Item 1. Business - --------------------
Corporate Profile
Cousins Properties Incorporated (the "Registrant" or "Cousins") is a Georgia corporation, which since 1987 has elected to be taxed as a real estate investment trust ("REIT"). Cousins Real Estate Corporation and its subsidiaries ("CREC") is a taxable entity consolidated with the Registrant, which owns, develops, and manages a portion of the Registrant's real estate portfolio. CREC II Inc. and its subsidiaries ("CREC II") is another taxable entity which owns a 50% interest in Cousins Stone LP, an unconsolidated joint venture which is a full-service real estate company headquartered in Dallas, Texas that specializes in third party property management and leasing of Class A office buildings. The Registrant, together with CREC and CREC II, is hereafter referred to as the "Company."
Cousins is an Atlanta-based, fully integrated, self administered equity real estate investment trust. The Company has extensive experience in the real estate industry, including the acquisition, financing, development, management and leasing of properties. Cousins has been a public company since 1962, and its common stock trades on the New York Stock Exchange. The Company owns a portfolio of well-located, high-quality retail, office, medical office and land development projects and holds several tracts of strategically located undeveloped land. The strategies employed to achieve the Company's investment goals include the development of properties which are substantially precommitted to quality tenants; maintaining high levels of occupancy within owned properties; the selective sale of assets; the creation of joint venture arrangements and the acquisition of quality income-producing properties at attractive prices. The Company also seeks to be opportunistic and take advantage of normal real estate business cycles.
Unless otherwise indicated, the notes referenced in the discussion below are the "Notes to Consolidated Financial Statements" included in the financial section of the Registrant's 1999 Annual Report to Stockholders.
Brief Description of Company Investments
Office. As of March 15, 2000, the Company's office portfolio included ------- the following thirty-two commercial office buildings:
(a) Under construction and/or in lease-up. (b) These projects are actually owned in ventures in which a portion of the upside is shared with the other venturer. See "Major Properties" - "Cousins/Daniel LLC," "101 Second Street," "One Second Street" and "CommonWealth/Cousins I, LLC" where discussed.
The weighted average leased percentage of these office buildings (excluding all non-operational properties currently under construction and/or in lease-up and One Ninety One Peachtree Tower, as it is less than 10% owned by the Company) was approximately 98% as of March 15, 2000 and the leases expire as follows:
(a) Annual base rent excludes the operating expense reimbursement portion of the rent payable. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars.
(b) Rentable square feet leased as of March 15, 2000 out of approximately 2,648,000 total rentable square feet.
(c) Rentable square feet leased as of March 15, 2000 out of approximately 5,316,000 total rentable square feet.
(d) Where a tenant has the option to cancel its lease without penalty, the lease expiration date used in the table above reflects the cancellation option date rather than the lease expiration date.
The weighted average remaining lease term of these twenty-five office buildings was approximately 7 years as of March 15, 2000. Most of the Company's leases in these buildings provide for pass through of operating expenses and base rents which escalate over time.
Retail. As of March 15, 2000, the Company's retail portfolio included ------- the following fourteen properties:
(a) Annual base rent excludes the operating expense reimbursement portion of the rent payable and any percentage rents due. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars.
(b) Gross leasable area leased as of March 15, 2000 out of approximately 1,186,000 total gross leasable area.
(c) Gross leasable area leased as of March 15, 2000 out of approximately 1,234,000 total gross leasable area.
The weighted average remaining lease term of these nine retail properties was approximately 12 years as of March 15, 2000. All of the major tenant leases in these retail properties provide for pass through of operating expenses and base rents which escalate over time.
Medical Office. As of March 15, 2000, the Company's medical office ---------------- portfolio included the following six medical office properties:
(a) Under construction and/or in lease-up. (b) This project is in a stage of predevelopment, is not yet under construction, and may not go forward if all criteria for proceeding with development are not satisfied.
The weighted average leased percentage of these medical office buildings (excluding all properties currently under construction and/or in lease-up) was 97% as of March 15, 2000 and the leases expire as follows:
(a) Annual base rent excludes the operating expense reimbursement portion of the rent payable. If the lease does not provide for pass through of such operating expense reimbursements, an estimate of operating expenses is deducted from the rental rate shown. The base rental rate shown is the estimated rate in the year of expiration. Amounts disclosed are in dollars.
(b) Rentable square feet leased as of March 15, 2000 out of approximately 315,000 total rentable square feet.
(c) Rentable square feet leased as of March 15, 2000 out of approximately 69,000 total rentable square feet.
The weighted average remaining lease term of these four medical office buildings was approximately 9 years as of March 15, 2000. The Company's leases in these medical office buildings provide for pass through of operating expenses and base rents which escalate over time.
Other. The Company's other real estate holdings include equity ------ interests in approximately 410 acres of strategically located land held for investment and future development at North Point and Wildwood Office Park, the option to acquire the fee simple interest in approximately 10,300 acres of land through its Temco Associates joint venture, and two mortgage notes for approximately $24 million which are secured by a 250,000 square foot office building in Washington, D.C. The terms of these two notes have some of the characteristics of an equity investment, and should provide a comparable return on investment (see Note 3).
The Company's joint venture partners include either the company a named or an affiliate of the company named and are as follows: IBM, The Coca- Cola Company ("Coca-Cola"), Bank of America Corporation ("Bank of America"), The Prudential Insurance Company of America ("Prudential"), Temple-Inland Inc., Cornerstone Properties, Inc., and CarrAmerica Realty Corporation.
The success of the Company's operations is dependent upon such unpredictable factors as the availability of satisfactory financing; general and local economic conditions; the activity of others developing competitive projects; the cyclical nature of the real estate industry; and zoning, environmental impact, and other government regulations.
Refer to Item 2
Item 2. Properties - ----------------------
Table of Major Properties
The following tables set forth certain information relating to major office, retail and medical office properties, stand alone retail lease sites, and land held for investment and future development in which the Company has a 10% or greater ownership interest. All information presented is as of December 31, 1999, except leasing information which is as of March 15, 2000. Dollars are stated in thousands.
(1) Cost as shown in the accompanying table includes deferred leasing and financing costs and other related assets. For each of the following projects: 2300 and 2500 Windy Ridge Parkway, 3200 Windy Hill Road, 4100 and 4300 Wildwood Parkway, 4200 Wildwood Parkway and Wildwood Stand Alone Retail Lease Sites, the cost shown is what the cost would be if the venture's land cost were adjusted downward to the Company's lower basis in the land it contributed to the venture.
(2) Approximately .18 acres of the total 4 acres of land at Inforum is under a ground lease expiring 2068. (3) Actual tenant or venture partner is affiliate of entity shown. (4) 103,656 square feet of this lease of 101 Independence Center expires in November 2000. The renewal of this lease is currently being negotiated. (5) Project was under construction, redevelopment and/or lease-up as of December 31, 1999. In certain situations, lease expiration dates are based upon estimated commencement dates and square footage is estimated. (6) See "Major Properties" - "Ten Peachtree Place," "Cousins/Daniel, LLC," "CommonWealth/Cousins I, LLC ," "CP Venture Two LLC," "CP Venture Two LLC and CP Venture Three LLC," "101 Second Street" and "One Second Street" where these ventures' preferences and terms are discussed. (7) AT&T Wireless Services Headquarters is located on 9 acres which are subject to a ground lease expiring in 2034, with an option to renew through 2087. (8) AT&T Wireless Services Headquarters became partially operational in September 1999 and fully operational in October 1999. Thus, economic occupancy for AT&T Wireless Services Headquarters does not include a full year of operations. (9) 44,844 square feet of this lease at 555 North Point Center East expires in 2009, with an option to extend the lease to 2014. (10) 333 John Carlyle became partially operational in May 1999. Thus, economic occupancy for 333 John Carlyle does not include a full year of operations. (11) 11,050 square feet of the Profit Recovery Group lease of 2300 Windy Ridge Parkway expires in 2002 and 1,556 square feet of the Financial Services Corporation lease of 2300 Windy Ridge Parkway expires in 2001. (12) 119,544 square feet of this lease of 3200 Windy Hill Road expires in 2001, and the balance expires in 2006. (13) Georgia-Pacific Corporation, PaineWebber and Green Tree Financial have the right to terminate their leases in 2007, 2008 and 2001, respectively, upon payment of significant cancellation penalties. (14) Georgia-Pacific Corporation has the option to purchase the building on its lease expiration date for a price of $33,750,000. (15) 4200 Wildwood Parkway became partially operational in June 1998 and fully operational in April 1999. Thus economic occupancy for 4200 Wildwood Parkway does not include a full year of operations. (16) See "Major Properties" - "Wildwood Office Park" where the accounting for the 3100 Windy Hill Road Building is discussed. (17) Ernst & Young LLP has a cancellation right on 23,036 square feet of this lease of Bank of America Plaza in 2003, if notice is received in 2002, and Paul Hastings has a cancellation right on 12,812 square feet and 20,574 square feet in 2005 and 2006, respectively. (18) See "Major Properties" - "Bank of America Plaza" where debt on Bank of America Plaza is discussed. (19) The Pinnacle became partially operational in November 1998 and remained so during a portion of 1999. Thus, economic occupancy for The Pinnacle does not include a full year of operations. (20) Maturity of the Ten Peachtree Place mortgage debt is extendible to December 31, 2008. Rate becomes floating after November 30, 2001. (21) 100 North Point Center East and 200 North Point Center East were financed together with one non-recourse mortgage note payable. For purposes of this schedule the total debt has been allocated 50% to each building. (22) Protective Life has the right to cancel 13,052 square feet of this lease of Grandview II in 2003. (23) Just For Feet, Inc. was acquired by Foot Star, Inc.subsequent to year-end but its stores will continue to operate under the Just For Feet name. (24) Includes 22,000 square feet not yet constructed as of March 15, 2000 which was excluded from the calculation of percentage leased and average 1999 economic occupancy. (25) This anchor tenant owns its own space. (26) The Avenue East Cobb became partially operational in September 1999. Thus, economic occupancy for The Avenue East Cobb does not include a full year of operations. (27) Laguna Niguel Promenade was sold on March 28, 2000. See "Major Properties- Other Retail Properties" where the sale is discussed. (28) North Point MarketCenter includes approximately 4 outparcels which are ground leased to freestanding users. (29) Northside/Alpharetta I and II are located on 1 acre and 2 acres subject to ground leases, which expire in 2058 and 2060, respectively. (30) Northside/Alpharetta II became partially operational in September 1999. Thus, economic occupancy for Northside/Alpharetta II does not include a full year of operations. (31) Meridian Mark Plaza became partially operational in April 1999. Thus, economic occupancy for Meridian Mark Plaza does not include a full year of operations. (32) The AtheroGenics building became fully operational in March 1999. Thus, economic occupancy for AtheroGenics does not include a full year of operations. (33) This project is in a stage of predevelopment, is not yet under construction, and may not go forward if all criteria for proceeding with development are not satisfied. (34) The Crawford Long Medical Office Building will be developed on top of a building within the rawford Long Hospital campus. The Company has received a fee simple interest in the air rights above this building in order to develop the medical office building. (35) Presbyterian Medical Plaza at University is located on 1 acre which is subject to a ground lease expiring in 2057. (36) Novant Health, Inc. has the option to renew 23,359 rentable square feet through 2027 of this lease of Presbyterian Medical Plaza at University, with the option to renew the balance through 2022.
