Form 10-Q September 30, 2014
Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 001-11312
COUSINS PROPERTIES INCORPORATED
(Exact name of registrant as specified in its charter)
GEORGIA
(State or other jurisdiction of
incorporation or organization)
58-0869052
(I.R.S. Employer
Identification No.)
191 Peachtree Street, Suite 500, Atlanta, Georgia
(Address of principal executive offices)
30303-1740
(Zip Code)
(404) 407-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding at October 24, 2014
Common Stock, $1 par value per share
 
216,508,024 shares

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Page No.
 
 

Table of Contents


FORWARD-LOOKING STATEMENTS

Certain matters contained in this report are “forward-looking statements” within the meaning of the federal securities laws and are subject to uncertainties and risks, as itemized in Item 1A included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. These forward-looking statements include information about possible or assumed future results of the Company's business and the Company's financial condition, liquidity, results of operations, plans, and objectives. They also include, among other things, statements regarding subjects that are forward-looking by their nature, such as:
•
the Company's business and financial strategy;
•the Company's ability to obtain future financing arrangements;
•future acquisitions and future dispositions of operating assets;
•future acquisitions of land;
•future development and redevelopment opportunities;
•future dispositions of land and other non-core assets;
•projected operating results;
•market and industry trends;
•future distributions;
•projected capital expenditures; and
•interest rates.
The forward-looking statements are based upon management's beliefs, assumptions, and expectations of the Company's future performance, taking into account information currently available. These beliefs, assumptions, and expectations may change as a result of possible events or factors, not all of which are known. If a change occurs, the Company's business, financial condition, liquidity, and results of operations may vary materially from those expressed in forward-looking statements. Actual results may vary from forward-looking statements due to, but not limited to, the following:
•
the availability and terms of capital and financing;
•
the ability to refinance indebtedness as it matures;
•
the failure of purchase, sale, or other contracts to ultimately close;
•
the failure to achieve anticipated benefits from acquisitions and investments or from dispositions;
•
the potential dilutive effect of common stock offerings;
•
the availability of buyers and adequate pricing with respect to the disposition of assets;
•
risks related to the geographic concentration of our portfolio;
•
risks and uncertainties related to national and local economic conditions, the real estate industry in general, and the commercial real estate markets in particular;
•
changes to the Company's strategy with regard to land and other non-core holdings that require impairment losses to be recognized;
•
leasing risks, including the ability to obtain new tenants or renew expiring tenants, and the ability to lease newly developed and/or recently acquired space;
•
the adverse change in the financial condition of one or more of its major tenants;
•
volatility in interest rates and insurance rates;
•
the availability of sufficient investment opportunities;
•
competition from other developers or investors;
•
the risks associated with real estate developments (such as zoning approval, receipt of required permits, construction delays, cost overruns, and leasing risk);
•
the loss of key personnel;
•
the potential liability for uninsured losses, condemnation, or environmental issues;
•
the potential liability for a failure to meet regulatory requirements;
•
the financial condition and liquidity of, or disputes with, joint venture partners;
•
any failure to comply with debt covenants under credit agreements; and
•
any failure to continue to qualify for taxation as a real estate investment trust.
The words “believes,” “expects,” “anticipates,” “estimates,” “plans,” “may,” “intend,” “will,” or similar expressions are intended to identify forward-looking statements. Although the Company believes its plans, intentions, and expectations reflected in any forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions, or expectations will be achieved. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information, or otherwise, except as required under U.S. federal securities laws.

2
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PART I — FINANCIAL INFORMATION
Item 1.    Financial Statements.
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
September 30, 2014
 
December 31, 2013
 
(unaudited)
 
 
Assets:
 
 
 
Real estate assets:
 
 
 
Operating properties, net of accumulated depreciation of $297,034 and $235,707 in 2014 and 2013, respectively
$
1,863,442

 
$
1,828,437

Projects under development
76,772

 
21,681

Land
26,831

 
35,053

 
1,967,045

 
1,885,171

Operating properties and related assets held for sale, net of accumulated depreciation and amortization of $14,851 and $21,444 in 2014 and 2013, respectively
181,116

 
24,554

Cash and cash equivalents
7,210

 
975

Restricted cash
4,652

 
2,810

Notes and accounts receivable, net of allowance for doubtful accounts of $1,635 and $1,827 in 2014 and 2013, respectively
12,208

 
11,778

Deferred rents receivable
52,985

 
39,969

Investment in unconsolidated joint ventures
111,353

 
107,082

Intangible assets, net of accumulated amortization of $64,947 and $37,544 in 2014 and 2013, respectively
141,610

 
170,973

Other assets
55,481

 
29,894

Total assets
$
2,533,660

 
$
2,273,206

Liabilities:
 
 
 
Notes payable
$
671,074

 
$
630,094

Accounts payable and accrued expenses
87,415

 
76,668

Deferred income
24,156

 
25,754

Intangible liabilities, net of accumulated amortization of $14,514 and $6,323 in 2014 and 2013, respectively
67,659

 
66,476

Other liabilities
15,753

 
15,242

Total liabilities
866,057

 
814,234

Commitments and contingencies
—

 
—

Equity:
 
 
 
Stockholders' investment:
 
 
 
Preferred stock, 7.50% Series B cumulative redeemable preferred stock, $1 par value, $25 liquidation preference, 20,000,000 shares authorized, -0- and 3,791,000 shares issued and outstanding in 2014 and 2013, respectively
—

 
94,775

Common stock, $1 par value, 350,000,000 and 250,000,000 shares authorized, 220,078,986 and 193,236,454 shares issued in 2014 and 2013, respectively
220,079

 
193,236

Additional paid-in capital
1,720,559

 
1,420,951

Treasury stock at cost, 3,570,082 shares in 2014 and 2013
(86,840
)
 
(86,840
)
Distributions in excess of cumulative net income
(187,773
)
 
(164,721
)
 
1,666,025

 
1,457,401

Nonredeemable noncontrolling interests
1,578

 
1,571

Total equity
1,667,603

 
1,458,972

Total liabilities and equity
$
2,533,660

 
$
2,273,206

 
 
 
 
See accompanying notes.
 
