COUSINS PROPERTIES INC - Quarter Report: 2011 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		58-0869052
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
191 Peachtree Street, Suite 500, Atlanta, Georgia		30303-1740
(Address of principal executive offices)		(Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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 2, 2011
Common Stock, $1 par value per share		103,631,398 shares

 

 

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, 2010. 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 national and local economic conditions, the real estate industry in general and in specific markets, and the commercial and residential markets in particular;

•

continued adverse market and economic conditions requiring the recognition of additional impairment losses;

•

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 rates 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 issues;

•

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;

•

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

(in thousands, except share and per share amounts)

		March 31, 2011				December 31, 2010
		(Unaudited)
ASSETS
PROPERTIES:
Operating properties, net of accumulated depreciation of $286,547 and $274,925 in 2011 and 2010, respectively		$	870,723			$	898,119
Land held for investment or future development			123,885				123,879
Residential lots			63,698				63,403
Other			738				2,994
Total properties			1,059,044				1,088,395
CASH AND CASH EQUIVALENTS			5,097				7,599
RESTRICTED CASH			15,854				15,521
NOTES AND OTHER RECEIVABLES, net of allowance for doubtful accounts of $5,728 and $6,287 in 2011 and 2010, respectively			48,414				48,395
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES			165,119				167,108
OTHER ASSETS			41,925				44,264
TOTAL ASSETS		$	1,335,453			$	1,371,282
LIABILITIES AND EQUITY
NOTES PAYABLE		$	496,823			$	509,509
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES			26,455				32,388
DEFERRED GAIN			4,157				4,216
DEPOSITS AND DEFERRED INCOME			17,978				18,029
TOTAL LIABILITIES			545,413				564,142
COMMITMENTS AND CONTINGENT LIABILITIES
REDEEMABLE NONCONTROLLING INTERESTS			8,953				14,289
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 2011 and 2010			74,827				74,827
7.50% Series B cumulative redeemable preferred stock, $25 liquidation preference; 3,791,000 shares issued and outstanding in 2011 and 2010			94,775				94,775
Common stock, $1 par value, 250,000,000 shares authorized, 107,201,480 and 106,961,959 shares issued in 2011 and 2010, respectively			107,201				106,962
Additional paid-in capital			685,028				684,551
Treasury stock at cost, 3,570,082 shares in 2011 and 2010			(86,840	)			(86,840	)
Distributions in excess of cumulative net income			(126,706	)			(114,196	)
TOTAL STOCKHOLDERS’ INVESTMENT			748,285				760,079
Nonredeemable noncontrolling interests			32,802				32,772
TOTAL EQUITY			781,087				792,851
TOTAL LIABILITIES AND EQUITY		$	1,335,453			$	1,371,282

See notes to condensed consolidated financial statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

(Unaudited, in thousands, except share and per share amounts)