Land Held for Investment and Future Development (excluding Retail Outparcels)
(1) Based upon management's estimates. (2) For the portion of the Wildwood Office Park land owned by a joint venture, the cost shown is what the cost would be if the venture's land cost were adjusted downward to the Company's lower basis in the land it contributed to the venture. The adjusted cost excludes building predevelopment costs, net, of $1,113,000. (3) The North Point property is located both east and west of Georgia Highway 400. Development had been mainly concentrated on the land located east of Georgia Highway 400, until July 1998 when the Company commenced construction of the first building, AtheroGenics, on the west side. The land located east of Georgia Highway 400 surrounds North Point Mall, a 1.3 million square foot regional mall on a 100 acre site which the Company sold in 1988. (4) Joint venture partner is an affiliate of the entity shown. (5) Temco Associates has an option through March 2006, with no carrying costs, to acquire the fee simple interest in approximately 10,300 acres in Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership also has an option to acquire interests in a timber rights only lease covering approximately 22,000 acres. This option also expires in March 2006, with the underlying lease expiring in 2025. The options may be exercised in whole or in part over the option period and the option price on the fee simple land is $929 per acre on January 1, 2000, escalating at 6% on January 1 of each succeeding year during the term of the option. During 1999, approximately 640 acres of the option related to the fee simple interest was exercised. Approximately 466 acres were simultaneously sold for gross profits of $2,458,000. Approximately 174 acres were acquired for development of the Bentwater residential community. Approximately 1,750 lots will be developed ithin Bentwater on an approximate total of 1,083 acres, the remainder of which will be acquired as needed through exercises of the option related to the fee simple interest. During 1998, approximately 328 acres of the option related to the fee simple interest was exercised. Approximately 83 acres were simultaneously sold for gross profits of approximately $192,000. The Cobb County, Georgia YMCA had a three year option to purchase approximately 38 acres out of the options exercised in 1998, which they exercised in December 1999. The remaining acreage (approximately 207 acres) was deeded in early 1999 to a golf course developer who is developing the golf course within Bentwater. None of the option was exercised in 1997.
Major Properties - ---------------- General - -------
This section describes the major operating properties in which the Company has an interest either directly or indirectly through joint venture arrangements. A "negative investment" in a joint venture results from distributions of capital to the Company, if any, exceeding the sum of (i) the Company's contributions of capital and (ii) reported earnings (losses) of the joint venture allocated to the Company. "Investment" in a joint venture means the book value of the Company's investment in the joint venture.
Wildwood Office Park - -------------------- Wildwood Office Park is a 285 acre Class A commercial development in Atlanta master planned by I.M. Pei, including 8 office buildings containing 2,439,000 rentable square feet. The property is zoned for office, institutional, commercial and residential use. Approximately 105 acres in the park are owned by, or committed to be contributed to, Wildwood Associates (see below), including approximately 34 acres of land held for future development. The Company owns 100% of the 146 acre balance of the land available for future development.
Located in Atlanta's northwest commercial district, just north of the Interstate 285/Interstate 75 intersection, Wildwood features convenient access to all of Atlanta's major office, commercial and residential districts. The Wildwood complex overlooks the Chattahoochee River and borders 1,200 acres of national forest, thus providing an urban office facility in a forest setting.
Wildwood Associates. Wildwood Associates is a joint venture formed in 1985 between the Company and IBM. The Company and IBM each have a 50% interest in Wildwood Associates. At December 31, 1999, the Company's investment in Wildwood Associates and a related partnership, which included the cost of the land the Company is committed to contribute to Wildwood Associates, was a negative investment of approximately $36,900,000 due to partnership distributions.
Wildwood Associates owns the 3200 Windy Hill Road Building (687,000 rentable square feet), the 2300 Windy Ridge Parkway Building (634,000 rentable square feet), the 2500 Windy Ridge Parkway Building (314,000 rentable square feet), the 4100 and 4300 Wildwood Parkway Buildings (250,000 rentable square feet in total) and the 4200 Wildwood Parkway Building (260,000 rentable square feet). As of March 15, 2000, these buildings were all 100% leased, with the exception of the 2300 Windy Ridge Parkway Building which was 99% leased. Wildwood Associates also owns 14 acres leased to two banking facilities and five restaurants.
Wildwood Associates has a $2 million bank line of credit (the Company severally guarantees one-half) under which $0 was drawn as of December 31, 1999.
Other Buildings in Wildwood Office Park. Wildwood Office Park also contains the 3301 Windy Ridge Parkway Building, a 106,000 rentable square foot office building located on approximately 10 acres which is wholly owned by the Company. The 3301 Windy Ridge Parkway Building was 100% leased as of March 15, 2000.
In addition, the 3100 Windy Hill Road Building, a 188,000 rentable square foot corporate training facility occupies a 13-acre parcel of land which is wholly owned by the Company. The training facility improvements were sold in 1983 to a limited partnership of private investors, at which time the Company received a leasehold mortgage note. The training facility land was simultaneously leased to the partnership for thirty years, along with certain equipment for varying periods. The training facility had been leased by the partnership to IBM through November 30, 1998.
Effective January 1, 1997, the IBM lease was extended eight years beyond its previous expiration, to November 30, 2006. Based on the economics of the lease, the Company will receive substantially all of the economic risks and rewards from the property through the term of the IBM lease. In addition, the Company will receive substantially all of the future economic risks and rewards from the property beyond the IBM lease because of the short term remaining on the land lease (7 years) and the large mortgage note balance ($25.9 million) that would have to be paid off, with interest, in that 7 year period before the limited partnership would receive any significant benefit. Therefore, effective January 1, 1997, the $17,005,000 balance of the mortgage note and land was reclassified to Operating Properties, and revenues and expenses (including depreciation) from that point forward have been recorded as if the building were owned by the Company.
North Point - -----------
North Point is a mixed-use commercial development located in north central suburban Atlanta, Georgia, off of Georgia Highway 400, a six lane state highway that runs from downtown Atlanta to the northern Atlanta suburbs. The Company owns either directly or through a joint venture approximately 134 and 221 acres located on the east and west sides of Georgia Highway 400, respectively. Development had been mainly concentrated on the land located east of Georgia Highway 400 until July 1998 when the Company commenced construction of the first building, AtheroGenics, on the west side. Planning and infrastructure work has also begun for additional development on the west side property. The east side land surrounds North Point Mall, a 1.3 million square foot regional mall on a 100-acre site which the Company sold in 1988. The following describes the various components of North Point.
North Point MarketCenter and Mansell Crossing Phase II. North Point MarketCenter, which is 98% leased as of March 15, 2000, is a 517,000 square foot retail power center (of which 401,000 square feet are owned by Cousins) located adjacent to North Point Mall. Mansell Crossing Phase II, which was 100% leased as of March 15, 2000, is an approximately 103,000 square foot expansion of an existing retail power center, previously developed by the Company for a third party. These two centers are located on 49 and 13 acres of land, respectively, at North Point. Both of these properties were contributed to the Prudential venture in November 1998 (see Note 5).
