COUSINS PROPERTIES INC - Quarter Report: 2010 March (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

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

Commission file number: 001-11312

COUSINS PROPERTIES INCORPORATED

(Exact name of registrant as specified in its charter)

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

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

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

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

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o

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

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

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

Class		Outstanding at May 5, 2010
Common Stock, $1 par value per share		100,866,360 shares

 

 

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION		4
Item 1. Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. Quantitative and Qualitative Disclosures about Market Risk		29
Item 4. Controls and Procedures		29
PART II — OTHER INFORMATION		29
Item 1. Legal Proceedings		29
Item 1A. Risk Factors		29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults upon Senior Securities		30
Item 4. (Removed and Reserved)		30
Item 5. Other Information		30
Item 6. Exhibits		31
SIGNATURES		32
EX-31.1
EX-31.2
EX-32.1
EX-32.2

FORWARD-LOOKING STATEMENTS

     Certain matters contained in this report are “forward-looking statements” within the meaning of the federal securities laws and are subject to uncertainties and risks, as itemized in Item 1A included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. These forward-looking statements include information about possible or assumed future results of the Company’s business and the Company’s financial condition, liquidity, results of operations, plans and objectives. They also include, among other things, statements regarding subjects that are forward-looking by their nature, such as:

•		the Company’s business and financial strategy;
•		the Company’s ability to obtain future financing arrangements;
•		the Company’s understanding of its competition and its ability to compete effectively;
•		projected operating results;
•		market and industry trends;
•		estimates relating to future distributions;
•		projected capital expenditures; and
•		interest rates.

     The forward-looking statements are based upon management’s beliefs, assumptions and expectations of the Company’s future performance, taking into account information currently available. These beliefs, assumptions and expectations may change as a result of many possible events or factors, not all of which are known. If a change occurs, the Company’s business, financial condition, liquidity and results of operations may vary materially from those expressed in forward-looking statements. Actual results may vary from forward-looking statements, due to, but not limited to, the following:

•		availability and terms of capital and financing, both to fund operations and to refinance indebtedness as it matures;
•		risks and uncertainties related to the national and local economic conditions, the real estate industry in general and in specific markets, and the commercial, residential and condominium markets in particular;
•		the potential for recognition of additional impairments due to continued adverse market and economic conditions;
•		leasing risks, including an inability to obtain new tenants or renew tenants on favorable terms, or at all, upon the expiration of existing leases and the ability to lease newly developed or currently unleased space;
•		financial condition of existing tenants;
•		rising interest and insurance rates;
•		the availability of sufficient development or investment opportunities;
•		competition from other developers or investors;
•		the risks associated with development projects (such as construction delay, cost overruns and leasing/sales risk of new properties);
•		potential liability for uninsured losses, condemnation or environmental liability;
•		potential liability for a failure to meet regulatory requirements;
•		the financial condition and liquidity of, or disputes with, joint venture partners;
•		any failure to comply with debt covenants under credit agreements; and
•		any failure to continue to qualify for taxation as a real estate investment trust.

     The words “believes,” “expects,” “anticipates,” “estimates,” “plans,” “may,” “intend,” “will” or similar expressions are intended to identify forward-looking statements. Although the Company believes its plans, intentions and expectations reflected in any forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions or expectations will be achieved. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise, except as required under U.S. federal securities laws.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

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

		March 31, 2010				December 31, 2009
		(Unaudited)
ASSETS
PROPERTIES:
Operating properties, net of accumulated depreciation of $246,129 and $233,091 in 2010 and 2009, respectively		$	991,762			$	1,006,760
Land held for investment or future development			135,313				137,233
Residential lots			62,894				62,825
Multi-family units held for sale			21,295				28,504
Total properties			1,211,264				1,235,322
CASH AND CASH EQUIVALENTS			30,349				9,464
RESTRICTED CASH			3,128				3,585
NOTES AND OTHER RECEIVABLES, net of allowance for doubtful accounts of $6,400 and $5,734 in 2010 and 2009, respectively			45,775				49,678
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES			145,352				146,150
OTHER ASSETS			49,609				47,353
TOTAL ASSETS		$	1,485,477			$	1,491,552
LIABILITIES AND EQUITY
NOTES PAYABLE		$	580,979			$	590,208
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES			61,688				56,577
DEFERRED GAIN			4,393				4,452
DEPOSITS AND DEFERRED INCOME			9,615				7,465
TOTAL LIABILITIES			656,675				658,702
COMMITMENTS AND CONTINGENT LIABILITIES
REDEEMABLE NONCONTROLLING INTERESTS			12,689				12,591
STOCKHOLDERS’ INVESTMENT:
Preferred stock, 20,000,000 shares authorized, $1 par value:
7.75% Series A cumulative redeemable preferred stock, $25 liquidation preference; 2,993,090 shares issued and outstanding in 2010 and 2009			74,827				74,827
7.50% Series B cumulative redeemable preferred stock, $25 liquidation preference; 3,791,000 shares issued and outstanding in 2010 and 2009			94,775				94,775
Common stock, $1 par value, 150,000,000 shares authorized, 104,436,442 and 103,352,382 shares issued in 2010 and 2009, respectively			104,436				103,352
Additional paid-in capital			667,597				662,216
Treasury stock at cost, 3,570,082 shares in 2010 and 2009			(86,840	)			(86,840	)
Accumulated other comprehensive loss on derivative instruments			(9,549	)			(9,517	)
Distributions in excess of net income			(61,956	)			(51,402	)
TOTAL STOCKHOLDERS’ INVESTMENT			783,290				787,411
Nonredeemable noncontrolling interests			32,823				32,848
TOTAL EQUITY			816,113				820,259
TOTAL LIABILITIES AND EQUITY		$	1,485,477			$	1,491,552

See notes to condensed consolidated financial statements.