		Three Months Ended March 31,
		2011				2010
REVENUES:
Rental property revenues		$	36,148			$	34,773
Fee income			3,385				3,544
Third party management and leasing revenues			4,088				4,794
Multi-family residential unit sales			4,657				10,146
Residential lot and outparcel sales			165				13,819
Other			513				124
			48,956				67,200
COSTS AND EXPENSES:
Rental property operating expenses			14,248				14,531
Third party management and leasing expenses			4,093				4,958
Multi-family residential unit cost of sales			2,500				7,970
Residential lot and outparcel cost of sales			69				9,096
General and administrative expenses			7,400				8,017
Interest expense			7,544				9,781
Reimbursed expenses			1,512				1,859
Depreciation and amortization			13,475				13,176
Impairment loss			3,508				—
Separation expenses			101				68
Other			862				862
			55,312				70,318
LOSS ON EXTINGUISHMENT OF DEBT			—				(592	)
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES, UNCONSOLIDATED JOINT VENTURES AND SALE OF INVESTMENT PROPERTIES			(6,356	)			(3,710	)
BENEFIT FOR INCOME TAXES FROM OPERATIONS			64				1,146
INCOME FROM UNCONSOLIDATED JOINT VENTURES			2,496				2,920
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES			(3,796	)			356
GAIN ON SALE OF INVESTMENT PROPERTIES			59				756
INCOME (LOSS) FROM CONTINUING OPERATIONS			(3,737	)			1,112
INCOME (LOSS) FROM DISCONTINUED OPERATIONS:
Income from discontinued operations			72				1,068
Loss on sale of investment properties			(384	)			—
			(312	)			1,068
NET INCOME (LOSS)			(4,049	)			2,180
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS			(581	)			(526	)
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST			(4,630	)			1,654
DIVIDENDS TO PREFERRED STOCKHOLDERS			(3,227	)			(3,227	)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS		$	(7,857	)		$	(1,573	)
PER COMMON SHARE INFORMATION — BASIC AND DILUTED:
Loss from continuing operations attributable to controlling interest		$	(0.07	)		$	(0.03	)
Income from discontinued operations			—				0.01
Net loss available to common stockholders — basic and diluted		$	(0.08	)		$	(0.02	)
WEIGHTED AVERAGE SHARES — BASIC AND DILUTED			103,515				100,069
DIVIDENDS DECLARED PER COMMON SHARE		$	0.045			$	0.09

See notes to condensed consolidated financial statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

																		Accumulated
																		Other
																		Comprehensive
										Additional								Loss on				Distributions in								Nonredeemable
		Preferred				Common				Paid-In				Treasury				Derivative				Excess of				Stockholders’				Noncontrolling				Total
		Stock				Stock				Capital				Stock				Instruments				Net Income				Investment				Interests				Equity
Balance December 31, 2010		$	169,602			$	106,962			$	684,551			$	(86,840	)		$	—			$	(114,196	)		$	760,079			$	32,772			$	792,851
Net income (loss)			—				—				—				—				—				(4,630	)			(4,630	)			620				(4,010	)
Common stock issued for restricted stock grants, net of amounts withheld for income taxes			—				243				(246	)			—				—				—				(3	)			—				(3	)
Stock issuance costs			—				—				(14	)			—				—				—				(14	)			—				(14	)
Amortization of stock options and restricted stock, net of forfeitures			—				(4	)			683				—				—				—				679				—				679
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(590	)			(590	)
Change in fair value of redeemable noncontrolling interests			—				—				54				—				—				—				54				—				54
Cash preferred dividends paid			—				—				—				—				—				(3,227	)			(3,227	)			—				(3,227	)
Cash common dividends paid			—				—				—				—				—				(4,653	)			(4,653	)			—				(4,653	)
Balance March 31, 2011		$	169,602			$	107,201			$	685,028			$	(86,840	)		$	—			$	(126,706	)		$	748,285			$	32,802			$	781,087
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
Other comprehensive loss			—				—				—				—				(32	)			—				(32	)			—				(32	)
Total comprehensive income (loss)			—				—				—				—				(32	)			1,654				1,622				548				2,170
Common stock issued pursuant to:
Stock dividend, net of issuance costs			—				820				5,137				—				—				(5,984	)			(27	)			—				(27	)
Restricted stock grants			—				264				(264	)			—				—				—				—				—				—
Amortization of stock options and restricted stock, net of forfeitures			—				—				508				—				—				—				508				—				508
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

See notes to condensed consolidated financial statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

(Unaudited, in thousands)

