 0 3,312,660 6,758,530 22,297,433
Annual Base
Rent/Sq. Ft. (a) 10.86 16.57 12.71 15.00 15.08 9.15 15.74 0 5.78 20.95 15.48
Joint Venture:
- --------------
Square Feet
Expiring (d) 115,957 28,586 165,283 450,062 353,285 235,906 88,732 363,770 375,971 1,618,894 3,796,446(c)
% of Leased Space 3% 1% 4% 12% 9% 6% 2% 10% 10% 43% 100%
Annual Base
Rent (a) 1,799,176 473,739 3,344,293 6,010,569 5,118,825 4,251,138 1,647,306 6,958,204 6,854,418 40,621,535 77,079,203
Annual Base
Rent/Sq. Ft.(a) 15.52 16.57 20.23 13.35 14.49 18.02 18.56 19.13 18.23 25.09 20.30
Total (including only Company's 50% share of Joint Venture Properties):
- -----------------------------------------------------------------------
Square Feet
Expiring (d) 115,620 82,914 353,834 485,954 207,930 239,527 140,843 181,885 397,855 1,132,037 3,338,399
% of Leased Space 3% 2% 11% 15% 6% 7% 4% 5% 12% 35% 100%
Annual Base
Rent (a) 1,525,447 1,373,597 5,120,288 6,918,994 3,031,087 3,237,532 2,341,823 3,479,102 6,739,869 27,069,296 60,837,035
Annual Base
Rent/Sq. Ft.(a) 13.19 16.57 14.47 14.24 14.58 13.52 16.63 19.13 16.94 23.91 18.22
(a) 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.
(b) Rentable square feet leased as of March 15, 1998 out of 1,539,000 total
rentable square feet.
(c) Rentable square feet leased as of March 15, 1998 out of 3,885,000 total
rentable square feet.
(d) Except as follows, 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. One of
the joint venture leases (50,242 square feet) has the right to terminate
effective March 31, 2001, if notice is given by April 1, 2000.
The weighted average remaining lease term of these sixteen office
buildings was approximately 8 years as of March 15, 1998. Most of the Company's
leases in these buildings provide for pass through of operating expenses, and
base rents which escalate over time.
Retail. As of March 15, 1998, the Company's retail portfolio includes the
following eleven properties:
Rentable Company's
Metropolitan Square Feet Ownership Percent
Property Description Area (Company Owned) Interest Leased
-------------------- ------------ --------------- --------- -------
Colonial Plaza MarketCenter Orlando, FL 493,000 (a) 100% 91%
Greenbrier MarketCenter Chesapeake, VA 478,000 100% 100%
North Point MarketCenter Atlanta, GA 398,000 100% 100%
The Shops at Palos Verdes Rolling Hills Estates, CA 380,000 100% (b)
Presidential MarketCenter Atlanta, GA 361,000 (c) 100% 99%
Perimeter Expo Atlanta, GA 171,000 100% 99%
Los Altos MarketCenter Long Beach, CA 157,000 100% 100%
Laguna Niguel Promenade Laguna Niguel, CA 153,000 100% 75% (b)
Mansell Crossing Phase II Atlanta, GA 103,000 100% 100%
Abbotts Bridge Station Atlanta, GA 83,000 100% 95% (b)
Haywood Mall Greenville, SC 330,000 50% 84%
---------
3,107,000
=========
(a) Includes 16,000 square feet not yet under construction.
(b) Under renovation, construction or lease-up.
(c) Includes 21,000 square feet not yet under construction.
The weighted average leased percentage of these retail properties
(excluding the properties currently under renovation, construction or lease-up
and Haywood Mall) was approximately 97% as of March 15, 1998, and the leases of
these retail properties (excluding Haywood Mall and The Shops at Palos Verdes)
expire as follows:
2007
&
1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
RETAIL
- ------
Square Feet
Expiring 2,580 51,321 47,626 90,079 111,475 10,360 51,267 46,097 175,845 1,501,042 2,087,692(b)
% of Leased Space 0% 3% 2% 5% 5% 1% 2% 2% 8% 72% 100%
Annual Base
Rent (a) 54,180 949,919 656,185 1,446,889 1,676,985 152,874 638,291 532,730 1,589,098 19,178,050 26,875,201
Annual Base
Rent/Sq. Ft. (a) 21.00 18.51 13.78 16.06 15.04 14.76 12.45 11.56 9.04 12.78 12.87
(a) 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.
(b) Gross leasable area leased as of March 15, 1998 out of 2,159,000 total
gross leasable area.
The weighted average remaining lease term of these seven retail
properties was approximately 13 years as of March 15, 1998. All of the major
tenant leases in these retail properties have lease terms of 10 years or more
from the date of initial occupancy and provide for pass through of operating
expenses and base rents which escalate over time.
Medical Office. As of March 15, 1998, the Company owned the following
medical office properties:
Company's
Metropolitan Rentable Ownership Percent
Property Description Area Square Feet Interest Leased
-------------------- ------------ ----------- --------- -------
Meridian Mark Plaza Atlanta, GA 159,000 100% 66% (a)
Presbyterian Medical Plaza
at University Charlotte, NC 69,000 100% 100%
-------
228,000
=======
(a) Under construction and lease-up.
The weighted average leased percentage of the one medical office
building (excluding the building currently under construction and lease-up) was
approximately 100% as of March 15, 1998 and the leases of this property expire
as follows:
2007
&
1998 1999 2000 2001 2002 2003 2004 2005 2006 Thereafter Total
---- ---- ---- ---- ---- ---- ---- ---- ---- ---------- -----
MEDICAL OFFICE
- --------------
Square Feet Expiring 0 0 0 0 1,397 0 0 3,445 0 63,862 68,704
% of Leased Space 0% 0% 0% 0% 2% 0% 0% 5% 0% 93% 100%
Annual Base Rent (a) 0 0 0 0 27,242 0 0 67,178 0 1,213,378 1,307,798
Annual Base Rent/Sq. Ft.(a) 0 0 0 0 19.50 0 0 19.50 0 19.00 19.04
(a) 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.
The weighted average remaining lease term of the one medical office
building (excluding the building currently under construction and lease-up) was
approximately 13 years as of March 15, 1998. The Company's leases in this
building provide for pass through of operating expenses and base rents which
escalate over time.
Other. The Company's other real estate holdings include equity
interests in approximately 445 acres of strategically located land held for
investment and future development at North Point and Wildwood Office Park, the
option to acquire the fee simple interest in approximately 11,300 acres of land
through its Temco Associates joint venture, and two mortgage notes for $28
million which are secured by a 250,000 square foot office building in
Washington, D.C. The terms of these two notes have some of the characteristics
of an equity investment, and should provide a comparable return on investment
(see Note 3).
The Company's joint venture partners include IBM and affiliates of The
Coca-Cola Company ("Coca-Cola"), NationsBank Corporation ("NationsBank"),
Corporate Property Investors, Temple-Inland Inc., Cornerstone Properties, Inc.,
American General Corporation, and CarrAmerica Realty Corporation.
The success of the Company's operations is dependent upon such
unpredictable factors as the availability of satisfactory financing; general and
local economic conditions; the activity of others developing competitive
projects; the cyclical nature of the real estate industry; and zoning,
environmental impact, and other government regulations.
Refer to Item 2 hereof for a more detailed description of the Company's
real estate properties.
Significant Changes in 1997
Significant changes in the Company's business and properties during the
year ended December 31, 1997 were as follows:
Office Properties. In April 1997, the Company purchased the land on
which construction commenced on Grandview II, a 150,000 rentable square foot
office building in Birmingham, Alabama.
Effective July 31, 1997, Cousins LORET Venture, L.L.C. ("the Venture")
was formed between the Company and LORET Holdings, L.L.L.P. ("LORET"), each as
50% members. LORET contributed Two Live Oak Center, a 278,000 rentable square
foot office building located in Atlanta, Georgia, which was recently renovated
and is in the process of being leased up. Two Live Oak Center became partially
operational for financial reporting purposes in October 1997. In August 1997,
Cousins LORET Venture, L.L.C. commenced construction on The Pinnacle, a 424,000
rentable square foot office building located adjacent to Two Live Oak Center
(see Note 5).
In November 1997, the Company purchased approximately .6 acres of
undeveloped land in downtown San Francisco, California which is entitled for an
approximately 381,000 rentable square foot office building. The Company is
currently pursuing predevelopment and investigative work to confirm the
feasibility of developing this office building.
Retail Properties. In January 1997, the Company purchased the land for,
and commenced construction of Abbotts Bridge Station, an approximately 83,000
square foot neighborhood retail center in suburban Atlanta, Georgia. In August
1997, the Company purchased the land for, and commenced construction of Laguna
Niguel Promenade, an approximately 153,000 square foot retail center in Laguna
Niguel, California.
On July 1, 1997, CREC sold Rivermont Station and Lovejoy Station, two
Atlanta neighborhood retail centers with 90,000 and 77,000 square feet,
respectively, for $20.1 million, which was approximately $4.0 million over the
cost of the centers. Including depreciation recapture of approximately $.5
million and net of an income tax provision of approximately $1.5 million, the
net gain on the sale was approximately $3.0 million.
Medical Office Properties. In August 1997, Presbyterian Medical Plaza
at University, a 69,000 rentable square foot medical office building became
partially operational for financial reporting purposes. In September 1997, the
Company commenced construction on Meridian Mark Plaza, a 159,000 rentable square
foot medical office building located in Atlanta, Georgia.
Financings. Three new financings were completed during 1997. On March
20, 1997, Wildwood Associates completed the financing of the 4100 and 4300
Wildwood Parkway Buildings with a $30 million non-recourse mortgage note payable
at a 7.65% interest rate and maturity of April 1, 2012. On July 30, 1997, the
Company completed the financing of the 100 and 200 North Point Center East
Buildings with a $25 million non-recourse mortgage note payable at a 7.86%
interest rate and maturity of August 1, 2007. On September 30, 1997, Cousins
LORET Venture, L.L.C. completed the financing of Two Live Oak Center with a $30
million non-recourse mortgage note payable at a 7.9% interest rate and a
maturity of October 1, 2007.
Effective June 30, 1997, the Company extended the maturity of its $100
million line of credit from June 30, 1997 to June 29, 1998. The line is
unsecured and bears interest tied to the Federal Funds rate. The Company had no
borrowings under the line as of December 31, 1997.
In November 1997, Cousins LORET Venture, L.L.C. received a commitment
for the financing of The Pinnacle office building which is expected to close in
the second quarter of 1998 and will be drawn down as needed, with the full
amount funded by December 1998. The $70 million non-recourse mortgage note
payable has an interest rate of 7.11% and term of twelve years.
Common Stock Issuance. In December 1997, the Company issued 2,150,000
shares of common stock through a public offering at a price of $31.5625 per
share. The Company has used the proceeds to reduce debt and develop
income-producing properties.
Subsequent Events
Subsequent to year-end, in January 1998, the Company purchased the land
for, and commenced construction on, Carlyle I, an approximately 150,000 rentable
square foot office building in Alexandria, Virginia.
Subsequent to year-end, in February 1998, the Company purchased The
Shops at Palos Verdes, located in Rolling Hills Estates, California, in the
greater Los Angeles metropolitan area. This 355,000 square foot center includes
existing retail space and a parking deck. The Company plans to reposition and
remerchandise the project into an approximately 380,000 square foot open-air,
high-end specialty center.
Executive Offices
The Registrant's executive offices are located at 2500 Windy Ridge
Parkway, Suite 1600, Atlanta, Georgia 30339-5683. At December 31, 1997, the
Company employed 180 people.
I-15
Item 2. Properties
- ----------------------
Table of Major Properties
The following tables set forth certain information relating to major
office and retail properties, stand alone retail lease sites, medical office
properties and land held for investment and future development in which the
Company has a 50% or greater ownership interest. All information presented is as
of December 31, 1997, except leasing information which is as of March 15, 1998.
Dollars are stated in thousands.
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Office
- ------
Wildwood Office Park:
Suburban Atlanta, GA
2300 Windy
Ridge Parkway
30339-5671 1987 IBM 50% 634,000 98% 98% IBM (2002/2012) 240,430
12 Acres Manhattan Associates, LLC 63,296
(2002/2007)
Electrolux (2000/2005) 62,576
Computer Associates 62,445
(2005/2010)
Financial Services 56,932
Corporation
(2006/2011)(2)
Chevron USA (2001) 50,242
2500 Windy
Ridge Parkway
30339-5683 1985 IBM 50% 313,000 98% 95% Coca-Cola Enterprises Inc. 165,180
8 Acres (2003/2008)
3200 Windy
Hill Road
30339-5609 1991 IBM 50% 685,000 98% 97% IBM (2001/2011)(3) 436,539
15 Acres Equifax (4) (1998/2003) 68,402
W.H. Smith Inc. 41,858
(2002/2007)
3301 Windy Ridge
Parkway
30339-5685 1984 N/A 100% 106,000 100% 80% Indus International, 106,000
10 Acres Inc.(4) (2003/2008)
3100 Windy Hill
Road
30339-5605 1983 N/A (5) 188,000 100% 100% IBM (2006) 188,000
13 Acres
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Office
- ------
Wildwood Office Park:
Suburban Atlanta, GA
2300 Windy
Ridge Parkway
30339-5671 $77,774 $ 69,995 12/1/05
$51,222 7.56%
2500 Windy
Ridge Parkway
30339-5683 $29,318 $ 24,781 12/15/05
$18,202 7.45%
3200 Windy
Hill Road
30339-5609 $80,997 $ 69,389 1/1/07
$59,971 8.23%
3301 Windy Ridge
Parkway
30339-5685 $10,467 $ 0 N/A
$ 6,559
3100 Windy Hill
Road
30339-5605 $17,005 (5) $ 0 N/A
$16,325 (5)
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
4100 and 4300
Wildwood Parkway
30339-8400 1996 IBM 50% 250,000 100% 100% Georgia-Pacific 250,000
13 Acres Corporation (2012/2017)
(6)(7)
4200 Wildwood Parkway
30339-8402 1997 IBM 50% 260,000 100% (8) General Electric 260,000
8 Acres (2014/2024)(8)
NationsBank Plaza
Atlanta, GA
30308-2214 1992 NationsBank (4) 50% (9) 1,260,000 95% 92% NationsBank (4) 572,742
4 Acres (2012/2042)
Ernst & Young LLP 203,397
(2007/2017)
Troutman Sanders 201,320
(2007/2017)
Paul Hastings (2012/2017) 92,224
Hunton & Williams 69,699
(2004/2009)
First Union Tower
Greensboro, NC
27401-2167 1990 N/A 100% 319,000 93% 93% Smith Helms Mullis & 70,360
1 Acre Moore (2000/2015)
First Union Bank (4) 62,622
(2009/2019)
Halstead Industries 60,253
(2000/2005)
Ten Peachtree Place
Atlanta, GA
30309-3814 1991 Coca-Cola (4) 50% (9) 259,000 100% 100% Coca-Cola (4) (2001/2006) 259,000
5 Acres
John Marshall-II
Suburban
Washington, D.C.