 
 

3
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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Rental property revenues
$
86,857

 
$
47,575

 
$
244,375

 
$
117,799

Fee income
1,802

 
2,420

 
6,165

 
8,932

Other
439

 
439

 
4,786

 
4,488

 
89,098

 
50,434

 
255,326

 
131,219

Costs and expenses:
 
 
 
 
 
 
 
Rental property operating expenses
38,685

 
22,035

 
109,501

 
55,112

Reimbursed expenses
783

 
1,097

 
2,703

 
4,365

General and administrative expenses
5,021

 
6,635

 
16,388

 
17,257

Interest expense
6,817

 
5,149

 
20,954

 
14,325

Depreciation and amortization
32,704

 
18,511

 
101,979

 
44,686

Separation expenses
—

 
520

 
84

 
520

Acquisition and related costs
644

 
6,859

 
815

 
7,427

Other
481

 
1,072

 
1,852

 
3,258

 
85,135

 
61,878

 
254,276

 
146,950

Income (loss) from continuing operations before taxes, unconsolidated joint ventures, and sale of investment properties
3,963

 
(11,444
)
 
1,050

 
(15,731
)
Benefit (provision) for income taxes from operations
(1
)
 
(1
)
 
20

 
(3
)
Income from unconsolidated joint ventures
2,030

 
63,078

 
5,343

 
65,862

Income from continuing operations before gain on sale of investment properties
5,992

 
51,633

 
6,413

 
50,128

Gain on sale of investment properties
81

 
3,801

 
1,569

 
61,361

Income from continuing operations
6,073

 
55,434

 
7,982

 
111,489

Income from discontinued operations:
 
 
 
 
 
 
 
Income from discontinued operations
348

 
1,257

 
1,806

 
2,724

Gain on sale from discontinued operations
12,993

 
8,346

 
19,372

 
8,550

 
13,341

 
9,603

 
21,178

 
11,274

Net income
19,414

 
65,037

 
29,160

 
122,763

Net income attributable to noncontrolling interests
(92
)
 
(3,879
)
 
(376
)
 
(4,901
)
Net income attributable to controlling interests
19,322

 
61,158

 
28,784

 
117,862

Dividends to preferred stockholders
—

 
(1,777
)
 
(2,955
)
 
(8,231
)
Preferred share original issuance costs
—

 
—

 
(3,530
)
 
(2,656
)
Net income available to common stockholders
$
19,322

 
$
59,381

 
$
22,299

 
$
106,975

Per common share information — basic and diluted:
 
 
 
 
 
 
 
Income from continuing operations attributable to controlling interest
$
0.03

 
$
0.30

 
$
—

 
$
0.74

Income from discontinued operations
0.06

 
0.06

 
0.11

 
0.09

Net income available to common stockholders
$
0.09

 
$
0.36

 
$
0.11

 
$
0.83

Weighted average shares — basic
209,839

 
163,426

 
200,073

 
128,953

Weighted average shares — diluted
210,111

 
163,603

 
200,325

 
129,121

Dividends declared per common share
$
0.075

 
$
0.045

 
$
0.225

 
$
0.135


See accompanying notes.

4
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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Nine Months Ended September 30, 2014 and 2013
(unaudited, in thousands)
 
Preferred
Stock
 
Common
Stock
 
Additional
Paid-In
Capital
 
Treasury
Stock
 
Distributions in
Excess of
Net Income
 
Stockholders’
Investment
 
Nonredeemable
Noncontrolling
Interests
 
Total
Equity
Balance December 31, 2013
$
94,775

 
$
193,236

 
$
1,420,951

 
$
(86,840
)
 
$
(164,721
)
 
$
1,457,401

 
$
1,571

 
$
1,458,972

Net income
—

 
—

 
—

 
—

 
28,784

 
28,784

 
376

 
29,160

Common stock issued pursuant to:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
Director stock grants
—

 
55

 
598

 
—

 
—

 
653

 
—

 
653

Stock option exercises
—

 
40

 
(267
)
 
—

 
—

 
(227
)
 
—

 
(227
)
Common stock offering, net of issuance costs
—

 
26,700

 
295,212

 
—

 
—

 
321,912

 
—

 
321,912

Restricted stock grants, net of amounts withheld for income taxes
—

 
53

 
(978
)
 
—

 
—

 
(925
)
 
—

 
(925
)
Amortization of stock options and restricted stock, net of forfeitures
—

 
(5
)
 
1,513

 
—

 
—

 
1,508

 
—

 
1,508

Distributions to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(369
)
 
(369
)
Redemption of preferred shares
(94,775
)
 
—

 
3,530

 
—

 
(3,530
)
 
(94,775
)
 
—

 
(94,775
)
Preferred dividends
—

 
—

 
—

 
—

 
(2,955
)
 
(2,955
)
 
—

 
(2,955
)
Common dividends
—

 
—

 
—

 
—

 
(45,351
)
 
(45,351
)
 
—

 
(45,351
)
Balance September 30, 2014
$
—

 
$
220,079

 
$
1,720,559

 
$
(86,840
)
 
$
(187,773
)
 
$
1,666,025

 
$
1,578

 
$
1,667,603

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2012
$
169,602

 
$
107,660

 
$
690,024

 
$
(86,840
)
 
$
(260,104
)
 
$
620,342

 
$
22,611

 
$
642,953

Net income
—

 
—

 
—

 
—

 
117,862

 
117,862

 
4,840

 
122,702

Common stock issued pursuant to:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Director stock grants
—

 
50

 
494

 
—

 
—

 
544

 
—

 
544

Stock option exercises
—

 
25

 
(162
)
 
—

 
—

 
(137
)
 
—

 
(137
)
Common stock offering, net of issuance costs
—

 
85,507

 
741,022

 
—

 
—

 
826,529

 
—

 
826,529

Restricted stock grants, net of amounts withheld for income taxes
—

 
30

 
(1,209
)
 
—

 
—

 
(1,179
)
 
—

 
(1,179
)
Amortization of stock options and restricted stock, net of forfeitures
—

 
(42
)
 
1,463

 
—

 
—

 
1,421

 
—

 
1,421

Distributions to nonredeemable noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
(25,888
)
 
(25,888
)
Redemption of preferred shares
(74,827
)
 
—

 
(10,822
)
 
—

 
10,822

 
(74,827
)
 
—

 
(74,827
)
Preferred dividends
—

 
—

 
—

 
—

 
(8,231
)
 
(8,231
)
 
—

 
(8,231
)
Common dividends
—

 
—

 
—

 
—

 
(18,657
)
 
(18,657
)
 
—

 
(18,657
)
Balance September 30, 2013
$
94,775

 
$
193,230

 
$
1,420,810

 
$
(86,840
)
 
$
(158,308
)
 
$
1,463,667

 
$
1,563

 
$
1,465,230

See accompanying notes.