		Three Months Ended
		March 31,
		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	(4,049	)		$	2,180
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Loss (gain) on sale of investment properties, net			325				(756	)
Loss on extinguishment of debt			—				592
Impairment loss			3,508				—
Depreciation and amortization			13,539				13,895
Amortization of deferred financing costs			536				407
Stock-based compensation			679				508
Effect of recognizing rental revenues on a straight-line or market basis			(1,500	)			(988	)
Income from unconsolidated joint ventures			(2,496	)			(2,920	)
Operating distributions from unconsolidated joint ventures			2,430				2,461
Residential lot, outparcel and multi-family cost of sales, net of closing costs paid			2,325				15,778
Residential lot acquisition and development expenditures			(435	)			(428	)
Changes in other operating assets and liabilities:
Change in other receivables and other assets			(258	)			(1,695	)
Change in accounts payable and accrued liabilities			(5,421	)			3,040
Net cash provided by operating activities			9,183				32,074
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment property sales			21,543				10,023
Property acquisition and development and tenant asset expenditures			(7,667	)			(4,279	)
Investment in unconsolidated joint ventures			(839	)			(1,022	)
Distributions from unconsolidated joint ventures			3,602				2,279
Collection of notes receivable			36				—
Change in other assets			(1,451	)			(1,067	)
Change in restricted cash			(496	)			457
Net cash provided by investing activities			14,728				6,391
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility			12,600				—
Repayment of credit facility			(24,300	)			—
Payment of loan issuance costs			—				(1,647	)
Repayment of notes payable			(986	)			(9,229	)
Common stock issuance costs			(14	)			(27	)
Cash common dividends paid			(4,653	)			(2,997	)
Cash preferred dividends paid			(3,227	)			(3,227	)
Contributions from noncontrolling interests			—				120
Distributions to noncontrolling interests			(5,833	)			(573	)
Net cash used in financing activities			(26,413	)			(17,580	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(2,502	)			20,885
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			7,599				9,464
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	5,097			$	30,349

See notes to condensed consolidated financial statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

1.

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, if applicable, the condensed consolidated statements of operations 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, 2011 and the results of operations for the three months ended March 31, 2011 and 2010. The results of operations for the three months ended March 31, 2011 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 consolidated 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, 2010. The accounting policies employed are the same as those shown in Note 2 to the consolidated financial statements included in such Form 10-K.

The Company earns fees and incurs expenses related to the management, development and leasing of properties owned both by third parties and by joint ventures in which the Company has an ownership interest. In the first quarter of 2011, the Company began separately stating on the Statements of Operations the third party management and leasing revenues, including reimbursements, for Cousins Properties Services (“CPS”), a wholly-owned subsidiary that performs management and leasing services for third-party owned office properties, and the related expenses incurred to earn that revenue, previously recognized in the General and Administrative and Other expense line items. The amounts remaining in Fee Income on the Statements of Operations relate to management, leasing and development fees, including reimbursements, earned by the Company from certain other third party owners or from joint ventures recognized outside of the CPS subsidiary. Expenses related to these fees are included in General and Administrative Expenses on the Statements of Operations, and the reimbursements are in a separate line item entitled Reimbursed Expenses. Prior periods 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 Company’s notes payable outstanding at March 31, 2011 and December 31, 2010 (in thousands):

						Term/
						Amortization								March 31,				December 31,
Description		Interest Rate				Period (Years)				Maturity				2011				2010
Credit Facility, unsecured (see note)		LIBOR + 1.75% to 2.25		%			4/N/A				8/29/11			$	93,700			$	105,400
Terminus 100 mortgage note			5.25	%			12/30				1/1/23				139,678				140,000
The American Cancer Society Center mortgage note (interest only until October 1, 2011)			6.45	%			10/30				9/1/17				136,000				136,000
333/555 North Point Center East mortgage note (see note)			7.00	%			10/25				11/1/11				26,184				26,412
100/200 North Point Center East mortgage note			5.39	%			5/30				6/1/12				24,744				24,830
Meridian Mark Plaza mortgage note			6.00	%			10/30				8/1/20				26,809				26,892
Lakeshore Park Plaza mortgage note			5.89	%			4/25				8/1/12				17,451				17,544
The Points at Waterview mortgage note			5.66	%			10/25				1/1/16				16,480				16,592
600 University Park Place mortgage note			7.38	%			10/30				8/10/11				12,228				12,292
Handy Road Associates, LLC (see note)		Prime + 1%, but not < 6		%			5/N/A				3/30/11				3,374				3,374
Callaway			4.13	%			2/N/A				11/18/13				175				173
														$	496,823			$	509,509

The Company’s Credit Facility bears interest at the London Interbank Offering Rate (“LIBOR”) plus a spread, based on the Company’s leverage ratio, as defined in the Credit Facility. At March 31, 2011, the spread over LIBOR under the Credit Facility was 2.0%. The amount that the Company may draw under the Credit Facility is a defined calculation based on the Company’s unencumbered assets and other factors and is reduced by any letters of credit outstanding. As of March 31, 2011, the Company was able to draw an additional $250.1 million under the Credit Facility. The Credit Facility can be extended for one year with the payment of a fee, unless there is an event of default. The Company’s current intention is to exercise the extension option.

