Cousins Properties - 10-Q quarterly report FY

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-3576

COUSINS PROPERTIES INCORPORATED

(Exact name of registrant as specified in its charter)


GEORGIA		58-0869052
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

191 Peachtree Street, Suite 3600, Atlanta, Georgia		30303-1740
(Address of principal executive offices)		(Zip Code)

(404) 407-1000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at July 31, 2007

Common Stock, $1 par value per share		51,851,287 shares

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
SIGNATURES
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

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FORWARD-LOOKING STATEMENTS

Certain matters contained in this report are forward-looking statements within the meaning of the federal securities laws and are subject to uncertainties and risks. These include, but are not limited to, general and local economic conditions, local real estate conditions, the activity of others developing competitive projects, the risks associated with development projects (such as delay, cost overruns and leasing/sales risk of new properties), the cyclical nature of the real estate industry, the financial condition of existing tenants, interest rates, the Company’s ability to obtain favorable financing or zoning, environmental matters, the effects of terrorism, the ability of the Company to close properties under contract and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including those described in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The words “believes,” “expects,” “anticipates,” “estimates” and similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in any forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions or expectations will be achieved. Such forward-looking statements are based on current expectations and speak as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share and per share amounts)


	June 30,			December 31,
	2007			2006
ASSETS
PROPERTIES:
Operating properties, net of accumulated depreciation of $123,650 and $115,723 in 2007 and 2006, respectively	$	575,116		$	472,375
Operating properties held-for-sale, net of accumulated depreciation of $7,139 and $142 in 2007 and 2006, respectively		5,197			1,470
Land held for investment or future development		93,085			101,390
Projects under development		358,807			300,382
Residential lots under development		34,981			27,624


Total properties		1,067,186			903,241

CASH AND CASH EQUIVALENTS		16,913			11,538
RESTRICTED CASH		2,895			2,824
NOTES AND OTHER RECEIVABLES, net of allowance for doubtful accounts of $680 and $501 in 2007 and 2006, respectively		33,958			32,138
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES		187,679			181,918
OTHER ASSETS		56,507			65,094


TOTAL ASSETS	$	1,365,138		$	1,196,753


LIABILITIES AND STOCKHOLDERS’ INVESTMENT
NOTES PAYABLE	$	477,971		$	315,149
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES		63,227			55,538
DEFERRED GAIN		170,909			154,104
DEPOSITS AND DEFERRED INCOME		3,301			2,062


TOTAL LIABILITIES		715,408			526,853

MINORITY INTERESTS		47,007			43,985

COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 3)

STOCKHOLDERS’ INVESTMENT:
Preferred stock, 20,000,000 shares authorized, $1 par value:
7.75% Series A cumulative redeemable preferred stock, $25 liquidation preference; 4,000,000 shares issued and outstanding		100,000			100,000
7.50% Series B cumulative redeemable preferred stock, $25 liquidation preference; 4,000,000 shares issued and outstanding		100,000			100,000
Common stock, $1 par value, 150,000,000 shares authorized, 54,734,951 and 54,439,310 shares issued in 2007 and 2006, respectively		54,735			54,439
Additional paid-in capital		344,828			336,974
Treasury stock at cost, 2,941,582 and 2,691,582 shares in 2007 and 2006, respectively		(72,593	)		(64,894	)
Cumulative undistributed net income		75,753			99,396


TOTAL STOCKHOLDERS’ INVESTMENT		602,723			625,915


TOTAL LIABILITIES AND STOCKHOLDERS’ INVESTMENT	$	1,365,138		$	1,196,753

See accompanying notes to condensed consolidated financial statements.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
REVENUES:
Rental property revenues	$	25,499		$	23,580		$	49,629		$	45,852
Fee income		9,860			7,755			17,926			16,136
Multi-family residential unit sales		—			15,136			—			21,715
Residential lot and outparcel sales		1,476			3,129			2,902			7,634
Interest and other		840			90			4,519			452

		37,675			49,690			74,976			91,789


COSTS AND EXPENSES:
Rental property operating expenses		11,341			8,589			21,358			16,915
General and administrative expenses		15,604			13,476			30,294			27,051
Depreciation and amortization		8,721			7,655			18,082			15,340
Multi-family residential unit cost of sales		—			12,377			—			17,735
Residential lot and outparcel cost of sales		1,085			2,298			2,293			5,501
Interest expense		531			4,880			531			8,494
Loss on extinguishment of debt		—			2,764			—			2,764
Other		758			481			1,118			935

		38,040			52,520			73,676			94,735


INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES, MINORITY INTEREST AND INCOME FROM UNCONSOLIDATED JOINT VENTURES		(365	)		(2,830	)		1,300			(2,946	)

BENEFIT (PROVISION) FOR INCOME TAXES FROM OPERATIONS		1,073			(1,926	)		2,100			(4,296	)

MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES		(842	)		(1,313	)		(1,704	)		(2,391	)

INCOME FROM UNCONSOLIDATED JOINT VENTURES		4,101			8,404			7,809			20,527


INCOME FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES		3,967			2,335			9,505			10,894

GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION		40			61			4,480			866


INCOME FROM CONTINUING OPERATIONS		4,007			2,396			13,985			11,760

DISCONTINUED OPERATIONS, NET OF APPLICABLE INCOME TAX PROVISION:
Income (loss) from discontinued operations		200			(2,202	)		278			451
Gain on sale of investment properties		—			135			8,164			326

		200			(2,067	)		8,442			777


NET INCOME		4,207			329			22,427			12,537

DIVIDENDS TO PREFERRED STOCKHOLDERS		(3,812	)		(3,812	)		(7,625	)		(7,625	)


NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS	$	395		$	(3,483	)	$	14,802		$	4,912


PER SHARE INFORMATION — BASIC:
Income (loss) from continuing operations	$	0.01		$	(0.03	)	$	0.13		$	0.08
Income (loss) from discontinued operations		0.00			(0.04	)		0.16			0.02

Basic net income (loss) available to common stockholders	$	0.01		$	(0.07	)	$	0.29		$	0.10


PER SHARE INFORMATION — DILUTED:
Income (loss) from continuing operations	$	0.01		$	(0.03	)	$	0.12		$	0.08
Income (loss) from discontinued operations		0.00			(0.04	)		0.16			0.01

Diluted net income (loss) available to common stockholders	$	0.01		$	(0.07	)	$	0.28		$	0.09


CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.37		$	0.37		$	0.74		$	0.74


WEIGHTED AVERAGE SHARES		51,825			50,385			51,772			50,377


DILUTED WEIGHTED AVERAGE SHARES		53,306			50,385			53,440			52,019

See accompanying notes to condensed consolidated financial statements.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands, except per share amounts)


	Six Months Ended June 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	22,427		$	12,537
Adjustments to reconcile net income to net cash flows provided by operating activities:
Gain on sale of investment properties, net of income tax provision		(12,644	)		(1,192	)
Loss on extinguishment of debt		—			2,764
Depreciation and amortization		18,227			24,512
Amortization of deferred financing costs		513			536
Stock-based compensation		2,752			3,309
Effect of recognizing rental revenues on a straight-line or market basis		346			(2,053	)
Income from unconsolidated joint ventures less than (in excess of) operating distributions		(3,200	)		1,160
Residential lot, outparcel and multi-family cost of sales, net of closing costs paid		2,264			22,787
Residential lot, outparcel and multi-family acquisition and development expenditures		(19,316	)		(10,344	)
Income tax benefit from stock options		(780	)		(286	)
Minority interest in income of consolidated entities		1,704			1,596
Changes in other operating assets and liabilities:
Change in other receivables		(1,839	)		13,266
Change in accounts payable and accrued liabilities		8,368			9,370

Net cash provided by operating activities		18,822			77,962


CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment property sales		21,280			1,522
Proceeds from venture formation		19,338			163,339
Property acquisition and development expenditures		(158,102	)		(152,760	)
Investment in unconsolidated joint ventures		(4,363	)		(5,583	)
Distributions from unconsolidated joint ventures in excess of income		1,805			7,740
Proceeds from (investment in) notes receivable, net		2,259			(1,196	)
Change in other assets, net		(9,092	)		(9,100	)
Change in restricted cash		(71	)		1,448

Net cash provided by (used in) investing activities		(126,946	)		5,410


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit and construction facilities		413,300			628,801
Repayment of credit and construction facilities		(253,200	)		(642,436	)
Payment of loan issuance costs		(43	)		(1,995	)
Proceeds from other notes payable or construction loans		4,003			8,726
Repayment of other notes payable or construction loans		(1,281	)		(21,168	)
Common stock issued, net of expenses		4,618			3,236
Purchase of treasury stock		(7,699	)		—
Income tax benefit from stock options		780			286
Common dividends paid		(38,445	)		(37,548	)
Preferred dividends paid		(7,625	)		(7,625	)
Contributions from minority partners		348			247
Distributions to minority partners		(1,257	)		(7,116	)

Net cash provided by (used in) financing activities		113,499			(76,592	)


NET INCREASE IN CASH AND CASH EQUIVALENTS		5,375			6,780
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		11,538			9,336

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	16,913		$	16,116

See accompanying notes to condensed consolidated financial statements.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2007
(UNAUDITED)

1. BASIS OF PRESENTATION AND NEW ACCOUNTING PRONOUNCEMENTS

Basis of Presentation

The condensed consolidated financial statements included herein include the accounts of Cousins Properties Incorporated (“Cousins”) and its consolidated subsidiaries, including Cousins Real Estate Corporation and its subsidiaries (“CREC”). All of the entities included in the condensed consolidated financial statements are hereinafter referred to collectively as the “Company.”