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

		Three Months Ended March 31,
		2010				2009
REVENUES:
Rental property revenues		$	37,213			$	37,509
Fee income			8,338				8,044
Multi-family residential unit sales			10,146				—
Residential lot and outparcel sales			13,819				2,548
Interest and other			124				986
			69,640				49,087
COSTS AND EXPENSES:
Rental property operating expenses			15,184				17,313
Multi-family residential unit cost of sales			7,970				—
Residential lot and outparcel cost of sales			9,096				1,730
General and administrative expenses			9,950				9,418
Separation expenses			68				344
Reimbursed general and administrative expenses			4,418				4,228
Depreciation and amortization			13,895				13,056
Interest expense			9,781				10,430
Other			1,328				1,546
			71,690				58,065
LOSS ON EXTINGUISHMENT OF DEBT			(592	)			—
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES, UNCONSOLIDATED JOINT VENTURES AND SALE OF INVESTMENT PROPERTIES			(2,642	)			(8,978	)
BENEFIT FOR INCOME TAXES FROM OPERATIONS			1,146				3,941
INCOME FROM UNCONSOLIDATED JOINT VENTURES			2,920				1,820
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES			1,424				(3,217	)
GAIN ON SALE OF INVESTMENT PROPERTIES			756				167,434
INCOME FROM CONTINUING OPERATIONS			2,180				164,217
LOSS FROM DISCONTINUED OPERATIONS			—				(7	)
NET INCOME			2,180				164,210
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS			(526	)			(412	)
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST			1,654				163,798
DIVIDENDS TO PREFERRED STOCKHOLDERS			(3,227	)			(3,227	)
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS		$	(1,573	)		$	160,571
NET INCOME (LOSS) PER COMMON SHARE — BASIC AND DILUTED		$	(0.02	)		$	3.13
DIVIDENDS DECLARED PER COMMON SHARE		$	0.09			$	0.25
WEIGHTED AVERAGE SHARES — BASIC AND DILUTED			100,069				51,350

See notes to condensed consolidated financial statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Three Months Ended March 31, 2010 and 2009
(Unaudited, in thousands)

																		Accumulated				Cumulative
																		Other				Undistributed
																		Comprehensive				Net Income
										Additional								Income (Loss)				(Distributions in				Total				Nonredeemable
		Preferred				Common				Paid-In				Treasury				on Derivative				Excess of				Stockholders’				Noncontrolling
		Stock				Stock				Capital				Stock				Instruments				Net Income)				Investment				Interests				Total Equity
Balance December 31, 2009		$	169,602			$	103,352			$	662,216			$	(86,840	)		$	(9,517	)		$	(51,402	)		$	787,411			$	32,848			$	820,259
Net income			—				—				—				—				—				1,654				1,654				548				2,202
Change in fair value of derivative instruments			—				—				—				—				(32	)			—				(32	)			—				(32	)
Total comprehensive income			—				—				—				—				(32	)			1,654				1,622				548				2,170
Common stock issued pursuant to stock dividend and other			—				820				5,137				—				—				(5,984	)			(27	)			—				(27	)
Restricted stock grant, net of amortization			—				264				(144	)			—				—				—				120				—				120
Amortization of stock options, net of forfeitures			—				—				388				—				—				—				388				—				388
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(573	)			(573	)
Cash preferred dividends paid			—				—				—				—				—				(3,227	)			(3,227	)			—				(3,227	)
Cash common dividends paid			—				—				—				—				—				(2,997	)			(2,997	)			—				(2,997	)
Balance March 31, 2010		$	169,602			$	104,436			$	667,597			$	(86,840	)		$	(9,549	)		$	(61,956	)		$	783,290			$	32,823			$	816,113
Balance December 31, 2008		$	169,602			$	54,922			$	368,829			$	(86,840	)		$	(16,601	)		$	(23,189	)		$	466,723			$	37,539			$	504,262
Net income			—				—				—				—				—				163,798				163,798				624				164,422
Change in fair value of derivative instruments			—				—				—				—				480				—				480				—				480
Total comprehensive income			—				—				—				—				480				163,798				164,278				624				164,902
Common stock issued pursuant to grants under director stock plan			—				—				(90	)			—				—				—				(90	)			—				(90	)
Amortization of stock options and restricted stock, net of forfeitures			—				(10	)			926				—				—				—				916				—				916
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(5,320	)			(5,320	)
Change in fair value of redeemable noncontrolling interests			—				—				—				—				—				(180	)			(180	)			—				(180	)
Preferred dividends paid			—				—				—				—				—				(3,227	)			(3,227	)			—				(3,227	)
Common dividends paid			—				—				—				—				—				(12,838	)			(12,838	)			—				(12,838	)
Balance March 31, 2009		$	169,602			$	54,912			$	369,665			$	(86,840	)		$	(16,121	)		$	124,364			$	615,582			$	32,843			$	648,425