22102-3802 1996 CarrAmerica Realty 50% 224,000 100% 100% Booz-Allen & Hamilton 224,000
Corporation (4) 3 Acres (2011/2016)
100 North Point Center East
Suburban Atlanta, GA
30022-4885 1995 N/A 100% 128,000 100% 100% Schweitzer-Mauduit 39,739
7 Acres International, Inc.
(2001/2007)
Green Tree Financial 21,914
(2006/2011)(6)
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Office (Continued)
- ------------------
Wildwood Parkway
30339-8400 $26,363 $ 29,696 4/1/12
$24,755 7.65%
4200 Wildwood Parkway
30339-8402 $19,670 $ 0 N/A
(8)
NationsBank Plaza
Atlanta, GA
30308-2214 $218,978 $ 0(10) N/A (10)
$182,043
First Union Tower
Greensboro, NC
27401-2167 $ 33,962 $ 0 N/A
$ 22,897
Ten Peachtree Place
Atlanta, GA
30309-3814 $ 23,474 $ 19,355 11/30/01(11)
$ 19,735 8.00%
John Marshall-II
Suburban
Washington, D.C.
22102-3802 $ 29,917 $ 23,673 4/1/13
$ 27,797 7.00%
100 North Point Center East
Suburban Atlanta, GA
30022-4885 $ 12,791 $ 12,446(12) 8/1/07
$ 11,594 7.86%
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
200 North Point Center East
Suburban Atlanta, GA
30022-4885 1996 N/A 100% 129,000 100% 94% Alltel Telecom Information 60,029
9 Acres Services, Inc. (1999/2000)
Motorola, Inc. (2001/2011) 26,897
APAC Teleservices, Inc. 22,409
(2004/2009)
333 North Point Center East
Suburban Atlanta, GA
30022-8274 (13) N/A 100% 129,000 41%(13) (13) J.C. Bradford (2005/2010)(13) 22,222
9 Acres
615 Peachtree Street
Atlanta, GA
30308-2312 1996 N/A 100% 147,000 73% 86% Wachovia (4)(2001/2007) 51,561
2 Acres McCann Erickson (1998) 28,967
101 Independence Center
Charlotte, NC
28246-1000 1996 N/A 100% 522,000 93% 96% NationsBank(4) 359,796
2 Acres (2008/2028)(14)
Robinson Bradshaw & Hinson, 64,893
P.A. (2004/2009)
Ernst & Young LLP (2001/2006) 33,962
Carlyle I
Alexandria, VA
22314-9999 (15) N/A 100% 150,000 58%(15) (15) A.T. Kearney (2009/2019)(15) 87,455
1 Acre
101 Second Street
San Francisco, CA
94105-3601 (9) Myers Second 100% (9) 381,000 (9) (9) (9) (9)
Street Company .63 Acres
LLC
Two Live Oak Center
Atlanta, GA
30326-1234 1997 LORET 50% 278,000 88% 30%(16) Sales Technologies, Inc. 75,484
Holdings, L.L.L.P. 2 Acres (2007/2017)
Chubb & Son, Inc. (4) 48,520
(2007/2017)
The Pinnacle
Atlanta, GA
30326-1234 (13) LORET 50% 424,000 33%(13) (13) PaineWebber (2013/2018) 47,631
Holdings, L.L.L.P. 4 Acres (13)(6)
A.T. Kearney (2009/2019)(13) 47,566
Merrill Lynch 46,440
(2008/2013)(13)
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Office (Continued)
- ------------------
200 North Point Center East
Suburban Atlanta, GA
30022-4885 $ 11,487 $ 12,447(12) 8/1/07
$ 10,768 7.86%
333 North Point Center East
Suburban Atlanta, GA
30022-8274 $ 10,583 $ 0 N/A
(13)
615 Peachtree Street
Atlanta, GA
30308-2312 $ 11,670 $ 0 N/A
$ 11,010
101 Independence Center
Charlotte, NC
28246-1000 $ 73,515 $ 48,928 11/1/07
$ 70,615 8.22%
Carlyle I
Alexandria, VA
22314-9999 (15) $ 0 N/A
101 Second Street
San Francisco, CA
94105-3601 $ 11,698 $ 0 N/A
(9)
Two Live Oak Center
Atlanta, GA
30326-1234 $ 48,000 $ 30,000 10/01/07
$ 47,506 7.9%
The Pinnacle
Atlanta, GA
30326-1234 $ 18,501 (17) (17)
(13)
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Office (Continued)
- ------------------
Grandview II
Birmingham, AL
35243-1930 (13) Daniel 100% 150,000 64%(13) (13) TXEN, Inc. (2008/2013)(13) 52,112
Realty Company 8 Acres Daniel Realty Company 20,097
(9) (2008)(13)
Retail Centers and Malls
Haywood Mall
Greenville, SC
29607-2749 1977/1995 Corporate 50% 1,256,000 91% 88% Sears (19) N/A
Property 86 acres overall of J.C. Penney (19) N/A
Investors (4) of which 84% of owned Rich's (19) N/A
330,000 and owned Belk (19) N/A
21 acres are Dillard's (19) N/A
owned (18)
Perimeter Expo
Atlanta, GA
30338-1519 1993 N/A 100% 291,000 99% 99% The Home Depot Expo (19) N/A
19 acres overall of Marshalls (2014/2029) 36,598
of which 99% of Company Best Buy (2014/2029) 36,000
171,000 and Company owned Linens `N Things (2014/2024) 30,351
10 acres are owned Office Max (2013/2033) 23,500
owned by The Sport Shoe (2004/2014) 14,348
the Company Gap's Old Navy Store 13,939
(2002/2012)
North Point MarketCenter
Suburban
Atlanta, GA
30202-4889 1994/1995 N/A 100% 514,000 100% 99% Target (19) N/A
60 Acres (20) Babies "R" Us (2011/2031) 50,275
of which Media Play (2010/2025) 48,884
398,000 and Marshalls (2010/2025) 40,000
49 acres are Rhodes (2011/2021) 40,000
owned by Linens `N Things 35,000
the Company (2005/2025)
United Artists (2014/2034) 34,733
Circuit City (2015/2030) 33,420
PETsMART (2009/2029) 25,465
Gap's Old Navy Store 20,000
(2000/2010)
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Office (Continued)
- ------------------
Grandview II
Birmingham, AL
35243-1930 $ 11,191 $ 0 N/A
(13)
Retail Centers and Malls
- ------------------------
Haywood Mall
Greenville, SC
29607-2749 $ 50,399 $ 0 N/A
$ 35,930
Perimeter Expo
Atlanta, GA
30338-1519 $ 19,769 $ 21,061 8/15/05
$ 17,983 8.04%
North Point MarketCenter
Suburban
Atlanta, GA
30202-4889 $ 27,003 $ 29,068 7/15/05
$ 23,929 8.50%
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
Presidential MarketCenter
Suburban
Atlanta, GA
30278-2149 1994/1996 N/A 100% 478,000 (21) 99% (21) 92% (21) Target (19) N/A
66 acres overall of Publix Super Market 56,146
of which 99% (21) Company (2019/2044)
361,000 (21) of Company owned Carmike Cinemas(5)(2023/2033) 44,565
and 49 acres owned MJDesigns (4) (2011/2026) 37,957
are owned Bed, Bath & Beyond (2008/2024)35,127
by the T.J. Maxx (2004/2014) 32,000
Company Office Depot, Inc. 31,628
(2011/2026)
Marshalls (2010/2025) 30,000
Colonial Plaza MarketCenter
Orlando, FL
32803-5029 1996 N/A 100% 493,000(22) 91%(22) 95%(22) Circuit City (2016/2036) 43,936
49 Acres Rhodes (2012/2027) 40,000
Baby Superstore, Inc.
(2006/2021) 40,000
Stein Mart, Inc. (2006/2026) 36,000
Barnes & Noble Superstores, 35,131
Inc.(2012/2022)
Linens `N Things 35,000
(2012/2027)
Marshalls (2012/2027) 30,400
Ross Stores (2007/2022) 28,000
Just For Feet, Inc. 26,667
(2012/2027)
Walgreen Co. (2012) 18,614
Gap's Old Navy Store 17,920
(2002/2012)
Mansell Crossing Phase II
Suburban
Atlanta, GA
30202-4822 1996 N/A 100% 103,000 100% 100% Bed Bath & Beyond 40,000
13 Acres (2012/2027)
Goody's Family Clothing, 32,144
Inc. (2009/2027)
Rooms To Go (2016/2036) 21,000
Greenbrier MarketCenter
Chesapeake, VA
23327-2840 1996 N/A 100% 478,000 100% 99% Target (2016/2046) 117,220
44 Acres Harris Teeter, Inc. 51,806
(2016/2036)
Bed Bath & Beyond 40,484
(2012/2027)
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
Presidential MarketCenter
Suburban
Atlanta, GA
30278-2149 $ 23,722 $ 0 N/A
$ 22,251
Colonial Plaza MarketCenter
Orlando, FL
32803-5029 $ 40,543 $ 0 N/A
$ 38,502
Mansell Crossing Phase II
Suburban
Atlanta, GA
30202-4822 $ 8,913 $ 0 N/A
$ 8,622
Chesapeake, VA
23327-2840 $ 33,525 $ 0 N/A
$ 32,238
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
Greenbrier MarketCenter (Continued) Baby Superstore, Inc. 40,000
(2006/2021)
Stein Mart, Inc. (2006/2026) 36,000
Kinetex, Inc. (2011/2026) 33,000
Barnes & Noble Superstores, 29,974
Inc. (2011/2026)
PETsMART (2011/2031) 26,052
Office Max (2011/2026) 23,484
Gap's Old Navy Store 14,000
(2001/2011)
Los Altos MarketCenter
Long Beach, CA
90815-3126 1996 N/A 100% 258,000 100% 97% Sears (19) N/A
19 Acres of Circuit City (4)(2017/2037) 38,541
which 157,000 Borders, Inc. (2017/2037) 30,000
and 17 Acres Bristol Farms (4)(2012/2032) 28,200
are owned by CompUSA, Inc. (2011/2021) 25,620
the Company Sav-on Drugs (4)(2016/2026) 16,914
Abbotts Bridge Station
Suburban Atlanta, GA
30097-5793 (13) N/A 100% 83,000 95%(13) (13) Harris Teeter, Inc. 40,406
17 Acres (2017/2037)(13)
Eckerd Corporation 10,909
(2017/2037)(13)
Laguna Niguel Promenade
Laguna Niguel, CA
92677-3920 (13) N/A 100% 153,000 75%(13) (13) Orchard's Supply Hardware(4) 63,811
13 Acres (2018/2033)(13)
Ralph's Grocery Company 51,028
(2018/2043)(13)
The Shops at Palos Verdes
Rolling Hills Estates, CA
90274-3664 (23) N/A 100% 380,000(23) (23) (23) (23) (23)
13 Acres
Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects
- -------------------------------------------------------------------------
Wildwood Office Park
Suburban Atlanta, GA
30339-5671 1985-1993 IBM 50% 15 Acres 100% 100% N/A N/A
North Point
Suburban Atlanta, GA
30202-4885 1993 N/A 100% 24 Acres 100% 100% N/A N/A
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Retail Centers and Malls (Continued)
- ------------------------------------
Greenbrier MarketCenter (Continued)
Los Altos MarketCenter
Long Beach, CA
90815-3126 $ 21,658 $ 0 N/A
$ 21,000
Abbotts Bridge Station
Suburban Atlanta, GA
30097-5793 $ 10,781 $ 0 N/A
(13)
Laguna Niguel Promenade
Laguna Niguel, CA
92677-3920 $ 9,128 $ 0 N/A
(13)
The Shops at Palos Verdes
Rolling Hills Estates, CA
90274-3664 (23) $ 0 N/A
Stand Alone Retail Sites Adjacent to Company's Office and Retail Projects
- -------------------------------------------------------------------------
Wildwood Office Park
Suburban Atlanta, GA
30339-5671 $ 8,813 $ 0 N/A
$ 7,581
North Point
Suburban Atlanta, GA
30202-4885 $ 3,742 $ 0 N/A
$ 3,666
Percentage
Description, Year Rentable Leased Average Major
Location Development Company's Square Feet as of 1997 Major Tenants (lease Tenants'
and Completed Joint Venture Ownership and Acres March 15, Economic expiration/options Rentable
Zip Code or Acquired Partner Interest as Noted 1998 Occupancy expiration) Sq. Feet
- ------------ ----------- ------------- ---------- ---------- ---------- --------- -------------------- --------
Medical Office
- --------------
Presbyterian Medical Plaza
at University
Charlotte, NC
28233-3549 1997 N/A 100% 69,000 100% 37%(24) Presbyterian Health Services 63,862
1 Acre (24) Corporation (2012/2027)(26)
Meridian Mark Plaza
Atlanta, GA
30342-1613 (13) N/A 100% 159,000 66%(13) (13) Northside Hospital (4) 40,675
3 Acres (2013/2023)(13)
Scottish Rite Hospital for 22,000
Crippled Children, Inc.
(2003/2008)(13)
Adjusted
Cost and
Adjusted
Debt
Description, Depreciation Maturity
Location and and
and Amortization Debt Interest
Zip Code (1) Balance Rate
- ------------ ------------ ------- --------
Medical Office
- --------------
Presbyterian Medical Plaza
at University
Charlotte, NC
28233-3549 $ 7,216 $ 0 N/A
$ 7,112
Meridian Mark Plaza
Atlanta, GA
30342-1613 $ 5,619 $ 0 N/A
(13)
(1)Cost as shown in the accompanying table includes deferred leasing and
financing costs and other related assets. For each of the following
projects: 2300 and 2500 Windy Ridge Parkway, 3200 Windy Hill Road, 4100 and
4300 Wildwood Parkway, 4200 Wildwood Parkway and Wildwood Stand Alone
Retail Lease Sites, the cost shown is what the cost would be if the
venture's land cost were adjusted downward to the Company's lower basis in
the land it contributed to the venture.
(2) 1,556 square feet of this lease of 2300 Windy Ridge Parkway expires in
2001.
(3) 115,944 square feet of this lease of 3200 Windy Hill Road expires in 2001,
and the balance expires in 2006.
(4) Actual tenant or venture partner is affiliate of entity shown.
(5) See "Major Properties" - "Wildwood Office Park" where the accounting for
the 3100 Windy Hill Road Building is discussed.
(6) Green Tree Financial, Georgia-Pacific Corporation and PaineWebber have
the right to terminate their leases in 2001, 2007 and 2008, respectively,
upon payment of significant cancellation penalties.
(7) Tenant has the option to purchase the building on its lease expiration date
for a price of $33,750,000.
(8) 4200 Wildwood Parkway was completed in December 1997. A lease for 100%
of the building was signed in March 1998 whereby the tenant will begin
partial occupancy in June 1998 with 100% occupancy by April 1999.
(9) See "Major Properties" - "NationsBank Plaza," "Ten Peachtree Place,"
"Grandview II," and "101 Second Street" where the venture's preferences
and terms are discussed.
(10) See "Major Properties" - "NationsBank Plaza" where debt on NationsBank
Plaza is discussed.