Cousins has elected to be taxed as a real estate investment trust (“REIT”) and intends to, among other things, distribute 100% of its federal taxable income to stockholders, thereby eliminating any liability for federal income taxes. Therefore, the results included herein do not include a federal income tax provision for Cousins. CREC operates as a taxable REIT subsidiary and is taxed separately from Cousins as a C-Corporation. Accordingly, the condensed consolidated statements of income include a provision for CREC’s income taxes.

The condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, these financial statements reflect all adjustments necessary (which adjustments are of a normal and recurring nature) for the fair presentation of the Company’s financial position as of June 30, 2007 and results of operations for the three and six month periods ended June 30, 2007 and 2006. Results of operations for the three and six months ended June 30, 2007 are not necessarily indicative of results expected for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The accounting policies employed are materially the same as those shown in Note 2 to the consolidated financial statements included in such Form 10-K.

In periods prior to the fourth quarter of 2006, the Company recorded reimbursements of salary and benefits of on-site employees pursuant to management agreements with third parties and unconsolidated joint ventures as reductions of general and administrative expenses. In the fourth quarter of 2006, the Company determined that these amounts should be recorded as revenues in accordance with Emerging Issues Task Force (“EITF”) No. 99-19 and, accordingly, began recording these reimbursements in Fee Income on the Condensed Consolidated Statements of Income. Prior periods have been revised to conform to this new presentation. As a result, Fee Income and General and Administrative Expenses have increased by $3.6 million and $7.2 million in the three and six months ended June 30, 2006, respectively, when compared to amounts previously reported.

New Accounting Pronouncement

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainties in Income Taxes” (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute for recognizing tax return positions in the financial statements as those which are “more-likely-than-not” to be sustained upon examination by the taxing authority. FIN 48 also provides guidance on derecognition, classification, interest and penalties,

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accounting for income tax uncertainties in interim periods and the level of disclosures associated with any recorded income tax uncertainties. The Company believes that all of its material income tax filing positions and deductions would be sustained upon audit under current tax laws and regulations. Therefore, the Company recorded no reserves and no cumulative effect adjustment in the financial statements in conjunction with the adoption of FIN 48, and there was no impact on the Company’s financial position, results of operations or cash flows.

2. CASH FLOWS SUPPLEMENTAL INFORMATION

The following table summarizes supplemental information related to cash flows ($ in thousands):


	Six Months Ended June 30,
	2007		2006
Interest paid, net of amounts capitalized	$	—	$	4,914
Income taxes paid, net of refunds		110		5,988

Non-Cash Transactions
Transfer from operating properties to land		2,392		7,250
Transfer from projects under development to operating properties		80,730		—
Transfer from other assets to projects under development		15,491		—
Transfer from other assets to operating properties		136		—
Change in accrued expenditures excluded from development and acquisition expenditures		441		9,420
Transfer from land to operating properties		2,868		—
Transfer from land to projects under development		18,997		4,783
Transfer from operating properties to operating properties held-for-sale		5,197		—
Transfer from projects under development to land		—		1,486
SAB 51 gain, net of tax, recorded in investment in joint ventures and additional paid-in capital		—		453
Transfer related to venture formation:
Projects under development to investment in joint venture		—		3,980
Operating properties to investment in joint venture		—		16,019
Transfer from other assets to land		—		228

3. NOTES PAYABLE, INTEREST EXPENSE AND COMMITMENTS AND CONTINGENCIES

The following table summarizes the terms and amounts of the notes payable outstanding at June 30, 2007 and December 31, 2006 ($ in thousands):

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				Term/
				Amortization				Outstanding at
	Interest			Period		Final		June 30,		December 31,
Description	Rate			(Years)		Maturity		2007		2006
Credit facility (a maximum of $400,000), unsecured	LIBOR +
	0.8% to 1.3%				4/N/A		3/7/10	$	267,300	$	128,200
Construction facility (a maximum of $100,000), unsecured	LIBOR +
	0.8% to 1.3%				4/N/A		3/7/10		85,700		64,700
333/555 North Point Center East mortgage note		7.00	%		10/25		11/1/11		29,223		29,571
Meridian Mark Plaza mortgage note		8.27	%		10/28		9/1/10		23,403		23,602
100/200 North Point Center East mortgage note (see discussion below)		5.39	%		5/30		6/1/12		25,000		22,365
The Points at Waterview mortgage note		5.66	%		10/25		1/1/16		18,003		18,183
600 University Park Place mortgage note		7.38	%		10/30		8/10/11		13,073		13,168
Lakeshore Park Plaza mortgage note		6.78	%		10/25		11/1/08		8,936		9,082
King Mill Project I member loan (a maximum of $2,849)		9.00	%		3/N/A		8/30/08		2,702		2,625
King Mill Project I second member loan (a maximum of $2,349)		9.00	%		3/N/A		6/26/09		1,860		1,815
Jefferson Mill Project member loan (a maximum of $3,156)		9.00	%		3/N/A		9/13/09		2,405		1,432
Other miscellaneous notes	Various			Various		Various			366		406

								$	477,971	$	315,149

The Company had $267.3 million drawn on its unsecured credit facility as of June 30, 2007 and, net of $1.1 million reserved for outstanding letters of credit, the Company had $131.6 million available for future borrowings under this facility. The Company had $85.7 million drawn on its construction facility as of June 30, 2007, with $14.3 million available for future borrowings under this facility.

On June 1, 2007, the Company refinanced its non-recourse mortgage note payable secured by the 100 and 200 North Point Center East office buildings. The new $25 million non-recourse mortgage note payable has an interest rate of 5.39% and a maturity date of June 1, 2012. This note replaced the former non-recourse mortgage note payable on these properties, which was due to mature on August 1, 2007 and had an interest rate of 7.86%.

On July 9, 2007, the Company entered into a $100 million bridge loan with a bank. The bridge loan matures on October 9, 2007, with an option to extend to January 9, 2008, and bears an interest rate of LIBOR plus 0.75%. The bridge loan contains financial and operating covenants that are identical to those of its credit facility.

For the three and six months ended June 30, 2007 and 2006, interest expense was recorded as follows ($ in thousands):

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	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Incurred	$	7,086		$	9,774		$	13,178		$	18,429
Capitalized		(6,555	)		(4,894	)		(12,647	)		(9,935	)

Expensed	$	531		$	4,880		$	531		$	8,494

At June 30, 2007, the Company had outstanding letters of credit and performance bonds of $20.6 million. The Company has several projects under development and redevelopment for which it estimates total future funding commitments of $498.7 million at June 30, 2007. Additionally, the Company has future obligations as a lessor of office, retail and industrial space to fund approximately $4.3 million of tenant improvements as of June 30, 2007. As a lessee, the Company has future obligations under ground and office leases of approximately $16.8 million at June 30, 2007.

4. EARNINGS PER SHARE

Net income per share-basic is calculated as net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Net income per share-diluted is calculated as net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during the period. Diluted weighted average number of common shares is calculated to reflect the potential dilution under the treasury stock method that would occur if stock options, restricted stock or other contracts to issue common stock were exercised and resulted in additional common shares outstanding. The numerator used in the Company’s per share calculations is the same for both basic and diluted net income per share.

Weighted average shares-basic and weighted average shares-diluted were as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Weighted average shares-basic		51,825		50,385		51,772		50,377
Dilutive potential common shares:
Stock options		1,437		—		1,629		1,481
Restricted stock		44		—		39		161

Weighted average shares-diluted		53,306		50,385		53,440		52,019

Anti-dilutive options not included		940		2,540		892		895

Because the Company reported a net loss available to common stockholders for the three months ended June 30, 2006, the effect of all outstanding options on per share earnings was anti-dilutive, and these options were excluded from the calculation of weighted average shares-diluted.

5. STOCK-BASED COMPENSATION

The Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 123(R), “Share-Based Payment,” on January 1, 2006, using the modified prospective method. SFAS 123(R) requires that companies recognize as compensation expense the grant date fair value of share-based awards over the required service period of the awards. The Company has several types of stock-based compensation — stock options, restricted stock and restricted stock units — which are described in Note 7 of “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form

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10-K for the year ended December 31, 2006. The Company uses the Black-Scholes model to value its new stock option grants under SFAS 123(R) and recognizes compensation expense in general and administrative expense in the Condensed Consolidated Statements of Income over the related awards’ vesting period. A portion of share-based payment expense is capitalized to projects under development in accordance with SFAS No. 67. SFAS 123(R) also requires the Company to estimate forfeitures in calculating the expense related to stock-based compensation, and to reflect the benefits of tax deductions in excess of recognized compensation cost to be reported as both a financing cash inflow and an operating cash outflow.

The Company expensed approximately $1.2 million for each of the three months ended June 30, 2007 and 2006, and $2.8 million and $2.6 million for the six months ended June 30, 2007 and 2006, respectively, for stock-based compensation, after the effect of capitalization to projects under development and income tax benefit. As of June 30, 2007, the Company had $16.7 million of total unrecognized compensation cost related to stock-based compensation, which will be recognized over a weighted average period of 2.6 years.