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

		Three Months Ended March 31,
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	2,180			$	164,210
Adjustments to reconcile net income to net cash flows provided by operating activities:
Gain on sale of investment properties			(756	)			(167,434	)
Loss on extinguishment of debt			592				—
Depreciation and amortization			13,895				13,056
Amortization of deferred financing costs			407				408
Stock-based compensation			508				916
Change in deferred income taxes, net of valuation allowance			—				(3,941	)
Effect of recognizing rental revenues on a straight-line or market basis			(988	)			(1,182	)
Income from unconsolidated joint ventures			(2,920	)			(1,820	)
Operating distributions from unconsolidated joint ventures			2,461				2,124
Residential lot, outparcel and multi-family cost of sales, net of closing costs paid			15,778				1,730
Residential lot, outparcel and multi-family acquisition and development expenditures			(428	)			(1,483	)
Changes in other operating assets and liabilities:
Change in other receivables and other assets, net			(1,695	)			381
Change in accounts payable and accrued liabilities			3,040				(2,780	)
Net cash provided by operating activities			32,074				4,185
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment property sales			10,023				673
Property acquisition and development expenditures			(4,279	)			(15,114	)
Investment in unconsolidated joint ventures			(1,022	)			(1,751	)
Distributions from unconsolidated joint ventures			2,279				1,571
Investment in notes receivable, net			—				(17	)
Change in other assets			(1,067	)			(878	)
Change in restricted cash			457				(913	)
Net cash provided by (used in) investing activities			6,391				(16,429	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility			—				82,200
Repayment of credit facility			—				(71,200	)
Payment of loan issuance costs			(1,647	)			—
Repayment of other notes payable			(9,229	)			(560	)
Common stock issuance costs			(27	)			(90	)
Cash common dividends paid			(2,997	)			(12,838	)
Cash preferred dividends paid			(3,227	)			(3,227	)
Contributions from noncontrolling interests			120				—
Distributions to noncontrolling interests			(573	)			(5,342	)
Net cash used in financing activities			(17,580	)			(11,057	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			20,885				(23,301	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			9,464				82,963
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	30,349			$	59,662

See notes to condensed consolidated financial statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(UNAUDITED)

1. BASIS OF PRESENTATION AND NEW ACCOUNTING PRONOUNCEMENTS

Basis of Presentation

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

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

     The condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, these financial statements reflect all adjustments necessary (which adjustments are of a normal and recurring nature) for the fair presentation of the Company’s financial position as of March 31, 2010 and results of operations for the three months ended March 31, 2010 and 2009. Results of operations for the three months ended March 31, 2010 are not necessarily indicative of results expected for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The accounting policies employed are materially the same as those shown in Note 2 to the consolidated financial statements included in such Form 10-K, with the addition of the following new accounting pronouncement.

New Accounting Pronouncement

     The Company follows the guidelines in Accounting Standards Codification (“ASC”) 810, (as amended by Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R)), for determining the appropriate consolidation treatment of non-wholly owned entities. The Company adopted new guidelines effective January 1, 2010, which modify how a company determines that an entity is a variable interest entity (“VIE”) and when that entity is consolidated. Variable interest holders who have the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and have the obligation to absorb the majority of losses of the entity or the right to receive significant benefits of the entity are considered to be the primary beneficiary. The primary beneficiary of a VIE must consolidate the VIE. When the Company is the primary beneficiary of a VIE, the new guidance also requires ongoing reassessments of this conclusion, not just upon the occurrence of certain events. Additional disclosures about the Company’s involvement in VIEs, including any significant changes in risk exposure due to that involvement, are required under the new guidelines. The impact of the adoption of these new guidelines did not result in any entities which were previously determined not to be VIEs to be VIEs

and had no effect on the Company’s financial condition, results of operations or cash flows. Additional disclosures as required upon adoption of the new guidelines regarding the Company’s VIEs are as follows:

     Cousins/Callaway, LLC (“Cousins/Callaway”), a 50-50 joint venture between the Company and Callaway Gardens Resort, Inc. (“Callaway”), develops residential lots within The Callaway Gardens Resort outside of Atlanta, Georgia. The project is anticipated to be funded fully through Company contributions, and Callaway has no obligation to fund any costs. Although the Company is contributing all of the equity to the venture, Callaway has the right to receive returns from the project, but absorbs no losses. The Company has determined that Cousins/Callaway is a VIE. The Company is the sole decision maker for the venture and is also the development manager. Since the Company has the power to direct the activities that could be significant to the VIE, the Company is the primary beneficiary and consolidates the venture. As March 31, 2010 and December 31, 2009, the assets of Cousins/Callaway equaled approximately $15.8 million, and there were no significant liabilities.