North Point Center East. The Company owns either directly or indirectly through a joint venture four Class A office buildings located adjacent to North Point Mall and the retail properties discussed above. 100 North Point Center East, 200 North Point Center East and 333 North Point Center East which were completed in 1995, 1996 and 1998, are 128,000, 130,000 and 129,000 rentable square feet, respectively. Construction commenced in May 1998 on the fourth office building, 555 North Point Center East, a 152,000 rentable square foot building also adjacent to the other buildings. These four office buildings are located on 35 acres of land at North Point and 100, 200 and 333 North Point Center East were all 100% leased as of March 15, 2000 and 555 North Point Center East was 79% leased as of March 15, 2000. 100 and 200 North Point Center East were contributed to the Prudential venture in November 1998 (see Note 5).
AtheroGenics. In July 1998, the Company commenced construction of AtheroGenics, an approximately 50,000 rentable square foot office and laboratory building. This building is located on a 4 acre site on the west side of Georgia Highway 400. AtheroGenics is 100% leased as of March 15, 2000 and became fully operational for financial reporting purposes in March 1999.
Other North Point Property. Approximately 24 acres of the North Point land are ground leased in 1 to 5 acre sites to freestanding users. These 24 acres were 100% leased as of March 15, 2000.
The remaining approximately 230 developable acres at North Point are 100% owned by the Company. Approximately 13 acres of this land are located on the east side of Georgia Highway 400 and are zoned for office use. Approximately 217 acres of the land are located on the west side of Georgia Highway 400 and are zoned for office, institutional and light industrial use.
Other Office Properties - ------------------------
Bank of America Plaza. Bank of America Plaza is a Class A, 55-story, approximately 1.3 million rentable square foot office tower designed by Kevin Roche and is located on approximately 4 acres of land between the midtown and downtown districts of Atlanta, Georgia. The building, which was completed in 1992, was 99% leased as of March 15, 2000. An affiliate of Bank of America leases approximately 45% of the rentable square feet. Bank of America Plaza was developed by CSC Associates, L.P. ("CSC"), a joint venture formed by the Company and a wholly owned subsidiary of Bank of America, each as 50% partners.
CSC's net income or loss and cash distributions are allocated to the partners based on their percentage interests (50% each). At December 31, 1999, the Company's investment in CSC was approximately $94,347,000.
Cousins LORET Venture, L.L.C.("Cousins LORET"). Effective July 31, 1997, Cousins LORET was formed between the Company and LORET Holdings, L.L.L.P. ("LORET"), each as 50% members. LORET contributed Two Live Oak Center, a 278,000 rentable square foot office building located in Atlanta, Georgia, which was renovated in 1997, and was 99% leased as of March 15, 2000. Two Live Oak Center was contributed subject to a 7.90% $30 million non-recourse ten year mortgage note payable. LORET also contributed an adjacent 4 acre site on which construction of The Pinnacle, a 423,000 rentable square foot Class A office building, commenced in August 1997 and was completed in November 1998. The Pinnacle became partially operational for financial reporting purposes in March 1999 and as of March 15, 2000 was 97% leased. In May 1998, Cousins LORET completed the $70 million non-recourse financing of The Pinnacle at an interest rate of 7.11% and a term of twelve years. This financing was completely funded on December 30, 1998. The Company contributed $25 million of cash to Cousins LORET to match the value of LORET's agreed-upon equity. At December 31, 1999, the Company had an investment in Cousins LORET of approximately $16,222,000.
Ten Peachtree Place. Ten Peachtree Place is a 20-story, 259,000 rentable square foot Class A office building located in midtown Atlanta, Georgia. Completed in 1991, this structure was designed by Michael Graves and is currently 100% leased to Coca-Cola. Approximately four acres of adjacent land, currently used for surface parking, are available for future development.
Ten Peachtree Place is owned by Ten Peachtree Place Associates, a general partnership between the Company (50%) and a wholly owned subsidiary of Coca-Cola (50%). The partnership acquired the property in 1991 for a nominal cash investment, subject to a ten-year purchase money note. This 8% purchase money note had an outstanding balance of $17,456,000 at December 31, 1999. If the purchase money note is paid in accordance with its terms, it will amortize to approximately $15.3 million ($59 per rentable square foot) over the ten-year term of the Coca-Cola lease, at which time Coca-Cola is entitled to receive the preferred return described below, and the property may be sold, released, or returned to the lender under the purchase money note for $1.00 without penalty or any further liability to the Company for the indebtedness. At December 31, 1999, the Company had an investment in Ten Peachtree Place Associates of approximately $175,000.
The Company anticipates that Ten Peachtree Place Associates will generate approximately $400,000 per year of cash flows from operating activities net of note principal amortization during the ten-year lease. The partnership agreement generally provides that each of the partners is entitled to receive 50% of cash flows from operating activities net of note principal amortization (excluding any sale proceeds) for ten years, after which time the Company is entitled to 15% of cash flows (including any sale proceeds) and its partner is entitled to receive 85% of cash flows (including any sale proceeds), until the two partners have received a combined distribution of $15.3 million, after which time each partner is entitled to receive 50% of cash flows (including any sale proceeds).
CC-JM II Associates. This joint venture was formed in 1994 between the Company and an affiliate of CarrAmerica Realty Corporation, each as 50% general partners, to develop and own John Marshall-II, a 224,000 square foot Class A office building in suburban Washington, D.C. The building is 100% leased for 15 years to Booz-Allen & Hamilton, an international consulting firm, as a part of its corporate headquarters campus. Rent commenced on January 21, 1996. At December 31, 1999, the Company had an investment in CC-JM II Associates of approximately $2,215,000.
Cousins/Daniel, LLC. Cousins/Daniel, LLC ("Cousins/Daniel") was formed in 1997 between Cousins, Inc. (a wholly owned subsidiary of Cousins) and Daniel Realty Company ("Daniel"). The purpose of this venture is to develop certain projects proposed by Daniel and selected by the Company. Daniel's economic rights are limited to development fees, leasing fees, management fees and certain incentive interests. These incentive interests include a residual interest in the cash flow and a residual interest in capital proceeds. All projects undertaken within the venture are pooled for purposes of calculating the aforementioned residuals. This venture is treated as a consolidated entity in the Company's financial statements.
In June 1998, Cousins/Daniel acquired Lakeshore Park Plaza, an approximately 193,000 rentable square foot office building and also purchased the land for and commenced construction of, 600 University Park Place, an approximately 123,000 rentable square foot Class A office building, which is still under construction and lease-up as of March 15, 2000. Both of these office buildings are located in Birmingham, Alabama, and are 98% and 69% leased as of March 15, 2000, respectively.
CommonWealth/Cousins I, LLC. On November 18, 1998, the Company entered into Commonwealth/Cousins I, LLC (the "Venture") with CommonWealth Pacific, LLC ("CommonWealth") for the purposes of developing AT&T Wireless Services Headquarters, a 222,000 rentable square foot Class A office building in suburban Los Angeles, California, which was 100% leased as of March 15, 2000.
CommonWealth transferred all rights in the project and in exchange received an initial credit to its capital account of $4,980,039, which is equal to a 49.9% interest in the Venture. The Company contributed $5,000,000 as its capital contribution for a 50.1% interest in the Venture. The Venture entered into a put and call agreement which the Company intends to exercise to buy out CommonWealth's interest in the Venture for approximately $7.5 million. The Venture is treated as a consolidated entity in the Company's financial statements.
CP Venture Two LLC. On November 12, 1998, the Company entered into a venture agreement with Prudential. On such date the Company contributed its interest in nine properties to the venture and Prudential contributed cash (see Note 5). The nine properties contributed included four office properties, 100 and 200 North Point Center East as discussed above, First Union Tower and Grandview II. First Union Tower is a Class A office building containing approximately 320,000 rentable square feet, located on one acre of land in downtown Greensboro, North Carolina. First Union Tower was 90% leased as of March 15, 2000. Grandview II is an approximately 149,000 rentable square foot Class A office building in Birmingham, Alabama, which was owned by Cousins/Daniel, LLC prior to being contributed. Grandview II was approximately 100% leased as of March 15, 2000. See Other Retail Properties and Medical Office Properties sections where retail and medical office properties contributed to the Prudential venture are discussed.
333 John Carlyle. In January 1998, the Company purchased the land for and commenced construction of 333 John Carlyle, an approximately 153,000 rentable square foot Class A office building in suburban Washington, D.C. 333 John Carlyle became partially operational for financial reporting purposes in May 1999 and was 87% leased as of March 15, 2000.
Inforum. In June 1999, the Company acquired Inforum, a 987,000 rentable square foot office building in downtown Atlanta, Georgia, for $71 million by completing a tax-deferred exchange with the proceeds ($69 million) from the sale of the Company's 50% interest in Haywood Mall. Inforum was 97% leased as of March 15, 2000.
101 Independence Center. In December 1996, the Company acquired 101 Independence Center, a 525,000 rentable square foot Class A office building (including an underground parking garage and an adjacent parking deck) located at the intersection of Trade and Tryon Streets in the central business district of Charlotte, North Carolina. 101 Independence Center was 97% leased as of March 15, 2000.