The Company estimates the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. The risk free interest rate utilized in the Black-Scholes calculation is the interest rate on U.S. Government Bonds and Notes having the same life as the estimated life of the Company’s option awards. Expected life of the options granted was computed using historical data reflecting actual hold periods plus an estimated hold period for unexercised options outstanding using the mid-point between 2007 and the expiration date. Expected volatility is based on the historical volatility of the Company’s stock over a period relevant to the related stock option grant. The assumed dividend yield is based on the annual dividend rate for regular dividends at the time of grant. Below are the Black-Scholes inputs used to calculate the weighted-average fair value of 2007 option grants:


Assumptions:
Risk free interest rate		4.62%
Expected life		6.60 years
Expected volatility		21.10%
Expected dividend yield		4.67%

Result:
Weighted-average fair value of options granted		$ 5.09

The following table summarizes stock option activity during the six months ended June 30, 2007:


								Weighted-
				Weighted-		Aggregate		Average
	Number of			Average		Intrinsic		Remaining
	Options			Exercise		Value		Contractual
	(in thousands)			Price		(in thousands)		Life (years)
Outstanding at December 31, 2006		6,117		$	23.27
Granted		54			32.67
Exercised		(307	)		16.36
Forfeited		(45	)		30.90

Outstanding at June 30, 2007		5,819		$	23.67	$	43,537		6.32

Exercisable at June 30, 2007		3,843		$	20.03	$	42,717		5.19

The total intrinsic value of options exercised during the three and six months ended June 30, 2007 was $0.2 million and $6.2 million, respectively.

11

The following table summarizes restricted stock activity during the six months ended June 30, 2007:


				Weighted-
	Number of			Average
	Shares			Grant Date
	(in thousands)			Fair Value
Non-vested stock at December 31, 2006		164			$30.39
Vested		(8	)		30.44
Forfeited		(3	)		31.06

Non-vested stock at June 30, 2007		153			$30.37

Restricted stock units (“RSU”) are accounted for as liability awards under SFAS 123(R) and employees are paid cash based upon the value of the Company’s stock upon vesting. The following table summarizes RSU activity for the six months ended June 30, 2007 (in thousands):


Outstanding at December 31, 2006	477
Granted	5
Vested	(3	)
Forfeited	(8	)

Outstanding at June 30, 2007	471

6. PROPERTY TRANSACTIONS

SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that the gains and losses from the disposition of certain real estate assets and the related historical results of operations of certain disposed of or held-for-sale assets be included in a separate section, discontinued operations, in the statements of income for all periods presented. SFAS No. 144 also requires that assets and liabilities of held-for-sale properties, as defined, be separately categorized on the balance sheet in the period that they are deemed held-for-sale.

In the second quarter of 2007, the Company executed a contract to sell 3301 Windy Ridge Parkway, a 107,000 square foot office building in Atlanta, Georgia, and the Company determined that this property met the requirements of a held-for-sale property under SFAS No. 144. The Company’s basis in this building was classified as held-for-sale on the June 30, 2007 Condensed Consolidated Balance Sheet, and there are no significant liabilities or other assets related to this property. 3301 Windy Ridge Parkway was sold in July 2007 for a sales price of $16.1 million and an estimated gain of approximately $10 million.

In 2006, the Company sold seven of its 12 stand-alone retail sites under ground leases near North Point Mall in suburban Atlanta, Georgia. The remaining five sites closed in the first quarter of 2007. The Company’s basis in the five sites sold in 2007 was separately classified as held-for-sale on the December 31, 2006 Condensed Consolidated Balance Sheet, and there are no significant liabilities or other assets associated with this project. Also in 2006, the Company sold Frost Bank Tower, a 531,000 square foot office building in Austin, Texas and The Avenue of the Peninsula, a 374,000 square foot retail center in Rolling Hills Estates, California. The operations of all of these projects are included in discontinued operations in the accompanying Condensed Consolidated Statements of Income.

The following details the components of income from discontinued operations ($ in thousands):

12


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Rental property revenues	$	358		$	6,218		$	769		$	12,390
Other revenues		7			771			42			3,092
Rental property operating expenses		(179	)		(3,157	)		(388	)		(5,859	)
Depreciation and amortization		14			(6,034	)		(145	)		(9,172	)

	$	200		$	(2,202	)	$	278		$	451

The gain on sale of the applicable properties included in Discontinued Operations is as follows ($ in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
North Point Ground Leases	$	—	$	—	$	8,164	$	—
Other		—		135		—		326

	$	—	$	135	$	8,164	$	326

In July 2007, the Company purchased approximately 71 acres of land in Kansas City, Missouri for approximately $21.4 million. The Company is developing an approximately 680,000 square foot retail center on this land, Tiffany Springs MarketCenter.

7. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

The Company describes its investments in unconsolidated joint ventures in Note 6 to its Annual Report on Form 10-K for the year ended December 31, 2006. The following table summarizes balance sheet financial data of unconsolidated joint ventures in which the Company had ownership interests as of June 30, 2007 and December 31, 2006 ($ in thousands):


															Company's
	Total Assets				Total Debt				Total Equity						Investment
	2007		2006		2007		2006		2007			2006			2007			2006
CP Venture IV LLC entities	$	366,592	$	352,798	$	38,759	$	39,364	$	306,602		$	294,169		$	18,297		$	18,610
CP Venture LLC entities		117,318		118,861		—		—		115,878			117,716			5,047			5,157
Charlotte Gateway Village, LLC		176,883		178,784		139,345		144,654		35,067			32,912			10,485			10,502
TRG Columbus Development Venture, Ltd.		241,576		154,281		103,704		76,861		67,802			55,724			32,215			27,619
CL Realty, L.L.C.		125,752		117,820		3,883		5,357		111,449			108,316			69,619			66,979
Temco Associates		64,431		66,001		3,512		3,746		59,145			60,786			30,543			31,223
Crawford Long — CPI, LLC		43,340		42,524		51,987		52,404		(11,109	)		(10,664	)		(4,295	)		(4,037	)
CF Murfreesboro Associates		100,422		54,356		60,250		21,428		21,698			21,698			12,172			11,975
Palisades West, LLC		27,531		26,987		—		—		25,244			25,072			12,694			11,959
Ten Peachtree Place Associates		26,369		27,312		28,614		28,849		(2,912	)		(1,796	)		(2,961	)		(2,411	)
Wildwood Associates		21,777		21,816		—		—		21,634			21,730			(1,433	)		(1,385	)
CSC Associates, L.P.		1,846		2,998		—		—		392			1,410			196			706
Pine Mountain Builders, LLC		4,833		3,999		1,608		614		2,454			2,347			1,363			1,191
Handy Road Associates, LLC		5,263		5,349		3,204		3,204		1,987			2,133			2,129			2,209
CPI/FSP I, L.P.		3,286		3,307		—		—		3,166			3,190			1,608			1,621

	$	1,327,219	$	1,177,193	$	434,866	$	376,481	$	758,497		$	734,743		$	187,679		$	181,918

The following table summarizes income statement financial data of unconsolidated joint ventures in which the Company had ownership interests, for the six months ended June 30, 2007 and 2006 ($ in thousands):

13


												Company’s Share of
	Total Revenues					Net Income (Loss)						Net Income (Loss)
	2007			2006		2007			2006			2007			2006
CP Venture IV LLC entities	$	16,311		$	158	$	2,139		$	12		$	662		$	28
CP Venture LLC entities		10,740			11,460		5,931			4,190			615			509
Charlotte Gateway Village, LLC		15,399			15,282		2,761			2,445			588			588
TRG Columbus Development Venture, Ltd.		45,628			40,278		13,153			11,604			4,228			4,426
CL Realty, L.L.C.		5,037			12,121		3,553			7,219			1,195			3,421
Temco Associates		3,595			31,066		359			9,839			196			4,645
Crawford Long — CPI, LLC		5,337			5,277		753			553			352			253
Palisades West, LLC		181			—		172			—			56			—
Ten Peachtree Place Associates		3,240			3,544		159			427			87			255
Wildwood Associates		3			—		(95	)		(97	)		(48	)		(49	)
CSC Associates, L.P.		(74	)		26,404		(71	)		10,929			(36	)		5,483
Pine Mountain Builders, LLC		1,711			10,008		107			1,123			13			436
Handy Road Associates, LLC		4			133		(145	)		(79	)		(84	)		(198	)
CPI/FSP I, L.P.		—			—		(25	)		—			(13	)		—
Brad Cous Golf Venutre, Ltd.		—			178		2			3,131			1			1,108
Other		—			5		—			93			(3	)		(378	)

	$	107,112		$	155,914	$	28,753		$	51,389		$	7,809		$	20,527

8. OTHER ASSETS

At June 30, 2007 and December 31, 2006, Other Assets included the following ($ in thousands):


	2007		2006
Investment in Verde Group, L.L.C.	$	9,376	$	9,376
FF&E and leasehold improvements, net of accumulated depreciation of $9,746 and $16,429 as of June 30, 2007 and December 31, 2006, respectively		12,750		8,665
Predevelopment costs and earnest money		13,189		22,924
Prepaid expenses and other assets		6,818		6,531
Intangible Assets:
Goodwill		5,602		5,602
Above market leases, net of accumulated amortization of $3,886 and $1,447 as of June 30, 2007 and December 31, 2006, respectively		6,968		9,407
In-place leases, net of accumulated amortization of $1,243 and $472 as of as of June 30, 2007 and December 31, 2006, respectively		1,804		2,589

