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