The Company notified the lender on the 333/555 North Point Center East mortgage note that it intends to prepay the note on June 1, 2011.

The Handy Road Associates, LLC (“Handy Road”) mortgage note matured March 30, 2011. The note is non-recourse to the Company, but is guaranteed by the Company’s partner in Handy Road. The Company has notified the lender that it will not satisfy the mortgage note, and the lender has begun foreclosure proceedings on this note.

Fair Value

At March 31, 2011 and December 31, 2010, the estimated fair values of the Company’s notes payable were approximately $509.1 million and $521.8 million, respectively, calculated by discounting future cash flows at estimated rates at which similar loans would have been obtained at March 31, 2011 and December 31, 2010. This fair value calculation is considered to be a Level 2 calculation under the guidelines as set forth in ASC 820, “Fair Value Measurements and Disclosures,” as the Company utilizes market rates for similar type loans from third party brokers.

Interest Rate Swap Agreements

In 2010, the Company had an interest rate swap agreement to manage its interest rate risk associated with its floating-rate, LIBOR-based borrowings. This swap expired in October 2010. Also during 2010, the Company had an interest rate swap agreement to manage interest rate risk under its former Term Facility, which swap was terminated in July 2010. The change in fair values of the interest rate swap agreements were recorded in Accumulated Other Comprehensive Loss on the Balance Sheets.

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, 2011 and 2010, the Company recorded interest expense of approximately $7.5 million and $9.8 million, respectively. There was no interest capitalized to projects under development during either of these periods.

At March 31, 2011, the Company had outstanding letters of credit and performance bonds of $5.8 million. As a lessor, the Company has $17.6 million in future obligations under leases to fund tenant improvements and other funding commitments as of March 31, 2011. As a lessee, the Company has future obligations under ground and office leases of approximately $16.5 million at March 31, 2011.

3.

EARNINGS PER SHARE

Net income (loss) per share-basic is calculated as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the period. Net income (loss) per share-diluted is calculated as net income (loss) 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 dividend rights. 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, if any) were exercised and resulted in additional common shares outstanding. 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 (loss) per share.

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

		Three Months Ended
		March 31,
		2011				2010
Weighted average shares-basic			103,515				100,069
Dilutive potential stock options			—				—
Weighted average shares-diluted			103,515				100,069
Anti-dilutive options not included			6,612				7,137

4.

STOCK-BASED COMPENSATION

The Company has several types of stock-based compensation — stock options, restricted stock and restricted stock units (“RSUs”) — which are described in Note 6 of “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The Company recorded net stock-based compensation expense of approximately $1.2 million and $1.1 million for the three months ended March 31, 2011 and 2010, respectively.

In the first quarter of 2011, the Company granted 211,729 stock options to key employees and 1,019 options to a director. Also during the first quarter of 2011, the Company made restricted stock grants of 243,617 shares to key employees, with a three-year ratable vesting.