	$	56,507	$	65,094

Goodwill relates entirely to the Office/Multi-Family reportable segment. Other intangible assets relate primarily to the 2006 acquisitions of the interests in 191 Peachtree Tower and Cosmopolitan Center. In conjunction with these acquisitions, the Company also acquired intangible liabilities for below market leases and an above market ground lease, which are recorded within Accounts Payable and Accrued Liabilities on the Condensed Consolidated Balance Sheets. Above and below market leases are amortized into rental revenues over the remaining lease terms. In-place leases are amortized into depreciation and amortization expense also over remaining lease terms. The aggregate amortization of these intangible assets and liabilities was $1.5 and $3.1 million for the three and six months ended June 30, 2007, respectively. There was no amortization expense recorded for intangibles for the three and six months ended June 30, 2006. Aggregate amortization of these intangible assets and liabilities is anticipated to be as follows ($ in thousands):

14


	Below Market Leases			Above Market Leases		In Place Leases		Total

Remainder of 2007	$	(87	)	$	2,316	$	492	$	2,721
2008		(161	)		4,142		865		4,846
2009		(138	)		185		108		155
2010		(136	)		185		83		132
2011		(120	)		124		64		68
Thereafter		(808	)		16		192		(600	)

	$	(1,450	)	$	6,968	$	1,804	$	7,322

9. REPORTABLE SEGMENTS

The Company has four reportable segments: Office/Multi-Family, Retail, Land, and Industrial. The Office/Multi-family division develops, leases and manages owned and third-party owned office buildings and invests in and/or develops for-sale multi-family real estate products. The Retail and Industrial divisions develop, lease and manage retail and industrial centers, respectively. The Land Division owns various tracts of land that are held for investment or future development. The Land Division also develops single-family residential communities that are parceled into lots and sold to various homebuilders or sold as undeveloped tracts of land. The Company’s reportable segments are categorized based on the type of product the division provides. The divisions are managed separately because each product they provide has separate and distinct development issues, leasing and/or sales strategies and management issues. The divisions also match the manner in which the chief operating decision maker reviews results and information and allocates resources. The unallocated and other category in the following table includes general corporate overhead costs not specific to any segment, interest expense, as financing decisions are not generally made at the reportable segment level, income taxes and preferred dividends.

Company management evaluates the performance of its reportable segments in part based on funds from operations available to common stockholders (“FFO”). FFO is a supplemental operating performance measure used in the real estate industry. The Company calculated FFO using the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition of FFO, which is net income available to common stockholders (computed in accordance with GAAP), excluding extraordinary items, cumulative effect of change in accounting principle and gains or losses from sales of depreciable property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

FFO is used by industry analysts, investors and the Company as a supplemental measure of an equity REIT’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of a REIT’s operating performance that excludes historical cost depreciation, among other items, from GAAP net income. Management believes that the use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. In addition to Company management evaluating the operating performance of its reportable segments based on FFO results, management uses FFO and FFO per share, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and employees.

15

In periods prior to the second quarter of 2007, the Company presented segment net income in its segment footnote, as well as a breakout of assets, investment in joint ventures and capital expenditures made. Management does not utilize these measures when analyzing its segments or when making resource allocation decisions, and therefore this information is no longer provided by segment. FFO is reconciled to net income on a total company basis.

The following tables summarize the operations of the Company’s reportable segments for the three and six months ended June 30, 2007 and 2006.

16


	Office/Multi-						Land			Industrial			Unallocated
Three Months Ended June 30, 2007 (in thousands)	Family Division			Retail Division			Division			Division			and Other			Total
Rental property revenues — continuing	$	18,345		$	6,527		$	—		$	627		$	—		$	25,499
Rental property revenues — discontinued		317			41			—			—			—			358
Residential lot and outparcel sales		—			—			1,476			—			—			1,476
Fee income		7,584			1,454			255			567			—			9,860
Other income — continuing		49			726			—			43			22			840
Other income — discontinued		—			7			—			—			—			7

Total revenues from consolidated entities		26,295			8,755			1,731			1,237			22			38,040

Rental property operating expenses — continuing		(9,312	)		(1,934	)		—			(95	)		—			(11,341	)
Rental property operating expenses — discontinued		(203	)		24			—			—			—			(179	)
Residential lot and outparcel cost of sales		—			—			(1,085	)		—			—			(1,085	)
Third party leasing and management direct operating expenses		(4,879	)		(87	)		—			—			—			(4,966	)
General and administrative expenses		(1,025	)		(2,493	)		(918	)		(132	)		(6,070	)		(10,638	)
Other expenses — continuing		(54	)		40			(134	)		(610	)		(1,289	)		(2,047	)

Total costs and expenses		(15,473	)		(4,450	)		(2,137	)		(837	)		(7,359	)		(30,256	)
Provision for income taxes from operations — continuing		—			—			—			—			1,073			1,073

Minority interest in income from consolidated subsidiaries		(238	)		(637	)		—			33			—			(842	)
Funds from operations from unconsolidated joint ventures:
Unconsolidated joint venture revenue less operating expenses		1,743			1,167			—			—			—			2,910
Residential lot and outparcel sales, net		—			—			1,235			—			—			1,235
Multi-family residential sales, net		1,676			—			—			—			—			1,676
Other joint venture income, net		128			—			(51	)		—			(718	)		(641	)

Funds from operations from unconsolidated joint ventures		3,547			1,167			1,184			—			(718	)		5,180

Gain on sale of undepreciated investment properties		—			—			—			—			—			—
Preferred stock dividends		—			—			—			—			(3,812	)		(3,812	)


Funds from operations available to common stockholders	$	14,131		$	4,835		$	778		$	433		$	(10,794	)		9,383

Real estate depreciation and amortization:
Continuing																	(7,963	)
Discontinued																	14
Unconsolidated joint ventures																	(1,089	)

Total real estate depreciation and amortization																	(9,038	)

Gain on sale of depreciated investment properties, net of applicable income tax provision:
Continuing																	40
Unconsolidated joint ventures																	10

Total gain on sale of depreciated investment properties, net of applicable income tax provision																	50


Net income (loss) available to common stockholders																$	395

17


	Office/Multi-						Land			Industrial			Unallocated
Six Months Ended June 30, 2007 (in thousands)	Family Division			Retail Division			Division			Division			and Other			Total
Rental property revenues — continuing	$	35,782		$	12,834		$	—		$	1,013		$	—		$	49,629
Rental property revenues — discontinued		625			144			—			—			—			769
Residential lot and outparcel sales		—			—			2,902			—			—			2,902
Fee income		14,285			2,705			365			567			4			17,926
Other income — continuing		3,475			864			6			84			90			4,519
Other income — discontinued		—			42			—			—			—			42

Total revenues from consolidated entities		54,167			16,589			3,273			1,664			94			75,787

Rental property operating expenses — continuing		(17,415	)		(3,798	)		—			(145	)		—			(21,358	)
Rental property operating expenses — discontinued		(408	)		20			—			—			—			(388	)
Residential lot and outparcel cost of sales		—			—			(2,293	)		—			—			(2,293	)
Third party leasing and management direct operating expenses		(9,499	)		(164	)		—			—			—			(9,663	)
General and administrative expenses		(2,149	)		(4,502	)		(1,596	)		(252	)		(12,132	)		(20,631	)
Other expenses — continuing		(136	)		(82	)		(227	)		(674	)		(1,789	)		(2,908	)

Total costs expense		(29,607	)		(8,526	)		(4,116	)		(1,071	)		(13,921	)		(57,241	)

Provision for income taxes from operations — continuing		—			—			—			—			2,100			2,100

Minority interest in income from consolidated subsidiaries		(542	)		(1,228	)		—			66			—			(1,704	)

Funds from operations from unconsolidated joint ventures:
Unconsolidated joint venture revenue less operating expense		3,493			2,271			—			—			—			5,764
Residential lot and outparcel sales, net		—			—			1,642			—			—			1,642
Multi-family residential sales, net		3,965			—			—			—			—			3,965
Other joint venture income, net		263			4			(192	)		—			(1,433	)		(1,358	)

Funds from operations from unconsolidated joint venture		7,721			2,275			1,450			—			(1,433	)		10,013

Gain on sale of undepreciated investment properties — continuing		—			4,376			—			—			—			4,376
Gain on sale of undepreciated investment properties — discontinued		—			8,164			—			—			—			8,164
Preferred stock dividends		—			—			—			—			(7,625	)		(7,625	)


Funds from operations available to common stockholders	$	31,739		$	21,650		$	607		$	659		$	(20,785	)		33,870


Real estate depreciation and amortization:
Continuing																	(16,823	)
Discontinued																	(145	)
Unconsolidated joint ventures																	(2,170	)

Total real estate depreciation and amortization																	(19,138	)

Gain on sale of depreciated investment properties, net of applicable income tax provision:
Continuing																	104
Unconsolidated joint ventures																	(34	)

Total gain on sale of depreciated investment properties, net of applicable income tax provision																	70


Net income (loss) available to common stockholders																$	14,802


	Three Months Ended						Six Months Ended
	June 30,						June 30,
Reconciliation to Consolidated Revenues	2007			2006			2007			2006
Total revenues from consolidated entities for segment reporting	$	38,040		$	56,679		$	75,787		$	107,271
Less: revenues from discontinued operations		(365	)		(6,989	)		(811	)		(15,482	)