(11) Maturity of the Ten Peachtree Place mortgage debt is extendible to December
31, 2008. Rate becomes floating after November 30, 2001.
(12) 100 North Point Center East and 200 North Point Center East were financed
together with one non-recourse mortgage note payable. For purposes of
this schedule the total debt has been allocated 50% to each building.
(13) Project was under construction as of December 31, 1997. Lease expiration
dates are based upon estimated commencement dates, and square footage
is estimated.
(14) 103,656 square feet of this lease of 101 Independence Center expires in
2000.
(15) Land was acquired and construction commenced on Carlyle I subsequent to
December 31, 1997. Lease expiration dates are based upon estimated
commencement dates, and square footage is estimated.
(16) Two Live Oak Center became partially operational in October 1997. Thus,
economic occupancy for Two Live Oak Center does not include a full
year of operations.
(17) In November 1997, Cousins LORET Venture, L.L.C. received a commitment
for the financing of The Pinnacle which is expected to close in March 1998
and will be drawn down as needed, with the full amount funded by December
1998. The $70 million non-recourse mortgage note payable has an interest
rate of 7.11% and a term of 12 years. (18) A portion of the Haywood Mall
parking lot (3 acres) is subject to a long-term ground lease expiring in
2017, with five 10-year renewal options.
(19) This anchor tenant owns its own space.
(20) North Point MarketCenter includes approximately 4 outparcels which are
ground leased to freestanding users.
(21) 61,000 square feet became operational in March 1997. Thus, economic
occupancy does not include a full year of operations for this 61,000 square
feet portion of Presidential MarketCenter. Includes 21,000 square feet not
yet constructed as of March 15, 1998 which were excluded from the
calculation of percentage leased and average 1997 economic occupancy.
(22) Includes 16,000 square feet not yet constructed as of March 15, 1998 which
were excluded from the calculation of percentage leased and average
1997 economic occupancy.
(23) The Shops at Palos Verdes was acquired subsequent to December 31, 1997.
This 355,000 square foot center includes existing retail space and a
parking deck. The Company plans to reposition and remerchandise the project
into an approximately 380,000 square foot open-air, high-end specialty
center.
(24) Presbyterian Medical Plaza at University is located on 1 acre which is
subject to a ground lease expiring in 2057.
(25) Presbyterian Medical Plaza at University became partially operational in
August 1997 for financial reporting purposes. Thus, economic occupancy
for Presbyterian Medical Plaza at University does not include a full year
of operations.
(26) Tenant has the option to renew 23,359 rentable square feet through 2027
of this lease of Presbyterian Medical Plaza at University, with the
option to renew the balance through 2022.
Land Held for Investment and Future Development (excluding Retail Outparcels)
Adjusted
Cost
Less
Developable Company's Depreciation
Land Area Joint Venture Ownership and Debt
Description, Location and Zoned Use Year Acquired (Acres)(1) Partner Interest Amortization Balances
- ----------------------------------- --------------- --------- ------------- --------- -------------- --------
Wildwood Office Park
Suburban Atlanta, Georgia
Office and Commercial 1971-1987 147 N/A 100% $ 7,005 $ 0
Office and Commercial 1971-1982 36 IBM 50% $ 10,075(2) $ 0
North Point Land
(Georgia Highway 400 & Haynes Bridge Road) (3)
Suburban Atlanta, Georgia
Office and Commercial - East 1970-1985 41 N/A 100% $ 1,356 $ 0
Office and Commercial - West 1970-1985 221 N/A 100% $ 4,587 $ 0
Midtown Atlanta
Office and Commercial 1984 2 N/A 100% $ 1,398 $ 0
Temco Associates
(Paulding County)
Suburban Atlanta, Georgia 1991 --(5) Temple-Inland 50% --(5) $ 0
Inc. (4)
(1) Based upon management's estimates.
(2) For the portion of the Wildwood Office Park land owned by a joint venture,
the cost shown is what the cost would be if the venture's land cost were
adjusted downward to the Company's lower basis in the land it contributed
to the venture. The adjusted cost excludes building predevelopment costs of
$1,183,000.
(3) The North Point property is located both east and west of Georgia Highway
400. Currently, only the land which is located east of Georgia Highway 400
is being developed, but planning and infrastructure work has begun for
additional development on the west side property. This land surrounds North
Point Mall, a 1.3 million square foot regional mall on a 100 acre site
which the Company sold in 1988.
(4) Joint venture partner is an affiliate of the entity shown.
(5) Temco Associates has an option through March 2006, with no carrying costs,
to acquire the fee simple interest in approximately 11,300 acres in
Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership
also has an option to acquire a timber rights interest only in
approximately 22,000 acres. The options may be exercised in whole or in
part over the option period. Temco Associates has engaged in certain sales
of land as to which it simultaneously exercised its purchase option. During
1996, approximately 375 acres of the option related to the fee simple
interest was exercised and simultaneously sold for gross profits of
$1,427,000. None of the option was exercised in 1995 or 1997.
Major Properties
- ----------------
General
- -------
This section describes the major operating properties in which the
Company has an interest either directly or indirectly through joint venture
arrangements. A "negative investment" in a joint venture results from
distributions of capital to the Company, if any, exceeding the sum of (i) the
Company's contributions of capital and (ii) reported earnings (losses) of the
joint venture allocated to the Company. "Investment" in a joint venture means
the book value of the Company's investment in the joint venture.
Wildwood Office Park
- --------------------
Wildwood Office Park is a 289 acre Class A commercial development in
suburban Atlanta master planned by I.M. Pei, including 8 office buildings
containing 2,436,000 rentable square feet. The property is zoned for office,
institutional and commercial use. Approximately 109 acres in the park are owned
by, or committed to be contributed to, Wildwood Associates (see below),
including approximately 36 acres of land held for future development. The
Company owns 100% of the 147 acre balance of the land available for future
development.
Located in Atlanta's northwest commercial district, just north of the
Interstate 285/Interstate 75 intersection, Wildwood features convenient access
to all of Atlanta's major office, commercial and residential districts. The
Wildwood complex overlooks the Chattahoochee River and borders 1,200 acres of
national forest, thus providing an urban office facility in a forest setting.
Wildwood Associates. Wildwood Associates is a joint venture formed in
1985 between the Company and IBM. The Company and IBM each have a 50% interest
in Wildwood Associates. At December 31, 1997, the Company's investment in
Wildwood Associates and a related partnership, which included the cost of the
land the Company is committed to contribute to Wildwood Associates, was reduced
to a negative investment of approximately $12.6 million due to partnership
distributions in excess of net income made during 1997 and prior years.
Wildwood Associates owns the 3200 Windy Hill Road Building (685,000
rentable square feet), the 2300 Windy Ridge Parkway Building (634,000 rentable
square feet), the 2500 Windy Ridge Parkway Building (313,000 rentable square
feet), the 4100 and 4300 Wildwood Parkway Buildings (250,000 rentable square
feet in total) and the 4200 Wildwood Parkway Building (260,000 rentable square
feet). At March 15, 1998, these buildings were 98%, 98%, 98%, 100% and 100%
leased, respectively. Wildwood Associates also owns 15 acres leased to two
banking facilities and five restaurants.
On March 20, 1997, Wildwood Associates completed the $30 million
financing of the 4100 and 4300 Wildwood Parkway Buildings (see Note 4). In
conjunction with this financing and a portion of the $70 million financing of
the 3200 Windy Hill Road Building completed in December 1996, during the first
quarter of 1997, Wildwood Associates made non-operating cash distributions of
$12.5 million to each partner and paid the entire calendar year 1997 operating
distribution of $4.5 million to each partner.
Wildwood Associates has a $10 million bank line of credit (the Company
severally guarantees one-half) under which $0 was drawn as of December 31,1997.
Other Buildings in Wildwood Office Park. Wildwood Office Park also
contains the 3301 Windy Ridge Parkway Building, a 106,000 rentable square foot
office building located on approximately 10 acres which is wholly owned by the
Company. Commencing January 1994, a single tenant leased the building for a term
of ten years. The lease was initially for 60% of the building with options
permitting the tenant to expand its occupancy to the remainder of the building
over the next several years. The first such option for an additional 10% of the
space was exercised in the fourth quarter of 1994, the second option for another
10% of the space was exercised effective December 15, 1996, and the remainder of
the option was exercised during 1997, bringing the building to 100% leased as of
March 15, 1998.
In addition, the 3100 Windy Hill Road Building, a 188,000 rentable
square foot corporate training facility occupies a 13-acre parcel of land which
is wholly owned by the Company. The training facility improvements were sold in
1983 to a limited partnership of private investors, at which time the Company
received a leasehold mortgage note. The training facility land was
simultaneously leased to the partnership for thirty years, along with certain
equipment for varying periods. The training facility had been leased by the
partnership to IBM through November 30, 1998.
Effective January 1, 1997, the IBM lease was extended eight years
beyond its previous expiration, to November 30, 2006. Based on the economics of
the lease which are discussed in Note 3, the Company will receive substantially
all of the economic risks and rewards from the property through the term of the
IBM lease. In addition, the Company will receive substantially all of the future
economic risks and rewards from the property beyond the IBM lease because of the
short term remaining on the land lease (7 years) and the large mortgage note
balance ($25.9 million) that would have to be paid off, with interest, in that 7
year period before the limited partnership would receive any significant
benefit. Therefore, effective January 1, 1997, the $17,005,000 balance of the
mortgage note and land was reclassified to Operating Properties, and 1997
revenues and expenses (including depreciation) have been recorded as if the
building were owned by the Company.
North Point
- -----------
North Point is a mixed-use commercial development located in north
central suburban Atlanta, Georgia off of Georgia Highway 400, a six lane state
highway that runs from downtown Atlanta to the northern Atlanta suburbs. The
Company owns approximately 152 and 221 acres located on the east and west sides
of Georgia Highway 400, respectively. Currently, only the land which is located
east of Georgia Highway 400 is being developed, but planning and infrastructure
work has begun for additional development on the west side property. This land
surrounds North Point Mall, a 1.3 million square foot regional mall on a 100
acre site which the Company sold in 1988. The following describes the various
components of North Point.
North Point MarketCenter and Mansell Crossing Phase II. North Point
MarketCenter, which is 100% leased as of March 15, 1998, is a 514,000 square
foot retail power center (of which 398,000 square feet are owned by Cousins)
located adjacent to North Point Mall. Mansell Crossing Phase II, which is 100%
leased as of March 15, 1998, is an approximately 103,000 square foot expansion
of an existing retail power center, previously developed by the Company for a
third party. These two centers are located on 49 (Company owned) and 13 acres of
land, respectively, at North Point.
North Point Center East. The Company owns three office buildings
located adjacent to North Point Mall and the Company's retail properties. 100
North Point Center East and 200 North Point Center East, which were completed in
1995 and 1996, are 128,000 and 129,000 rentable square feet, respectively.
Construction commenced in December 1996 on the third office building, 333 North
Point Center East, a 129,000 square foot office building, adjacent to 100 and
200 North Point Center East. These three office buildings are located on 25
acres of land at North Point and are 100%, 100% and 41% leased, respectively, as
of March 15, 1998.
Other North Point Property. Approximately 24 acres of the North Point
land are ground leased in 1 to 5 acre sites to freestanding users. These 24
acres were 100% leased as of March 15, 1998.
The remaining approximately 262 developable acres at North Point are
100% owned by the Company. Approximately 41 acres of this land are located on
the east side of Georgia Highway 400 and are zoned for mixed-use development
including retail and office space. Approximately 221 acres of the land are
located on the west side of Georgia Highway 400 and are zoned for office,
institutional and light industrial use.
Other Office Properties
- -----------------------
NationsBank Plaza. NationsBank Plaza is a Class A, 55-story, 1.3
million rentable square foot office tower designed by Kevin Roche and is located
on approximately 4 acres of land between the midtown and downtown districts of
Atlanta, Georgia. The building, which was completed in 1992, was approximately
95% leased as of March 15, 1998. An affiliate of NationsBank leases 46% of the
rentable square feet. NationsBank Plaza was developed by CSC, a joint venture
formed by the Company and a wholly owned subsidiary of NationsBank, each as 50%
partners.
CSC's net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each). At December 31, 1997,
the Company's investment in CSC was approximately $99,513,000.
Cousins LORET Venture, L.L.C. Effective July 31, 1997, Cousins LORET
Venture, L.L.C. ("the Venture") was formed between the Company and LORET
Holdings, L.L.L.P. ("LORET"), each as 50% members. LORET contributed Two Live
Oak Center, a 278,000 rentable square foot office building located in Atlanta,
Georgia, which was recently renovated and is in the process of being leased up.
Two Live Oak Center became partially operational for financial reporting
purposes in October 1997 and was 88% leased as of March 15, 1998. LORET also
contributed an adjacent 4 acre site on which construction commenced in August
1997 on The Pinnacle, a 424,000 rentable square foot office building which was
33% leased as of March 15, 1998. Two Live Oak Center was contributed subject to
a 7.90% $30 million non-recourse ten year mortgage note payable (see Note 4).
The Company is obligated to contribute $25 million of cash to the Venture to
match the value of LORET's agreed-upon equity, which cash is to be contributed
as needed for the development of The Pinnacle. As of December 31, 1997, the
Company had contributed $8.5 million of its $25 million obligation. The Pinnacle
is expected to be completed at the end of 1998 at a cost of approximately $86
million.
In November 1997, Cousins LORET Venture, L.L.C. received a commitment
for the financing of The Pinnacle office building which is expected to close in
the second quarter of 1998 and will be drawn down as needed with the full amount
funded by December 1998. The $70 million non-recourse mortgage note payable has
an interest rate of 7.11% and term of twelve years.
First Union Tower. First Union Tower is a Class A office building
containing approximately 319,000 rentable square feet. The property is located
on approximately one acre of land in downtown Greensboro, North Carolina. First
Union Tower opened in the first quarter of 1990 and as of March 15, 1998 was
approximately 93% leased.
615 Peachtree Street. In August 1996, the Company acquired 615
Peachtree Street, a 147,000 rentable square foot 12-story downtown Atlanta
office building, located across from NationsBank Plaza. 615 Peachtree Street was
73% leased as of March 15, 1998.
101 Independence Center. In December 1996, the Company acquired 101
Independence Center, a 522,000 rentable square foot office building (including
an underground parking garage and an adjacent parking deck) located at the
intersection of Trade and Tryon in the central business district of Charlotte,
North Carolina. 101 Independence Center was 93% leased as of March 15, 1998.
One Ninety One Peachtree Tower. One Ninety One Peachtree Tower is a
50-story, Class A office tower located in downtown Atlanta, Georgia that was
completed in December 1990. One Ninety One Peachtree Tower, which contains 1.2
million rentable square feet, was designed by John Burgee Architects, with
Phillip Johnson as design consultant.
One Ninety One Peachtree Tower was developed on approximately 2 acres
of land, of which approximately 1.5 acres is owned and approximately one-half
acre under the parking facility is leased for a 99-year term expiring in 2087
with a 99-year renewal option. One Ninety One Peachtree Tower was approximately
93% leased at March 15, 1998.