615 Peachtree Street. In August 1996, the Company acquired 615 Peachtree Street, a 145,000 rentable square foot 12-story downtown Atlanta office building, located across from Bank of America Plaza. 615 Peachtree Street was 84% leased as of March 15, 2000.
One Ninety One Peachtree Tower. One Ninety One Peachtree Tower is a 50-story, Class A office tower located in downtown Atlanta, Georgia that was completed in December 1990. One Ninety One Peachtree Tower, which contains 1.2 million rentable square feet, was designed by John Burgee Architects, with Phillip Johnson as design consultant.
One Ninety One Peachtree Tower was developed on approximately 2 acres of land, of which approximately 1.5 acres is owned and approximately one-half acre under the parking facility is leased for a 99-year term expiring in 2087 with a 99-year renewal option. One Ninety One Peachtree Tower was approximately 97% leased at March 15, 2000.
C-H Associates, Ltd. ("C-H Associates"), a partnership formed in 1988 between CREC (49%), Hines Peachtree Associates Limited Partnership (49%) and Peachtree Palace Hotel, Ltd. (2%), owns a 20% interest in the partnership that owns One Ninety One Peachtree Tower. C-H Associates' 20% ownership of One Ninety One Peachtree Tower results in an effective 9.8% ownership interest by CREC, subject to a preference in favor of the majority partner, in the One Ninety One Peachtree Tower project. The balance of the One Ninety One Peachtree Tower project was owned by DIHC Peachtree Associates, which was an affiliate of Dutch Institutional Holding Company, but was acquired by Cornerstone Properties, Inc. in October 1997.
Through C-H Associates, CREC received 50% of the development fees from the One Ninety One Peachtree Tower project. In addition, CREC owns a 50% interest in two general partnerships which receive fees from leasing and managing the One Ninety One Peachtree Tower project.
The One Ninety One Peachtree Tower project was funded substantially by debt until March 1993, at which time DIHC Peachtree Associates (now Cornerstone Properties, Inc. as discussed above) contributed equity in the amount of $145,000,000 which repaid approximately one-half of the debt. Subsequent to the equity contribution, C-H Associates is entitled to a priority distribution of $250,000 per year (of which the Company is entitled to receive $112,500) for seven years beginning in 1993. The equity contributed is entitled to a preferred return at a rate increasing over the first 14 years from 5.5% to 11.5% (payable after the Company's priority return); at December 31, 1999, the cumulative undistributed preferred return was $13,235,783. After Cornerstone Properties, Inc. recovers its preferred return, the partners share in any operating cash flow distributions in accordance with their percentage interests. The project is subject to long-term debt of approximately $143,336,000 at December 31, 1999. At December 31, 1999, the Company had a negative investment of approximately $91,000 in the One Ninety One Peachtree Tower project.
Office Properties Under Development - -----------------------------------
101 Second Street. Cousins/Myers Second Street Partners, L.L.C., a venture formed in 1997 between the Company and Myers Second Street Company LLC ("Myers"), purchased approximately 1 acre of undeveloped land in downtown San Francisco, California upon which 101 Second Street, an approximately 388,000 rentable square foot Class A office building was developed. 101 Second Street was 98% leased as of March 15, 2000. Myers' economic rights are limited to development fees and certain incentive interests, which include a residual interest in the cash flow and capital proceeds. This venture is treated as a consolidated entity in the Company's financial statements.
One Second Street. In November 1999, the Company formed Cousins/Myers II, LLC, a venture with Myers Bay Area Company LLC ("Myers Bay"), which purchased approximately 1 acre of fully entitled undeveloped land in downtown San Francisco, California for the development of One Second Street, an approximately 374,000 rentable square foot Class A office building. Myers Bay's economic rights are limited to development fees and certain incentive interests, which include a residual interest in the cash flow and capital proceeds. The venture is treated as a consolidated entity in the Company's financial statements.
Charlotte Gateway Village, LLC ("Gateway"). On December 14, 1998, the Company and a wholly owned subsidiary of Bank of America Corporation formed Gateway for the purpose of developing and owning Gateway Village, a 1,076,000 rentable square foot Class A office building and parking deck in downtown Charlotte, North Carolina. Construction of Gateway Village commenced in July 1998, and the project is 100% leased to Bank of America Corporation. In December 1998, Gateway completed construction financing of up to $190 million for Gateway Village. The note bears an interest rate of LIBOR (adjusted for certain reserve requirements) plus .50% and matures January 2, 2002. No amounts were drawn on the note until 1999. This note is fully exculpated and is supported by a lease to Bank of America Corporation with a term of 15 years. Pursuant to the Gateway operating agreement, this construction financing will be replaced with permanent long-term financing which will be fully amortized at the end of the Bank of America Corporation lease. At December 31, 1999, the Company had an investment in Gateway of approximately $21,221,000.
Gateway's net income or loss and cash distributions are allocated to the members as follows: first to the Company so that it receives a cumulative compound return equal to 11.46% on its capital contributions, second to a wholly owned subsidiary of Bank of America Corporation until it has received an amount equal to the aggregate amount distributed to the Company and then to each member, 50%.
285 Venture, Ltd. In March 1999, the Company and a commingled trust fund advised by J.P. Morgan Investment Management Inc. (the "J.P. Morgan Fund") formed 285 Venture, Ltd., each as 50% partners, for the purpose of developing 1155 Perimeter Center West, an approximately 361,000 rentable square foot Class A office building complex in Atlanta, Georgia. 1155 Perimeter Center West wa 66% leased as of March 15, 2000. The J.P. Morgan Fund contributed the approximately 6 acre site upon which 1155 Perimeter Center West is being developed. The land had an agreed-upon value of approximately $5.4 million which the Company matched with a cash contribution. At December 31, 1999, the Company's investment in 285 Venture, Ltd. was approximately $16,888,000.
1900 Duke Street. In January 1999, the Company purchased the land for and commenced construction of 1900 Duke Street, an approximately 97,000 rentable square foot Class A office building in suburban Washington, D.C.
Other Retail Properties - -----------------------
Fully Operational Retail Properties. The Company owns three retail centers which were fully operational for financial reporting purposes as of December 31, 1999. Perimeter Expo is a 291,000 square foot retail power center (of which the Company owns 176,000 square feet) which is located in Atlanta, Georgia and was 100% leased (Company owned) as of March 15, 2000. Presidential MarketCenter is a 493,000 square foot retail power center (of which the Company owns 376,000 square feet) which is located in suburban Atlanta, Georgia and was 86% leased (Company owned) as of March 15, 2000. Colonial Plaza MarketCenter is a 480,000 square foot retail power center which is located in Orlando, Florida and was 96% leased as of March 15, 2000. Laguna Niguel Promenade is a 154,000 square foot retail center located in Laguna Niguel, California and was 94% leased as of March 15, 2000.
CP Venture Two LLC and CP Venture Three LLC. In November 1998, the Company contributed both Greenbrier MarketCenter and Los Altos MarketCenter in addition to North Point MarketCenter and Mansell Crossing II (see North Point discussion) to the aforementioned Prudential venture (see Note 5). Greenbrier MarketCenter is a 493,000 square foot retail power center which is located in Chesapeake, Virginia and was 100% leased as of March 15, 2000. Los Altos MarketCenter is a 258,000 square foot retail power center (of which the Prudential venture owns 157,000 square feet) which is located in Long Beach, California and was 100% leased as of March 15, 2000.
The Company is currently developing Mira Mesa MarketCenter, an approximately 453,000 square foot retail power center in suburban San Diego, California, which was 87% leased as of March 15, 2000. Mira Mesa MarketCenter is owned by CP Venture Three LLC (see Note 5). This venture is treated as a consolidated entity in the Company's financial statements.
Brad Cous Golf Venture, Ltd. Effective January 31, 1998, the Company formed the Brad Cous Golf Venture, Ltd. with the W.C. Bradley Co., each as 50% partners, for the purpose of developing and owning The Shops at World Golf Village, an approximately 80,000 square foot retail center located adjacent to the PGA Hall of Fame in St. Augustine, Florida. The Shops at World Golf Village became partially operational for financial reporting purposes in April 1999 and was 60% leased as of March 15, 2000. At December 31, 1999, the Company had an investment in Brad Cous Golf Venture, Ltd. of approximately $5,257,000.
Other Retail Properties Under Development. In February 1998, the Company purchased The Shops at Palos Verdes, located in Rolling Hills Estates, California, in the greater Los Angeles metropolitan area. This 355,000 square foot center included existing retail space and a parking deck. The Company is redeveloping and remerchandising the project into The Avenue of the Peninsula, an approximately 374,000 square foot open-air, retail specialty center which was 61% leased as of March 15, 2000. In April 1998, the Company purchased the land for and commenced construction of The Avenue East Cobb, an approximately 225,000 square foot open-air, retail specialty center in suburban Atlanta, Georgia. The Avenue East Cobb became partially operational in September 1999 and was 94% leased as of March 15, 2000.
In September 1999, the Company purchased the land for and commenced construction of Salem Road Station, an approximately 67,000 square foot neighborhood retail center in suburban Atlanta, Georgia. Salem Road Station was 68% leased as of March 15, 2000. In September and October 1999, the Company purchased the land for The Avenue Peachtree City, an approximately 168,000 square foot retail specialty center in suburban Atlanta, Georgia.