Total consolidated revenues	$	37,675		$	49,690		$	74,976		$	91,789

18


	Office/Multi-									Industrial			Unallocated
Three Months Ended June 30, 2006 (in thousands)	Family Division			Retail Division			Land Division			Division			and Other			Total
Rental property revenues — continuing	$	13,450		$	10,130		$	—		$	—		$	—		$	23,580
Rental property revenues — discontinued		3,881			2,337			—			—			—			6,218
Residential lot and outparcel sales		—			110			2,747			272			—			3,129
Multi-family residential unit sales		15,136			—			—									15,136
Fee income		7,150			336			269			—			—			7,755
Other income — continuing		(109	)		107			35			—			57			90
Other income — discontinued		—			771			—			—			—			771

Total revenues from consolidated entities		39,508			13,791			3,051			272			57			56,679

Rental property operating expenses — continuing		(5,584	)		(3,005	)		—			—			—			(8,589	)
Rental property operating expenses — discontinued		(2,314	)		(843	)		—			—			—			(3,157	)
Residential lot and outparcel cost of sales		—			(103	)		(1,978	)		(217	)		—			(2,298	)
Multi-family residential unit cost of sales		(12,377	)		—			—			—			—			(12,377	)
Third party leasing and management direct operating expenses		(3,659	)		—			—			—			—			(3,659	)
General and administrative expenses		(2,232	)		(742	)		(520	)		(70	)		(6,186	)		(9,750	)
Other expenses — continuing		(99	)		(346	)		(100	)		(3	)		(5,748	)		(6,296	)

Total costs and expenses		(26,265	)		(5,039	)		(2,598	)		(290	)		(11,934	)		(46,126	)

Provision for income taxes from operations — continuing		—			—			—			—			(1,926	)		(1,926	)

Minority interest in income from consolidated subsidiaries		(955	)		(358	)		—			—			—			(1,313	)

Funds from operations from unconsolidated joint ventures:
Unconsolidated joint venture revenue less operating expenses		5,638			498			—			—			—			6,136
Residential lot and outparcel sales, net		—			—			2,076			—			—			2,076
Multi-family residential sales, net		2,552			—			—			—			—			2,552
Other joint venture income, net		73			—			260			—			(682	)		(349	)

Funds from operations from unconsolidated joint ventures		8,263			498			2,336			—			(682	)		10,415

Gain on sale of undepreciated investment properties		—			—			(5	)		—			—			(5	)
Preferred stock dividends		—			—			—			—			(3,812	)		(3,812	)

Funds from operations available to common stockholders, excluding loss on extinguishment of debt		20,551			8,892			2,784			(18	)		(18,297	)		13,912


Loss on extinguishment of debt		—			(2,764	)		—			—			—			(2,764	)

Funds from operations available to common stockholders	$	20,551		$	6,128		$	2,784		$	(18	)	$	(18,297	)		11,148


Real estate depreciation and amortization:
Continuing																	(6,787	)
Discontinued																	(6,034	)
Unconsolidated joint ventures																	(2,012	)

Total real estate depreciation and amortization																	(14,833	)

Gain on sale of depreciated investment properties, net of applicable income tax provision:
Continuing																	66
Discontinued																	135
Unconsolidated joint ventures																	1

Total gain on sale of depreciated investment properties, net of applicable income tax provision																	202


Net income (loss) available to common stockholders																$	(3,483	)

19


	Office/Multi-						Land			Industrial			Unallocated and
Six Months Ended June 30, 2006 (in thousands)	Family Division			Retail Division			Division			Division			Other			Total
Rental property revenues — continuing	$	27,105		$	18,747		$	—		$	—		$	—		$	45,852
Rental property revenues — discontinued		7,531			4,859			—			—			—			12,390
Residential lot and outparcel sales		—			110			7,251			273			—			7,634
Multi-family residential unit sales		21,715			—			—			—			—			21,715
Fee income		14,166			618			1,352			—			—			16,136
Other income — continuing		(204	)		521			55			—			80			452
Other income — discontinued		2,300			792			—			—			—			3,092

Total revenues from consolidated entities		72,613			25,647			8,658			273			80			107,271

Rental property operating expenses — continuing		(11,194	)		(5,721	)		—			—			—			(16,915	)
Rental property operating expenses — discontinued		(4,120	)		(1,739	)		—			—			—			(5,859	)
Residential lot and outparcel cost of sales		—			(103	)		(5,181	)		(217	)		—			(5,501	)
Multi-family residential unit cost of sales		(17,735	)		—			—			—			—			(17,735	)
Third party leasing and management direct operating expenses		(7,470	)		—			—			—			—			(7,470	)
General and administrative expenses		(4,334	)		(1,316	)		(1,194	)		(33	)		(12,608	)		(19,485	)
Other expenses — continuing		(223	)		(696	)		(197	)		(7	)		(10,091	)		(11,214	)

Total costs and expenses		(45,076	)		(9,575	)		(6,572	)		(257	)		(22,699	)		(84,179	)

Provision for income taxes from operations — continuing		—			—			—			—			(4,296	)		(4,296	)

Minority interest in income from consolidated subsidiaries		(1,932	)		(459	)		—			—			—			(2,391	)

Funds from operations from unconsolidated joint ventures:
Unconsolidated joint venture revenue less operating expenses		11,199			973			—			—			—			12,172
Residential lot and outparcel sales, net		—			—			4,163			—			—			4,163
Multi-family residential sales, net		4,298			—			—			—			—			4,298
Other joint venture income, net		120			90			4,075			—			(1,375	)		2,910

Funds from operations from unconsolidated joint ventures		15,617			1,063			8,238			—			(1,375	)		23,543

Gain on sale of undepreciated investment properties		—			—			735			—			—			735
Preferred stock dividends		—			—			—			—			(7,625	)		(7,625	)


Funds from operations available to common stockholders, excluding loss on extinguishment of debt		41,222			16,676			11,059			16			(35,915	)		33,058


Loss on extinguishment of debt		—			(2,764	)		—			—			—			(2,764	)

Funds from operations available to common stockholders	$	41,222		$	13,912		$	11,059		$	16		$	(35,915	)		30,294


Real estate depreciation and amortization:
Continuing																	(13,651	)
Discontinued																	(9,172	)
Unconsolidated joint ventures																	(4,070	)

Total real estate depreciation and amortization																	(26,893	)

Gain on sale of depreciated investment properties, net of applicable income tax provision:
Continuing																	131
Discontinued																	326
Unconsolidated joint ventures																	1,054

Total gain on sale of depreciated investment properties, net of applicable income tax provision																	1,511

Net income available to common stockholders																$	4,912

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview:

Cousins Properties Incorporated (the “Company”) is a real estate development company with experience in the development, leasing, financing and management of office, retail and industrial properties in addition to residential land development. In addition, the Company has experience with the development and sale of multi-family products. As of June 30, 2007, the Company held interests directly or through joint ventures in 25 office properties totaling 7.7 million square feet, 14 retail properties totaling 4.7 million square feet, four industrial properties totaling 2.0 million square feet and 833 developed residential land lots held for sale. These interests include office, retail, and industrial projects under development or redevelopment totaling 6.2 million square feet. The Company also had an interest in two condominium projects under development which contain 671 units. The Company had 24 residential communities under development directly or through joint ventures in which approximately 10,750 lots remain to be developed and/or sold. In addition, the Company owned directly or through joint ventures approximately 9,100 acres of land.

The Company’s strategy is to produce stockholder returns by creating value through the development of high quality, well-located office, retail, industrial, multi-family and residential properties. The Company has developed substantially all of the real estate assets it owns. A key element in the Company’s strategy is to actively manage its portfolio of investment properties and, at the appropriate times, to engage in timely and strategic dispositions, either by sale or through contributions to ventures in which the Company retains an ownership interest. These timely transactions seek to maximize the value of the assets the Company has created, generate capital for additional development properties and return a portion of the value created to the Company’s stockholders.

Significant events during the three months ended June 30, 2007 included the following:

	•		Commenced construction of 10 Terminus Place, a 32-story, 142-unit condominium project at its Terminus project in the Buckhead district in Atlanta, Georgia;

	•		Commenced construction of Terminus 200, a 25-story, 565,000 square-foot office building at its Terminus project in the Buckhead district of Atlanta;

	•		Purchased approximately 47 acres of land in Lancaster, Texas for a future industrial project with our joint venture partner, Seefried Industrial Properties;

	•		Repurchased 250,000 shares of common stock.

Results of Operations:

Rental Property Revenues. Rental property revenues increased approximately $1.9 million (8%) and $3.8 million (8%) in the three and six month 2007 periods, respectively, compared to the same 2006 periods. These increases are discussed in detail below, but generally result from the acquisition and operations of newly-developed office and industrial properties offset by revenue lost on retail properties contributed to a venture and office properties sold.

Rental property revenues of the office portfolio increased approximately $4.9 million and $8.7 million in the three and six month 2007 periods, respectively, as a result of the following:

•

Increase of $4.3 million and $8.5 million in the three and six month 2007 periods, respectively, related to the third quarter 2006 purchase of the interests in 191 Peachtree Tower;

21

	•		Increase of $403,000 in both the three and six month 2007 periods due to the second quarter 2007 opening of Terminus 100;

	•		Increase of $194,000 and $391,000 in the three and six month 2007 periods, respectively, related to the third quarter 2006 purchase of Cosmopolitan Center;

	•		Increase of $950,000 and $1.3 million in the three and six month 2007 periods, respectively, related to increased leasing at The Inforum, 200 North Point Center East, 600 University Park Place, and Lakeshore Park Plaza.