C-H Associates, Ltd. ("C-H Associates"), a partnership formed in 1988
between CREC (49%), Hines Peachtree Associates Limited Partnership (49%) and
Peachtree Palace Hotel, Ltd. (2%), owns a 20% interest in the partnership that
owns One Ninety One Peachtree Tower. C-H Associates' 20% ownership of One Ninety
One Peachtree Tower results in an effective 9.8% ownership interest by CREC,
subject to a preference in favor of the majority partner, in the One Ninety One
Peachtree Tower project. The balance of the One Ninety One Peachtree Tower
project is owned by DIHC Peachtree Associates, which was an affiliate of Dutch
Institutional Holding Company, but was acquired by Cornerstone Properties, Inc.
in October 1997.
Through C-H Associates, CREC received 50% of the development fees from
the One Ninety One Peachtree Tower project. In addition, CREC owns a 50%
interest in two general partnerships which receive fees from leasing and
managing the One Ninety One Peachtree Tower project.
The One Ninety One Peachtree Tower project was funded substantially by
debt until March 1993, at which time DIHC Peachtree Associates contributed
equity in the amount of $145,000,000 which repaid approximately one-half of the
debt. Subsequent to the equity contribution, C-H Associates is entitled to a
priority distribution of $250,000 per year (of which the Company is entitled to
receive $112,500) for seven years beginning in 1993. The equity contributed by
DIHC Peachtree Associates is entitled to a preferred return at a rate increasing
over the first 14 years from 5.5% to 11.5% (payable after the Company's priority
return); at December 31, 1997, the cumulative undistributed preferred return was
$15,281,555. After DIHC Peachtree Associates recovers its preferred return, the
partners share in any operating cash flow distributions in accordance with their
percentage interests. The project is subject to long-term debt of $145,000,000
at December 31, 1997. At December 31, 1997, the Company had a negative
investment of $90,000 in the One Ninety One Peachtree Tower project.
Ten Peachtree Place. Ten Peachtree Place is a 20-story, 259,000
rentable square foot Class A office building located in midtown Atlanta,
Georgia. Completed in 1991, this structure was designed by Michael Graves and is
currently 100% leased to Coca-Cola. Approximately four acres of adjacent land,
currently used for surface parking, are available for future development.
Ten Peachtree Place is owned by Ten Peachtree Place Associates, a
general partnership between the Company (50%) and a wholly owned subsidiary of
Coca-Cola (50%). The partnership acquired the property in 1991 for a nominal
cash investment, subject to a ten-year purchase money note. This 8% purchase
money note had an outstanding balance of $19.4 million at December 31, 1997. If
the purchase money note is paid in accordance with its terms, it will amortize
to approximately $15.3 million ($59 per rentable square foot) over the ten-year
term of the Coca-Cola lease, at which time Coca-Cola is entitled to receive the
preferred return described below, and the property may be sold, released, or
returned to the lender under the purchase money note for $1.00 without penalty
or any further liability to the Company for the indebtedness. At December 31,
1997, the Company had an investment in Ten Peachtree Place Associates of
$44,000.
The Company anticipates that Ten Peachtree Place Associates will
generate approximately $400,000 per year of cash flows from operating activities
net of note principal amortization during the ten-year lease. The partnership
agreement generally provides that each of the partners is entitled to receive
50% of cash flows from operating activities net of note principal amortization
(excluding any sale proceeds) for ten years, after which time the Company is
entitled to 15% of cash flows (including any sale proceeds) and its partner is
entitled to receive 85% of cash flows (including any sale proceeds), until the
two partners have received a combined distribution of $15.3 million, after which
time each partner is entitled to receive 50% of cash flows (including any sale
proceeds).
CC-JM II Associates. This joint venture was formed in 1994 between the
Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general
partners, to develop and own a 224,000 square foot office building in suburban
Washington, D.C. The building is 100% leased for 15 years to Booz-Allen &
Hamilton, an international consulting firm, as a part of its corporate
headquarters campus. Rent commenced on January 21, 1996.
Office Properties Under Development
- -----------------------------------
Grandview II. Cousins/Daniel, LLC was formed in 1997 between Cousins,
Inc. (a wholly owned subsidiary of Cousins) and Daniel Realty Company
("Daniel"). The purpose of this venture is to develop certain projects proposed
by Daniel and selected by Cousins. Daniel's economic rights are limited to
development fees, leasing fees, management fees and certain incentive interests.
These incentive interests include a residual interest in the cash flow and a
residual interest in capital proceeds. All projects undertaken within the
venture are pooled for purposes of calculating the aforementioned residuals.
This venture is treated as a consolidated entity in the Company's financial
statements.
In April 1997, Cousins/Daniel, LLC purchased the land on which
construction commenced on Grandview II, the first project developed and owned by
Cousins/Daniel, LLC which is a 150,000 rentable square foot office building in
Birmingham, Alabama. Grandview II is expected to be completed during the second
quarter of 1998 at a cost of approximately $18 million and was 64% leased as of
March 15, 1998.
101 Second Street. Cousins/Myers Second Street Partners, L.L.C., a
venture formed in 1997 between Cousins and Myers Second Street Company LLC
("Myers"), purchased .63 acres of undeveloped land in downtown San Francisco,
California which is entitled for 101 Second Street, an approximately 381,000
rentable square foot office building. The venture is currently pursing
predevelopment and investigative work to confirm the feasibility of developing
this office building.
Pursuant to the Operating Agreement, Cousins funded substantially all
of the purchase price of the land through its initial capital contribution of
$11,101,500. Myers' initial capital contribution was $603,304 which included
$500,000 of earnest money toward the purchase of the land. Cousins and Myers are
each obligated to fund additional capital contributions of $450,000. Thereafter,
Cousins is obligated to fund 30% of the total budgeted costs of the project,
with the remaining 70% obtained either from Cousins, if it so elects, or with
project financing. Myers' economic rights are limited to development fees and
certain incentive interests, which include a residual interest in the cash flow
and a residual interest in capital proceeds. This venture is treated as a
consolidated entity in the Company's financial statements.
Carlyle I. Subsequent to year-end, in January 1998, the Company
purchased the land for, and commenced construction on Carlyle I, an
approximately 150,000 rentable square foot office building in Alexandria,
Virginia. Carlyle I is expected to be completed during the second quarter of
1999 at a cost of approximately $30 million and was 58% leased as of March 15,
1998.
Other Retail Properties
- -----------------------
Haywood Mall. Haywood Mall is an enclosed regional shopping center
located 5 miles southeast of downtown Greenville, South Carolina, which was
developed and opened in 1980, and is owned by the Company and Bellwether
Properties of South Carolina, L.P. ("Bellwether"), an affiliate of Corporate
Properties Investors. The mall has 1,256,000 gross leaseable square feet ("GLA")
of which approximately 330,000 GLA is owned. The balance of the mall is owned by
the mall's five major department stores. The portion of Haywood Mall owned by
the Company and Bellwether was developed on approximately 21 acres of land, of
which approximately 18 acres is owned and approximately 3 acres (of parking
area) is leased under a ground lease expiring in 2017, with five 10-year renewal
options. The portion of Haywood Mall owned by the Company and Bellwether was
approximately 84% leased as of March 15, 1998.
The Company has a 50% interest in Haywood Mall. At December 31, 1997,
the Company's investment was $20,626,000.
Other Fully Operational Retail Properties. In addition to the
aforementioned North Point MarketCenter and Mansell Crossing Phase II, the
Company owns five other retail centers which were fully operational for
financial reporting purposes as of December 31, 1997. Perimeter Expo is a
291,000 square foot retail power center (of which the Company owns 171,000
square feet) which is located in Atlanta, Georgia and was 99% leased (Company
owned) as of March 15, 1998. Presidential MarketCenter is a 478,000 square foot
retail power center (of which the Company owns 361,000 square feet) which is
located in suburban Atlanta, Georgia and was 99% leased (Company owned) as of
March 15, 1998. Greenbrier MarketCenter is a 478,000 square foot retail power
center which is located in Chesapeake, Virginia and was 100% leased as of March
15, 1998. Colonial Plaza MarketCenter is a 493,000 square foot retail power
center which is located in Orlando, Florida and was 91% leased as of March 15,
1998. Los Altos MarketCenter is a 258,000 square foot retail power center (of
which the Company owns 157,000 square feet) which is located in Long Beach,
California and was 100% leased as of March 15, 1998.
Retail Properties Under Development. The Company owns two retail
centers which were under construction as of December 31, 1997. Abbotts Bridge
Station, an 83,000 square foot neighborhood retail center which is located in
suburban Atlanta, was completed in early 1998 and was 95% leased as of March 15,
1998. In August 1997, the Company purchased the land for and commenced
construction on Laguna Niguel Promenade, an approximately 153,000 square foot
retail center in Laguna Niguel, California and is expected to be completed in
mid 1998 at a total cost of approximately $19.5 million. Laguna Niguel Promenade
was 75% leased as of March 15, 1998.
Subsequent to year-end, in February 1998, the Company purchased The
Shops at Palos Verdes, located in Rolling Hills Estates, California, in the
greater Los Angeles metropolitan area. This 355,000 square foot center includes
existing retail space and a parking deck. The Company plans to reposition and
remerchandise the project into an approximately 380,000 square foot open-air,
high-end specialty center.
Retail Properties Sold. On July 1, 1997, CREC sold Rivermont Station
and Lovejoy Station, two Atlanta neighborhood retail centers with 90,000 and
77,000 square feet, respectively, for $20.1 million, which was approximately
$4.0 million over the cost of the centers. Including depreciation recapture of
approximately $.5 million and net of an income tax provision of approximately
$1.5 million, the net gain on the sale was approximately $3.0 million.
Medical Office Properties
- -------------------------
In August 1997, Presbyterian Medical Plaza at University, a 69,000
rentable square foot medical office building located in Charlotte, North
Carolina, became partially operational for financial reporting purposes and was
100% leased as of March 15, 1998. In September 1997, the Company commenced
construction on Meridian Mark Plaza, a 159,000 rentable square foot medical
office building located in Atlanta, Georgia. Meridian Mark Plaza is expected to
be completed during the third quarter of 1998 at a total cost of approximately
$27 million and was 66% leased as of March 15, 1998.
Residential Lots Under Development
- -----------------------------------
As of December 31, 1997, CREC owned the following parcels of land which
are being developed into residential communities ($ in thousands):
Estimated
Total Lots Purchase
Initial on Land Money
Year Currently Lots Remaining Carrying Debt
Description Acquired Owned (1) Sold to Date Lots Value Balances
----------- -------- --------- -------------------------- --------- --------
Brown's Farm 1993 219 133 86 $ 2,426 $ 0
West Cobb County
Suburban Atlanta, GA
Apalachee River Club 1994 186 90 96 2,974 0
Gwinnett County
Suburban Atlanta, GA
Echo Mill 1994 543 197 346 4,585 0
West Cobb County
Suburban Atlanta, GA
Barrett Downs 1994 145 77 68 1,603 0
Forsyth County
Suburban Atlanta, GA
Bradshaw Farm 1994 512 252 260 2,322 0
Cherokee County
Suburban Atlanta, GA
Alcovy Woods
Gwinnett County
Suburban Atlanta, GA 1996 121 37 84 1,032 568
----- --- --- ------- ------
Total 1,726 786 940 $14,942 $ 568
===== === === ======= ======
(1) Includes lots sold to date. Additional lots may be developed on
adjacent land on which CREC holds purchase options.
Land Held for Investment and Future Development
- -----------------------------------------------
In addition to the various land parcels located adjacent to operating
properties or projects under construction discussed above, the Company owns the
following significant land holdings either directly or indirectly through joint
venture arrangements. The Company intends to convert its land holdings to
income-producing usage or to sell portions of land holdings as opportunities
present themselves over time.
Temco Associates. Temco Associates was formed in March 1991 as a
partnership between CREC (50%) and a subsidiary of Temple-Inland Inc. (50%).
Temco Associates has an option through March 2006, with no carrying costs, to
acquire the fee simple interest in approximately 11,300 acres in Paulding
County, Georgia (northwest of Atlanta, Georgia). The partnership also has an
option to acquire a timber rights interest only in approximately 22,000 acres.
The options may be exercised in whole or in part over the option period and the
option price of the fee simple land was $827 per acre at January 1, 1998,
escalating at 6% on January 1 of each succeeding year during the term of the
option. The Temco Associates property has the potential for future residential,
industrial and commercial development. Temco Associates has to date sold parcels
of land as to which it simultaneously exercised its purchase option. During
1996, approximately 375 acres of the option related to the fee simple interest
was exercised and simultaneously sold for gross profits of $1,427,000.
None of the option was exercised in 1995 or 1997.
Other Real Property Investments
- -------------------------------
Omni Norfolk Hotel. Norfolk Hotel Associates ("NHA") was a general
partnership formed in 1978 between the Company and an affiliate of Odyssey
Partners, L.P. (an investment partnership), each as 50% partners, which held a
mortgage note on and owned the land under the 442-room Omni International Hotel
in downtown Norfolk, Virginia. In January 1992, NHA terminated the land lease
and became the owner of the hotel and a long-term parking agreement with an
adjacent building owner. In April 1993, the partnership sold the hotel, but
retained its interest in the parking agreement. The partnership received a
$8,325,000 mortgage note for a portion of the sales proceeds. In July 1994, NHA
distributed to each partner a 50% interest in the parking agreement held by NHA,
and in July 1996 the Company sold its 50% interest for $2 million, resulting in
a profit to the Company of approximately $408,000 which is included in Gain on
Sale of Investment Properties in the 1996 Consolidated Statement of Income.
On February 14, 1997, the mortgage note receivable due to NHA with a
balance of $8,325,000 was repaid in full. A portion of the proceeds from the
repayment was used to pay off the partnership's lines of credit, with the
balance of the partnership's assets ($2.2 million of cash for each partner)
distributed to the partners in 1997. The partnership was dissolved in 1997.
Dusseldorf Joint Venture. In 1992, Cousins entered into a joint venture
agreement for the development of a 133,000 rentable square foot office building
in Dusseldorf, Germany which is 34% leased to IBM. Cousins' venture partners are
IBM and Multi Development Corporation International B.V. ("Multi"), a Dutch real
estate development company. In December 1993, the building was presold to an
affiliate of Deutsche Bank. CREC and Multi jointly developed the building. Due
to the release of certain completion guarantees related to the building,
approximately $2.6 million of development income was recognized in September
1995 ($931,000 of which had been deferred as of December 31, 1994). An
additional $235,000 and $777,000 of development income was received and
recognized in 1997 and 1996, respectively.
Kennesaw Crossings. The Company owns Kennesaw Crossings, a 116,000
square foot shopping center in suburban Atlanta, Georgia. The center was
constructed in 1974 on 14 acres of land leased from an unrelated party through
2068. The Company's net carrying value in Kennesaw Crossings as of December 31,
1997 was $908,000.
Air Rights Near the CNN Center. The Company owns a leasehold interest
in the air rights over the approximately 365,000 square foot CNN Center parking
facility in Atlanta, Georgia, adjoining the headquarters of Turner Broadcasting
System, Inc. and Cable News Network. The air rights are developable for
additional parking or office use. The Company's net carrying value of this
property is $0.