Retail Properties Sold. On February 1, 1999, CREC sold Abbotts Bridge Station, an approximately 83,000 square foot neighborhood retail center in suburban Atlanta, Georgia for $15.7 million, which was approximately $5.2 million over the cost of the center. Including depreciation recapture of approximately $.3 million and net of an income tax provision of approximately $2.0 million, the net gain on the sale was approximately $3.5 million.
On March 28, 2000, the Company sold Laguna Niguel Promenade, an approximately 154,000 square foot retail center located in Laguna Niguel, California for $26.7 million, which was approximately $6.4 million over the cost of the center. Including depreciation recapture of approximately $.8 million, the net gain on the sale was approximately $7.2 million. The net proceeds from the sale were placed in escrow pending a tax-deferred exchang to be identified by the Company.
Medical Office Properties - -------------------------
Operational Medical Office Properties. In June 1998, the Company acquired Northside/Alpharetta I, an approximately 106,000 rentable square foot medical office building in suburban Atlanta, Georgia. Northside/Alpharetta I was 100% leased as of March 15, 2000.
Medical Office Properties Under Development. Construction commenced in June 1998 on Northside/Alpharetta II, an approximately 198,000 rentable square foot medical office building. Northside/Alpharetta II became partially operational in September 1999 and was 63% leased as of March 15, 2000. Additionally, Meridian Mark Plaza, a 159,000 rentable square foot medical office building, became partially operational for financial reporting purposes in April 1999. Meridian Mark Plaza was 94% leased at March 15, 2000.
CP Venture Two LLC. In November 1998, the Company contributed Presbyterian Medical Plaza at University, an approximately 69,000 rentable square foot medical office building in Charlotte, North Carolina, to the Prudential venture (see Note 5). Presbyterian Medical Plaza at University was approximately 100% leased as of March 15, 2000.
Residential Lots Under Development - ----------------------------------
As of December 31, 1999, CREC and Temco Associates owned the following parcels of land which are being developed into residential communities ($ in thousands):
Land Held for Investment and Future Development - -----------------------------------------------
In addition to the various land parcels located adjacent to operating properties or projects under construction discussed above, the Company owns or controls the following significant land holdings either directly or indirectly through joint venture arrangements. The Company intends to convert these land holdings to income-producing usage or to sell portions of land holdings as opportunities arise over time.
Temco Associates. Temco Associates was formed in March 1991 as a partnership between CREC (50%) and a subsidiary of Temple-Inland Inc. (50%). Temco Associates has an option through March 2006, with no carrying costs, to acquire the fee simple interest in approximately 10,300 acres in Paulding County, Georgia (northwest of Atlanta, Georgia). The partnership also has an option to acquire interests in a timber rights only lease covering approximately 22,000 acres. This option also expires in March 2006, with the underlying lease expiring in 2025. The options may be exercised in whole or in part over the option period and the option price on the fee simple land is $929 per acre on January 1, 2000, escalating at 6% on January 1 of each succeeding year during the term of the option. During 1999, approximately 640 acres of the option related to the fee simple interest was exercised. Approximately 466 acres were simultaneously sold for gross profits of $2,458,000. Approximately 174 acres were acquired for development of the Bentwater residential community. Approximately 1,750 lots will be developed within Bentwater on an approximate total of 1,083 acres, the remainder of which will be acquired as needed through exercises of the option related to the fee simple interest.
During 1998, approximately 328 acres of the option related to the fee simple interest was exercised. Approximately 83 acres were simultaneously sold for gross profits of approximately $192,000. The Cobb County, Georgia YMCA had a three year option to purchase approximately 38 acres out of the options exercised in 1998, which they exercised in December 1999. The remaining acreage (approximately 207 acres) was deeded in early 1999 to a golf course developer who is developing the golf course within Bentwater. None of the option was exercised in 1997. At December 31, 1999, the Company had an investment in Temco Associates of approximately $6,600,000.
Other Investments - -----------------
Air Rights Near the CNN Center. The Company owns a leasehold interest in the air rights over the approximately 365,000 square foot CNN Center parking facility in Atlanta, Georgia, adjoining the headquarters of Turner Broadcasting System, Inc. and Cable News Network. The air rights are developable for additional parking or office use. The Company's net carrying value of this property is $0.
Cousins Stone LP. Cousins Stone LP was formed on June 1, 1999 when CREC II's subsidiaries acquired Faison's 50% interest in Faison-Stone. Cousins Stone LP is a full-service real estate company headquartered in Dallas, Texas that specializes in third party property management and leasing of Class A office properties. At December 31, 1999, the Company had an investment in Cousins Stone LP of approximately $7,131,000.
Warrants to Purchase Stock in Other Companies - ---------------------------------------------
Cypress Communications, Inc. In December 1999, the Company executed a Master Communications License Agreement (the "Agreement") with Cypress Communications, Inc. ("Cypress") that provides Cypress a non-exclusive right to access the risers and certain areas of certain of the Company's office and medical office buildings. The Agreement allows Cypress to install equipment and wiring, at Cypress' sole cost and expense, and to offer a variety of telecommunication services to each of the applicable building's tenants. The Agreement has a term of 5 years with an automatic renewal for another 5 years unless Cypress elects not to renew or Cypress fails to equip the applicable building with a server within 18 months of the execution of the Agreement.
Pursuant to the Agreement, the Company will receive a percentage of the revenue earned by Cypress from tenants and third parties who use the telecommunication services. In addition, the Company has entered into a Stock Warrant Agreement with Cypress which provides that Cypress issue to the Company 12,000 warrants per one million gross leasable square feet in the buildings subject to the agreement or approximately 88,234 warrants to purchase Cypress' common stock at an exercise price of $4.22 per share. Certain provisions of the Stock Warrant Agreement result in the return from the transfer of said warrants or stock upon the sale of the buildings. On February 10, 2000, Cypress completed its initial public offering of 10 million shares of common stock.
AtheroGenics, Inc. In July 1998, the Company received 50,000 warrants at an exercise price of $5.00 per share for the purchase of Series C Convertible Preferred Stock of AtheroGenics, Inc. ("AtheroGenics"), a tenant which leases 100% of a 50,000 rentable square foot office and laboratory building the Company developed and owns. On March 1, 2000, the Company received notice from AtheroGenics of its pending registration of its common stock for sale under the Securities Act of 1933. Supplemental Financial and Leasing Information
Depreciation and amortization expense, net of minority interest's share, include the following components for the years ended December 31, 1999 and 1998 ($ in thousands):
Exclusive of new developments and purchases of furniture, fixtures and equipment, the Company had the following capital expenditures for the years ended December 31, 1999 and 1998, including its share of unconsolidated joint ventures ($ in thousands):
Item 3.
Item 3. Legal Proceedings - -----------------------------
No material legal proceedings are presently pending by or against the Company.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders - ---------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth quarter of the Registrant's fiscal year ended December 31, 1999.
Item X. Executive Officers of the Registrant - ------------------------------------------------
The Executive Officers of the Registrant as of the date hereof are as follows:
Name Age Office Held ---- --- -----------
Thomas G. Cousins 68 Chairman of the Board of Directors and Chief Executive Officer Daniel M. DuPree 53 President and Chief Operating Officer Kelly H. Barrett 35 Senior Vice President - Finance George J. Berry 62 Senior Vice President Tom G. Charlesworth 50 Senior Vice President, Secretary and General Counsel Craig B. Jones 49 Senior Vice President and President of the Office Division John S. McColl 37 Senior Vice President - Medical Office Division Joel T. Murphy 41 Senior Vice President and President of the Retail Division John L. Murphy 54 Senior Vice President - Office Division W. James Overton 53 Senior Vice President - Development Lea Richmond III 52 Senior Vice President and President of the Medical Office Division
Relationships: - --------------
Lillian C. Giornelli, Mr. Cousins' daughter, is a director of the Company. There are no other family relationships among the current Executive Officers or Directors.
Term of Office: - ---------------
The term of office for all officers expires at the annual directors' meeting, but the Board has the power to remove any officer at any time.
Business Experience: - --------------------
Mr. Cousins has been the Chief Executive Officer of the Company since its inception.
Mr. DuPree joined the Company in October 1992, became Senior Vice President in April 1993, Senior Executive Vice President in April 1995 and President and Chief Operating Officer in November 1995. Prior to that he was President of New Market Companies, Inc. and affiliates since 1984.
Ms. Barrett joined the Company in October 1992 as Vice President and Controller and became Senior Vice President - Finance of the Company in August 1997. Prior to that she was employed by Arthur Andersen LLP as an Audit Manager.
Mr. Berry has been Senior Vice President since joining the Company in September 1990. Prior to that he was Commissioner of the State of Georgia's Department of Industry, Trade and Tourism from 1983 to 1990.
Mr. Charlesworth joined the Company in October 1992 and became Senior Vice President, Secretary and General Counsel in November 1992. Prior to that he worked for certain affiliates of Thomas G. Cousins as Chief Financial Officer and Legal Counsel.