RSUs are accounted for as liability awards under ASC 718, “Compensation — Stock Compensation,” and employees are paid cash at vesting based upon the closing prices of the Company’s stock. In the first quarter 2011, the Company awarded 401 RSUs to a director, which cliff vest in three years. Also in the first quarter of 2011, the Company awarded two types of performance-based RSUs to key employees, based on the following performance metrics: (1) Total Stockholder Return of the Company, as defined, as compared to the companies in the SNL Financial US Office REIT index as of January 1, 2011 (“TSR SNL RSUs”), and (2) ratio of funds from operations per share to targeted cumulative funds from operations per share amount (“FFO RSUs”). The performance period for both awards is January 1, 2011 to December 31, 2013, and the targeted number of TSR SNL RSUs and FFO RSUs is 99,970 and 64,266, 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, 2014 and are dependent upon the attainment of required service and performance criteria. The number of RSUs that vests will be determined at that date, and the payout per unit will be equal to the average closing price on each trading day during the 30-day period ending on December 31, 2013. The Company expenses an estimate of the fair value of the TSR SNL RSUs over the vesting period using a quarterly Monte Carlo valuation. The Company expenses the FFO RSUs 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 4 of “Notes to Consolidated Financial Statements” in its Annual Report on Form 10-K for the year ended December 31, 2010. The following table summarizes balance sheet data of the Company’s unconsolidated joint ventures as of March 31, 2011 and December 31, 2010 (in thousands). The investments in joint ventures which have negative balances are included in the Deposits and Deferred Income line item on the Balance Sheets.

		Total Assets								Total Debt								Total Equity								Company’s Investment
SUMMARY OF FINANCIAL POSITION:		2011				2010				2011				2010				2011				2010				2011				2010
CP Venture IV LLC entities		$	310,800			$	313,603			$	36,475			$	36,620			$	263,841			$	267,085			$	15,149			$	15,364
Charlotte Gateway Village, LLC			152,600				154,200				93,630				97,030				56,646				54,834				10,358				10,366
CF Murfreesboro Associates			127,918				129,738				101,983				103,378				24,376				24,263				14,273				14,246
Palisades West LLC			126,412				129,378				—				—				80,591				80,767				42,150				42,256
CP Venture LLC entities			103,403				106,066				—				—				101,654				104,067				3,528				3,779
CL Realty, L.L.C.			82,785				86,657				2,152				2,663				78,929				82,534				38,137				39,928
MSREF/Terminus 200 LLC			67,403				65,164				48,936				46,169				13,719				13,956				2,744				2,791
Temco Associates, LLC			60,580				60,608				2,894				2,929				57,423				57,475				22,688				22,713
Crawford Long — CPI, LLC			34,057				34,408				48,440				48,701				(15,796	)			(15,341	)			(6,668	)			(6,431	)
Wildwood Associates			21,209				21,220				—				—				21,169				21,216				(1,666	)			(1,642	)
Ten Peachtree Place Associates			19,942				20,980				26,637				26,782				(7,161	)			(6,263	)			(5,028	)			(4,581	)
Cousins Watkins LLC			57,447				57,184				28,800				28,850				28,191				28,334				15,280				14,850
TRG Columbus Development Venture, Ltd.			3,525				3,574				—				—				2,121				2,115				75				58
Pine Mountain Builders, LLC			1,246				1,559				664				896				363				403				737				757
		$	1,169,327			$	1,184,339			$	390,611			$	394,018			$	706,066			$	715,445			$	151,757			$	154,454

The following table summarizes statement of operations information of the Company’s unconsolidated joint ventures for the three months ended March 31, 2011 and 2010 (in thousands):

																		Company’s Share of Net
		Total Revenues								Net Income (Loss)								Income (Loss)
SUMMARY OF OPERATIONS:		2011				2010				2011				2010				2011				2010
CP Venture IV LLC entities		$	7,727			$	8,004			$	905			$	1,192			$	263			$	289
Charlotte Gateway Village, LLC			8,045				7,903				2,118				1,879				294				294
CF Murfreesboro Associates			3,428				4,084				113				623				(5	)			266
Palisades West LLC			4,030				3,315				1,456				1,124				711				545
CP Venture LLC entities			4,826				4,641				2,504				2,263				259				234
CL Realty, L.L.C.			1,662				1,727				657				(144	)			313				238
MSREF/Terminus 200 LLC			938				—				(1,159	)			—				(232	)			—
Terminus 200 LLC			—				397				—				10				—				—
Temco Associates, LLC			59				1,820				(204	)			1,200				(103	)			603
Crawford Long — CPI, LLC			2,937				2,810				544				448				272				223
Wildwood Associates			—				—				(47	)			(44	)			(24	)			(21	)
Ten Peachtree Place Associates			1,931				1,906				300				228				154				118
Cousins Watkins LLC			1,213				—				21				—				594				—
TRG Columbus Development Venture, Ltd.			12				1,055				—				385				17				117
Pine Mountain Builders, LLC			1,064				745				(40	)			40				(21	)			20
Other			—				—				—								4				(6	)
		$	37,872			$	38,407			$	7,168			$	9,204			$	2,496			$	2,920