     Handy Road Associates, LLC (“Handy Road”) is a 50-50 joint venture which owns 1,187 acres of land in suburban Atlanta, Georgia, intended for future development and/or sale. In 2009, the Company’s partner in Handy Road indicated it will not make further capital contributions to the venture. In addition, the Company determined the partner would not receive any of the economic benefits of the entity. Therefore, Handy Road has been determined to be a VIE, with the Company as the primary beneficiary. As a result of this determination, the Company consolidates the entity. The creditors of Handy Road have recourse only against the assets of Handy Road and do not have recourse against the Company. As of March 31, 2010 and December 31, 2009, Handy Road had approximately $5.4 million in assets and $3.4 million in notes payable.

     Terminus 200 LLC (“T200”) is a 50-50 joint venture that was formed to develop and operate an office building in Atlanta, Georgia. Since the equity at risk is not sufficient to permit T200 to finance its activities without additional subordinated financial support, T200 is a VIE. It was determined that neither partner is the primary beneficiary, as both the Company and its joint venture partner have shared control, and therefore the Company accounts for its investment using the equity method. The Company’s basis in T200 is zero as of March 31, 2010 and December 31, 2009. See Note 5 for additional information related to this venture.

Reclassifications

     In the periods prior to the second quarter of 2009, the Company included separation payments to terminated employees within the general and administrative expense line item. Beginning in the second quarter of 2009, these amounts were segregated on the Condensed Consolidated Statements of Income and prior period amounts have been revised to conform to this new presentation.

2. NOTES PAYABLE, INTEREST EXPENSE AND COMMITMENTS AND CONTINGENCIES

     The following table summarizes the terms and amounts of the notes payable outstanding at March 31, 2010 and December 31, 2009 (in thousands):

				Term/
				Amortization				Outstanding at
Description		Interest Rate		Period (Years)		Maturity		March 31, 2010				December 31, 2009
Credit Facility, unsecured (see note)		LIBOR + 1.75% to 2.25%		4/N/A		8/29/11		$	40,000			$	40,000
Term Facility, unsecured (see note)		Swapped rate of 5.01% + 1.75% to 2.25%		5/N/A		8/29/12			100,000				100,000
Terminus 100 mortgage note (interest only)		6.13%		5/N/A		10/1/12			180,000				180,000
The American Cancer Society Center mortgage note (interest only until October 1, 2011)		6.4515%		5/30		9/1/17			136,000				136,000
333/555 North Point Center East mortgage note		7.00%		10/25		11/1/11			27,074				27,287
Meridian Mark Plaza mortgage note		8.27%		10/28		9/1/10			22,153				22,279
100/200 North Point Center East mortgage note (interest only until July 1, 2010)		5.39%		5/30		6/1/12			25,000				25,000
The Points at Waterview mortgage note		5.66%		10/25		1/1/16			16,918				17,024
600 University Park Place mortgage note		7.38%		10/30		8/10/11			12,477				12,536
Lakeshore Park Plaza mortgage note		5.89%		4/25		8/1/12			17,815				17,903
Glenmore Garden Villas, LLC (see note)		LIBOR + 2.25%		3/N/A		10/3/10			—				8,674
Handy Road Associates, LLC (see note)		Prime + 1%, but not < 6%		5/N/A		3/30/11			3,374				3,340
Other miscellaneous notes		Various		Various		Various			168				165
								$	580,979			$	590,208

     In the first quarter of 2010, the Company sold its interest in Glenmore Garden Villas, LLC (“Glenmore”), a townhome development in Charlotte, North Carolina. In connection with this sale, Glenmore repaid the $8.7 million outstanding construction loan on the project. Also in the first quarter of 2010, the Handy Road note payable was extended for one year, to March 30, 2011, at an interest rate of Prime plus 1%, with a minimum interest rate of 6%.

     Credit Facility Amendment

     In February 2010, the Company entered into a First Amendment (the “Amendment”) of its Credit and Term Facilities with Bank of America and the other participating banks. The Amendment reduced the amount available under the Credit Facility from $500 million to $250 million. The amount available under the Term Facility remained at $100 million. If the Term Facility is repaid prior to the maturity of the Credit Facility, the availability under the Credit Facility will increase correspondingly, allowing a total availability under the combined Facilities of $350 million. The maturity dates for both Facilities remain the same under the Amendment.

     Amounts outstanding under the Credit and Term Facilities accrue interest at LIBOR plus a spread. The Amendment changed the spread for the Credit and Term Facilities, as detailed below:

		Credit and Term Facilities				Credit Facility				Term Facility Applicable
		Applicable Spread — As				Applicable Spread —				Spread — Before
Leverage Ratio		Amended				Before Amendment				Amendment
< 35%			1.75	%			0.75	%			0.70	%
>35% but < 45%			2.00	%			0.85	%			0.80	%
>45% but < 50%			2.25	%			0.95	%			0.90	%
>50% but < 55’%			2.25	%			1.10	%			1.05	%
>55%			N/A				1.25	%			1.20	%

     At March 31, 2010, the spread over LIBOR was 2.0%. Certain covenants changed under the Amendment, specifically, the minimum Consolidated Fixed Charge Coverage Ratio, as defined, decreased from 1.50 to 1.30. Other covenants and fees were also amended. The Company incurred an administrative fee of approximately $1.6 million related to the Amendment, and expensed unamortized deferred loan costs related to the previous facility of $592,000.