5
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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)


 
Nine Months Ended September 30,
 
2014
 
2013
Cash flows from operating activities:
 
 
 
Net income
$
29,160

 
$
122,763

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Gain on sale of investment properties, including discontinued operations
(20,941
)
 
(69,911
)
Depreciation and amortization, including discontinued operations
102,481

 
45,950

Amortization of deferred financing costs
604

 
778

Amortization of stock options and restricted stock, net of forfeitures
1,508

 
1,421

Effect of certain non-cash adjustments to rental revenues
(21,740
)
 
(5,605
)
Income from unconsolidated joint ventures
(5,343
)
 
(65,862
)
Operating distributions from unconsolidated joint ventures
5,195

 
65,563

Land and multi-family cost of sales, net of closing costs paid
302

 
904

Changes in other operating assets and liabilities:
 
 
 
Change in other receivables and other assets, net
(1,912
)
 
(3,572
)
Change in operating liabilities
5,282

 
6,247

Net cash provided by operating activities
94,596

 
98,676

Cash flows from investing activities:
 
 
 
Proceeds from investment property sales
53,827

 
171,779

Property acquisition, development, and tenant asset expenditures
(351,657
)
 
(1,502,016
)
Investment in unconsolidated joint ventures
(10,578
)
 
(2,139
)
Distributions from unconsolidated joint ventures
7,433

 
86,752

Collection of notes receivable
1,020

 
1,233

Change in notes receivable and other assets
(2,838
)
 
(1,930
)
Change in restricted cash
(1,834
)
 
(101
)
Net cash used in investing activities
(304,627
)
 
(1,246,422
)
Cash flows from financing activities:
 
 
 
Proceeds from credit facility
395,175

 
343,725

Repayment of credit facility
(347,550
)
 
(292,650
)
Proceeds from other notes payable
68

 
304,268

Repayment of notes payable
(6,713
)
 
(76,314
)
Payment of loan issuance costs
(3,176
)
 
(1,693
)
Common stock issued, net of expenses
321,912

 
826,529

Redemption of preferred shares
(94,775
)
 
(74,827
)
Common dividends paid
(45,351
)
 
(18,657
)
Preferred dividends paid
(2,955
)
 
(8,231
)
Distributions to noncontrolling interests
(369
)
 
(25,888
)
Net cash provided by financing activities
216,266

 
976,262

Net increase (decrease) in cash and cash equivalents
6,235

 
(171,484
)
Cash and cash equivalents at beginning of period
975

 
176,892

Cash and cash equivalents at end of period
$
7,210

 
$
5,408

 
 
 
 
Interest paid, net of amounts capitalized
$
20,450

 
$
14,522

 
 
 
 
Significant non-cash transactions:
 
 
 

Increase in accrued property acquisition, development, and tenant asset expenditures
$
3,055

 
$
14,764

Transfer from operating properties to operating properties and related assets held for sale
181,116

 
49,435

Transfer from projects under development to operating properties
—

 
25,629

Transfer from other assets to projects under development
—

 
3,062


See accompanying notes.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The condensed consolidated financial statements included herein include the accounts of Cousins Properties Incorporated (“Cousins”) and its consolidated subsidiaries, including Cousins Real Estate Corporation and its subsidiaries (“CREC”). All of the entities included in the condensed consolidated financial statements are hereinafter referred to collectively as the “Company.”
The Company develops, acquires, leases, manages, and owns primarily Class A office assets and opportunistic mixed-use properties in Sunbelt markets with a focus on Georgia, Texas, and North Carolina. Cousins has elected to be taxed as a real estate investment trust (“REIT”) and intends to, among other things, distribute 90% of its net taxable income to stockholders, thereby eliminating any liability for federal income taxes under current law. Therefore, the results included herein do not include a federal income tax provision for Cousins. CREC operates as a taxable REIT subsidiary and is taxed separately from Cousins as a C-Corporation. Accordingly, if applicable, the Company's statements of operations include a provision for, or benefit from, CREC's income taxes.
The condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these financial statements reflect all adjustments necessary (which adjustments are of a normal and recurring nature) for the fair presentation of the Company's financial position as of September 30, 2014 and the results of operations for the three and nine months ended September 30, 2014 and 2013. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of results expected for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The accounting policies employed are substantially the same as those shown in note 2 to the consolidated financial statements included in such Form 10-K.
For the three and nine months ended September 30, 2014 and 2013, there were no items of other comprehensive income. Therefore, no presentation of comprehensive income is required.
The Company evaluates all partnerships, joint ventures and other arrangements with variable interests to determine if the entity or arrangement qualifies as a variable interest entity (“VIE”), as defined in the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC"). If the entity or arrangement qualifies as a VIE and the Company is determined to be the primary beneficiary, the Company is required to consolidate the assets, liabilities, and results of operations of the VIE.
In August 2014, the Company acquired a building and transferred it to a special purpose entity to facilitate a potential Section 1031 exchange under the Internal Revenue Code. To realize the tax deferral available under the Section 1031 exchange, the Company must complete the Section 1031 exchange, if any, and take title to the to-be-exchanged building within 180 days of the acquisition date. The Company has determined that this entity is a VIE, and the Company is the primary beneficiary. Therefore, the Company consolidates this entity. As of September 30, 2014, this VIE had total assets of $215.0 million, no significant liabilities, and no significant cash flows.
In April 2014, the FASB issued new guidance related to the presentation of discontinued operations. Prior to this new guidance, the Company included activity for all assets held for sale and disposals in discontinued operations on the statements of operations. Under the new guidance, only assets held for sale and disposals representing a major strategic shift in operations, such as the disposal of a line of business, a significant geographical area, or a major equity investment, will be presented as discontinued operations. Additionally, the new guidance requires expanded disclosures about discontinued operations that will provide more information about their assets, liabilities, income, and expenses. The guidance is effective for periods beginning after December 15, 2014. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. The Company adopted this guidance in 2014.
In May 2014, the FASB issued new guidance related to the accounting for revenue from contracts with customers. Under the new guidance, companies will recognize revenue when the seller satisfies a performance obligation, which would be when the buyer takes control of the good or service. This new guidance could result in different amounts of revenue being recognized and could result in revenue being recognized in different reporting periods than it is under the current guidance. The new guidance specifically excludes revenue associated with lease contracts. The guidance is effective for periods beginning after December 15, 2016 and early adoption is prohibited.