6.

OTHER ASSETS

Other Assets on the Balance Sheets as of March 31, 2011 and December 31, 2010 included the following (in thousands):

		March 31, 2011				December 31, 2010
Investment in Verde		$	5,868			$	9,376
FF&E and leasehold improvements, net of accumulated depreciation of $16,697 and $16,117 in 2011 and 2010, respectively			4,834				4,673
Predevelopment costs and earnest money			7,384				7,039
Lease inducements, net of accumulated amortization of $3,272 and $2,991 in 2011 and 2010, respectively			11,642				11,899
Loan closing costs, net of accumulated amortization of $3,645 and $3,109 in 2011 and 2010, respectively			2,167				2,703
Prepaid expenses and other assets			3,781				2,296
Intangible Assets:
Goodwill			5,430				5,430
Above market leases, net of accumulated amortization of $8,751 and $8,741 in 2011 and 2010, respectively			517				526
In-place leases, net of accumulated amortization of $2,512 and $2,492 in 2011 and 2010, respectively			302				322
		$	41,925			$	44,264

Investment in Verde relates to a cost method investment in a non-public real estate investment trust. During the three months ended March 31, 2011, the Company determined that there were impairment indicators related to its investment in Verde, including Verde’s withdrawal of its proposed initial public offering. The Company estimated the fair value of Verde by calculating discounted future cash flows using Level 3 inputs, such as market capitalization rates, discount rates and other items. The fair value estimate was less than carrying value, and the Company determined the impairment was other-than-temporary in accordance with accounting standards for investments in unconsolidated entities. Accordingly, the Company recorded an impairment loss of $3.5 million during the period.

Goodwill relates entirely to the Office reportable segment. Above-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.

NONCONTROLLING INTERESTS

The Company consolidates various ventures that are involved in the ownership and/or development of real estate. The partner’s share of the entity, in cases where the entity’s documents do not contain a required redemption clause, is reflected in a separate line item called Nonredeemable Noncontrolling Interests shown within Equity on the Balance Sheets. Correspondingly, the partner’s share of income or loss is recorded in Net Income Attributable to Noncontrolling Interests in the Statements of Operations.

Other consolidated ventures contain provisions requiring the Company to purchase the partners’ share of the venture at a certain value upon demand or at a future prescribed date. In these situations, the partner’s share of the entity is recognized as Redeemable Noncontrolling Interests and is presented between liabilities and equity on the Balance Sheets, with the corresponding share of income or loss in the venture recorded in Net Income Attributable to Noncontrolling Interests in the Statements of Operations. The redemption values are evaluated each period and adjusted to the higher of fair value or the partner’s cost basis within Equity. The Company recognizes changes in the redemption value as they occur. The following table details the components of Redeemable Noncontrolling Interests in consolidated subsidiaries for the three months ended March 31, 2011 and 2010 (in thousands):

		2011				2010
Beginning Balance — Redeemable		$	14,289			$	12,591
Net loss attributable to redeemable noncontrolling interests			(39	)			(22	)
Contributions from (distributions to) noncontrolling interests			(5,243	)			120
Change in fair value of noncontrolling interests			(54	)			—
Ending Balance — Redeemable		$	8,953			$	12,689

The following reconciles the net income (loss) attributable to noncontrolling interests as shown in the Statements of Equity, which only includes nonredeemable interests, to the net income attributable to noncontrolling interests as shown in the Statements of Operations, for the three months ended March 31, 2011 and 2010 (in thousands):

		2011				2010
Net income attributable to nonredeemable noncontrolling interests		$	620			$	548
Net loss attributable to redeemable noncontrolling interests			(39	)			(22	)
Net income attributable to noncontrolling interests		$	581			$	526

8.