     Derivative Instruments and Hedging Activities

     The Company follows the requirements of ASC 815 for derivative instruments. Entities that use derivative instruments are required to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. Entities are also required to disclose certain information about the amounts and location of derivatives located within the financial statements, how the provisions of derivative accounting rules have been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows.

     The Company utilizes interest rate swap agreements to manage its exposure to interest rate changes under variable-rate obligations. The Company has an interest rate swap agreement with a notional amount of $100 million in order to manage its interest rate risk under the Term Facility. The Company designated this swap as a cash flow hedge, and this swap effectively fixes the underlying LIBOR rate of the Term Facility at 5.01%. The Company also has an interest swap with a notional amount of $40 million in order to manage interest rate risk associated with floating-rate, LIBOR-based borrowings. This swap was also designated as a cash flow hedge and effectively fixes a portion of the underlying LIBOR rate on Company borrowings at 2.995% through October 2010. In the fourth quarter of 2009, the Company terminated a $75 million swap on LIBOR-based borrowings, which had an interest rate of 2.69%, as well as reduced the $40 million, 2.995% swap described above from $75 million. During both the three months ended March 31, 2010 and 2009, there was no ineffectiveness under any of the Company’s interest rate swaps. The Company calculates the fair value of its interest rate swaps as of the end of each reporting period by obtaining a third party valuation utilizing estimated future LIBOR rates. The fair value calculation for the swaps is deemed to be a Level 2 calculation under the guidelines as set forth in ASC 820. The fair values of the interest rate swap agreements were recorded in accounts payable and accrued liabilities and other comprehensive loss on the Condensed Consolidated Balance Sheets, detailed as follows (in thousands):

						Floating Rate,
						LIBOR-based
		Term Loan				Borrowings				Total
Balance, December 31, 2009		$	8,662			$	855			$	9,517
Change in fair value			251				(219	)			32
Balance, March 31, 2010		$	8,913			$	636			$	9,549

     Other Debt Information

     The real estate and other assets of The American Cancer Society Center (the “ACS Center”) are restricted under the ACS Center loan agreement in that they are not available to settle debts of the Company. However, provided that the ACS Center loan has not incurred any uncured event of default, as defined in the loan agreement, the cash flows from the ACS Center, after payments of debt service, operating expenses and reserves, are available for distribution to the Company.

     For the three months ended March 31, 2010 and 2009, interest expense was as follows (in thousands):

		Three Months Ended March 31,
		2010				2009
Interest expensed		$	9,781			$	12,256
Interest capitalized			—				(1,826	)
Total interest incurred		$	9,781			$	10,430

     At March 31, 2010, the Company had outstanding letters of credit and performance bonds of $6.7 million. The Company has estimated development commitments of $17.3 million as March 31, 2010 related to a loan guarantee, which was paid in May 2010. Additionally, the Company has $13.9 million in future obligations as a lessor under numerous leases to fund tenant improvements and other funding commitments as of March 31, 2010. As a lessee, the Company has future obligations under ground and office leases of approximately $17.3 million at March 31, 2010.

     Fair Value

     At March 31, 2010 and December 31, 2009, the estimated fair value of the Company’s notes payable was approximately $578.2 million and $586.2 million, respectively, calculated by discounting future cash flows at estimated rates at which similar loans would have been obtained at March 31, 2010 and December 31, 2009. This fair value calculation is considered to be a Level 2 calculation under the guidelines as set forth in ASC 820, as the Company utilizes market rates for similar type loans from third party brokers.

3. EARNINGS PER SHARE

     Net income per share-basic is calculated as net income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Net income per share-diluted is calculated as net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during the period, including nonvested restricted stock which has nonforfeitable dividends. Diluted weighted average number of common shares is calculated to reflect the potential dilution under the treasury stock method that would occur if stock options or other contracts to issue common stock were exercised and resulted in additional common shares outstanding. As of March 31, 2010 and 2009, none of the Company’s outstanding stock options were dilutive. The numerator used in the Company’s per share calculations is reduced for the effect of preferred dividends and is the same for both basic and diluted net income per share.

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

		Three Months Ended
		March 31,
		2010				2009
Weighted average shares-basic			100,069				51,350
Dilutive potential common shares — stock options			—				—
Weighted average shares-diluted			100,069				51,350
Anti-dilutive options not included			7,137				6,313

4. STOCK-BASED COMPENSATION

     In accordance with ASC 718, the Company recognizes compensation expense based on the grant date fair value of share-based awards over the required service period of the awards. The Company has several types of stock-based compensation — stock options, restricted stock and restricted stock units — which are described in Note 7 of “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The Company recorded compensation expense of approximately $1,062,000 and $911,000 for the three months ended March 31, 2010 and 2009, respectively, related to stock-based compensation, after the effect of capitalization to projects under development and income tax benefit.

     On February 15, 2010, the Company granted 301,993 options to certain key employees and 2,416 options to one of its directors. Also on February 15, 2010, the Company made stock grants of 264,401 shares to key employees. These stock grants cliff vest three years from the date of grant,

receive dividends and have voting rights during the vesting period. Previous stock grants vested ratably over four years. Compensation expense will be recorded ratably over the new vesting period.