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2. PROPERTY TRANSACTIONS

Held for Sale
Assets and significant liabilities, if any, of held for sale properties, as defined, are required to be separately categorized on the balance sheet.
The following properties were held for sale in 2014 or 2013, respectively:
Property
 
Property Type
 
Location
 
Square Feet
2014
 
 
 
 
 
 
777 Main
 
Office
 
Fort Worth, TX
 
980,000

Mahan Village
 
Retail
 
Tallahassee, FL
 
147,000

2013
 
 
 
 
 
 
Lakeshore Park Plaza
 
Office
 
Birmingham, AL
 
197,000

600 University Park Place
 
Office
 
Birmingham, AL
 
123,000

Discontinued Operations
In April 2014, the FASB issued new guidance related to the presentation of discontinued operations, which changed the accounting criteria for discontinued operations. See footnote 1 for further information. The new guidance applies to assets that are sold or meet the criteria for held for sale after the date of adoption. The Company adopted the new standard in 2014. As a result, two of the Company’s properties that became held for sale in the third quarter of 2014 (777 Main and Mahan Village) that under the previous guidance would have been considered discontinued operations are not considered discontinued operations under the new guidance.
The following properties met the criteria for discontinued operations presentation prior to the adoption of the new guidance discussed above.  Accordingly, the results of operations of these properties are included in a separate section, discontinued operations, in the statements of operations for all periods presented ($ in thousands):
Property
 
Property Type
 
Location
 
Square Feet
 
Sales Price
 
Quarter Sold
2014
 
 
 
 
 
 
 
 
 
 
Lakeshore Park Plaza
 
Office
 
Birmingham, AL
 
197,000

 
$
25,000

 
3Q 2014
600 University Park Place
 
Office
 
Birmingham, AL
 
123,000

 
$
19,700

 
1Q 2014
2013
 
 
 
 
 
 
 
 
 
 
Tiffany Springs MarketCenter
 
Retail
 
Kansas City, MO
 
238,000

 
$
53,500

 
3Q 2013
Lakeshore Park Plaza
 
Office
 
Birmingham, AL
 
197,000

 
Held for sale

 
N/A
600 University Park Place
 
Office
 
Birmingham, AL
 
123,000

 
Held for sale

 
N/A
Inhibitex
 
Office
 
Atlanta, GA
 
51,000

 
$
8,300

 
4Q 2013
The components of discontinued operations and the gains and losses on property sales for the three and nine months ended September 30, 2014 and 2013 are as follows (in thousands):

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Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Income from discontinued operations:
 
 
 
 
 
 
 
 
Rental property revenues
 
$
601

 
$
2,870

 
$
2,923

 
$
8,811

Fee income
 
—

 
—

 
—

 
76

Other income
 
14

 
18

 
29

 
33

Rental property operating expenses
 
(260
)
 
(1,118
)
 
(1,125
)
 
(3,493
)
General and administrative expenses
 
(1
)
 
(15
)
 
(2
)
 
(94
)
Depreciation and amortization
 
—

 
(492
)
 
—

 
(2,590
)
Other expenses
 
(6
)
 
(6
)
 
(19
)
 
(19
)
 
 
$
348

 
$
1,257

 
$
1,806

 
$
2,724

 
 

 

 
 
 
 
Gain on sale of discontinued operations:
 
 
 
 
 
 
 
 
Lakeshore Park Plaza
 
$
13,025

 
$
—

 
$
13,025

 
$
—

600 University Park Place
 
(37
)
 
—

 
6,334

 
—

Third party management and leasing business
 
—

 
4,531

 
—

 
4,531

Tiffany Springs MarketCenter
 
—

 
3,715

 
—

 
3,715

King Mill
 
—

 
38

 
—

 
246

Other
 
5

 
62

 
13

 
58

 
 
$
12,993

 
$
8,346

 
$
19,372

 
$
8,550

Fifth Third Center Acquisition
In August 2014, the Company acquired Fifth Third Center, a 698,000 square foot Class-A office tower located in the Charlotte, North Carolina central business district. The gross purchase price for this property was $215.0 million, before adjustments for customary closing costs and other closing credits. As of September 30, 2014, the Company had incurred $328,000 in acquisition and related costs associated with this acquisition.
The following tables summarize preliminary allocations of the estimated fair values of the assets and liabilities of Fifth Third Center (in thousands):
Tangible assets:
 
 
Land and improvements
 
$
22,863

Building
 
163,649

Tenant improvements
 
16,781

Accounts receivable
 
1,014

Total tangible assets
 
204,307

 
 
 
Intangible assets:
 
 
Above-market leases
 
632

In-place leases
 
17,096

Below-market ground leases
 
338

Total intangible assets
 
18,066

 
 
 
Tangible Liabilities:
 
 
Accounts payable and accrued expenses
 
(1,026
)
Total tangible liabilities
 
(1,026
)
 
 
 
Intangible Liabilities:
 
 
Below-market leases
 
(9,374
)
Total intangible liabilities
 
(9,374
)
 
 
 
Total net assets acquired
 
$
211,973

Subsequent Event

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In October 2014, the Company acquired Northpark Town Center, a 1.5 million square foot office asset located in Atlanta, Georgia. The gross purchase price for this property was $348.0 million, before adjustments for customary closing costs and other closing credits. The Company funded the purchase of Northpark Town Center with cash on hand and borrowings under its Credit Facility. As of September 30, 2014, the Company had incurred $385,000 in acquisition and related costs associated with this acquisition, and the Company expects to incur additional acquisition and related costs in the fourth quarter. Due to the limited time since the acquisition date, the initial accounting for this transaction is incomplete and, as such, the Company is unable to provide purchase price allocation disclosures.

3. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Company describes its investments in unconsolidated joint ventures in note 5 of notes to consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2013. The following table summarizes balance sheet data of the Company's unconsolidated joint ventures as of September 30, 2014 and December 31, 2013 (in thousands):
 
Total Assets
 
Total Debt
 
Total Equity
 
Company’s Investment
 
SUMMARY OF FINANCIAL POSITION:
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
 Terminus Office Holdings
$
291,415

 
$
297,815

 
$
214,228

 
$
215,942

 
$
62,481

 
$
69,867

 
$
32,157

 
$
35,885

 
 EP I LLC
86,059

 
88,130

 
58,029

 
57,092

 
26,671

 
29,229

 
23,401

 
25,319

 
 EP II LLC
33,048

 
12,644

 
3,608

 
1

 
24,969

 
11,695

 
19,773

 
9,566

 
 Cousins Watkins LLC
50,226

 
51,653

 
27,278

 
27,710

 
21,775

 
23,081

 
17,522

 
17,213

 
 Charlotte Gateway Village, LLC
131,937

 
135,966

 
39,852

 
52,408

 
90,101

 
82,373

 
11,226

 
11,252

 
 Temco Associates, LLC
7,910

 
8,474

 
—

 
—

 
7,672

 
8,315

 
3,659

 
4,083

 
 CL Realty, L.L.C.
7,389

 
7,602

 
—

 
—

 
7,220

 
7,374

 
3,614

 
3,704

 
 Wildwood Associates
21,101

 
21,127

 
—

 
—

 
20,997

 
21,121

 
(1,739
)
(1)
(1,689
)
(1)
 Crawford Long - CPI, LLC
30,876

 
32,042

 
75,000

 
75,000

 
(46,183
)
 
(44,295
)
 
(21,997
)
(1)
(21,071
)
(1)
 Other
1,245

 
1,931

 
—

 
—

 
1,204

 
1,700

 
1

 
60

 
 
$
661,206

 
$
657,384

 
$
417,995

 
$
428,153

 
$
216,907

 
$
210,460

 
$
87,617

 
$
84,322

 
(1) Negative balances are included in deferred income on the balance sheets.
The following table summarizes statement of operations information of the Company's unconsolidated joint ventures for the nine months ended September 30, 2014 and 2013 (in thousands):
 
Total Revenues
 
Net Income (Loss)
 
Company's Share of Income (Loss)
SUMMARY OF OPERATIONS:
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 Terminus Office Holdings
$
29,354

 
$
23,842

 
$
314

 
$
(219
)
 
$
134

 
$
(110
)
 EP I LLC
9,024

 
5,499

 
2,102

 
(348
)
 
1,577

 
(261
)
 Cousins Watkins LLC
3,801

 
4,297

 
217

 
16

 
1,702

 
1,738

 Charlotte Gateway Village, LLC
25,079

 
25,079

 
8,635

 
7,931

 
882

 
882

 Temco Associates, LLC
793

 
437

 
157

 
48

 
(24
)
 
(12
)
 CL Realty, L.L.C.
1,240

 
1,246

 
846

 
801

 
410

 
392

 Wildwood Associates
29

 
—

 
(125
)
 
(126
)
 
(50
)
 
(63
)
 Crawford Long - CPI, LLC
8,905

 
8,826

 
2,075

 
2,134

 
1,062

 
1,028

 CF Murfreesboro Associates
—

 
8,079

 
—

 
48,969

 
(390
)
 
23,562

 CP Venture Five LLC
—

 
20,192

 
—

 
3,056

 
—

 
17,146

 CP Venture Two LLC
—

 
12,965

 
—

 
7,035

 
—

 
21,592

 MSREF/ Cousins Terminus 200 LLC
—

 
1,268

 
—

 
(172
)
 
—

 
(28
)
 Other
5

 
1,273

 
(245
)
 
(375
)
 
40

 
(4
)
 
$
78,230

 
$
113,003

 
$
13,976

 
$
68,750

 
$
5,343

 
$
65,862

4. INTANGIBLE ASSETS
Intangible assets on the balance sheets as of September 30, 2014 and December 31, 2013 included the following (in thousands):

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September 30, 2014
 
December 31, 2013
In-place leases, net of accumulated amortization of $51,957 and $26,239 in 2014 and 2013, respectively
 
$
127,624

 
$
152,830

Above-market tenant leases, net of accumulated amortization of $12,990 and $11,284 in 2014 and 2013, respectively
 
9,929

 
12,332

Below-market ground lease, net of accumulated amortization of $0 and $21 in 2014 and 2013, respectively
 
—

 
1,680

Goodwill
 
4,057

 
4,131

 
 
$
141,610

 
$
170,973


Goodwill relates entirely to the office reportable segment. As office assets are sold, either by the Company or by joint ventures in which the Company has an ownership interest, goodwill is reduced. The following is a summary of goodwill activity for the nine months ended September 30, 2014 and 2013 (in thousands):
 
Nine Months Ended September 30,
 
2014
 
2013
Beginning balance
$
4,131

 
$
4,751

Allocated to property sales
(74
)
 
(604
)
Ending balance
$
4,057

 
$
4,147

5. OTHER ASSETS
Other assets on the balance sheets as of September 30, 2014 and December 31, 2013 included the following (in thousands):
 
 
September 30, 2014
 
December 31, 2013
Lease inducements, net of accumulated amortization of $5,139 and $4,181 in 2014 and 2013, respectively
 
$
12,189

 
$
12,548

FF&E and leasehold improvements, net of accumulated depreciation of $18,712 and $17,684 in 2014 and 2013, respectively
 
8,959

 
8,743

Loan closing costs, net of accumulated amortization of $1,927 and $2,621 in 2014 and 2013, respectively
 
6,418

 
4,176

Prepaid expenses and other assets
 
3,793

 
3,606

Predevelopment costs and earnest money
 
24,122

 
821

 
 
$
55,481

 
$
29,894


6. NOTES PAYABLE
The following table summarizes the terms and amounts of the Company’s notes payable at September 30, 2014 and December 31, 2013 ($ in thousands):
Description
 
Interest Rate
 
Maturity
 
September 30, 2014
 
December 31, 2013
Post Oak Central mortgage note
 
4.26
%
 
2020
 
$
185,922

 
$
188,310

The American Cancer Society Center mortgage note
 
6.45
%
 
2017
 
131,507

 
132,714

Promenade mortgage note
 
4.27
%
 
2022
 
111,612

 
113,573

191 Peachtree Tower mortgage note
 
3.35
%
 
2018
 
100,000

 
100,000

Credit Facility, unsecured
 
1.25
%
 
2019
 
87,700

 
40,075

Meridian Mark Plaza mortgage note
 
6.00
%
 
2020
 
25,512

 
25,813

The Points at Waterview mortgage note
 
5.66
%
 
2016
 
14,736

 
15,139

Mahan Village construction facility
 
1.80
%
 
2015
 
14,085

 
14,470

 
 
 
 
 
 
$
671,074

 
$
630,094


In the third quarter of 2014, the Mahan Village construction facility's maturity date was extended from September 2014 to January 2015.

