Edgar Filing: COUSINS PROPERTIES INC

10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________

FORM 10-K



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

For the fiscal year ended December 31, 2015



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

191 Peachtree Street NE, Suite 500, Atlanta, Georgia	30303-1740
(Address of principal executive offices)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Name of Exchange on which registered
Common Stock ($1 par value)	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

___________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 ý No ¨

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	o (Do not check if a smaller reporting company)	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 ¨ No ý

As of June 30, 2015, the aggregate market value of the common stock of Cousins Properties Incorporated held by non-affiliates was $2,128,680,591 based on the closing sales price as reported on the New York Stock Exchange. As of February 5, 2016, 211,441,397 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s proxy statement for the annual stockholders meeting to be held on May 3, 2016 are incorporated by reference into Part III of this Form 10-K.

Table of Contents



PART I
Item 1.	Business	2

Item 1A.	Risk Factors	4

Item 1B.	Unresolved Staff Comments	12

Item 2.	Properties	12

Item 3.	Legal Proceedings	15

Item 4.	Mine Safety Disclosures	15

Item X.	Executive Officers of the Registrant	15

PART II
Item 5.	Market for Registrant’s Common Stock and Related Stockholder Matters	16

Item 6.	Selected Financial Data	18

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 7A.	Quantitative and Qualitative Disclosure about Market Risk	33

Item 8.	Financial Statements and Supplementary Data	34

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	35

Item 9A.	Controls and Procedures	35

Item 9B.	Other Information	37
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	37

Item 11.	Executive Compensation	37

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	37

Item 13.	Certain Relationships and Related Transactions, and Director Independence	37

Item 14.	Principal Accountant Fees and Services	37

PART IV
Item 15.	Exhibits and Financial Statement Schedules	37

SIGNATURES		43

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 this Form 10-K. These forward-looking statements include information about possible or assumed future results of the business of Cousins Properties Incorporated ("the Company") 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:


•	our business and financial strategy;


•	our 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;


•	future repurchases of our common stock;


•	projected operating results;


•	market and industry trends;


•	future distributions;


•	projected capital expenditures; and


•	interest rates.

Any forward-looking statements are based upon management's beliefs, assumptions, and expectations of our 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, our 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 or repay 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 any common stock offerings;


•	the failure to achieve benefits from the repurchase of our common stock;


•	the availability of buyers and adequate pricing with respect to the disposition of assets;


•	risks related to the geographic concentration of our portfolio, including, but not limited to, metropolitan Houston and

metropolitan Atlanta;


•	risks related to industry concentration of our portfolio including, but, not limited to, the energy industry;


•	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 our 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 our 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 we believe that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, we can give no assurance that such plans, intentions, or expectations will be achieved. We undertake 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.

Table of Contents

PART I


Item 1.	Business

Corporate Profile

Cousins Properties Incorporated (the “Registrant” or “Cousins”) is a Georgia corporation, which has elected to be taxed as a real estate investment trust (“REIT”). Through December 31, 2014, Cousins Real Estate Corporation (“CREC”), including its subsidiaries, was a taxable entity wholly-owned by the Registrant, which was consolidated with the Registrant. CREC owned, developed, and managed its own real estate portfolio and performed certain real estate related services for other parties. On December 31, 2014, CREC merged into the Registrant. Coincident with this merger, the Registrant formed Cousins TRS Services LLC ("CTRS"), a new taxable entity wholly-owned by the Registrant. Upon formation, CTRS received a capital contribution of certain real estate assets and contracts that were previously owned by CREC. CTRS owns and manages its own real estate portfolio and performs certain real estate related services for other parties beginning in 2015. The Registrant, its subsidiaries, CREC and CTRS combined are hereafter referred to as “we,” “us,” “our” and the “Company.” Our common stock trades on the New York Stock Exchange under the symbol “CUZ.”

Our operations are conducted through a number of segments based on our method of internal reporting, which classifies operations by property and geographical area. For financial information related to each of our operating segments, see note 17 to the consolidated financial statements included in this Annual Report on Form 10-K.

Company Strategy

Our strategy is to create value for our stockholders through the acquisition, development, ownership, and management of Class A office assets and opportunistic mixed-use developments in Sunbelt markets, with a particular focus on Georgia, Texas, and North Carolina. This strategy is based on a simple platform, trophy assets, opportunistic investments, and a strong balance sheet. This approach enables us to maintain a targeted, asset-specific approach to investing where we seek to leverage our acquisition and development skills, relationships, market knowledge, and operational expertise.

2015 Activities

During 2015, we shifted our investment activities from acquisitions to development by initiating and completing Class A office assets in our target markets, enhancing the value of our existing assets through leasing activities, and maintaining a strong balance sheet. The following is a summary of our significant 2015 activities.

Investment Activity


•	Commenced construction on NCR Corporation's corporate headquarters building in midtown Atlanta, Georgia. The project is expected to contain 485,000 square feet of space with a total projected cost of $200.0 million.