Supplemental Financial and Leasing Information
- ----------------------------------------------
Depreciation and amortization expense include the following components
for the years ended December 31, 1997 and 1996 ($ in thousands):
1997 1996
------------------------------------- --------------------------------------
Share of Share of
Unconsolidated Unconsolidated
Consolidated Joint Ventures Total Consolidated Joint Ventures Total
------------ -------------- ----- ------------ -------------- -----
Furniture, fixtures and
equipment $ 435 $ 7 $ 442 $ 306 $ 40 $ 346
Deferred financing costs -- 10 10 -- 16 16
Goodwill and related business
acquisition costs 486 35 521 363 44 407
Real estate related:
Building (including tenant
first generation) 12,351 9,056 21,407 6,336 8,958 15,294
Tenant second generation 774 1,243 2,017 214 979 1,193
-------- -------- ------- ------ -------- -------
$ 14,046 $ 10,351 $24,397 $7,219 $ 10,037 $17,256
======== ======== ======= ====== ======== =======
Exclusive of new developments and purchases of furniture, fixtures and
equipment, the Company had the following capital expenditures for the years
ended December 31, 1997 and 1996, including its share of unconsolidated joint
ventures ($ in thousands):
1997 1996
------------------------------ --------------------------------
Office Retail Total Office Retail Total
------ ------ ----- ------ ------ -----
Second generation related costs $ 978 $ -- $ 978 $1,892 $ -- $1,892
Building improvements 14 -- 14 3 -- 3
------ ----- ------ ------ ----- ------
Total $ 992 $ -- $ 992 $1,895 $ -- $1,895
====== ===== ====== ====== ===== ======
Item 3. Legal Proceedings
- -----------------------------------
No material legal proceedings are presently pending by or against the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the Registrant's fiscal year ended December 31, 1997.
Item X. Executive Officers of the Registrant
The Executive Officers of the Registrant as of the date hereof are as
follows:
Name Age Office Held
---- --- -----------
Thomas G. Cousins 66 Chairman of the Board of Directors
and Chief Executive Officer
Daniel M. DuPree 51 President and Chief Operating Officer
Kelly H. Barrett 33 Senior Vice President - Finance
George J. Berry 60 Senior Vice President
Tom G. Charlesworth 48 Senior Vice President, Secretary and
General Counsel
Craig B. Jones 47 Senior Vice President
Joel T. Murphy 39 Senior Vice President and President
of the Retail Division (Cousins
MarketCenters, Inc.)
John L. Murphy 52 Senior Vice President
W. James Overton 51 Senior Vice President - Development
Lea Richmond III 50 Senior Vice President and President
of the Medical Office Division
(Cousins/Richmond)
Peter A. Tartikoff 56 Senior Vice President and Chief
Financial Officer
Relationships:
- --------------
There are no family relationships among the Executive Officers or
Directors.
Term of Office:
- ---------------
The term of office for all officers expires at the annual directors'
meeting, but the Board has the power to remove any officer at any time. Business
Experience:
Mr. Cousins has been the Chief Executive Officer of the Company since its
inception.
Mr. DuPree joined the Company in October 1992, became Senior Vice President
in April 1993, Senior Executive Vice President in April 1995 and President and
Chief Operating Officer in November 1995. Prior to that he was President of New
Market Companies, Inc. and affiliates since 1984.
Ms. Barrett joined the Company in October 1992 as Vice President and
Controller and became Senior Vice President - Finance of the Company in August
1997. Prior to that she was employed by Arthur Andersen LLP as an Audit Manager.
Mr. Berry has been Senior Vice President since joining the Company in
September 1990. Prior to that he was Commissioner of the State of Georgia's
Department of Industry, Trade and Tourism from 1983 to 1990.
Mr. Charlesworth joined the Company in October 1992 and became Senior Vice
President, Secretary and General Counsel in November 1992. Prior to that he
worked for certain affiliates of Thomas G. Cousins as Chief Financial Officer
and Legal Counsel.
Mr. Jones joined the Company in October 1992 and became Senior Vice
President in November 1995. From 1987 until joining the Company, he was
Executive Vice President of New Market Companies, Inc. and affiliates.
Mr. Joel Murphy joined the Company in October 1992 and became Senior Vice
President of the Company and President of the Retail Division in November 1995.
From 1988 until joining the Company, he was Senior Vice President of New Market
Companies, Inc. and affiliates.
Mr. John Murphy has been Senior Vice President since joining the Company in
December 1987.
Mr. Overton has been Senior Vice President since joining the Company in
September 1989. Prior to that he was employed by Hardin Construction Group, Inc.
from 1972 to 1989, where he served as President from 1985 to 1989.
Mr. Richmond has been Senior Vice President and President of the Medical
Office Division since he joined the Company in July 1996. Prior to that he was
President of The Lea Richmond Company and The Richmond Development Company from
1975 to 1996.
Mr. Tartikoff has been Senior Vice President and Chief Financial Officer of
the Company since February 1986.
PART II
-------
Item 5. Market for Registrant's Common Stock and Related Security Holder Matters
- --------------------------------------------------------------------------------
The information concerning the market prices for the Registrant's common
stock and related stockholder matters appearing under the caption "Market and
Dividend Information" on page 47 of the Registrant's 1997 Annual Report to
Stockholders is incorporated herein by reference.
Item 6. Selected Financial Data
- --------------------------------
The information appearing under the caption "Five Year Summary of Selected
Financial Data" on page 39 of the Registrant's 1997 Annual Report to
Stockholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations which appears on pages 40 through 46 of the Registrant's 1997 Annual
Report to Stockholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Consolidated Financial Statements and Notes to Consolidated Financial
Statements of the Registrant and Report of Independent Public Accountants which
appear on pages 21 through 39 of the Registrant's 1997 Annual Report to
Stockholders are incorporated herein by reference.
The information appearing under the caption "Selected Quarterly Financial
Information (Unaudited)" on page 48 of the Registrant's 1997 Annual Report to
Stockholders is incorporated herein by reference.
Other financial statements and financial statement schedules required under
Regulation S-X are filed pursuant to Item 14 of Part IV of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -------------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
- --------------------------------------------------------------
The information concerning the Directors and Executive Officers of the
Registrant that is required by this Item 10, except that which is presented in
Item X in Part I above, is included under the captions "Directors and Executive
Officers of the Company" on pages 2 through 5 and "Compliance with Section 16(a)
of the Securities Exchange Act of 1934" on page 13 of the Proxy Statement dated
March 27, 1998 relating to the 1997 Annual Meeting of the Registrant's
Stockholders, and is incorporated herein by reference.
Item 11. Executive Compensation
- ----------------------------------
The information appearing under the caption "Executive Compensation" on
pages 7 through 9 and "Compensation of Directors" on page 13 of the Proxy
Statement dated March 27, 1998 relating to the 1997 Annual Meeting of the
Registrant's Stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------------------
The information concerning security ownership of certain beneficial owners
and management required by this Item 12 is included under the captions
"Directors and Executive Officers of the Company" on pages 2 through 6 and
"Principal Stockholders" on pages 23 and 24 of the Proxy Statement dated March
27, 1998 relating to the 1997 Annual Meeting of the Registrant's Stockholders,
and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- ----------------------------------------------------------
The information concerning certain transactions required by this Item
13 is included under the caption "Certain Transactions" on pages 13 and 14 of
the Proxy Statement dated March 27, 1998 relating to the 1997 Annual Meeting of
the Registrant's Stockholders, and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- ----------------------------------------------------------------------------
(a) 1. Financial Statements
--------------------------
A. The following Consolidated Financial Statements of the
Registrant, together with the applicable Report of
Independent Public Accountants, are contained on pages 21
through 39 of the Registrant's 1997 Annual Report to
Stockholders and are incorporated herein by reference:
Page Number
in Annual Report
----------------
Consolidated Balance Sheets - December 31, 1997
and 1996 21
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 22
Consolidated Statements of Stockholders' Investment for the
Years Ended December 31, 1997, 1996 and 1995 23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 24
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995 25
Report of Independent Public Accountants 39
B. The following Combined Financial Statements, together with
the applicable Report of Independent Public Accountants, of
Wildwood Associates and Green Valley Associates II, joint
ventures of the Registrant meeting the criteria for
significant subsidiaries under the rules and regulations of
the Securities and Exchange Commission, are filed as a part
of this report.
Page Number
in Form l0-K
------------
Report of Independent Public Accountants F-1
Combined Balance Sheets - December 31, 1997 and 1996 F-2
Combined Statements of Income for the Years
Ended December 31, 1997, 1996 and 1995 F-3
Combined Statements of Partners' Capital for the Years
Ended December 31, 1997, 1996 and 1995 F-4
Combined Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 F-5
Notes to Combined Financial Statements
December 31, 1997, 1996 and 1995 F-6 through
F-11
Item 14. Continued
- ---------------------
C. The following Financial Statements, together with the
applicable Report of Independent Auditors, of CSC
Associates, L.P., a joint venture of the Registrant meeting
the criteria for a significant subsidiary under the rules
and regulations of the Securities and Exchange Commission,
are filed as a part of this report.
Page Number
in Form l0-K
------------
Report of Independent Auditors G-1
Balance Sheets - December 31, 1997 and 1996 G-2
Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 G-3
Statements of Partners' Capital for the Years Ended
December 31, 1997, 1996 and 1995 G-4
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 G-5
Notes to Financial Statements G-6 through
December 31, 1997, 1996 and 1995 G-9
2. Financial Statement Schedules
-----------------------------------
The following financial statement schedules, together with the
applicable report of independent public accountants are filed as a
part of this report.
Page Number
in Form l0-K
------------
A. Cousins Properties Incorporated and Consolidated Entities:
Report of Independent Public Accountants on Schedule S-7
Schedule III- Real Estate and Accumulated
Depreciation - December 31, 1997 S-8 through
S-12
B. Wildwood Associates and Green Valley Associates II
Schedule III - Real Estate and Accumulated
Depreciation - December 31, 1997 F-12
C. CSC Associates, L.P.
Schedule III- Real Estate and Accumulated
Depreciation - December 31, 1997 G-10
NOTE: Other schedules are omitted because of the absence of conditions
under which they are required or because the required information
is given in the financial statements or notes thereto.
Item 14. Continued
- ---------------------
3. Exhibits
--------------
3(a)(i) Articles of Incorporation of Registrant, as
approved by the Stockholders on April 29, 1997,
filed as Exhibit B to the Registrant's Proxy
Statement dated April 29, 1997, and incorporated
herein by reference.
3(b) By-laws of Registrant, as approved by the
Stockholders on April 30, 1990, and as further
amended by the Stockholders on April 29, 1993,
filed as Exhibit 4(b) to the Registrant's Form S-3
dated September 28, 1993, and incorporated herein
by reference.
4(a) Dividend Reinvestment Plan as restated as of March
27, 1995, filed in the Registrant's Form S-3 dated
March 27, 1995, and incorporated herein by
reference.
10(a)(i) Cousins Properties Incorporated 1989 Stock Option
Plan, as renamed the 1995 Stock Incentive Plan and
approved by the Stockholders on May 6, 1996, filed
as Exhibit A to the Registrant's Proxy Statement
dated May 6, 1996, and incorporated herein by
reference.
10(a)(ii) Cousins Real Estate Corporation Stock Appreciation
Right Plan, amended and restated as of March 15,
1993, filed as Exhibit 10(a)(ii) to the
Registrant's Form 10-K for the year ended December
31, 1992, and incorporated herein by reference.
10(a)(iii) Cousins Properties Incorporated Stock Appreciation
Right Plan, dated as of March 15, 1993, filed as
Exhibit 10(a)(iii) to the Registrant's Form 10-K
for the year ended December 31, 1992, and
incorporated herein by reference.
10(b)(i) Cousins Properties Incorporated Profit Sharing Plan
as amended and restated effective as of January 1,
1996.
10(b)(ii) Cousins Properties Incorporated Profit Sharing
Trust Agreement as effective as of January 1, 1991,
filed as Exhibit 10(b)(ii) to the Registrant's Form
10-K for the year ended December 31, 1991, and
incorporated herein by reference.
10(c) Land lease (Kennesaw) dated December 17, 1969, and
an amendment thereto dated December 15, 1977, filed
as Exhibit l0(d) to the Registrant's Form 10-K for
the year ended December 31, 1980, and incorporated
herein by reference.
10(d) Cousins Properties Incorporated Stock Plan for
Outside Directors, as approved by the Stockholders
on April 29, 1997, filed as Exhibit B to the
Registrant's Proxy Statement dated April 29, 1997,
and incorporated herein by reference.
11 Schedule showing computation of net income per
share for each of the five years ended December 31,
1997.
13 Annual Report to Stockholders for the year ended
December 31, 1997.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Public Accountants (Arthur
Andersen LLP).
23(b) Consent of Independent Auditors
(Ernst & Young LLP).