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On May 28, 2014, the Company entered into a Third Amended and Restated Credit Agreement (the “New Facility”) under which the Company may borrow up to $500 million if certain conditions are satisfied. The New Facility recast the Company's existing $350 million senior unsecured revolving line of credit, dated February 28, 2012 (the “Existing Facility”) by:
•
Increasing the size by $150 million to $500 million;
•
Extending the maturity date from February 28, 2016 to May 28, 2019;
•
Reducing the per annum variable interest rate spread and other fees; and
•
Providing for the expansion of the New Facility by an additional $250 million for a total available of $750 million, subject to receipt of additional commitments from lenders and other customary conditions.
The New Facility contains certain financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 2.00; a fixed charge coverage ratio of at least 1.50; an overall leverage ratio of no more than 60%; and a minimum shareholders’ equity in an amount equal to $1.0 billion, plus a portion of the net cash proceeds from certain equity issuances. The New Facility also contains customary representations and warranties and affirmative and negative covenants, as well as customary events of default. The amounts outstanding under the New Facility may be accelerated upon the occurrence of any events of default.
The interest rate applicable to the New Facility varies according to the Company’s leverage ratio, and may, at the election of the Company, be determined based on either (1) the current LIBOR plus the applicable spread detailed below, or (2) the greater of Bank of America’s prime rate, the federal funds rate plus 0.50% or the one-month LIBOR plus 1.0% (the “Base Rate”), plus the applicable spread detailed below. Fees on letters of credit issued under the New Facility are payable at an annual rate equal to the spread applicable to loans bearing interest based on LIBOR. The Company also pays an annual facility fee on the total commitments under the New Facility. The pricing spreads and the facility fee under the New Facility are as follows:
Leverage Ratio
 
Applicable % Spread for LIBOR Loans
 
Applicable % Spread for Base Rate Loans
 
Annual Facility Fee %
≤ 30%
 
1.10%
 
0.10%
 
0.15%
> 30% but ≤ 35%
 
1.10%
 
0.10%
 
0.20%
> 35% but ≤ 40%
 
1.15%
 
0.15%
 
0.20%
> 40% but ≤ 45%
 
1.20%
 
0.20%
 
0.20%
> 45% but ≤ 50%
 
1.20%
 
0.20%
 
0.25%
> 50%
 
1.45%
 
0.45%
 
0.30%
At September 30, 2014, the Company's spread over LIBOR was 1.10%. The New Facility also provides for alternative pricing spreads and facility fees, which would be available to the Company on any date after the Company obtains an investment grade credit rating.
Fair Value
At September 30, 2014 and December 31, 2013, the aggregate estimated fair values of the Company's notes payable were $711.3 million and $654.1 million, respectively, calculated by discounting the debt's remaining contractual cash flows at estimated rates at which similar loans could have been obtained at those respective dates. The estimate of the current market rate, which is the most significant input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value relationship. These fair value calculations are considered to be Level 2 under the guidelines as set forth in ASC 820, Fair Value Measurement, as the Company utilizes market rates for similar type loans from third party brokers.
Other Information
For the three and nine months ended September 30, 2014 and 2013, interest expense was as follows (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Total interest incurred
$
7,667

 
$
5,268

 
$
22,787

 
$
14,602

Interest capitalized
(850
)
 
(119
)
 
(1,833
)
 
(277
)
Total interest expense
$
6,817

 
$
5,149

 
$
20,954

 
$
14,325


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The real estate and other assets of The American Cancer Society Center (the “ACS Center”) are restricted under the ACS Center loan agreement in that they are not available to settle debts of the Company. However, provided that the ACS Center loan has not incurred any uncured event of default, as defined in the loan agreement, the cash flows from the ACS Center, after payments of debt service, operating expenses and reserves, are available for distribution to the Company.
Subsequent Events
On October 1, 2014, the Company acquired Northpark Town Center as discussed in note 2 and funded the acquisition with cash on hand and with borrowings under its Credit Facility. On October 14, 2014, the Company entered into an $85.0 million mortgage note secured by 816 Congress. This mortgage note has a fixed rate of 3.75% and matures in November 2024. The Company used the proceeds from this mortgage note to reduce amounts outstanding under its Credit Facility. As of October 24, 2014, the amount outstanding under the Company's Credit Facility was $318.2 million.

7. COMMITMENTS AND CONTINGENCIES

Commitments
At September 30, 2014, the Company had outstanding letters of credit and performance bonds totaling $2.4 million. As a lessor, the Company had $103.6 million in future obligations under leases to fund tenant improvements as of September 30, 2014. As a lessee, the Company had future obligations under ground and office leases of $150.0 million as of September 30, 2014. At September 30, 2014, the Company had a commitment to purchase land for an anticipated future development in the amount of $7.4 million.
Litigation
The Company is subject to various legal proceedings, claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. The Company does not disclose information with respect to litigation where an unfavorable outcome is considered to be remote or where the estimated loss would not be material. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company.

8. NONCONTROLLING INTERESTS
The Company consolidates various joint ventures that are involved in the ownership and/or development of real estate. The following table details the components of redeemable noncontrolling interests in consolidated entities for the nine months ended September 30, 2014 and 2013 (in thousands):
 
Nine Months Ended September 30,
 
2014
 
2013
Beginning Balance
$
—

 
$
—

Net income attributable to redeemable noncontrolling interests
—

 
61

Distributions to redeemable noncontrolling interests
—

 
(61
)
Ending Balance
$
—

 
$
—

The following reconciles the net income or loss attributable to nonredeemable noncontrolling interests as shown in the statements of equity to the net income or loss attributable to noncontrolling interests as shown in the statements of operations, which includes both redeemable and nonredeemable interests, for the nine months ended September 30, 2014 and 2013 (in thousands):

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Nine Months Ended September 30,
 