	•		Decrease of $1.0 million and $2.1 million in the three and six month 2007 periods, respectively, related to 3100 Windy Hill Road, as the lease for the sole tenant in this building expired in the fourth quarter of 2006. The Company is actively attempting to re-lease this space, although there can be no guarantee of lease-up in the near term.

Rental property revenues from the retail portfolio decreased approximately $3.6 million and $5.9 million in the three and six month 2007 periods, respectively, as a result of the following:

•

Decrease of $6.4 million and $12.5 million in the three and six month 2007 periods, respectively, related to the contribution of five retail properties to a venture with an affiliate of The Prudential Insurance Company of America (“PREI” — see Note 5 in the Annual Report on Form 10-K for the year ended December 31, 2006). Upon venture formation, the Company began accounting for the properties on the equity method;

•

Increase of $379,000 and $1.1 million in the three and six month 2007 periods, respectively, related to the lease up of The Avenue Carriage Crossing;

•

Increase of $505,000 and $1.9 million for the three and six month 2007 periods, respectively, related to the first quarter 2006 opening of San Jose MarketCenter;

•

Increase of $1.9 million and $3.6 million for the three and six month 2007 periods, respectively, related to the August 2006 opening of The Avenue Webb Gin.

Rental property revenues from the Industrial Division increased approximately $627,000 and $1.0 million for the three and six month 2007 periods, respectively, compared to the same 2006 periods, due to the third quarter 2006 opening of King Mill Distribution Park Building 3A and the first quarter 2007 opening of the first building at Lakeside Ranch Business Park.

Rental Property Operating Expenses. Rental property operating expenses increased approximately $2.8 million and $4.4 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods as a result of the following:

	•		Increase of $3.6 million and $6.5 million in the three and six month 2007 periods, respectively, related to the aforementioned openings or lease up of The Avenue Carriage Crossing, San Jose MarketCenter, The Avenue Webb Gin, Terminus 100 and the two industrial buildings, plus the purchase of Cosmopolitan Center and the interests in the 191 Peachtree Tower office building.

	•		Increase of approximately $733,000 and $1.1 million in the three and six month 2007 periods, respectively, due to the gross up of certain reimbursements from tenants at Inforum. Prior to 2007, the Company reduced its rental property operating expenses for certain reimbursements from tenants (mainly utility overage reimbursements). The Company now records these reimbursements in both rental property revenues and rental property operating expenses.

	•		Decrease of $1.6 million and $3.3 million, respectively, in the three and six month 2007 periods as a result of the aforementioned formation of the venture with PREI and the commencement

22

of equity method accounting for the five retail centers contributed to this venture.

Fee Income. Fee income increased approximately $2.1 million and $1.8 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods. These increases are due to the following:

	•		Increase of $1.5 million and $2.0 million in the three and six month 2007 periods, respectively, related to salary and expense reimbursements for projects the Company develops or manages for third parties. Certain expenditures of the Company are reimbursed by these third parties, and this reimbursement is recognized in fee income.

	•		Increase of approximately $430,000 for both the three and six month 2007 periods related to development fee income from the Palisades joint venture, in which the Company is a 50% partner.

	•		Increase of approximately $240,000 and $479,000 for the three and six month 2007 periods, respectively, related to development fee income from the Murfreesboro joint venture, in which the Company is also a 50% partner.

	•		Decrease of $1.0 million for the six month 2007 period due to lower development fee income from the Temco Associates (“Temco”) joint venture from the 2006 sale of 855 acres of land at Temco’s Seven Hills project.

Multi-family Residential Unit Sales and Cost of Sales. Multi-family residential unit sales decreased approximately $15.1 million and $21.7 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods. Cost of sales decreased approximately $12.4 million and $17.7 million between the same periods. These decreases relate to the 2006 closings of all units in the 905 Juniper multi-family residential project.

Residential Lot and Outparcel Sales and Cost of Sales. Residential lot and outparcel sales decreased approximately $1.7 million and $4.7 million in three and six month 2007 periods, respectively, compared to the same 2006 periods. Residential lot and outparcel cost of sales decreased approximately $1.2 million and $3.2 million for the same periods. The Company recognized $382,000 in outparcel sales in both the three and six month 2006 periods and $320,000 in outparcel cost of sales for both the three and six month 2006 periods, compared to none in either category in 2007. Lot sales at the Company’s consolidated residential projects decreased from 29 lots in the second quarter of 2006 to 9 lots in the second quarter of 2007. For the year-to-date period, lots sold decreased from 87 in 2006 to 34 in 2007. The mix of sales at the various developments between years also affects the level of revenues and profits from residential lots. Consistent with current market trends, the Company anticipates a continued decline in residential lot sales for 2007 when compared to those of 2006, both at consolidated projects and at residential developments owned by Temco and CL Realty, L.L.C., entities in which the Company is a joint venture partner. The Company cannot predict with any certainty when the residential market will recover. A continued decline will have an adverse effect on lot revenues and net income.

Interest and Other. Interest and other income increased approximately $750,000 and $4.1 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods. The Company recognized $664,000 in the second quarter of 2007 from a lease termination fee at The Avenue Webb Gin, and $3.6 million in the first quarter of 2007, mainly from a lease termination fee at Inforum. A lease termination fee of $400,000 was recognized in the first quarter of 2006. The change in these fees was the main contributor to the increase in interest and other income in 2007.

General and Administrative Expenses. General and administrative expenses increased approximately $2.1 million and $3.2 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods. This increase is partially due to the following:

23

	•		Increase of approximately $1.0 million and $1.4 million in the three and six month 2007 periods, respectively, in salaries and benefits and certain office expenses charged to third party entities, for which the Company receives reimbursement.

	•		Increase of approximately $330,000 and $512,000 related to salaries and benefits, net of amounts capitalized to projects under development, due to general salary increases between 2006 and 2007.

	•		Increase of approximately $400,000 in both the three and six month 2007 periods, mainly due to an increase in legal fees. This increase was due partially to the timing of legal bills and partially to increased fees due to additional work necessary to comply with new SEC rules and regulations related to the proxy and other projects.

Depreciation and Amortization. Depreciation and amortization increased approximately $1.1 million and $2.7 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods primarily as a result of the following:

	•		Increase of approximately $3.0 million and $7.2 million in the three and six month 2007 periods, respectively, from the openings San Jose MarketCenter, The Avenue Webb Gin, the two industrial properties, and Terminus 100, and the acquisitions of Cosmopolitan Center and the ownership interests in 191 Peachtree Tower;

	•		Decrease of approximately $2.0 million and $4.0 million in the three and six month 2007 periods, respectively, for the five retail properties contributed to the venture with PREI.

Interest Expense. Interest expense decreased approximately $4.3 million and $8.0 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods as a result of the following:

	•		Decrease of $2.5 million and $5.0 million in the three and six month 2007 periods, respectively, related to the repayment of the mortgage note related to Bank of America Plaza, which was sold in 2006;

	•		Decrease of $763,000 and $1.5 million in the three and six month 2007 periods, respectively, related to the assumption of the mortgage note on The Avenue East Cobb by the aforementioned venture with PREI;

	•		Decrease in interest expense of $1.7 million and $2.7 million for the three and six month 2007 periods, respectively, related to an increase in capitalized interest to projects under development due to higher weighted average expenditures on these projects in 2007;

	•		Partially offsetting the decrease was an increase of $600,000 and $1.6 million for the three and six month 2007 periods, respectively, related to the construction facility for Terminus 100, which the Company entered into in March 2006, and under which amounts borrowed have increased.

Benefit (Provision) for Income Taxes from Operations. The provision for income taxes from operations decreased approximately $3.0 million and $6.4 million from the three and six month 2006 periods to a benefit for income taxes for the three and six month 2007 periods. Operations at Cousins Real Estate Corporation (“CREC”), the Company’s taxable REIT subsidiary, decreased to a loss before taxes between the 2006 and 2007 periods, mainly due to decreases in residential lot sales, both at consolidated projects and from the Temco and CL Realty, L.L.C. (“CL Realty”) residential joint ventures (discussed in the income from unconsolidated joint ventures section below). Multi-family residential unit profits decreased in 2007 at the 50 Biscayne project, owned 50% by CREC (discussed in the income from unconsolidated joint ventures section below), and at the 905 Juniper project (as previously mentioned in the multi-family discussion) which also contributed to the

24

decrease in income taxes. In addition, interest expense on intercompany borrowings has increased, which also contributed to the decrease in income taxes from operations.

Income from Unconsolidated Joint Ventures. Income from unconsolidated joint ventures decreased approximately $4.3 million and $12.7 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods due to the following (All amounts discussed reflect the Company’s share of joint venture income based on its ownership interest in each joint venture):

	•		Income from CSC Associates, L.P. decreased approximately $2.8 million and $5.5 million in the three and six month 2007 periods, respectively, due to the sale of Bank of America Plaza in September 2006, the single asset of this venture.