Mr. Jones joined the Company in October 1992 and became Senior Vice President in November 1995 and President of the Office Division in September 1998. From 1987 until joining the Company, he was Executive Vice President of New Market Companies, Inc. and affiliates.
Mr. McColl joined the Company in April 1996 as Vice President of the Office Division. He was promoted in May 1997 to Senior Vice President of the Medical Office Division. Prior to that he was President of Hutchinson Capital Group, Inc. and an officer of Quest Capital Corp.
Mr. Joel Murphy joined the Company in October 1992 and became Senior Vice President of the Company and President of the Retail Division in November 1995. From 1988 until joining the Company, he was Senior Vice President of New Market Companies, Inc. and affiliates.
Mr. John Murphy has been Senior Vice President since joining the Company in December 1987.
Mr. Overton has been Senior Vice President since joining the Company in September 1989. Prior to that he was employed by Hardin Construction Group, Inc. from 1972 to 1989, where he served as President from 1985 to 1989.
Mr. Richmond has been Senior Vice President and President of the Medical Office Division since he joined the Company in July 1996. Prior to that he was President of The Lea Richmond Company and The Richmond Development Company from 1975 to 1996.
PART II
Item 5.
Item 5. Market for Registrant's Common Stock and Related Security Holder Matters - --------------------------------------------------------------------------------
The information concerning the market prices for the Registrant's common stock and related stockholder matters appearing under the caption "Market and Dividend Information" on page 54 of the Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data - -------------------------------
The information appearing under the caption "Five Year Summary of Selected Financial Data" on page 46 of the Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations -------------
Management's Discussion and Analysis of Financial Condition and Results of Operations which appears on pages 47 through 53 of the Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference.
Item 7a.
Item 7a. Quantitative and Qualitative Disclosure about Market Risk - ------------------------------------------------------------------
Quantitative and Qualitative Disclosures about Market Risk, which appears on page 53 of the Registrant's 1999 Annual Report to Stockholders, is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data - ---------------------------------------------------
The Consolidated Financial Statements and Notes to Consolidated Financial Statements of the Registrant and Report of Independent Public Accountants which appear on pages 25 through 46 of the Registrant's 1999 Annual Report to Stockholders are incorporated herein by reference.
The information appearing under the caption "Selected Quarterly Financial Information (Unaudited)" on page 55 of the Registrant's 1999 Annual Report to Stockholders is incorporated herein by reference.
Other financial statements and financial statement schedules required under Regulation S-X are filed pursuant to Item 14 of Part IV of this report.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and - ------------------------------------------------------------------------------- Financial Disclosure --------------------
Not applicable.
PART III --------
Item 10.
Item 10. Directors and Executive Officers of the Registrant - --------------------------------------------------------------
The information concerning the Directors and Executive Officers of the Registrant that is required by this Item 10, except that which is presented in Item X in Part I above, is included under the captions "Directors and Executive Officers of the Company" on pages 2 through 7 and "Section 16(A) Beneficial Ownership Reporting Compliance" on page 13 of the Proxy Statement dated March 27, 2000 relating to the 1999 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation - ----------------------------------
The information appearing under the caption "Executive Compensation" on pages 7 through 9 (other than the Committee Report on Compensation) and "Compensation of Directors" on page 13 of the Proxy Statement dated March 27, 2000 relating to the 1999 Annual Meeting of the Registrant's Stockholders is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management - --------------------------------------------------------------------------
The information concerning security ownership of certain beneficial owners and management required by this Item 12 is included under the captions "Directors and Executive Officers of the Company" on pages 2 through 7 and "Principal Stockholders" on pages 14 and 15 of the Proxy Statement dated March 27, 2000 relating to the 1999 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions - ----------------------------------------------------------
The information concerning certain transactions required by this Item 13 is included under the caption "Certain Transactions" on pages 13 and 14 of the Proxy Statement dated March 27, 2000 relating to the 1999 Annual Meeting of the Registrant's Stockholders, and is incorporated herein by reference.
PART IV
Item 14.
Item 14. Continued - ---------------------
3. Exhibits --------------
3(a)(i) Articles of Incorporation of Registrant, as approved by the Stockholders on April 29, 1997, filed as Exhibit B to the Registrant's Proxy Statement dated April 29, 1997, and as amended by the Stockholders on April 21, 1998 as filed in the Registrant's Proxy Statement dated March 27, 1998, and incorporated herein by reference.
3(b) By-laws of Registrant, as approved by the Stockholders on April 30, 1990, and as further amended by the Stockholders on April 29, 1993, filed as Exhibit 4(b) to the Registrant's Form S-3 dated September 28, 1993, and incorporated herein by reference.
4(a) Dividend Reinvestment Plan as restated as of March 27, 1995, filed in the Registrant's Form S-3 dated March 27, 1995, and incorporated herein by reference.
10(a)(i) Cousins Properties Incorporated 1989 Stock Option Plan, as renamed the 1995 Stock Incentive Plan and approved by the Stockholders on May 6, 1996, filed as Exhibit A to the Registrant's Proxy Statement dated May 6, 1996, and as amended by the Stockholders on April 21, 1998, as filed in the Registrant's Proxy Statement dated March 27, 1998, and incorporated herein by reference.
10(a)(ii) Cousins Real Estate Corporation Stock Appreciation Right Plan, amended and restated as of March 15, 1993, filed as Exhibit 10(a)(ii) to the Registrant's Form 10-K for the year ended December 31, 1992, and incorporated herein by reference.
10(a)(iii) Cousins Properties Incorporated Stock Appreciation Right Plan, dated as of March 15, 1993, filed as Exhibit 10(a)(iii) to the Registrant's Form 10-K for the year ended December 31, 1992, and incorporated herein by reference.
10(a)(iv) Cousins Properties Incorporated 1999 Stock Incentive Plan, as approved by the Stockholders on May 4, 1999, filed as Exhibit A to the Registrant's Proxy Statement dated March 29, 1999, and incorporated herein by reference.
10(b)(i) Cousins Properties Incorporated Profit Sharing Plan as amended and restated effective as of January 1, 1996.
10(b)(ii) Cousins Properties Incorporated Profit Sharing Trust Agreement as effective as of January 1, 1991, filed as Exhibit 10(b)(ii) to the Registrant's Form 10-K for the year ended December 31, 1991, and incorporated herein by reference.
Item 14. Continued - ---------------------
10(c) Land lease (Kennesaw) dated December 17, 1969, and an amendment thereto dated December 15, 1977, filed as Exhibit l0(d) to the Registrant's Form 10-K for the year ended December 31, 1980, and incorporated herein by reference.
10(d) Cousins Properties Incorporated Stock Plan for Outside Directors, as approved by the Stockholders on April 29, 1997, filed as Exhibit B to the Registrant's Proxy Statement dated April 29, 1997, and incorporated herein by reference.
13 Annual Report to Stockholders for the year ended December 31, 1999.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Public Accountants (Arthur Andersen LLP).
23(b) Consent of Independent Auditors (Ernst & Young LLP).
27 Financial Data Schedule.
(b) Reports on Form 8-K. --------------------------
There were no reports filed on Form 8-K in the quarter ended December 31, 1999.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cousins Properties Incorporated ------------------------------- (Registrant)
Dated: March 20, 2000
BY: /s/ Kelly H. Barret ------------------------------- Kelly H. Barrett Senior Vice President - Finance (Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature Capacity Date - --------- -------- ----
Principal Executive Officer:
Chairman of the Board, March 20, 2000 Chief Executive Officer /s/ T.G. Cousins and Director - --------------------------- T. G. Cousins
Principal Financial and Accounting Officer:
Senior Vice President - Finance March 20, 2000 /s/ Kelly H. Barrett - --------------------------- Kelly H. Barrett
Additional Directors:
/s/ Richard W. Courts Director March 20, 2000 - --------------------------- Richard W. Courts, II
/s/ Boone A. Knox Director March 20, 2000 - --------------------------- Boone A. Knox
/s/ William Porter Payne Director March 20, 2000 - --------------------------- William Porter Payne
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE ----------------------------------------------------
To Cousins Properties Incorporated:
We have audited in accordance with generally accepted auditing standards, the financial statements included in the Cousins Properties Incorporated annual report to stockholders incorporated by reference in this Form l0-K, and have issued our report thereon dated February 8, 2000. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14, Part (a) 2.A. is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia February 8, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------
To Wildwood Associates and Green Valley Associates II: We have audited the accompanying combined balance sheets of WILDWOOD ASSOCIATES (a Georgia general partnership) and GREEN VALLEY ASSOCIATES II (a North Carolina general partnership) as of December 31, 1999 and 1998, and the related combined statements of income, partners' capital and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the management of the partnerships. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wildwood Associates and Green Valley Associates II as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 14 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia February 8, 2000
WILDWOOD ASSOCIATES AND GREEN VALLEY ASSOCIATES II -------------------------------------------------- NOTES TO COMBINED FINANCIAL STATEMENTS -------------------------------------- DECEMBER 31, 1999, 1998 AND 1997 --------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The combined financial statements include the accounts of Wildwood Associates ("WWA") and Green Valley Associates II ("GVA II"), both of which are general partnerships. Cousins Properties Incorporated (together with its other consolidated entities hereinafter referred to as "Cousins") and International Business Machines Corporation ("IBM") each have a 50% general partnership interest in both partnerships. The financial statements of the partnerships have been combined because of the common ownership. The combined entities are hereinafter referred to as the "Partnerships." All transactions between WWA and GVA II have been eliminated in the combined financial statements.