     Restricted stock units (“RSUs”) are accounted for as liability awards under ASC 718, and employees are paid cash upon vesting based upon the value of the Company’s stock. On February 15, 2010, the Company awarded two new types of performance-based RSUs to key employees, based on two performance metrics: (1) Total Stockholder Return (“TSR”) of the Company, as defined, as compared to the Morgan Stanley REIT index, and (2) Ratio of total debt, as defined, to the trailing 12-month earnings before interest, taxes, depreciation and amortization, as defined (“EBITDA”). The performance period is January 1, 2010 to December 31, 2012, and the targeted number of TSR RSUs and EBITDA RSUs awarded is 91,815 and 132,207, respectively. The ultimate payout of these awards can range from 0% to 200% of the targeted number of units depending on the achievement of the performance metrics described above. Both of these types of RSUs cliff vest on February 15, 2013 and are dependent upon the attainment of required service and performance criteria. The number of each type of RSU to be issued will be determined at that date, and the payout per unit will be equal to the 30-day average closing price of the Company’s stock ending on December 31, 2012. The Company is expensing an estimate of the fair value of the TSR RSUs over the vesting period using a quarterly Monte Carlo valuation. The EBITDA RSUs are also expensed over the vesting period using the fair market value of the Company’s stock at the reporting period multiplied by the anticipated number of units to be paid based on the current estimate of what the ratio is expected to be upon vesting. Dividend equivalents on the RSUs will also be paid based upon the percentage vested. The dividend equivalent payments will equal the total cash dividends that would have been paid during the performance period, and as if the cash dividends had been reinvested in Company stock.

5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

     The Company describes its investments in unconsolidated joint ventures in Note 5 of “Notes to Consolidated Financial Statements” in its Annual Report on Form 10-K for the year ended December 31, 2009. The following table summarizes balance sheet data of the Company’s unconsolidated joint ventures as of March 31, 2010 and December 31, 2009 (in thousands):

																										Company’s
		Total Assets								Total Debt								Total Equity								Investment
		2010				2009				2010				2009				2010				2009				2010				2009
SUMMARY OF FINANCIAL POSITION:
CP Venture IV LLC entities		$	322,837			$	324,402			$	35,092			$	35,451			$	275,179			$	277,063			$	15,726			$	15,933
Charlotte Gateway Village, LLC			159,692				160,266				106,911				110,101				49,788				48,214				10,392				10,401
CF Murfreesboro Associates			138,816				139,782				113,254				113,476				23,854				23,231				14,114				13,817
Palisades West LLC			124,707				125,537				—				—				75,008				74,237				39,465				39,104
CL Realty, L.L.C.			111,129				114,598				3,243				3,568				106,724				109,184				48,905				49,825
CPV and CPV Two			103,058				101,209				—				—				101,393				99,133				3,504				3,270
Terminus 200 LLC			34,508				27,537				77,443				76,762				(47,911	)			(47,921	)			—				—
Temco Associates, LLC			60,613				60,752				3,028				3,061				57,334				57,484				22,645				22,716
Crawford Long — CPI, LLC			35,938				35,277				49,463				49,710				(14,833	)			(15,280	)			(6,172	)			(6,396	)
Ten Peachtree Place Associates			22,588				22,971				27,204				27,341				(5,214	)			(4,846	)			(4,070	)			(3,887	)
Wildwood Associates			21,245				21,263				—				—				21,161				21,205				(1,669	)			(1,647	)
TRG Columbus Dev Venture, Ltd.			6,106				6,802				—				—				2,717				2,464				100				383
Pine Mountain Builders, LLC			6,938				6,807				1,819				1,834				2,900				3,119				2,412				2,631
		$	1,148,175			$	1,147,203			$	417,457			$	421,304			$	648,100			$	647,287			$	145,352			$	146,150

     The following table summarizes income statement data of the Company’s unconsolidated joint ventures for the three months ended March 31, 2010 and 2009 (in thousands):

																		Company’s Share of
		Total Revenues								Net Income (Loss)								Net Income (Loss)
		2010				2009				2010				2009				2010				2009
SUMMARY OF OPERATIONS:
CP Venture IV LLC entities		$	8,004			$	7,867			$	1,192			$	960			$	289			$	277
Charlotte Gateway Village, LLC			7,903				7,859				1,879				1,660				294				294
CP and CPV Two			4,641				4,544				2,263				2,564				234				261
CL Realty, L.L.C.			1,727				1,600				(144	)			504				238				282
CF Murfreesboro Associates			4,084				3,199				623				278				266				90
Temco Associates, LLC			1,820				857				1,200				(420	)			603				(210	)
Palisades West LLC			3,315				3,003				1,124				1,307				545				640
Crawford Long — CPI, LLC			2,810				2,835				448				439				223				219
Terminus 200 LLC			397				76				10				(18	)			—				(9	)
Ten Peachtree Place Associates			1,906				1,837				228				137				118				73
Wildwood Associates			—				—				(44	)			(14	)			(21	)			(7	)
TRG Columbus Dev. Venture, Ltd.			1,055				29				385				25				117				(1	)
Pine Mountain Builders, LLC			745				246				40				(9	)			20				(5	)
Other			—				—				—				(105	)			(6	)			(84	)
		$	38,407			$	33,952			$	9,204			$	7,308			$	2,920			$	1,820

     In the first quarter 2010, the Company sold its interest in Glenmore, a townhome development in Charlotte, North Carolina, and concurrently repaid the $8.7 million outstanding construction loan on the project.