	•		Income from TRG decreased approximately $825,000 and $198,000 in the three and six month 2007 periods, respectively. TRG recognizes income on its condominium units under contract for sale using the percentage of completion method of accounting. Income fluctuates from quarter to quarter depending on the pace of construction and the number of units for which revenues are being recognized. The primary reason for the decrease between the 2007 periods compared to the 2006 periods is a slowdown in the pace of construction as this project is nearing completion. There have been recent reports about softening in the Miami, Florida condominium market. While this softening market could affect this project, 99% of the residential units are under non-cancelable contracts, and some of the units have been re-sold in the secondary market for prices in excess of the original contract amount. The Company anticipates commencing unit sales closings in the fourth quarter of 2007.

	•		Income from Temco decreased approximately $600,000 and $4.4 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods due to the sale of 855 acres of land at the venture’s Seven Hills project in the first quarter of 2006, which generated a gain to the Company of $3.2 million, and to a decrease in the number of lots sold from 272 in the first half of 2006 to 45 in the same 2007 period.

	•		Income from CL Realty decreased approximately $301,000 and $2.2 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods due to a decrease in lots sold from 484 in the first half of 2006 to 221 in the same 2007 period.

	•		Income from Brad Cous Golf Venture, Ltd. decreased approximately $1.1 million in the six month 2007 period compared to the same 2006 period due to the sale of and resultant gain from the Shops of World Golf Village, an 80,000 square foot retail project which this venture owned.

Gain on Sale of Investment Properties. The 2007 gain consisted primarily of the sale of undeveloped land near the Company’s Avenue Carriage Crossing project. The 2006 gain consisted primarily of the sale of undeveloped land at the North Point/Westside project.

Discontinued Operations. Income from discontinued operations (including gain on sale of investment properties) increased approximately $2.3 million and $7.7 million in the three and six month 2007 periods, respectively, compared to the same 2006 periods. In the second quarter 2006, The Avenue of the Peninsula terminated a lease and recorded a loss relating to the acceleration of the amortization of the lease-related assets, compared to no loss from discontinued operations in 2007. The increase in the six month 2007 period is mainly the result of the gain recognized upon the 2007 sale of the five sites under ground lease at the Company’s North Point project, compared to no sales in the same 2006 period.

Discussion of New Accounting Pronouncements. In November 2006, FASB ratified the consensus in EITF No. 06-08, “Applicability of the Assessment of a Buyer’s Continuing Investment under FASB Statement No. 66, Accounting for Sales of Real Estate, for Sales of Condominiums”(“EITF 06-08”), which provides guidance for determining the adequacy of a buyer’s continuing investment and the appropriate profit recognition in the sale of individual units in a condominium

25

project. EITF 06-08 requires that companies evaluate the adequacy of a buyer’s continuing investment in recognizing condominium revenues on the percentage of completion method by applying paragraph 12 of Statement No. 66 to the level and timing of deposits received on contracts for condominium sales. This rule is effective for the Company on January 1, 2008, although earlier adoption is permitted. The Company does not anticipate the impact of adopting EITF 06-08 will have a material effect on its financial position or results of operations for current projects, but anticipates that the accounting under EITF 06-08 will have a material effect on the timing of revenue recognition for any future multi-family residential projects the Company undertakes.

Funds From Operations. The following table shows Funds From Operations Available to Common Stockholders (“FFO”) and the related reconciliation to net income available to common stockholders for the Company. The Company calculated FFO in accordance with the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition, which is net income available to common stockholders (computed in accordance with accounting principles generally accepted in the United States (“GAAP”)), excluding extraordinary items, cumulative effect of change in accounting principle and gains or losses from sales of depreciable property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

FFO is used by industry analysts and investors as a supplemental measure of an equity REIT’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income. The use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Company management evaluates the operating performance of its reportable segments and of its divisions based in part on FFO. Additionally, the Company uses FFO and FFO per share, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and employees. The reconciliation of net income available to common stockholders to funds from operations is as follows ($ in thousands):

26


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Net Income (Loss) Available to Common Stockholders	$	395		$	(3,483	)	$	14,802		$	4,912
Depreciation and amortization:
Consolidated properties		8,721			7,655			18,082			15,340
Discontinued properties		(14	)		6,034			145			9,172
Share of unconsolidated joint ventures		1,089			2,016			2,170			4,078
Depreciation of furniture, fixtures and equipment and amortization of specifically identifiable intangible assets:
Consolidated properties		(758	)		(868	)		(1,259	)		(1,689	)
Share of unconsolidated joint ventures		—			(4	)		—			(8	)
Gain on sale of investment properties, net of applicable income tax provision:
Consolidated		(40	)		(61	)		(4,480	)		(866	)
Discontinued properties		—			(135	)		(8,164	)		(326	)
Share of unconsolidated joint ventures		(10	)		(1	)		34			(1,054	)
Gain (loss) on sale of undepreciated investment properties		—			(5	)		12,540			735


Funds From Operations Available to Common Stockholders, as defined	$	9,383		$	11,148		$	33,870		$	30,294

Loss on extinguishment of debt		—			2,764			—			2,764


Funds From Operations Available to Common Stockholders, Excluding Loss on Extinguishment of Debt	$	9,383		$	13,912		$	33,870		$	33,058

Liquidity and Capital Resources:

Financial Condition.

The Company had a significant number of projects in its development pipeline at June 30, 2007 and does not expect the number of projects or the amounts invested in development projects to decrease in the near term. The Company has one existing office building included in operating properties on its Condensed Consolidated Balance Sheet that will require capital to effect leasing and redevelopment activities. The Company also has a large amount of undeveloped land, both consolidated and at unconsolidated joint ventures, which may progress into development projects in the remainder of 2007. Additionally, the Company and its joint ventures sold a significant number of operating properties in the last several years, some of which have been replaced by the completion of properties previously under development. The Company intends to obtain additional capital in the remainder of 2007 in order to fund development. Management believes that this capital may be secured through one or more of the following alternatives: additional borrowings, formations of joint ventures, capital transactions, and the selective and strategic sale of mature operating properties or parcels of land held for investment. The financial condition of the Company is discussed in further detail below.

At June 30, 2007, the Company was subject to the following contractual obligations and commitments ($ in thousands):

27


			Less than						After
	Total		1 Year		1-3 Years		4-5 Years		5 years
Contractual Obligations:
Company long-term debt
Unsecured notes payable and construction loans	$	360,334	$	313	$	360,021	$	—	$	—
Mortgage notes payable		117,637		2,041		12,486		87,213		15,897
Interest commitments under notes payable (1)		93,440		30,093		51,639		8,669		3,039
Operating leases (ground leases)		15,296		90		188		198		14,820
Operating leases (all other)		1,493		428		800		228		37

Total Contractual Obligations	$	588,200	$	32,965	$	425,134	$	96,308	$	33,793


Commitments:
Letters of Credit	$	1,100	$	1,100	$	—	$	—	$	—
Performance bonds		19,450		18,683		767		—		—
Estimated Development Commitments		498,693		295,626		196,945		6,122		—
Unfunded tenant improvements		4,349		4,349		—		—		—

Total Commitments	$	523,592	$	319,758	$	197,712	$	6,122	$	—


(1)		Interest on variable rate obligations is based on rates effective as of June 30, 2007

The Company expects indebtedness to be the primary funding source for its contractual obligations and commitments. The Company’s credit facility can be expanded to $500 million under certain circumstances, although the availability of the additional capacity is not guaranteed. As of June 30, 2007, the Company had $267.3 million drawn on its $400 million credit facility. The amount available under this credit facility is reduced by outstanding letters of credit, which were approximately $1.1 million at June 30, 2007. The Company’s interest rate on its credit facility is variable based on LIBOR plus a spread based on certain of the Company’s ratios and other factors. As of June 30, 2007, the spread over LIBOR was 0.80%.

The Company also has a $100 million construction facility. While this facility is unsecured, advances under the facility are to be used to fund the construction costs of the Terminus 100 project. As of June 30, 2007, the Company had $85.7 million drawn on its construction facility.

On June 1, 2007, the Company refinanced its non-recourse mortgage note payable secured by the 100 and 200 North Point Center East office buildings. The new $25 million non-recourse mortgage note payable has an interest rate of 5.39% and a maturity date of June 1, 2012. This note replaced the former non-recourse mortgage note payable on these properties, which was due to mature on August 1, 2007 and had an interest rate of 7.86%.

The Company’s mortgage debt is primarily non-recourse fixed-rate mortgage notes secured by various real estate assets. In addition, many of the Company’s non-recourse mortgages contain covenants which, if not satisfied, could result in acceleration of the maturity of the debt. The Company expects that it will either refinance the non-recourse mortgages at maturity or repay the mortgages with proceeds from other financings.

As of June 30, 2007, the weighted average interest rate on the Company’s consolidated debt was 6.38%, and the Company’s consolidated debt to total market capitalization ratio was 21.9%.

As part of its strategy to raise additional capital for development projects, the Company has initiated a process that includes amending its existing credit facility to provide additional capacity by increasing the maximum amount of the facility and expanding the borrowing base of the facility. Management also has begun the process of obtaining long-term mortgage financing on three of its existing properties. Management expects the mortgage financing to be approximately $400 million for the three properties and expects to close on these financings in the third and fourth quarters of 2007. However, there can be no assurance that the Company will be able to amend its existing credit facility or close any or all of these loans.

In order to bridge any potential gap in the timing of its need for additional capital and the closing of the financings noted above, in July 2007, the Company closed a $100 million bridge loan that matures on October 9, 2007 with an option to extend to January 9, 2008. The loan bears interest

28

at LIBOR plus 0.75% and contains the same financial and operating covenants as its existing line of credit.