Cost of Property Contributed by Cousins:
The cost of property contributed or committed to be contributed by Cousins was recorded by WWA based upon the procedure described in Note 3. Such cost was, in the opinion of the partners, at or below estimated fair market value at the time of such contribution or commitment, but was in excess of Cousins' historical cost basis.
Cost Capitalization:
All costs related to planning, development and construction of buildings, and expenses of buildings prior to the date they become operational for financial statement purposes, are capitalized. Interest and real estate taxes are also capitalized to property under development.
Depreciation and Amortization:
Real estate assets are stated at depreciated cost. Buildings are depreciated over 25 to 40 years. Furniture, fixtures, and equipment are depreciated over 3 to 5 years. Leasehold improvements and tenant improvements are amortized over the life of the leases or useful life of the assets, whichever is shorter. Deferred expenses - which include certain marketing and leasing costs, loan acquisition costs and deferred operating expenses which are being passed through to tenants - are amortized over the period of estimated benefit. The straight-line method is used for all depreciation and amortization.
Allowance for Possible Losses:
The allowance for possible losses provides for potential writeoffs of certain tenant receivables and other tenant related assets on WWA's books. The allowance reflects management's evaluation of the exposure to WWA based on a specific review of its properties and the impact of current economic conditions on those properties.
Allocation of Operating Expenses:
In accordance with certain lease agreements, certain management and maintenance costs incurred by WWA are allocated to individual buildings or tenants, including buildings not owned by WWA.
Income Taxes:
No provision has been made for federal or state income taxes because each partner's proportionate share of income or loss from the Partnerships is passed through to be included on each partner's separate tax return.
Cash and Cash Equivalents:
Cash and Cash Equivalents includes all cash and highly liquid money market instruments. Highly liquid money market instruments include securities and repurchase agreements with original maturities of three months or less, money market mutual funds, and securities on which the interest rate is adjusted to market rate at least every three months.
Rental Income:
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 13, income on leases which include scheduled increases in rental rates over the lease term (other than scheduled increases based on the Consumer Price Index) is recognized on a straight-line basis.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
2. FORMATION AND PURPOSE OF THE PARTNERSHIPS
WWA and GVA II were formed under the terms of partnership agreements effective May 30, 1985 and March 31, 1988, respectively. The purpose of the Partnerships is, among other things, to develop and operate selected property within Wildwood Office Park ("Wildwood"), located in Atlanta, Georgia and the Summit Green project located in Greensboro, North Carolina (see Note 8).
Wildwood is an office park containing a total of approximately 285 acres, of which approximately 92 acres are owned by WWA, and an estimated 13 acres are committed to be contributed to WWA by Cousins (see Note 3). Cousins owns the balance of the developable acreage in the park. At December 31, 1999, WWA's income producing real estate assets in Wildwood consisted of: six office buildings totaling 2,132,000 rentable square feet (including land under such buildings totaling approximately 56 acres); land parcels totaling approximately 14 acres leased to two banking facilities and five restaurants; and a 2 acre site on which a child care facility is constructed. In addition, WWA's assets include 34 acres of land held for future development, which is composed of a 4 acre site with approximately 58,000 square feet of office space which was purchased in 1986 for future development (classified with income producing properties in the accompanying financial statements), and 30 acres of other land to be developed (including additional land committed to be contributed by Cousins) (see Note 3).
3. CONTRIBUTIONS TO THE PARTNERSHIPS
IBM and Cousins have each contributed or committed to contribute $62,857,000 in cash or properties to the Partnerships. The value of property contributed by IBM was agreed to by the partners at the time of formation of WWA and was recorded at the cash amount IBM paid for the property just prior to contributing it to the Partnership. The value of the property contributed and to be contributed by Cousins was recorded on the Partnership's books at an amount equal to the cash and property contributed by IBM for an equal (50%) partnership interest.
The status of contributions at December 31, 1999, was as follows ($ in thousands):
IBM COUSINS TOTAL ------- ------- -------
Cash contributed $46,590 $ 84 $ 46,674 Property contributed 16,267 54,472 70,739 Land committed to be contributed -- 8,301 8,301 -------------------------------- Total $62,857 $ 62,857 $125,714 ================================
WWA has elected not to take title to the remaining land committed to be contributed by Cousins until such land is needed for development. However, Cousins' capital account was previously credited with the amount originally required to bring it equal to IBM's, and a like amount, plus preacquisition costs paid by WWA, were set up as an asset entitled "Land Committed To Be Contributed." This asset account subsequently has been reduced as land actually has been contributed, or as land yet to be contributed became associated with a particular building.
At December 31, 1999, Cousins was committed to contribute land on which an additional 598,493 GSF are developable, provided that regardless of planned use or density, 38,333 GSF shall be the minimum GSF attributed to each developable acre contributed. Cousins has also agreed to contribute infrastructure land in Wildwood, as defined, at no cost to WWA, in order to provide the necessary land for development of roads and utilities. The ultimate acreage remaining to be contributed by Cousins will depend upon the actual density achieved, but would be approximately 13 acres if the density were similar to that achieved on land contributed to date.
WWA pays all of the expenses related to the Land Committed to be Contributed which were approximately $82,000, $87,000 and $143,000 in 1999, 1998 and 1997, respectively.
4. OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENTS
Net income or loss and net cash flow, as defined, shall be allocated to the partners based on their percentage interests (50% each, subject to adjustment as provided in the partnership agreements).
In the event of dissolution of the Partnerships, the assets will be distributed as follows:
o First, to repay all debts to third parties, including any secured loans with the partners.
o Second, to each partner until each capital account is reduced to zero.
o The balance to each partner in accordance with its percentage interest.
5. FEES TO RELATED PARTIES
The Partnerships engaged Cousins to manage, develop and lease the Partnerships' property. Fees to Cousins incurred by the Partnerships during 1999, 1998 and 1997 were as follows ($ in thousands):
1999 1998 1997 ------ ------ ------
Development and tenant construction fees $ 246 $ 123 $ 406 Management fees 1,227 1,139 1,047 Leasing and procurement fees 246 1,224 223 ---------------------------- $1,719 $2,486 $1,676 ============================ 6. RENTAL REVENUES
WWA leases property to the partners, as well as to unrelated third parties. The leases with partners are at rates comparable to those quoted to third parties. The leases typically contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases.
At December 31, 1999, future minimum rentals to be received under existing non-cancelable leases, including tenants' current pro rata share of operating expenses are as follows ($ in thousands):
Leases Leases With With Third Partners Parties Total -------- ------- -----
2000 $ 9,946 $ 36,755 $ 46,701 2001 8,271 34,458 42,729 2002 8,555 34,388 42,943 2003 5,771 27,116 32,887 2004 5,771 23,428 29,199 Thereafter 6,732 106,649 113,381 --------------------------------- $45,046 $262,794 $307,840 =================================
At December 31, 1999 and 1998, receivables which related to the cumulative excess of revenues recognized in accordance with SFAS No. 13 over revenues which accrued in accordance with the actual lease agreements totaled $5,711,000 and $7,240,000, respectively. Of the 1999 amount, 41% was related to leases with IBM.
The 2300 Windy Ridge Parkway Building, the 3200 Windy Hill Road Building, the 4100/4300 Wildwood Parkway Buildings, and 4200 Wildwood Parkway mortgage notes provide for additional amortization in the later years of the notes (over that required by the amortization periods shown above) concurrent with scheduled rent increases.
The line of credit matures September 1, 2000, but will automatically be renewed from year to year unless the lender provides a notice of non-renewal at least three months in advance of the annual renewal date. The line generally prohibits new borrowings other than those under the line, or the pledging of any assets not pledged as of August 1, 1990, without the Lender's prior approval. The line bears a floating interest rate equal to the daily London Interbank Offering Rate ("LIBOR") plus 3/4%, and there are no fees or compensating balance arrangements required under the line. Cousins and IBM have each severally guaranteed one-half of the line of credit. Assets with net carrying values of approximately $190,504,000 were pledged as security on the Partnerships' debt.
The aggregate maturities of the indebtedness at December 31, 1999 summarized above are as follows ($ in thousands):
2000 $ 5,352 2001 6,037 2002 6,746 2003 7,412 Thereafter 203,635 -------- $229,182 ========
The Partnerships capitalize interest expense to property under development as required by SFAS No. 34. In the year ended December 31, 1998, the Partnerships capitalized interest totaling $1,463,000. No interest was capitalized in 1999.
The estimated fair value of the notes payable at December 31, 1999 was approximately $221 million, which was calculated by discounting future cash flows under the notes at estimated rates at which similar notes would be made currently.
8. DISPOSITION OF SUMMIT GREEN
Effective December 1, 1996, WWA disposed of its interest in a 144,000 GSF office building at Summit Green in exchange for cancellation of the related mortgage debt. In connection with this disposition, the Partnerships also may dispose of their leasehold interest in land adjacent to the office building. The Partnerships anticipate no material gain or loss will result from their disposition of the Summit Green project.