REPORTABLE SEGMENTS

The Company has six reportable segments: Office, Retail, Land, Third-Party Management and Leasing, For-Sale Multi-Family and Other. 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 and Retail segments show the results by each product type. Net operating income is calculated as rental property revenues less rental property operating expenses. 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 and Leasing segment includes fee income and related expenses for the third party owned properties managed or leased by the Company’s CPS subsidiary. The For-Sale Multi-Family segment includes results of operations for the development and sale of multi-family real estate projects.

The Other segment includes:

•

fee income for third party properties, other than those managed by CPS, and joint venture properties for which the Company performs management, development and leasing services (fee income related to residential joint ventures is included in the Land segment);

•

compensation for corporate employees, other than those in the CPS Third Party Management and Leasing segment;

•

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 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, 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 (loss) on a total Company basis (in thousands).

														Third Party
														Management				For-Sale
Three Months Ended March 31, 2011		Office				Retail				Land				and Leasing				Multi-Family				Other				Total
Net operating income		$	15,250			$	5,737			$	—			$	—			$	—			$	1,049			$	22,036
Fee income, net of reimbursed expenses			—				—				—				1,840				—				1,873				3,713
Residential lot, outparcel and multi-family unit sales, net of cost of sales			—				50				46				—				2,157				—				2,253
Other income			371				24				—				—				—				118				513
Third party management and leasing expenses			—				—				—				(1,845	)			—				—				(1,845	)
General and administrative expenses			—				—				—				—				—				(7,400	)			(7,400	)
Interest expense			—				—				—				—				—				(7,544	)			(7,544	)
Impairment loss			—				—				—				—				—				(3,508	)			(3,508	)
Depreciation and amortization of non-real estate assets			—				—				—				—				—				(563	)			(563	)
Separation expenses			—				—				—				—				—				(101	)			(101	)
Other expenses			—				—				—				—				—				(862	)			(862	)
Funds from operations from unconsolidated joint ventures			2,721				2,241				195				—				17				—				5,174
Income attributable to noncontrolling interests			—				—				—				—				—				(581	)			(581	)
Benefit for income taxes from operations			—				—				—				—				—				64				64
Preferred stock dividends			—				—				—				—				—				(3,227	)			(3,227	)
Funds from operations available to common stockholders		$	18,342			$	8,052			$	241			$	(5	)		$	2,174			$	(20,682	)			8,122
Real estate depreciation and amortization, including Company’s share of joint ventures																											(15,654	)
Loss on sale of depreciated investment properties, net																											(325	)
Net loss available to common stockholders																										$	(7,857	)

														Third Party
														Management				For-Sale
Three Months Ended March 31, 2010		Office				Retail				Land				and Leasing				Multi-Family				Other				Total
Net operating income		$	14,718			$	6,778			$	—			$	—			$	—			$	533			$	22,029
Fee income, net of reimbursed expenses			—				—				66				2,235				—				1,619				3,920
Residential lot, outparcel and multi-family unit sales, net of cost of sales			—				4,593				499				—				2,176				328				7,596
Other income			—				8				—				—				—				116				124
Loss on extinguishment of debt			—				—				—				—				—				(592	)			(592	)
Third party management and leasing expenses			—				—				—				(2,399	)			—				—				(2,399	)
General and administrative expenses			—				—				—				—				—				(8,017	)			(8,017	)
Interest expense			—				—				—				—				—				(9,781	)			(9,781	)
Depreciation and amortization of non-real estate assets			—				—				—				—				—				(571	)			(571	)
Separation expenses			—				—				—				—				—				(68	)			(68	)
Other expenses			—				—				—				—				—				(862	)			(862	)
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			$	(164	)		$	2,293			$	(19,902	)			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	)