2014
 
2013
Net income attributable to nonredeemable noncontrolling interests
$
376

 
$
4,840

Net income attributable to redeemable noncontrolling interests
—

 
61

Net income attributable to noncontrolling interests
$
376

 
$
4,901

9. STOCKHOLDERS' EQUITY
In August 2014, the Company issued 18.0 million shares of common stock, resulting in net proceeds to the Company of $223.4 million, which includes customary legal, accounting, and other expenses. The Company used the proceeds from this offering to acquire Fifth Third Center, a 698,000 square foot Class-A office tower located in the Charlotte, North Carolina central business district.
In March 2014, the Company issued 8.7 million shares of common stock, resulting in net proceeds to the Company of $98.5 million, which includes customary legal, accounting, and other expenses. The Company used the proceeds from this offering to paydown the Credit Facility in preparation for the redemption of all outstanding shares of its 7.5% Series B Cumulative Redeemable Preferred Stock. In April 2014, the Company redeemed all outstanding shares of its 7.5% Series B Cumulative Redeemable Preferred Stock, par value $1.00 per share, for $25.00 per share or $94.8 million, excluding accrued dividends. In connection with the redemption of Preferred Stock, the Company decreased net income available for common shareholders by $3.5 million (non-cash), which represents the original issuance costs applicable to the shares redeemed.
In April 2013, the Company issued 16.5 million shares of common stock resulting in net proceeds to the Company of $165.1 million, which includes customary legal, accounting, and other expenses. The Company used the proceeds from this offering to paydown the Credit Facility in preparation for the redemption of all outstanding shares of its 7.75% Series A Cumulative Redeemable Preferred Stock. In May 2013, the Company redeemed all outstanding shares of its 7.75% Series A Cumulative Redeemable Preferred Stock, par value $1.00 per share, for $25.00 per share or $74.8 million, excluding accrued dividends. In connection with the redemption of Preferred Stock, the Company increased net loss available for common shareholders by $2.7 million (non-cash), which represents the original issuance costs applicable to the shares redeemed.
10. STOCK-BASED COMPENSATION
The Company has several types of stock-based compensation - stock options, restricted stock, and restricted stock units (“RSUs”) - which are described in note 13 of notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The expense related to a portion of the stock-based compensation awards is fixed. The expense related to other stock-based compensation awards fluctuates from period to period dependent, in part, on the Company's stock price and stock performance relative to its peers. The Company recorded stock-based compensation expense, net of forfeitures, of $2.3 million for each of the three months ended September 30, 2014 and 2013 and $7.2 million and $5.9 million for the nine months ended September 30, 2014 and 2013, respectively.
The Company maintains the 2005 Restricted Stock Unit Plan (the “RSU Plan”), which is described in note 13 of notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. Under the RSU Plan, the Company made restricted stock grants in 2014 of 137,591 shares to key employees, which vest ratably over a three-year period. In addition, the Company awarded two types of RSUs to key employees based on the following metrics: (1) Total Stockholder Return of the Company, as defined in the RSU Plan, as compared to the companies in the SNL US REIT Office index (“SNL RSUs”), and (2) the ratio of cumulative funds from operations per share to targeted cumulative funds from operations per share (“FFO RSUs”) as defined in the RSU Plan. The performance period for both awards is January 1, 2014 to December 31, 2016, and the targeted units awarded of SNL RSUs and FFO RSUs is 108,751 and 56,405, respectively. The ultimate payout of these awards can range from 0% to 200% of the targeted number of units depending on the achievement of the market and performance metrics described above. Both of these RSUs cliff vest on January 30, 2017 and are dependent upon the attainment of required service, market and performance criteria. The number of RSUs vesting will be determined at that date, and the payout per unit will be equal to the average closing price on each trading day during the 30-day period ending on December 31, 2016. The SNL RSUs are valued using a quarterly Monte Carlo valuation and are expensed over the vesting period. The FFO RSUs are expensed over the vesting period using the fair market value of the Company's stock at the reporting date multiplied by the anticipated number of units to be paid based on the current estimate of what the ratio is expected to be upon vesting.
11. EARNINGS PER SHARE
Net income (loss) per share-basic is calculated as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the period, including nonvested restricted stock which has nonforfeitable dividend rights. Net income (loss) per share-diluted is calculated as net income (loss) available to common stockholders divided

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by the diluted weighted average number of common shares outstanding during the period. Diluted weighted average number of common shares uses the same weighted average share number as in the basic calculation and adds the potential dilution, if any, that would occur if stock options (or any other contracts to issue common stock) were exercised and resulted in additional common shares outstanding, calculated using the treasury stock method. The numerator is reduced for the effect of preferred dividends in both the basic and diluted net income (loss) per share calculations. Weighted average shares-basic and diluted for the three and nine months ended September 30, 2014 and 2013, respectively, are as follows (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Weighted average shares — basic
209,839

 
163,426

 
200,073

 
128,953

Dilutive potential common shares — stock options
272

 
177

 
252

 
168

Weighted average shares — diluted
210,111

 
163,603

 
200,325

 
129,121

Weighted average anti-dilutive stock options
2,200

 
2,784

 
2,200

 
2,908

Stock options are dilutive when the average market price of the Company's stock during the period exceeds the option exercise price. In periods where the Company is in a net loss position, the dilutive effect of stock options is not included in the diluted weighted average shares total.
Anti-dilutive stock options represent stock options which are outstanding but which are not exercisable during the period because the exercise price exceeded the average market value of the Company's stock. These anti-dilutive stock options are not included in the current calculation of dilutive weighted average shares, but could be dilutive in the future.

12. REPORTABLE SEGMENTS
The Company has four reportable segments: Office, Retail, Land, and Other. These reportable segments represent an aggregation of operating segments reported to the chief operating decision maker based on similar economic characteristics that include the type of product and the nature of service. Each segment includes both consolidated operations and joint ventures, where applicable. The Office and Retail segments show the results for that product type. The Land segment includes results of operations for certain land holdings and single-family residential communities. The Other segment includes:
•
fee income and related expenses for third party owned properties and joint venture properties for which the Company performs management, development and leasing services;
•
compensation for corporate employees;
•
general corporate overhead costs, interest expense for consolidated and unconsolidated entities;
•
income attributable to noncontrolling interests;
•
income taxes;
•
depreciation; and
•
preferred dividends.
Company management evaluates the performance of its reportable segments in part based on funds from operations available to common stockholders (“FFO”). FFO is a supplemental operating performance measure used in the real estate industry. The Company calculated FFO using the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition of FFO, which is net income (loss) available to common stockholders (computed in accordance with GAAP), excluding extraordinary items, cumulative effect of change in accounting principle and gains on sale or impairment losses on depreciable property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.
FFO is used by industry analysts, investors and the Company as a supplemental measure of a REIT’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of a REIT’s operating performance that excludes historical cost depreciation, among other items, from GAAP net income. Management believes the use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Company management evaluates operating performance in part based on FFO. Additionally, the Company uses FFO, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and other key employees.