27 Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------------
On December 12, 1997, the Registrant filed a current report on
Form 8-K to file the Underwriting Agreement, dated December 10,
1997, among the Registrant and the Underwriters named therein.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Cousins Properties Incorporated
(Registrant)
Dated: March 20, 1998
BY: /s/ Kelly H. Barret
-------------------------------------
Kelly H. Barrett
Senior Vice President - Finance
(Authorized Officer)
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Capacity Date
- --------- -------- ----
Principal Executive Officer:
Chairman of the Board, March 20, 1998
Chief Executive Officer
/s/ T.G. Cousins and Director
- ----------------------------
T. G. Cousins
Principal Financial Officer:
Senior Vice President and March 20, 1998
/s/ Peter A. Tartikoff Chief Financial Officer
- ----------------------------
Peter A. Tartikoff
Additional Directors:
/s/ Richard W. Courts Director March 20, 1998
- ----------------------------
Richard W. Courts, II
/s/ Boone A. Knox Director March 20, 1998
- ----------------------------
Boone A. Knox
/s/ William Porter Payne Director March 20, 1998
- ----------------------------
William Porter Payne
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Stockholders of Cousins Properties Incorporated:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in the Cousins Properties
Incorporated annual report to stockholders incorporated by reference in this
Form l0-K, and have issued our report thereon dated February 16, 1998. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in Item 14, Part (a)2.A. is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 16, 1998
SCHEDULE III
(Page 1 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1997
------------ ----------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT
- ----------------------------------------------
101 Second Street -
San Francisco, CA $ -- $ 11,698 $ -- $ -- $ -- $ 11,698 $ -- $ 11,698
Wildwood - Atlanta, GA -- 11,156 -- 4,737 (8,888) 7,005 -- 7,005
North Point Property -
Fulton Co., GA -- 10,294 -- 12,213 (16,942) 5,565 -- 5,565
Midtown - Atlanta, GA -- 2,949 -- 56 (1,607) 1,398 -- 1,398
McMurray - Cobb Co., GA. -- 1,015 -- 172 (1,092) 95 -- 95
Lawrenceville -
Gwinnett Co., GA -- 5,543 -- 365 (5,044) 864 -- 864
Colonial Plaza MarketCenter -
Orlando, FL -- 1,649 -- 286 (1,218) 717 -- 717
Greenbrier MarketCenter
Outparcels -
Chesapeake, VA -- 3,191 -- 201 (2,985) 407 -- 407
Lovejoy Station Outparcels -
Clayton Co., GA -- 575 -- -- (376) 199 -- 199
---------------------------------------------------------------------------------------------
-- 48,070 -- 18,030 (38,152) 27,948 -- 27,948
---------------------------------------------------------------------------------------------
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
LAND HELD FOR INVESTMENT OR FUTURE DEVELOPMENT
- ----------------------------------------------
101 Second Street -
San Francisco, CA $ -- -- 1997 --
Wildwood - Atlanta, GA -- -- 1971-1982,1989 --
North Point Property -
Fulton Co., GA -- -- 1970-1985 --
Midtown - Atlanta, GA -- -- 1984 --
McMurray - Cobb Co., GA. -- -- 1981 --
Lawrenceville -
Gwinnett Co., GA -- -- 1994 --
Colonial Plaza MarketCenter -
Orlando, FL -- -- 1995 --
Greenbrier MarketCenter
Outparcels -
Chesapeake, VA -- -- 1995 --
Lovejoy Station Outparcels -
Clayton Co., GA -- -- 1995 --
-------
--
-------
SCHEDULE III
(Page 2 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1997
------------ ----------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
OPERATING PROPERTIES
- --------------------
First Union Tower -
Greensboro, N.C. $ -- $ 1,394 $ -- $ 30,597 $ 1,971 $ 1,399 $32,563 $ 33,962
Wildwood - 3301 Windy
Ridge - Atlanta, GA -- 20 -- 8,928 1,519 1,237 9,230 10,467
Wildwood - 3100 Windy Hill
Road - Atlanta, GA -- -- 17,005 -- -- -- 17,005 17,005
Kennesaw - Cobb Co., GA -- -- -- 2,351 -- -- 2,351 2,351
615 Peachtree Street -
Atlanta, GA -- 4,740 6,930 -- -- 4,740 6,930 11,670
100 North Point Center East -
Fulton Co., GA 12,447 419 -- 11,868 504 419 12,372 12,791
200 North Point Center East -
Fulton County, GA 12,446 419 -- 10,705 363 419 11,068 11,487
101 Independence Center -
Charlotte, NC 48,928 11,096 62,419 -- -- 11,096 62,419 73,515
Perimeter Expo -
Atlanta, GA 21,061 8,564 -- 11,134 71 8,564 11,205 19,769
North Point
Stand Alone Retail Sites -
Fulton Co., GA -- 4,559 -- 164 (981) 3,742 -- 3,742
North Point MarketCenter -
Fulton Co., GA 29,068 8,500 -- 17,997 506 8,500 18,503 27,003
Presidential MarketCenter -
Gwinnett Co., GA -- 3,956 -- 18,949 817 3,956 19,766 23,722
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
OPERATING PROPERTIES
- --------------------
First Union Tower -
Greensboro, N.C. $11,065 1988-1990 1987 40 Years
Wildwood - 3301 Windy
Ridge - Atlanta, GA 3,908 1984 1984 30 Years
Wildwood - 3100 Windy Hill
Road - Atlanta, GA 680 1997 1997 25 Years
Kennesaw - Cobb Co., GA 1,443 1974 1973 30 Years
615 Peachtree Street -
Atlanta, GA 660 -- 1996 15 Years
100 North Point Center East -
Fulton Co., GA 1,197 1994 1994 40 Years
200 North Point Center East -
Fulton County, GA 720 1995 1995 --
101 Independence Center -
Charlotte, NC 2,900 -- 1996 25 Years
Perimeter Expo -
Atlanta, GA 1,787 1993 1993 30 Years
North Point
Stand Alone Retail Sites -
Fulton Co., GA 75 -- 1970-1985 --
North Point MarketCenter -
Fulton Co., GA 3,073 1993-1994 1970-1985 30 Years
Presidential MarketCenter -
Gwinnett Co., GA 1,470 1993-1995 1993 30 Years
SCHEDULE III
(Page 3 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1997
------------ ----------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
OPERATING PROPERTIES (Continued)
- --------------------------------
Mansell Crossing Phase II -
Fulton Co., GA $ -- $ 3,272 $ -- $ 5,171 $ 470 $ 3,272 $ 5,641 $ 8,913
Greenbrier MarketCenter -
Chesapeake, VA -- 5,500 -- 26,441 1,584 5,500 28,025 33,525
Colonial Plaza MarketCenter -
Orlando, FL -- 8,500 -- 30,138 1,905 8,500 32,043 40,543
Los Altos MarketCenter -
Long Beach, CA -- 4,900 -- 16,178 580 4,900 16,758 21,658
Miscellaneous -- 398 145 77 (473) -- 147 147
----------------------------------------------------------------------------------------------
123,950 66,237 86,499 190,698 8,836 66,244 286,026 352,270
----------------------------------------------------------------------------------------------
PROJECTS UNDER CONSTRUCTION
- ---------------------------
333 North Point Center East -
Fulton County, GA $ -- $ 587 $ -- $ 9,528 $ 453 $ 587 $ 9,981 $ 10,568
Presbyterian Medical
Plaza at University -
Charlotte, NC -- -- -- 6,923 189 -- 7,112 7,112
Abbotts Bridge Station -
Fulton Co., GA -- 2,856 -- 7,477 449 2,856 7,926 10,782
Laguna Niguel Promenade -
Laguna Niguel, CA -- 5,578 -- 3,342 208 5,578 3,550 9,128
Meridian Mark Plaza -
Atlanta, GA -- 2,200 -- 3,162 257 2,200 3,419 5,619
Grandview II -
Birmingham, AL -- 2,010 -- 8,844 337 2,010 9,181 11,191
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
OPERATING PROPERTIES (Continued)
- --------------------------------
Mansell Crossing Phase II -
Fulton Co., GA $ 291 1995 1995 30 Years
Greenbrier MarketCenter -
Chesapeake, VA 1,287 1995 1995 30 Years
Colonial Plaza MarketCenter -
Orlando, FL 2,042 1995 1995 --
Los Altos MarketCenter -
Long Beach, CA 658 1996 1996 --
Miscellaneous 113 -- 1977-1984 Various
-------
33,369
-------
PROJECTS UNDER CONSTRUCTION
- ---------------------------
333 North Point Center East -
Fulton County, GA $ -- 1996 1996 --
Presbyterian Medical
Plaza at University -
Charlotte, NC -- 1996 1996 --
Abbotts Bridge Station -
Fulton Co., GA -- 1997 1997 --
Laguna Niguel Promenade -
Laguna Niguel, CA -- 1997 1997 --
Meridian Mark Plaza -
Atlanta, GA -- 1997 1997 --
Grandview II -
Birmingham, AL -- 1997 1997 --
SCHEDULE III
(Page 4 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisition December 31, 1997
------------ ----------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a),(b)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -------
PROJECTS UNDER CONSTRUCTION (Continued)
- ---------------------------------------
Other $ -- $ 378 $ -- $ -- $ -- $ 378 $ -- $ 378
----------------------------------------------------------------------------------------------
-- 13,609 -- 39,276 1,893 13,609 41,169 54,778
----------------------------------------------------------------------------------------------
RESIDENTIAL LOTS UNDER DEVELOPMENT
- ----------------------------------
Brown's Farm -
Cobb Co., GA -- 3,154 -- 4,549 (5,277) 2,426 -- 2,426
Apalachee River Club -
Gwinnett Co., GA -- 1,820 -- 3,613 (2,459) 2,974 -- 2,974
Echo Mill -
Cobb Co., GA -- 5,298 -- 5,203 (5,916) 4,585 -- 4,585
Barrett Downs -
Forsyth Co., GA -- 1,489 -- 2,426 (2,312) 1,603 -- 1,603
Bradshaw Farm -
Cherokee Co., GA -- 5,100 -- 8,259 (11,037) 2,322 -- 2,322
Alcovy Woods -
Gwinnett Co., GA 568 1,142 -- 684 (794) 1,032 -- 1,032
----------------------------------------------------------------------------------------------
568 18,003 -- 24,734 (27,795) 14,942 -- 14,942
----------------------------------------------------------------------------------------------
$ 124,518 $ 145,919 $86,499 $272,738 $(55,218) $122,743 $327,195 $449,938
==============================================================================================
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
PROJECTS UNDER CONSTRUCTION (Continued)
- ---------------------------------------
Other $ -- -- 1996 --
-------
--
-------
RESIDENTIAL LOTS UNDER DEVELOPMENT
- ----------------------------------
Brown's Farm -
Cobb Co., GA -- 1993-1994 1993-1994 --
Apalachee River Club -
Gwinnett Co., GA -- 1994 1994 --
Echo Mill -
Cobb Co., GA -- 1994 1994 --
Barrett Downs -
Forsyth Co., GA -- 1994 1994 --
Bradshaw Farm -
Cherokee Co., GA -- 1994 1994 --
Alcovy Woods -
Gwinnett Co., GA -- 1996 1996 --
-------
--
--------
$ 33,369
========
SCHEDULE III
(Page 5 of 5)
COUSINS PROPERTIES INCORPORATED AND CONSOLIDATED ENTITIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
NOTES:
(a) Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended December 31, 1997 are as
follows:
Real Estate Accumulated Depreciation
----------- ------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Balance at beginning of period $377,663 $235,344 $149,242 $20,339 $15,483 $12,112
Additions during the period:
Improvements and other
capitalized costs 100,714 181,682 97,036 -- -- --
Provision for depreciation -- -- -- 13,030 5,571 3,371
------------------------------ --------------------------
100,714 181,682 97,036 13,030 5,571 3,371
------------------------------ --------------------------
Deductions during the period:
Cost of real estate sold (28,439) (39,363) (10,934) -- (715) --
------------------------------ --------------------------
(28,439) (39,363) (10,934) -- (715) --
------------------------------ --------------------------
Balance at close of period $449,938 $377,663 $235,344 $33,369 $20,339 $15,483
============================== ==========================
(b) Initial cost for Kennesaw was previously adjusted to reflect a write-
down of $1,430 to state the property at the then realizable value.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Wildwood Associates and Green Valley Associates II:
We have audited the accompanying combined balance sheets of WILDWOOD ASSOCIATES
(a Georgia general partnership) and GREEN VALLEY ASSOCIATES II (a North Carolina
general partnership) as of December 31, 1997 and 1996, and the related combined
statements of income, partners' capital and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the management of the partnerships. Our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Wildwood Associates and Green
Valley Associates II as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Item 14 is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 16, 1998
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED BALANCE SHEETS
-----------------------
DECEMBER 31, 1997 AND 1996
--------------------------
($ in thousands)
1997 1996
------- --------
ASSETS
- ------
REAL ESTATE ASSETS:
- -------------------
Income producing properties, including land of
$44,366 in 1997 and 1996 (Note 7) $271,227 $239,647
Accumulated depreciation and amortization (56,354) (48,699)
-------------------
214,873 190,948
Projects under construction -- 19,670
Land committed to be contributed (Note 3) 9,405 9,405
Land and property predevelopment costs 11,828 11,862
-------------------
Total real estate assets 236,106 231,885
-------------------
CASH AND CASH EQUIVALENTS 9,413 16,511
-------------------
OTHER ASSETS:
Deferred expenses, net of accumulated amortization of
$7,091 and $6,365 in 1997 and 1996, respectively 6,636 7,249
Receivables (Note 6) 11,451 15,330
Allowance for possible losses (Note 1) (2,550) (2,550)
Furniture, fixtures and equipment, net of accumulated
depreciation of $364 and $1,153 in 1997 and 1996,
respectively 733 456
Other 39 29
-------------------
16,309 20,514
-------------------
$261,828 $268,910
===================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
NOTES PAYABLE (Note 7) $193,861 $166,490
RETAINAGE, ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES 7,503 11,762
-------------------
Total liabilities 201,364 178,252
-------------------
PARTNERS' CAPITAL (Notes 3 and 4):
International Business Machines Corporation 30,232 45,329
Cousins Properties Incorporated 30,232 45,329
-------------------
Total partners' capital 60,464 90,658
-------------------
$261,828 $268,910
===================
The accompanying notes are an integral part of these combined balance sheets.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED STATEMENTS OF INCOME
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
1997 1996 1995
------- ------- -------
REVENUES:
Rental income and recovery of expenses
charged directly to specific tenants $38,507 $40,351 $37,589
Interest 474 39 32
Other 134 115 146
-------------------------
Total revenues 39,115 40,505 37,767
-------------------------
EXPENSES:
Real estate taxes 3,471 3,579 3,032
Maintenance and repairs 2,791 2,622 2,207
Utilities 2,031 2,182 1,965
Management and personnel costs 2,262 2,217 1,892
Contract security 1,051 1,094 820
Grounds maintenance 823 776 646
Expenses charged directly to specific tenants 444 417 395
Insurance 93 93 98
Interest expense 12,972 9,712 11,478
Depreciation and amortization 8,798 8,372 8,353
Predevelopment, marketing and other expenses 283 293 345
Ground lease expense (Note 8) -- 295 322
Real estate taxes on undeveloped land (Note 3) 143 208 163
General and administrative expenses 147 155 167
-------------------------
Total expenses 35,309 32,015 31,883
-------------------------
NET INCOME $ 3,806 $ 8,490 $ 5,884
=========================
The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED STATEMENTS OF PARTNERS' CAPITAL
----------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
International
Business Cousins
Machines Properties
Corporation Incorporated Total
----------- ------------ -----
BALANCE, December 31, 1994 $46,142 $46,142 $92,284
Distributions (4,000) (4,000) (8,000)
Net income 2,942 2,942 5,884
---------------------------------------
BALANCE, December 31, 1995 45,084 45,084 90,168
Distributions (4,000) (4,000) (8,000)
Net income 4,245 4,245 8,490
---------------------------------------
BALANCE, December 31, 1996 $45,329 $45,329 $90,658
Distributions (17,000) (17,000) (34,000)
Net income 1,903 1,903 3,806
---------------------------------------
BALANCE, December 31, 1997 $30,232 $30,232 $60,464
=======================================
The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
--------------------------------------------------
COMBINED STATEMENTS OF CASH FLOWS (Note 9)
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
1997 1996 1995
------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,806 $ 8,490 $ 5,884
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,798 8,372 8,353
Effect of recognizing rental revenues
on a straight-line basis 3,311 421 (383)
Change in tenant rental receivables 297 (562) (38)
Change in accounts payable and accrued
liabilities related to operations (423) 3,557 (1,004)
---------------------------
Net cash provided by operating activities 15,789 20,278 12,812
---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisition and development
expenditures (15,501) (34,871) (4,940)
Payment for deferred expenses, furniture,
fixtures and equipment, and other assets (757) (2,978) (2,123)
---------------------------
Net cash used in investing activities (16,258) (37,849) (7,063)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (2,629) (1,610) (1,063)
Repayment of long term financing -- -- (111,998)
Proceeds from long term financing 30,000 70,000 --
Proceeds from long term refinancing -- -- 98,000
Proceeds from line of credit -- 75,733 31,212
Repayments under line of credit -- (102,041) (13,904)
Partnership distributions (34,000) (8,000) (8,000)
---------------------------
Net cash (used in) provided by financing
activities (6,629) 34,082 (5,753)
---------------------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (7,098) 16,511 (4)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 16,511 -- 4
---------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,413 $ 16,511 $ --
===========================
The accompanying notes are an integral part of these combined statements.