     T200 developed and operates an office building in the Terminus project in Atlanta, Georgia. The partners of T200 guarantee the construction loan up to an amount of $17.25 million each, plus any unpaid interest. During 2009, the Company accrued this guarantee amount and recorded impairment charges equal to its full investment in T200. In the second quarter of 2010, the Company entered into a transaction which reduced its interest in T200 from 50% to 20%, and the Company’s partner in the joint venture was replaced. In connection with this transaction, the Company paid its guarantee to the lender, the term of the loan was extended, the interest rate was adjusted and the Company contributed additional equity to the new venture.

6. OTHER ASSETS

     Other Assets on the Condensed Consolidated Balance Sheets included the following (in thousands):

		March 31,				December 31,
		2010				2009
Investment in Verde		$	9,376			$	9,376
FF&E and leasehold improvements, net of accumulated depreciation of $14,675 and $14,195 as of March 31, 2010 and December 31, 2009, respectively			5,123				5,306
Predevelopment costs and earnest money			8,226				7,673
Lease inducements, net of accumulated amortization of $2,140 and $1,860 as of March 31, 2010 and December 31, 2009, respectively			12,616				12,545
Loan closing costs, net of accumulated amortization of $2,219 and $4,177 as of March 31, 2010 and December 31, 2009, respectively			4,032				3,385
Prepaid expenses and other assets			3,838				2,631
Intangible Assets:
Goodwill			5,450				5,450
Above market leases, net of accumulated amortization of $8,714 and $8,704 as of March 31, 2010 and December 31, 2009, respectively			554				564
In-place leases, net of accumulated amortization of $2,420 and $2,391 as of March 31, 2010 and December 31, 2009, respectively			394				423
		$	49,609			$	47,353

     Investment in Verde relates to a cost method investment in a non-public real estate owner and developer. Goodwill relates entirely to the Office reportable segment. Above and below market leases are amortized into rental revenues over the remaining lease terms. In-place leases are amortized into depreciation and amortization expense also over remaining lease terms.

7. SUPPLEMENTAL CASH FLOWS INFORMATION

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

		2010				2009
Interest paid, net of amounts capitalized		$	9,257			$	11,342
Income taxes refunded			—				754
Non-Cash Transactions
Issuance of common stock for payment of common dividends		$	5,984			$	—
Land received as collateral on note receivable default			5,030				—
Change in accruals excluded from property development and acquisition expenditures			1,813				(3,260	)
Issuance of note receivable for residential lot sale			150				—
Change in accumulated other comprehensive income			(32	)			(480	)
Transfer from note payable to redeemable noncontrolling interests			—				7,410
Transfer from accrued interest payable to redeemable noncontrolling interests			—				1,357
Transfer from projects under development to land held for investment or future development			—				5,159
Transfer from accounts payable and accrued liabilities to deferred tax asset			—				(1,793	)
Change in fair value of redeemable noncontrolling interests			—				180

8. NONCONTROLLING INTERESTS

     Under the guidance in ASC 810, the Company consolidates various ventures that it controls which are involved in the ownership and/or development of real estate. The noncontrolling interest’s share of income or loss is presented separately, net of tax, below net income on the Condensed Consolidated Statements of Income. The Company has several consolidated ventures with agreements that contain provisions requiring the Company to purchase the noncontrolling interest at the then fair value upon demand on or after a future date. The obligation to the noncontrolling partner is recognized as Redeemable Noncontrolling Interests and is presented between liabilities and equity on the Condensed Consolidated Balance Sheets. The redemption values related to these redeemable interests are adjusted to the higher of fair value or cost basis in a separate line item within Equity. The Company is recognizing changes in the redemption value immediately as they occur. Nonredeemable noncontrolling interests are recorded in a separate line item within Equity.

     The following table details the components of Redeemable Noncontrolling Interests for the three months ended March 31, 2010 and 2009 (in thousands):

		Three Months Ended March 31,
		2010				2009
Beginning Balance		$	12,591			$	3,945
Net loss attributable to redeemable noncontrolling interests			(22	)			(212	)
Contributions from (distributions to) noncontrolling interests			120				(22	)
Conversion of note payable and accrued interest to noncontrolling interest			—				8,767
Change in fair value of noncontrolling interests			—				180
Ending Balance		$	12,689			$	12,658

     For the three months ended March 31, 2010 and 2009, net income on the Condensed Consolidated Statements of Equity is reconciled to the Condensed Consolidated Income Statements as follows (in thousands):

		Three Months Ended March 31,
		2010				2009
Net income attributable to controlling interest		$	1,654			$	163,798
Net income attributable to nonredeemable noncontrolling interests			548				624
Net loss attributable to redeemable noncontrolling interests			(22	)			(212	)
Net income		$	2,180			$	164,210