The Company may also generate capital through the issuance of securities that includes, but is not limited to, preferred stock under an existing shelf registration statement. As of June 30, 2007, the Company had approximately $100 million available for issuance under this registration statement.

Over the long term, the Company will continue to actively manage its portfolio of income producing properties and strategically sell assets to capture value for stockholders and to recycle capital for future development activities. The Company will continue to utilize indebtedness to fund future commitments and expects to place long-term permanent mortgages on selected assets as well as utilize construction facilities for other development assets. The Company may enter into additional joint venture arrangements to help fund future developments and may enter into additional structured transactions with third parties. While the Company does not foresee the need to issue common equity in the future, it will evaluate all public equity sources and select the most appropriate options as capital is required.

The Company’s business model is highly dependent upon raising capital to meet development obligations. If one or more sources of capital are not available when required, the Company may be forced to raise capital on potentially unfavorable terms which could have an adverse effect on the Company’s financial position or results of operations.

Cash Flows.

Cash Flows from Operating Activities. Cash flows provided by operating activities decreased $59.1 million between the six months ended June 30, 2006 and the corresponding 2007 period. The primary reason for the decrease was a decrease in cash flows from properties that were sold or contributed to ventures in 2006, including Frost Bank Tower, Bank of America Plaza and the properties contributed to the venture with PREI. These decreases were partially offset by cash flows from the 191 Peachtree acquisition in 2006. Another reason for the decrease in cash flows from operating activities was lower sales of consolidated multi-family and residential projects. The Company completed construction and sold all of the units in its 905 Juniper multi-family residential project during 2006. The Company began construction of another multi-family project in the second quarter of 2007, 10 Terminus Place, but none of these unit sales have closed, thereby causing a decrease in proceeds from multi-family sales and an increase in development and acquisition expenditures. In addition, there was a 2007 decrease in distributions in excess of income from unconsolidated joint ventures, mainly due to decreased distributions from residential joint ventures, which also contributed to the decrease in cash flows from operations

Cash Flows from Investing Activities. Net cash provided by investing activities decreased $132.4 million between the six months ended June 30, 2006 and the corresponding 2007. This decrease is mainly the result of lower proceeds from venture formation, as the Company formed the venture with PREI in June 2006. In addition, the Company had higher property acquisition and development expenditures in the 2007 period and received lower capital distributions from joint ventures. Partially offsetting the investing activities cash flow change was higher proceeds received in 2007 compared to 2006 for investment property sales, due to the 2007 sale of the North Point ground leased parcels and the sale of land adjacent to The Avenue Carriage Crossing.

Cash Flows from Financing Activities. Cash flows from financing activities increased $190.1 million between the six months ended June 30, 2006 and the corresponding 2007 period. The primary reason for the increase was higher net borrowings under the Company’s credit and construction facilities over the first half of 2006 by approximately $173.7 million, mainly due to increased development and acquisition costs. Also contributing to the increase was the repayment in 2006 of the 905 Juniper construction loan. Partially offsetting the increase was the purchase of treasury shares of $7.7 million in 2007, compared to none in 2006.

29

During the six months ended June 30, 2007, the Company paid common and preferred dividends of $46.1 million which it funded with cash provided by operating activities and with proceeds from investment property sales and the venture formation. During the 2006 period, the Company paid common and preferred dividends of $45.2 million which it funded with cash provided by operating activities. For the foreseeable future, the Company intends to fund its quarterly distributions to common and preferred stockholders with cash provided by operating activities, a portion of proceeds from investment property sales and a portion of distributions from unconsolidated joint ventures in excess of income.

Off Balance Sheet Arrangements

The Company has a number of off balance sheet joint ventures with varying structures. At June 30, 2007, the Company’s unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of approximately $463.1 million of which the Company’s share was $198.6 million. These loans are generally mortgage or construction loans most of which are non-recourse to the Company. In certain instances, the Company provides “non-recourse carve-out guarantees” on these non-recourse loans.

One of the Company’s ventures, CF Murfreesboro, which is constructing a retail center, has a $131 million construction loan that matures on July 20, 2010, of which the venture has drawn approximately $60.3 million. The Company guarantees 20% of the amount outstanding under the construction loan, which equals approximately $12.0 million at June 30, 2007. The retail center under construction serves as collateral against the loan, and the Company is liable for 20% of any difference between the proceeds from the sale of the retail center and the amounts due under the loan in the event of default. The Company has not recorded a liability as of June 30, 2007, as it estimates no obligation is or will be required. The unconsolidated joint ventures also had performance bonds which the Company guarantees totaling approximately $1.6 million at June 30, 2007.

Several of these ventures are involved in the active acquisition and development of real estate. As capital is required to fund the acquisition and development of this real estate, the Company must fund its share of the costs not funded by operations or outside financing. Based on the nature of the activities conducted in these ventures, management cannot estimate with any degree of accuracy amounts that the Company may be required to fund in the short or long-term. However, management does not believe that additional funding of these ventures will have a material adverse effect on its financial condition or results of operation.

Critical Accounting Policies

There has been no material change in the Company’s critical accounting policies from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the Company’s market risk related to its notes payable and notes receivable from that disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and

30

procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives. We also have investments in certain unconsolidated entities. As we do not always control or manage these entities, our disclosure controls and procedures with respect to such entities are necessarily more limited than those we maintain with respect to our consolidated subsidiaries.

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer along with the Chief Financial Officer, of the effectiveness, design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon the foregoing, the Chief Executive Officer along with the Chief Financial Officer concluded that our disclosure controls and procedures are effective at providing reasonable assurance that all material information required to be included in our Exchange Act reports is reported in a timely manner. In addition, based on such evaluation we have identified no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to routine actions for negligence and other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material impact on the financial condition or results of operations of the Company.

Item 1A. Risk Factors

There has been no material change in the Company’s risk factors from those outlined in Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table contains information about the Company’s purchases of its equity securities during the second quarter of 2007:


	PURCHASES RELATED TO OPTIONS				TREASURY STOCK PURCHASES
					Total Number of				Maximum Number
					Shares Purchased as				of Shares That May
	Total Number of		Average Price Paid		Part of Publicly		Average Price		Yet Be Purchased
	Shares Purchased (1)		Per Share (1)		Announced Plan (2)		Paid Per Share		Under Plan (2)
April 1-30		—		—		—	$	—		5,000,000
May 1-31		—		—		—		—		5,000,000
June 1-30		—		—		250,000		30.79		4,750,000

Total		—		—		250,000	$	30.79		4,750,000


(1)		There were no purchases of equity securities during the second quarter of 2007 related to remittances of shares of stock for option exercises or taxes due thereon.

(2)		On May 9, 2006, the Board of Directors of the Company authorized a stock repurchase plan, which expires May 9, 2009, of up to 5,000,000 shares of the Company’s common stock. The Company purchased 250,000 shares under this plan in the second quarter of 2007.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Submission of Matters to a Vote of Security Holders

The Company’s Annual Meeting of Stockholders was held on May 14, 2007. The following proposals were adopted by the stockholders of the Company at the annual meeting:

(i)

The election of nine Directors.

The vote on the above was:


			Withheld
	For		Authority
Thomas D. Bell, Jr.		48,945,583		380,494
Erskine B. Bowles		49,101,505		224,572
James D. Edwards		49,245,753		80,324
Lillian C. Giornelli		49,080,003		246,074
S. Taylor Glover		47,546,322		1,779,755
James H. Hance, Jr.		49,115,957		210,120
William B. Harrison, Jr.		49,137,183		188,894
Boone A. Knox		48,307,453		1,018,624
William Porter Payne		48,815,115		510,962

	(ii)		A proposal to approve an amendment to the 1999 Incentive Stock Plan to increase the number of shares of common stock available under the 1999 Incentive Stock Plan by 900,000 shares.

			The vote on the above was:


For			32,348,433
Against			7,394,222
Abstain			331,969
Broker Non-Votes			9,251,453

	(iii)		A proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007.

			The vote on the above was:


For			48,880,218
Against			417,749
Abstain			28,110

Item 5. Other Information

None.

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Item 6. Exhibits


			3.1			Restated and Amended Articles of Incorporation of the Registrant, as amended August 9, 1999, filed as Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference.

			3.1.1			Restated and Amended Articles of Incorporation of the Registrant, as amended December 15, 2004, filed as Exhibit 3(a)(I) to Registrant’s Form 10-K for the year ended December 31, 2004, and incorporated herein by reference.

			3.2			Bylaws of the Registrant, as amended April 29, 1993, filed as Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference.

			10.1			Form of Indemnification Agreement, filed as Exhibit 10.1 to the Registrant’s Form 8-K on June 20, 2007 and incorporated herein by reference.

			10.2			Cousins Properties Incorporated 1999 Incentive Stock Plan, as amended and restated, approved by the stockholders on May 14, 2007, filed as Annex B to the Company’s proxy statement dated April 13, 2007, an incorporated herein by reference.

			11			Computation of Per Share Earnings*

			31.1			Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

			31.2			Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

			32.1			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

			32.2			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Data required by SFAS No. 128, “Earnings Per Share,” is provided in Note 4 to the condensed consolidated financial statements included in this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	COUSINS PROPERTIES INCORPORATED
	/s/ James A. Fleming
	James A. Fleming
	Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

August 9, 2007

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Cousins Properties - 10-Q quarterly report FY

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