The land adjacent to the formerly owned office building is subject to a non-subordinated ground lease expiring October 31, 2084. Lease payments effective December 1, 1996 are approximately $256,000 per year, and escalate at ten year intervals based on the cumulative increase in the Index over the prior ten year period (subject to a 5% annual cap on the increase in such Index in any one year). The next escalation date is December 1, 2006.
9. COMBINED STATEMENTS OF CASH FLOWS-SUPPLEMENTAL INFORMATION
Interest paid (net of amounts capitalized) was as follows ($ in thousands):
1999 1998 1997 ---- ---- ----
Interest paid $17,861 $14,987 $12,700
In 1997, one building with a total cost of $29,807,000 was transferred from Projects Under Construction to Income Producing Properties.
REPORT OF INDEPENDENT AUDITORS ------------------------------
To the Partners of CSC Associates, L.P. (A Limited Partnership)
We have audited the accompanying balance sheets of CSC Associates, L.P. (the Partnership) as of December 31, 1999 and 1998, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended December 31, 1999. Our audits also include the financial statement schedule of CSC Associates, L.P. listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CSC Associates, L.P. as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Atlanta, Georgia February 4, 2000
CSC ASSOCIATES, L.P. -------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- DECEMBER 31, 1999, 1998 AND 1997 --------------------------------
1. FORMATION OF THE PARTNERSHIP AND TERMS OF THE PARTNERSHIP AGREEMENT -------------------------------------------------------------------
CSC Associates, L.P. ("CSC" or the "Partnership") was formed under the terms of a Limited Partnership Agreement dated September 29, 1989 and by the filing of its Certificate of Limited Partnership on October 27, 1989. C&S Premises, Inc. ("Premises") and Cousins Properties Incorporated ("CPI") each own a 1% general partnership and a 49% limited partnership interest in the Partnership. Premises is a wholly owned subsidiary of NB Holdings Corporation which is a wholly owned subsidiary of Bank of America. In 1996 Premises transferred its 1% general partnership interest in the partnership to C&S Premises-SPE, Inc., a wholly owned subsidiary of Premises. The Partnership was formed for the purpose of developing and owning a 1.4 million gross square foot office tower in downtown Atlanta, Georgia (the "Building"), which is the Atlanta headquarters of Bank of America Corporation.
The Partnership Agreement and related documents (the "Agreements") contain among other provisions, the following:
a. CPI is the Managing Partner.
b. CPI is obligated to contribute a total of $18.2 million cash to the Partnership, all of which has been contributed. Premises is obligated to contribute land parcels to the Partnership having an aggregate agreed upon value of $18.2 million, all of which has been contributed, which property value, in the opinion of the partners, was equal to the estimated fair market value of the land at the time of formation of the Partnership. The value of the property contributed by Premises was recorded on the Partnership's books at an amount equal to the cash contributed by CPI for an equal (50%) partnership interest. In October 1993, the partners each contributed an additional $86.7 million.
c. No interest is earned on partnership capital.
d. Net income or loss and cash distributions are allocated to the partners based on their percentage interests (50% each).
2. SIGNIFICANT ACCOUNTING POLICIES -------------------------------
Capitalization Policies - -----------------------
All costs related to planning, developing and constructing the Building plus expenditures for the Building prior to the date it became operational for financial statement purposes have been capitalized. Interest expense, amortization of financing costs, and real estate taxes were also capitalized while the Building was under development.
Depreciation and Amortization - -----------------------------
Real estate assets are carried at cost. Depreciation of the Building commenced on the date the Building became operational for financial statement purposes and the Building is being depreciated over 40 years. Leasehold and tenant improvements are amortized over the life of the related lease or the useful life of the asset, whichever is shorter. Furniture, fixtures, and equipment are depreciated over 5 years. Deferred expenses, which include certain marketing and leasing costs and deferred operating expenses which are being passed through to the tenants, are amortized over the period of estimated benefit. The straight line method is used for all depreciation and amortization.
Income Taxes - ------------
No provision has been made for federal or state income taxes because each partner's proportionate share of income or loss from the Partnership will be passed through to be included on each partner's separate tax return.
Rental Income - -------------
In accordance with Statement of Financial Accounting Standards No. 13 ("SFAS No. 13"), income on leases which include increases in rental rates over the lease term (other than scheduled increases based on the Consumer Price Index) is recognized on a straight-line basis.
Allowance for Doubtful Accounts - -------------------------------
From time to time, the Partnership evaluates the need to establish an allowance for doubtful accounts based on a review of specific receivables. As of December 31, 1999 and 1998, there is no allowance for doubtful accounts included in the accompanying balance sheets.
Use of Estimates - ----------------
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Reclassifications - -----------------
Certain 1998 amounts have been reclassified to conform with 1999 presentation.
3. LEASES ------
The Partnership has leased office space to NB Holdings Corporation, as well as to unrelated third parties. The lease with NB Holdings Corporation was negotiated at rates comparable to those quoted to third parties. The leases contain escalation provisions and provisions requiring tenants to pay a pro rata share of operating expenses. The leases typically include renewal options and all are classified and accounted for as operating leases.
At December 31, 1999, future minimum rentals to be received under existing non-cancelable leases, including tenants' current pro rata share of operating expenses, are as follows ($ in thousands):
Lease Leases With With NB Holdings Third Corporation Parties Total ----------- -------- -------- 2000 $ 16,762 $ 19,829 $ 36,591 2001 16,762 20,032 36,794 2002 16,785 20,678 37,463 2003 16,788 21,040 37,828 2004 16,788 19,332 36,120 Subsequent to 2004 124,598 57,334 181,932 --------------------------------------- $208,483 $158,245 $366,728 =======================================
In the year ended December 31, 1999, income which would have accrued in accordance with the lease terms exceeded income recognized on a straight-line basis by $15,000. In the year ended December 31, 1998, income recognized on a straight-line basis exceeded income which would have accrued in accordance with the lease terms by approximately $164,000. At December 31, 1999 and 1998, receivables which related to the cumulative excess of revenues recognized in accordance with SFAS No. 13 over revenues which accrued in accordance with the actual lease agreements totaled approximately $10,819,000 and $10,834,000, respectively. Of that amount, 16% was related to leases with NB Holdings Corporation and approximately 37% and 33% was related to each of two professional services firms, respectively. At December 31, 1999 NB Holdings Corporation leased approximately 46% and two professional services firms leased approximately 17% and 16%, respectively, of the net rentable space of the Building.
4. NOTE PAYABLE AND NOTE RECEIVABLE --------------------------------
On February 6, 1996, the Partnership issued $80 million of 6.377% collateralized notes (the "Notes"). The Notes amortize in equal monthly installments of $590,680 based on a 20 year amortization schedule, and mature February 15, 2011. The Notes are non-recourse obligations of the Partnership and are secured by a Deed to Secure Debt, Assignment of Rents and Security Agreement covering the Partnership's interest in the Building.
The Partnership has loaned the $80 million proceeds of the Notes to CPI under a non-recourse loan (the "CPI Loan") secured by CPI's Partnership interests under the same payment terms as those of the Notes. CPI paid all costs of issuing the Notes and the CPI Loan, including a $400,000 fee to an affiliate of Bank of America. In addition, CPI pays a monthly fee to an affiliate of Bank of America of .025% of the outstanding principal balance of the Notes. These fees totaled approximately $218,000 and $225,000 in 1999 and 1998, respectively.
The estimated fair value of both the note payable and related note receivable at December 31, 1999 was $64 million which was calculated by discounting future cash flows under the notes at estimated rates at which similar notes would be made currently.
The maturities of the Notes at December 31, 1999 are as follows (in thousands):
2000 $ 2,610 2001 2,782 2002 2,965 2003 3,159 2004 3,367 Subsequent to 2004 56,516 ------- $71,399 =======
5. RELATED PARTIES ---------------
The Partnership engaged CPI and an affiliate of CPI to manage, develop and lease the Building. During 1999, 1998 and 1997, fees to CPI and its affiliate incurred by the Partnership were as follows ($ in thousands):
1999 1998 1997 ------ ------ ---- Development and tenant construction fees $ 27 $ 38 $ 17 Leasing and procurement fees 63 399 32 Management fees 959 917 870 --------------------------- $1,049 $1,354 $919 ===========================
6. PARKING AGREEMENT -----------------
On February 7, 1996, CSC entered into a 25 year Cross Parking License Agreement ("Parking Agreement") with the North Avenue Presbyterian Church ("NAPC") which allows CSC the use of 200 parking spaces in NAPC's parking deck which is located adjacent to NAPC. The agreement commenced on October 1, 1996. CSC paid a $1,000,000 contribution toward the construction cost of the parking deck as consideration for the Parking Agreement. The $1,000,000 contribution plus additional costs of approximately $23,000 are included in Other Assets and are being amortized over the 25 year life of the Parking Agreement. NAPC may reduce the number of parking spaces available to the Partnership or may terminate the Parking Agreement under certain conditions after the sixth year, at which time a partial refund of the $1,000,000 would be due to CSC. In addition, CSC is responsible for the maintenance of the parking deck and the payment of the related operating expenses.