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The Combined Financial Statements include the accounts of Wildwood
Associates ("WWA") and Green Valley Associates II ("GVA II"), both of which are
general partnerships. Cousins Properties Incorporated (together with its other
consolidated entities hereinafter referred to as "Cousins") and International
Business Machines Corporation ("IBM") each have a 50% general partnership
interest in both partnerships. The financial statements of the partnerships have
been combined because of the common ownership. The combined entities are
hereinafter referred to as the "Partnerships." All transactions between WWA and
GVA II have been eliminated in the Combined Financial Statements.
Cost of Property Contributed by Cousins:
The cost of property contributed or committed to be contributed by
Cousins was recorded by WWA based upon the procedure described in Note 3. Such
cost was, in the opinion of the partners, at or below estimated fair market
value at the time of such contribution or commitment, but was in excess of
Cousins' historical cost basis.
Cost Capitalization:
All costs related to planning, development and construction of
buildings, and expenses of buildings prior to the date they become operational
for financial statement purposes, are capitalized. Interest and real estate
taxes are also capitalized to property under development.
Depreciation and Amortization:
Real estate assets are stated at depreciated cost. Buildings are
depreciated over 25 to 40 years. Furniture, fixtures, and equipment are
depreciated over 3 to 5 years. Leasehold improvements and tenant improvements
are amortized over the life of the leases or useful life of the assets,
whichever is shorter. Deferred expenses - which include organizational costs,
certain marketing and leasing costs, and loan acquisition costs - are amortized
over the period of estimated benefit. The straight-line method is used for all
depreciation and amortization.
Allowance for Possible Losses:
The allowance for possible losses provides for potential writeoffs of
certain tenant receivables and other tenant related assets on WWA's books. The
allowance reflects management's evaluation of the exposure to WWA based on a
specific review of its properties and the impact of current economic conditions
on those properties.
Allocation of Operating Expenses:
In accordance with certain lease agreements, certain management and
maintenance costs incurred by WWA are allocated to individual buildings or
tenants, including buildings not owned by WWA.
Income Taxes:
No provision has been made for federal or state income taxes because
each partner's proportionate share of income or loss from the Partnerships is
passed through to be included on each partner's separate tax return.
Cash and Cash Equivalents:
Cash and Cash Equivalents includes all cash and highly liquid money
market instruments. Highly liquid money market instruments include securities
and repurchase agreements with original maturities of three months or less,
money market mutual funds, and securities on which the interest rate is adjusted
to market rate at least every three months.
Rental Income:
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 13, income on leases which include scheduled increases in rental rates over
the lease term (other than scheduled increases based on the Consumer Price Index
("Index")) is recognized on a straight-line basis.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. FORMATION AND PURPOSE OF THE PARTNERSHIPS
WWA and GVA II were formed under the terms of partnership agreements
effective May 30, 1985 and March 31, 1988, respectively. The purpose of the
Partnerships is, among other things, to develop and operate selected property
within Wildwood Office Park ("Wildwood"), located in Atlanta, Georgia and the
Summit Green project located in Greensboro, North Carolina.
Wildwood is an office park containing a total of approximately 289
acres, of which approximately 94 acres are owned by WWA, and an estimated 15
acres are committed to be contributed to WWA by Cousins (see Note 3). Cousins
owns the balance of the developable acreage in the park. At December 31, 1997,
WWA's income producing real estate assets in Wildwood consisted of: six office
buildings totaling 2,132,000 rentable square feet (including land under such
buildings totaling approximately 56 acres); land parcels totaling approximately
15 acres leased to two banking facilities and five restaurants; and a 2 acre
site on which a child care facility is constructed. In addition, WWA's assets
include 36 acres of land held for future development, which is composed of a 4
acre site with approximately 58,000 square feet of office space which was
purchased in 1986 for future development (classified with income producing
properties in the accompanying financial statements), and 32 acres of other land
to be developed (including additional land committed to be contributed by
Cousins) (see Note 3).
See Note 8 where the disposition of the Summit Green property is
discussed.
3. CONTRIBUTIONS TO THE PARTNERSHIPS
IBM and Cousins have each contributed or committed to contribute
$62,857,000 in cash or properties to the Partnerships. The value of property
contributed by IBM was agreed to by the partners at the time of formation of WWA
and was recorded at the cash amount IBM paid for the property just prior to
contributing it to the Partnership. The value of the property contributed and to
be contributed by Cousins was recorded on the Partnership's books at an amount
equal to the cash and property contributed by IBM for an equal (50%) partnership
interest.
The status of contributions at December 31, 1997, was as follows ($ in
thousands):
IBM COUSINS TOTAL
------- ------- --------
Cash contributed $46,590 $ 84 $ 46,674
Property contributed 16,267 53,853 70,120
Land committed to be contributed -- 8,920 8,920
--------------------------------
Total $62,857 $62,857 $125,714
================================
WWA has elected not to take title to the remaining land committed to be
contributed by Cousins until such land is needed for development. However,
Cousins' capital account was previously credited with the amount originally
required to bring it equal to IBM's, and a like amount, plus preacquisition
costs paid by WWA, were set up as an asset entitled "Land Committed To Be
Contributed." This asset account subsequently has been reduced as land actually
has been contributed, or as land yet to be contributed became associated with a
particular building.
At December 31, 1997, Cousins was committed to contribute land on which
an additional 678,051 GSF are developable, provided that regardless of planned
use or density, 38,333 GSF shall be the minimum GSF attributed to each
developable acre contributed. Cousins has also agreed to contribute
infrastructure land in Wildwood, as defined, at no cost to WWA, in order to
provide the necessary land for development of roads and utilities. The ultimate
acreage remaining to be contributed by Cousins will depend upon the actual
density achieved, but would be approximately 15 acres if the density were
similar to that achieved on land contributed to date.
WWA pays all of the expenses related to the Land Committed to be
Contributed which were approximately $143,000, $208,000 and $163,000 in 1997,
1996 and 1995, respectively.
4. OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENTS
Net income or loss and net cash flow, as defined, shall be allocated to
the partners based on their percentage interests (50% each, subject to
adjustment as provided in the partnership agreements).
In the event of dissolution of the Partnerships, the assets will be
distributed as follows:
First, to repay all debts to third parties, including any
secured loans with the partners.
Second, to each partner until each capital account is reduced
to zero.
The balance to each partner in accordance with its percentage
interest.
5. FEES TO RELATED PARTIES
The Partnerships engaged Cousins to manage, develop and lease the
Partnerships' property. Fees to Cousins incurred by the Partnerships during
1997, 1996 and 1995 were as follows ($ in thousands):
1997 1996 1995
------ ------ ------
Development and tenant
construction fees $ 406 $ 604 $ 250
Management fees 1,047 1,032 945
Leasing and procurement fees 223 1,105 235
----------------------------
$1,676 $2,741 $1,430
============================
6. RENTAL REVENUES
WWA leases property to the partners, as well as to unrelated third
parties. The leases with partners are at rates comparable to those quoted to
third parties. The leases typically contain escalation provisions and provisions
requiring tenants to pay a pro rata share of operating expenses. The leases
typically include renewal options and all are classified and accounted for as
operating leases.
At December 31, 1997, future minimum rentals to be received under
existing non-cancelable leases, including tenants' current pro rata share of
operating expenses are as follows ($ in thousands):
Leases
Leases With
With Third
Partners Parties Total
-------- ------- -----
1998 $10,403 $ 19,482 $ 29,885
1999 10,145 16,760 26,905
2000 9,915 14,805 24,720
2001 7,728 13,474 21,202
2002 8,555 12,811 21,366
Thereafter 23,083 31,078 54,161
------------------------------------------
$69,829 $108,410 $178,239
==========================================
At December 31, 1997 and 1996, receivables which related to the
cumulative excess of revenues recognized in accordance with SFAS No. 13 over
revenues which accrued in accordance with the actual lease agreements totaled
$11,020,000 and $14,331,000, respectively. Of the 1997 amount, 84% was related
to leases with IBM.
7. NOTES PAYABLE
At December 31, 1997, notes payable included the following ($ in
thousands):
Term/
Amortization Balance at
Period Final December 31,
Description Rate (Years) Maturity 1997
----------- ---------------- ------------ -------- ------------
Line of credit ($10 million maximum) Fed Funds + .75% 1/ N/A 9/1/98 $ --
2300 Windy Ridge Parkway Building mortgage note 7.56% 10/25 12/01/05 69,995
3200 Windy Hill Road Building mortgage note 8.23% 10/28 1/1/07 69,389
4100/4300 Wildwood Parkway Buildings mortgage note 7.65% 15/25 4/1/12 29,696
2500 Windy Ridge Parkway Building mortgage note 7.45% 10/20 12/15/05 24,781
--------
$193,861
========
On March 20, 1997, WWA completed the financing of the 4100 and 4300
Wildwood Parkway Buildings with a $30 million non-recourse mortgage note payable
at an interest rate of 7.65% and a maturity of April 1, 2012. In conjunction
with this financing and a portion of the $70 million financing of the 3200 Windy
Hill Road Building completed in December 1996, WWA made non-operating cash
distributions of $12.5 million to each partner and paid the entire calendar year
1997 operating distribution of $4.5 million to each partner.
The 2300 Windy Ridge Parkway Building, the 3200 Windy Hill Road
Building, and the 4100/4300 Wildwood Parkway Buildings mortgage notes provide
for additional amortization in the later years of the notes (over that required
by the amortization periods shown above) concurrent with scheduled rent
increases.
The line of credit matures September 1, 1998, but will automatically be
renewed from year to year unless the lender provides a notice of non-renewal at
least three months in advance of the annual renewal date. The line generally
prohibits new borrowings other than those under the line, or the pledging of any
assets not pledged as of August 1, 1990, without the Lender's prior approval.
The line bears a floating interest rate equal to the daily federal funds rate
plus 3/4%, and there are no fees or compensating balance arrangements required
under the line. Cousins and IBM have each severally guaranteed one-half of the
line of credit. Assets with net carrying values of $167,671,000 were pledged as
security on the Partnerships' debt.
The aggregate maturities of the indebtedness at December 31, 1997
summarized above are as follows ($ in thousands):
1998 $ 3,952
1999 4,265
2000 4,604
2001 5,131
2002 5,670
Thereafter 170,239
--------
$193,861
========
The Partnerships capitalize interest expense to property under
development as required by SFAS No. 34. In the years ended December 31, 1997 and
1996, the Partnerships capitalized interest totaling $1,998,000 and $1,053,000,
respectively.
The estimated fair value of the notes payable at December 31, 1997 was
approximately $209 million, which was calculated by discounting future cash
flows under the notes at estimated rates at which similar notes would be made
currently.
8. DISPOSITION OF SUMMIT GREEN
Effective December 1, 1996, WWA disposed of its interest in a 144,000
GSF office building at Summit Green in exchange for cancellation of the related
mortgage debt. In connection with this disposition, the Partnerships also may
dispose of their leasehold interest in land adjacent to the office building. The
Partnerships anticipate no material gain or loss will result from their
disposition of the Summit Green project.
The land adjacent to the formerly owned office building is subject to a
non-subordinated ground lease expiring October 31, 2084. Lease payments
effective December 1, 1996 are approximately $256,000 per year, and escalate at
ten year intervals based on the cumulative increase in the Index over the prior
ten year period (subject to a 5% annual cap on the increase in such Index in any
one year). The next escalation date is December 1, 2006.
9. COMBINED STATEMENTS OF CASH FLOWS-SUPPLEMENTAL INFORMATION
Interest paid (net of amounts capitalized) was as follows ($ in
thousands):
1997 1996 1995
---- ---- ----
Interest paid $12,700 $9,096 $12,011
Significant non-cash financing and investing activities included the
following:
In 1996, land parcels with a cost of $4,498,000 were transferred from
Land Committed To Be Contributed to Land and Property Predevelopment Cost.
In 1996, the Partnerships recorded the disposition of the Summit Green
project (including the office building and the anticipated disposition of the
leasehold interest in the adjacent land) having a total cost of $10,447,000, and
the cancellation of $10,447,000 of related debt (see Note 8).
In 1996, two buildings with a total cost of $29,368,000 were
transferred from Projects Under Construction to Income Producing Properties. In
1997, one building with a total cost of $29,807,000 was transferred from
Projects Under Construction to Income Producing Properties.
SCHEDULE III
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Venture to Acquisition December 31, 1997
------------------- -------------------- -----------------------------------
Carrying
Costs
Buildings Less Cost Land Buildings
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a)
- ----------- ------------ ---- ------------ ----- --------- ------------ ------------ ---
Wildwood Office Park -
Cobb Co., GA
2500 Windy Ridge $ 24,781 $ 4,414 $ 14,814 $ 10,435 $ 141 $ 4,414 $ 25,390 $ 29,804
2300 Windy Ridge 69,995 8,927 -- 62,247 5,429 8,927 67,676 76,603
Parkside -- 4,274 2,553 (1,029) (45) 3,136 2,617 5,753
3200 Windy Hill 69,389 10,503 -- 67,840 5,470 10,503 73,310 83,813
4100/4300 Wildwood Parkway 29,696 6,689 -- 22,945 251 6,689 23,196 29,885
4200 Wildwood Parkway -- 4,347 -- 25,085 375 -- 29,807 29,807
Stand Alone Retail Sites -- 7,659 1,234 3,691 123 9,570 3,137 12,707
Land committed to
be contributed -- 9,023 -- -- 382 9,405 -- 9,405
Other land and
property -- 11,430 -- 3,426 (173) 11,575 3,108 14,683
--------------------------------------------------------------------------------------------
$193,861 $67,266 $ 18,601 $194,640 $ 11,953 $64,219 $228,241 $292,460
============================================================================================
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- -------- --------- -------- -----------
Wildwood Office Park -
Cobb Co., GA
2500 Windy Ridge $10,004 1985 1985 40 Years
2300 Windy Ridge 22,416 1986 1986 40 Years
Parkside 2,098 1980 1986 25 Years
3200 Windy Hill 18,565 1989 1989 40 Years
4100/4300 Wildwood Parkway 1,449 1995 1986 40 Years
4200 Wildwood Parkway -- 1996 1986 --
Stand Alone Retail Sites 1,180 Various 1985-1995 Various
Land committed to
be contributed -- -- 1985-1986 --
Other land and
property 642 Various 1985-1986 Various
------
$56,354
=======
NOTE: (a) Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended December 31, 1997 are as
follows:
Real Estate Accumulated Depreciation
---------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- ------- ------- -------
Balance at beginning of period $280,584 $259,428 $250,738 $48,699 $44,900 $40,009
Additions during the period:
Improvements, and other
capitalized costs 11,876 32,361 8,690 -- -- --
Provisions for depreciation -- -- -- 7,655 7,296 4,891
Deductions during the period:
Retirement of fully depreciated
assets and writeoffs -- -- -- -- (16) --
Disposition of Summit Green
Office Building -- (11,205) -- -- (3,481) --
---------------------------------- -------------------------------
Balance at close of period $292,460 $280,584 $259,428 $56,354 $48,699 $44,900
================================== ===============================
REPORT OF INDEPENDENT AUDITORS
To the Partners of
CSC Associates, L.P. (A Limited Partnership)
We have audited the accompanying balance sheets of CSC Associates, L.P. (the
Partnership) as of December 31, 1997 and 1996, and the related statements of
operations, partners' capital, and cash flows for each of the three years in the
period ended December 31, 1997. Our audits also included the financial statement
schedule of CSC Associates, L.P. listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. We conducted our audits in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of CSC Associates, L.P. as of December 31, 1997 and 1996, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Atlanta, Georgia
February 2, 1998
CSC ASSOCIATES, L.P.