9. REPORTABLE SEGMENTS

     The Company follows the rules as outlined in ASC 280 for segment reporting. The Company has five reportable segments: Office, Retail, Land, Third-Party Management and Multi-Family. These reportable segments represent an aggregation of operating segments reported to the Chief Operating Decision Maker based on similar economic characteristics that include the type of product and nature of service. Each segment includes both consolidated operations and joint ventures. The Office segment includes results of operations for office properties. The Retail segment includes results of operations for retail centers. The Land segment includes results of operations for various tracts of land that are held for investment or future development, and single-family residential communities that are parceled into lots and sold to various homebuilders or sold as undeveloped tracts of land. The Third-Party Management segment includes fee income where the Company manages, leases and/or develops properties for other owners. The Multi-Family segment includes results of operations for the development and sale of multi-family real estate. The Other segment includes:

	•		fee income, salary reimbursements and expenses for joint venture properties that the Company manages, develops and/or leases;
	•		compensation for corporate employees, other than those in the Third-Party Management segment or those allocated to properties;
	•		general corporate overhead costs, interest expense for consolidated entities (as financing decisions are made at the corporate level, with the exception of joint venture interest expense, which is included in joint venture results in the respective segment);
	•		income attributable to noncontrolling interests;
	•		income taxes;
	•		depreciation;
	•		preferred dividends; and
	•		operations of the Industrial properties, which are not material for separate presentation.

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

     FFO is used by industry analysts, investors and the Company as a supplemental measure of an equity REIT’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure

of a REIT’s operating performance that excludes historical cost depreciation, among other items, from GAAP net income. Management believes that the use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Company management evaluates operating performance in part based on FFO. Additionally, the Company uses FFO and FFO per share, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and other key employees.

     Segment net income, investment in joint ventures and capital expenditures are not presented in the following tables. Management does not utilize these measures when analyzing its segments or when making resource allocation decisions, and therefore this information is not provided. FFO is reconciled to net income on a total Company basis. Dollars are stated in thousands.

														Third Party
Three Months Ended March 31, 2010		Office				Retail				Land				Management				Multi-Family				Other				Total
Net rental property revenues less rental property operating expenses		$	14,718			$	6,778			$	—			$	—			$	—			$	533			$	22,029
Fee income, net of reimbursed expenses			—				—				66				2,095				—				1,759				3,920
Residential lot, multi-family unit, tract, and outparcel sales, net of cost of sales, including gain on sale of undepreciated investment properties			—				4,593				499				—				2,176				328				7,596
Other income			—				8				—				—				—				116				124
Loss on extinguishment of debt			—				—				—				—				—				(592	)			(592	)
General and administrative expenses			—				—				—				(1,901	)			—				(8,117	)			(10,018	)
Interest expense			—				—				—				—				—				(9,781	)			(9,781	)
Depreciation and amortization of non-real estate assets			—				—				—				—				—				(571	)			(571	)
Other expenses			—				—				—				(466	)			—				(862	)			(1,328	)
Funds from operations from unconsolidated joint ventures			2,416				1,803				872				—				117				—				5,208
Income attributable to noncontrolling interests			—				—				—				—				—				(526	)			(526	)
Benefit for income taxes from operations			—				—				—				—				—				1,146				1,146
Preferred stock dividends			—				—				—				—				—				(3,227	)			(3,227	)
Funds from operations available to common stockholders		$	17,134			$	13,182			$	1,437			$	(272	)		$	2,293			$	(19,794	)			13,980
Real estate depreciation and amortization, including Company’s share of joint ventures																											(15,612	)
Gain on sale of depreciated investment properties																											59
Net loss available to common stockholders																										$	(1,573	)

														Third Party
Three Months Ended March 31, 2009		Office				Retail				Land				Management				Multi-Family				Other				Total
Net rental property revenues less rental property operating expenses		$	13,704			$	6,130			$	—			$	—			$	—			$	355			$	20,189
Fee income			—				—				—				2,160				—				1,656				3,816
Residential lot, tract and outparcel sales, net of cost of sales, including gain on sale of undepreciated investment properties			—				678				236				—				—				113				1,027
Other income			2				357				—				—				—				627				986
General and administrative expenses			—				—				—				(1,349	)			—				(8,413	)			(9,762	)
Interest expense			—				—				—				—				—				(10,430	)			(10,430	)
Depreciation and amortization of non-real estate assets			—				—				—				—				—				(968	)			(968	)
Other expenses			—				—				—				—				—				(1,546	)			(1,546	)
Funds from operations from unconsolidated joint ventures			2,353				1,604				42				—				(36	)			(23	)			3,940
Income attributable to noncontrolling interests			—				—				—				—				—				(412	)			(412	)
Benefit for income taxes from operations			—				—				—				—				—				3,941				3,941
Preferred stock dividends			—				—				—				—				—				(3,227	)			(3,227	)
Funds from operations available to common stockholders		$	16,059			$	8,769			$	278			$	811			$	(36	)		$	(18,327	)		$	7,554
Real estate depreciation and amortization, including Company’s share of joint ventures																											(14,236	)
Gain on sale of depreciated investment properties																											167,253
Net income available to common stockholders																										$	160,571