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Segment net income, the balance of the Company’s investment in joint ventures and the amount of capital expenditures are not presented in the following tables. Management does not utilize these measures when analyzing its segments or when making resource allocation decisions, and therefore this information is not provided. FFO is reconciled to net income (loss) on a total Company basis (in thousands):
 
Three Months Ended September 30, 2014
 
Office
 
Retail
 
Land
 
Other
 
Total
 Net operating income
$
52,691

 
$
1,221

 
$
—

 
$
1,200

 
$
55,112

 Sales less costs of sales
—

 
—

 
82

 
—

 
82

 Fee income
—

 
—

 
—

 
1,802

 
1,802

 Other income
—

 
—

 
—

 
399

 
399

 General and administrative expenses
—

 
—

 
—

 
(5,021
)
 
(5,021
)
 Reimbursed expenses
—

 
—

 
—

 
(783
)
 
(783
)
 Interest expense
—

 
—

 
—

 
(8,660
)
 
(8,660
)
 Other expenses
—

 
—

 
—

 
(1,255
)
 
(1,255
)
 Preferred stock dividends and original issuance costs
—

 
—

 
—

 
—

 
—

 Funds from operations available to common stockholders
 
$
52,691

 
$
1,221

 
$
82

 
$
(12,318
)
 
41,676

 Real estate depreciation and amortization, including Company's share of joint ventures
 
 
 
 
 
 
 
 
 
(35,347
)
 Gain on sale of depreciated investment properties, including Company's share of joint ventures
 
 
 
 
 
 
 
 
 
12,993

 Net income available to common stockholders
 
 
 
 
 
 
 
 
 
$
19,322

Three Months Ended September 30, 2013
 
Office
 
Retail
 
Land
 
Other
 
Total
 Net operating income
 
$
30,308

 
$
3,663

 
$
—

 
$
861

 
$
34,832

 Sales less costs of sales
 
—

 
—

 
725

 
(6
)
 
719

 Fee income
 
—

 
—

 
—

 
2,420

 
2,420

 Other income
 
—

 
—

 
—

 
303

 
303

 Gain on sale of third party management and leasing business
 
—

 
—

 
—

 
4,531

 
4,531

 Separation expenses
 
—

 
—

 
—

 
(520
)
 
(520
)
 General and administrative expenses
 
—

 
—

 
—

 
(6,635
)
 
(6,635
)
 Reimbursed expenses
 
—

 
—

 
—

 
(1,097
)
 
(1,097
)
 Interest expense
 
—

 
—

 
—

 
(7,224
)
 
(7,224
)
 Other expenses
 
—

 
—

 
—

 
(8,326
)
 
(8,326
)
 Preferred stock dividends and original issuance costs
 
—

 
—

 
—

 
(1,777
)
 
(1,777
)
 Funds from operations available to common stockholders
 
$
30,308

 
$
3,663

 
$
725

 
$
(17,470
)
 
17,226

 Real estate depreciation and amortization, including Company's share of joint ventures
 
 
 
 
 
 
 
 
 
(21,890
)
 Gain on sale of depreciated investment properties including the Company's share of joint ventures
 
 
 
 
 
 
 
 
 
67,435

 Noncontrolling interest related to sale of depreciated properties
 
 
 
 
 
 
 
 
 
(3,390
)
 Net income available to common stockholders
 
 
 
 
 
 
 
 
 
$
59,381


16
Table of Contents


Nine Months Ended September 30, 2014
 
Office
 
Retail
 
Land
 
Other
 
Total
 Net operating income
 
$
149,110

 
$
3,813

 
$
—

 
$
3,496

 
$
156,419

 Sales less costs of sales
 
—

 
—

 
1,573

 
42

 
1,615

 Fee income
 
—

 
—

 
—

 
6,165

 
6,165

 Other income
 
—

 
—

 
—

 
4,563

 
4,563

 Separation expenses
 
—

 
—

 
—

 
(84
)
 
(84
)
 General and administrative expenses
 
—

 
—

 
—

 
(16,388
)
 
(16,388
)
 Reimbursed expenses
 
—

 
—

 
—

 
(2,703
)
 
(2,703
)
 Interest expense
 
—

 
—

 
—

 
(26,485
)
 
(26,485
)
 Other expenses
 
—

 
—

 
—

 
(2,974
)
 
(2,974
)
 Preferred stock dividends and original issuance costs
 
—

 
—

 
—

 
(6,485
)
 
(6,485
)
Funds from operations available to common stockholders
 
$
149,110

 
$
3,813

 
$
1,573

 
$
(40,853
)
 
113,643

Real estate depreciation and amortization, including Company's share of joint ventures
 
 
 
 
 
 
 
 
 
(110,319
)
Gain on sale of depreciated investment properties, including Company's share of joint ventures
 
 
 
 
 
 
 
 
 
18,975

Net income available to common stockholders
 
 
 
 
 
 
 
 
 
$
22,299

Nine Months Ended September 30, 2013
 
Office
 
Retail
 
Land
 
Other
 
Total
 Net operating income
 
$
76,039

 
$
12,255

 
$
—

 
$
1,280

 
$
89,574

 Sales less costs of sales
 
—

 
—

 
1,244

 
154

 
1,398

 Fee income
 
—

 
—

 
—

 
9,007

 
9,007

 Other income
 
—

 
—

 
—

 
2,649

 
2,649

 Gain on sale of third party management and leasing business
 
—

 
—

 
—

 
4,531

 
4,531

 Separation expenses
 
—

 
—

 
—

 
(520
)
 
(520
)
 General and administrative expenses
 
—

 
—

 
—

 
(17,257
)
 
(17,257
)
 Reimbursed expenses
 
—

 
—

 
—

 
(4,365
)
 
(4,365
)
 Interest expense
 
—

 
—

 
—

 
(20,442
)
 
(20,442
)
 Other expenses
 
—

 
—

 
—

 
(10,843
)
 
(10,843
)
 Preferred stock dividends and original issuance costs
 
—

 
—

 
—

 
(10,887
)