--------------------
BALANCE SHEETS
--------------
DECEMBER 31, 1997 AND 1996
--------------------------
($ in thousands)
ASSETS
------
1997 1996
-------- --------
REAL ESTATE ASSETS:
Building and improvements, including land and
land improvements of $22,818 in 1997 and 1996 $209,120 $209,141
Accumulated depreciation (33,621) (27,621)
-------------------
175,499 181,520
-------------------
CASH 487 31
-------------------
NOTE RECEIVABLE (Note 4) 76,147 78,304
-------------------
OTHER ASSETS:
Deferred expenses, net of accumulated amortization
of $3,292 and $4,779 in 1997 and 1996, respectively 6,485 7,293
Other receivables (Note 3) 11,243 10,895
Furniture, fixtures and equipment, net of accumulated
depreciation of $22 and $1,311 in 1997 and 1996,
respectively 59 162
Other, net of accumulated amortization of $338 and
$256 in 1997 and 1996, respectively (Note 6) 1,425 1,486
-------------------
Total other assets 19,212 19,836
-------------------
$271,345 $279,691
===================
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
NOTE PAYABLE (Note 4) $ 76,147 $ 78,304
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 1,482 1,041
-------------------
Total liabilities 77,629 79,345
-------------------
PARTNERS' CAPITAL (Note 1) 193,716 200,346
-------------------
$271,345 $279,691
===================
The accompanying notes are an integral part of these balance sheets.
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
1997 1996 1995
------- ------- -------
REVENUES:
Rental income and recovery of expenses
charged directly to specific tenants $35,159 $33,312 $31,195
Interest income (Note 4) 4,931 4,561 --
---------------------------
Total revenues 40,090 37,873 31,195
---------------------------
EXPENSES:
Real estate taxes 3,349 3,578 3,482
Utilities 887 967 1,103
Management and personnel costs 1,546 1,523 1,403
Cleaning 1,253 1,152 1,086
Contract security 474 640 434
Repairs and maintenance 461 408 349
Elevator 325 330 305
Parking 260 245 208
Insurance 106 112 116
Grounds maintenance 129 135 116
Interest expense (Note 4) 4,931 4,561 --
Depreciation and amortization 7,535 7,968 7,688
Marketing and other expenses 37 64 164
General and administrative expenses 77 82 44
---------------------------
Total expenses 21,370 21,765 16,498
---------------------------
NET INCOME $18,720 $16,108 $14,697
===========================
The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
BALANCE, December 31, 1994 $204,712
Net income 14,697
Distributions (15,471)
--------
BALANCE, December 31, 1995 203,938
Net income 16,108
Distributions (19,700)
--------
BALANCE, December 31, 1996 200,346
Net income 18,720
Distributions (25,350)
--------
BALANCE, December 31, 1997 $193,716
========
The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P.
--------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------------------------------------------------
($ in thousands)
1997 1996 1995
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $18,720 $16,108 $14,697
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,535 7,968 7,688
Rental revenue recognized on straight-line
basis in excess of rental revenue
specified in the lease agreements (238) (748) (1,148)
Change in other receivables and
other assets (90) (997) 7
Change in accounts payable and
accrued liabilities related to operations 454 (1,937) 1,122
---------------------------
Net cash provided by operating activities 26,381 20,394 22,366
---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to building and improvements (433) (571) (6,918)
Payments for deferred expenses (112) (143) (1,285)
Investment in note receivable -- (80,000) --
Collection of note receivable 2,157 1,696 --
(Payments for) proceeds from furniture, fixtures
and equipment (30) (46) 10
---------------------------
Net cash provided by (used in) investing activities 1,582 (79,064) (8,193)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable -- 80,000 --
Repayment of note payable (2,157) (1,696) --
Partnership distributions (25,350) (19,700) (15,471)
Net cash (used in) provided by financing activities (27,507) 58,604 (15,471)
NET INCREASE (DECREASE) IN CASH 456 (66) (1,298)
CASH AT BEGINNING OF YEAR 31 97 1,395
---------------------------
CASH AT END OF YEAR $ 487 $ 31 $ 97
===========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $ 4,937 $ 4,339 $ --
===========================
The accompanying notes are an integral part of these statements.
CSC ASSOCIATES, L.P.
--------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997, 1996 AND 1995
--------------------------------
1. FORMATION OF THE PARTNERSHIP AND TERMS OF THE PARTNERSHIP AGREEMENT
CSC Associates, L.P. ("CSC," or the "Partnership") was formed under the
terms of a Limited Partnership Agreement dated September 29, 1989 and by the
filing of its Certificate of Limited Partnership on October 27, 1989. C&S
Premises, Inc. ("Premises") and Cousins Properties Incorporated ("CPI") each own
a 1% general partnership and a 49% limited partnership interest in the
Partnership. Premises is a wholly owned subsidiary of NB Holdings Corporation
which is a wholly owned subsidiary of NationsBank Corporation. The Partnership
was formed for the purpose of developing and owning a 1.4 million gross square
foot office tower in downtown Atlanta, Georgia (the "Building"), which is the
Atlanta headquarters of NationsBank Corporation.
The Partnership Agreement and related documents (the "Agreements")
contain among other provisions, the following:
a. CPI is the Managing Partner.
b. CPI is obligated to contribute a total of $18.2 million cash to the
Partnership, all of which has been contributed. Premises is obligated to
contribute land parcels to the Partnership having an aggregate agreed upon value
of $18.2 million, all of which has been contributed, which property value, in
the opinion of the partners, was equal to the estimated fair market value of the
land at the time of formation of the Partnership. The value of the property
contributed by Premises was recorded on the Partnership's books at an amount
equal to the cash contributed by CPI for an equal (50%) partnership interest. In
October 1993, the partners each contributed an additional $86.7 million.
c. No interest is earned on partnership capital.
d. Net income or loss and cash distributions are allocated to the
partners based on their percentage interests (50% each), subject to a preference
to CPI. The CPI preference was $2.5 million, and accrued to CPI, with interest
at 9% to the extent unpaid, over the period February 1, 1992 through January 31,
1995. During the year ended December 31, 1994, CPI received distributions of the
preference and accrued interest of approximately $2.65 million. The remaining
preference amount of $71,000 was distributed to CPI in January 1995. Amounts
above the preference amount are allocated based on the partners' percentage
interests.
2. SIGNIFICANT ACCOUNTING POLICIES
Capitalization Policies
All costs related to planning, development and construction of the
Building, and expenditures for the Building prior to the date it became
operational for financial statement purposes, have been capitalized. Interest
expense, amortization of financing costs, and real estate taxes were also
capitalized while the Building was under development.
Depreciation and Amortization
Real estate assets are carried at cost. Depreciation of the Building
commenced the date the Building became operational for financial statement
purposes and the Building is being depreciated over 40 years. Leasehold and
tenant improvements are amortized over the life of the leases or useful life of
the assets, whichever is shorter. Furniture, fixtures, and equipment are
depreciated over 5 years. Deferred expenses which include organizational costs,
certain marketing and leasing costs, and loan acquisition costs are amortized
over the period of estimated benefit. The straight line method is used for all
depreciation and amortization.
Income Taxes
No provision has been made for federal or state income taxes because
each partner's proportionate share of income or loss from the Partnership will
be passed through to be included on each partner's separate tax return.
Rental Income
In accordance with Statement of Financial Accounting Standards No. 13
("SFAS No. 13"), income on leases which include increases in rental rates over
the lease term (other than scheduled increases based on the Consumer Price
Index) is recognized on a straight-line basis.
Allowance for Doubtful Accounts
From time to time, the Partnership evaluates the need to establish an
allowance for doubtful accounts based on a review of specific receivables. As of
December 31, 1997 and 1996, there is no allowance for doubtful accounts included
in the accompanying balance sheets.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Reclassifications
Certain 1996 amounts have been reclassified to conform with 1997
presentation.
3. LEASES
The Partnership has leased office space to NB Holdings Corporation, as
well as to unrelated third parties. The lease with NB Holdings Corporation was
at rates comparable to those quoted to third parties. The leases contain
escalation provisions and provisions requiring tenants to pay a pro rata share
of operating expenses. The leases typically include renewal options and all are
classified and accounted for as operating leases.
At December 31, 1997, future minimum rentals to be received under
existing non-cancelable leases, including tenants' current pro rata share of
operating expenses, are as follows ($ in thousands):
Lease Leases
With With
NB Holdings Third
Corporation Parties Total
----------- ------- -----
1998 $ 16,762 $ 17,499 $ 34,261
1999 16,762 17,451 34,213
2000 16,762 17,440 34,202
2001 16,762 17,804 34,566
2002 16,785 18,412 35,197
Subsequent to 2002 153,237 90,334 243,571
-------- -------- --------
$237,070 $178,940 $416,010
======== ======== ========
In the years ended December 31, 1997 and 1996, income recognized on a
straight-line basis exceeded income which would have accrued in accordance with
the lease terms by approximately $238,000 and $748,000, respectively. At
December 31, 1997 and 1996, receivables which related to the cumulative excess
of revenues recognized in accordance with SFAS No. 13 over revenues which
accrued in accordance with the actual lease agreements totaled approximately
$10,670,000 and $10,432,000, respectively. Of that amount, 19% was related to
leases with NB Holdings Corporation and 35% was related to each of two
professional services firms. At December 31, 1997, NB Holdings Corporation
leased approximately 46% and two professional services firms leased
approximately 15% and 14%, respectively, of the net rentable space of the
Building.
4. NOTE PAYABLE AND NOTE RECEIVABLE
On February 6, 1996, the Partnership issued $80 million of 6.377%
collateralized notes (the "Notes"). The Notes amortize in equal monthly
installments of $590,680 based on a 20 year amortization schedule, and mature
February 15, 2011. The Notes are non-recourse obligations of the Partnership and
are secured by a Deed to Secure Debt, Assignment of Rents and Security Agreement
covering the Partnership's interest in the Building. In conjunction with this
financing, Premises transferred its 1% general partnership interest in the
partnership to C&S Premises-SPE, Inc., a wholly owned subsidiary of Premises.
The Partnership has loaned the $80 million proceeds of the Notes to CPI
under a non-recourse loan (the "CPI Loan") secured by CPI's Partnership
interests under the same payment terms as those of the Notes. CPI paid all costs
of issuing the Notes and the CPI Loan, including a $400,000 fee to an affiliate
of NationsBank Corporation. In addition, CPI pays a monthly fee to an affiliate
of NationsBank Corporation of .025% of the outstanding principal balance of the
Notes which totaled approximately $232,000 and $220,000 in 1997 and 1996,
respectively.
The estimated fair value of both the note payable and related note
receivable at December 31, 1997 was $75 million which was calculated by
discounting future cash flows under the notes at estimated rates at which
similar notes would be made currently.
The Partnership also has an unsecured $3 million line of credit
provided by an affiliate of Premises. Interest on the line is paid at a floating
rate (6.35% weighted average rate in December 1997) and interest only is payable
quarterly through July 31, 1998, at which time the entire outstanding balance is
due. There were no borrowings under the line as of December 31, 1997 and 1996.
The maturities of the Notes at December 31, 1997 are as follows (in
thousands):
1998 $ 2,299
1999 2,450
2000 2,610
2001 2,782
2002 2,965
Subsequent to 2002 63,041
-------
$76,147
=======
5. RELATED PARTIES
- ---------------------
The Partnership engaged CPI and an affiliate of CPI to manage,
develop and lease the Building. During 1997, 1996 and 1995, fees to CPI
and its affiliate incurred by the Partnership were as follows ($ in thousands):
1997 1996 1995
---- ---- ------
Development and tenant construction fees $ 17 $ 13 $ 88
Leasing and procurement fees 32 101 229
Management fees 870 815 744
---- ---- ------
$919 $929 $1,061
==== ==== ======
6. PARKING AGREEMENT
- -----------------------
On February 7, 1996, CSC entered into a 25 year Cross Parking License
Agreement ("Parking Agreement") with the North Avenue Presbyterian Church
("NAPC") which allows CSC the use of 200 parking spaces in NAPC's parking deck
which is located adjacent to NAPC. The agreement commenced on October 1, 1996.
CSC paid a $1,000,000 contribution toward the construction cost of the parking
deck as consideration for the Parking Agreement. The $1,000,000 contribution is
included in Other Assets and is being amortized over the 25 year life of the
Parking Agreement. NAPC may reduce the number of parking spaces available to the
Partnership or may terminate the Parking Agreement under certain conditions
after the sixth year, at which time a partial refund of the $1,000,000 would be
due to CSC. In addition, CSC is responsible for the maintenance of the parking
deck and the payment of the related operating expenses.
SCHEDULE III
CSC ASSOCIATES, L.P.
--------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------
DECEMBER 31, 1997
-----------------
($ in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized Gross Amount at Which
Initial Cost Subsequent Carried at
to Company to Acquisitions December 31, 1997
------------------ -------------------- ----------------------------------
Carrying
Costs
and Improve- of Sales and Land and Total
Description Encumbrances Land Improvements ments and Other Improvements Improvements (a)
- ----------- ------------ ---- ------------ -------- --------- ------------ ------------ -----
NationsBank Plaza
Atlanta, Georgia $ -- $ 18,200 $ -- $180,471 $ 10,449 $ 22,818 $186,302 $209,120
=============================================================================================
Column A Column F Column G Column H Column I
-------- -------- -------- -------- --------
Life on
Which De-
preciation
Accumu- In 1997
lated Date of Income
Deprecia- Construc- Date Statement
Description tion (a) tion Acquired Is Computed
- ----------- --------- --------- -------- -----------
NationsBank Plaza
Atlanta, Georgia $33,621 1990-1992 1990 5-40
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NOTE: (a) Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended December 31, 1997 are as
follows:
Real Estate Accumulated Depreciation
-------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- -------- ------- ------- -------
Balance at beginning of period $209,141 $208,676 $203,275 $27,621 $21,232 $14,980
Improvements and other capitalized costs 420 465 5,401 -- -- --
Write offs of improvements and other capitalized costs (441) -- -- (441) -- --
Provision for depreciation -- -- -- 6,441 6,389 6,252
-------------------------------- -------------------------------
Balance at close of period $209,120 $209,141 $208,676 $33,621 $27,621 $21,232
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