•	Formed a joint venture to potentially develop HICO Avalon, an office building in Alpharetta, Georgia.


•	Formed a joint venture to develop Carolina Square, a mixed-use property in Chapel Hill, North Carolina, which is expected to have 159,000 square feet of office space, 246 apartment units, and 43,000 square feet of retail space. Total project costs are expected to be $123.0 million.


•	Opened Research Park V, a Class-A office tower in Austin, Texas, containing 173,000 square feet of space.


•	Opened Colorado Tower, a Class-A office tower in downtown Austin, Texas, containing 373,000 square feet of space.


•	Opened the second phase of Emory Point in Atlanta, Georgia, a mixed-use property which consists of 307 apartments and 45,000 square feet of retail space.


•	Initiated a $100.0 million share repurchase program. Through year-end, we repurchased 5.2 million shares for $47.8 million.

Disposition Activity


•	Sold 200, 333, and 555 North Point Center East, office buildings located in Atlanta, Georgia, containing 411,000 square feet, for $70.3 million.


•	Sold The Points at Waterview, a 203,000 square foot office tower in Dallas, Texas, for $26.8 million


•	Sold 2100 Ross, an 844,000 square foot office tower in Dallas, Texas, for $131.0 million.


•	Sold 8,643 acres of residential land for total gross proceeds of $20.9 million.

Financing Activity

Table of Contents


•	Repaid without recourse, the $14.2 million The Points at Waterview mortgage loan.


•	Reduced total consolidated indebtedness by $71.1 million and maintained strong leverage ratios.

Portfolio Activity


•	Leased or renewed 3.0 million square feet of office space.


•	Increased second generation net rent per square foot by 36.7% in accordance with accounting principles generally accepted in the United States ("GAAP") and 19.8% on a cash basis.


•	Increased same property net operating income by 3.3% on a GAAP basis and 7.3% on a cash basis.

Other Activity


•	In the first quarter of 2015, increased the quarterly common stock dividend from $0.075 per share to $0.080 per share.

Environmental Matters

Our business operations are subject to various federal, state, and local environmental laws and regulations governing land, water, and wetlands resources. Among these are certain laws and regulations under which an owner or operator of real estate could become liable for the costs of removal or remediation of certain hazardous or toxic substances present on or in such property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may subject the owner to substantial liability and may adversely affect the owner’s ability to develop the property or to borrow using such real estate as collateral.

We typically manage this potential liability through performance of Phase I Environmental Site Assessments and, as necessary, Phase II environmental sampling, on properties we acquire or develop, although no assurance can be given that environmental liabilities do not exist, that the reports revealed all environmental liabilities, or that no prior owner created any material environmental condition not known to us. In certain situations, we have also sought to avail ourselves of legal and regulatory protections offered by federal and state authorities to prospective purchasers of property. Where applicable studies have resulted in the determination that remediation was required by applicable law, the necessary remediation is typically incorporated into the acquisition or development activity of the relevant property. We are not aware of any environmental liability that we believe would have a material adverse effect on our business, assets, or results of operations.

Certain environmental laws impose liability on a previous owner of a property to the extent that hazardous or toxic substances were present during the prior ownership period. A transfer of the property does not necessarily relieve an owner of such liability. Thus, although we are not aware of any such situation, we may have such liabilities on properties previously sold. We believe that we and our properties are in compliance in all material respects with applicable federal, state, and local laws, ordinances, and regulations governing the environment.

Competition

We compete with other real estate owners with similar properties located in our markets and distinguish ourselves to tenants/buyers primarily on the basis of location, rental rates/sales prices, services provided, reputation, and the design and condition of the facilities. We also compete with other real estate companies, financial institutions, pension funds, partnerships, individual investors, and others when attempting to acquire and develop properties.

Executive Offices; Employees

Our executive offices are located at 191 Peachtree Street NE, Suite 500, Atlanta, Georgia 30303-1740. On December 31, 2015, we employed 257 people.

Available Information

We make available free of charge on the “Investor Relations” page of our website, www.cousinsproperties.com, our filed and furnished reports on Forms 10-K, 10-Q, and 8-K, and all amendments thereto, as soon as reasonably practicable after the reports are filed with or furnished to the Securities and Exchange Commission (the “SEC”).

Our Corporate Governance Guidelines, Director Independence Standards, Code of Business Conduct and Ethics, and the Charters of the Audit Committee, the Investment Committee, and the Compensation, Succession, Nominating and Governance Committee of the Board of Directors are also available on the “Investor Relations” page of our website. The information contained on our website is not incorporated herein by reference. Copies of these documents (without exhibits, when applicable) are also available free of charge upon request to us at 191 Peachtree Street NE, Suite 500, Atlanta, Georgia 30303-1740, Attention: Marli

Table of Contents

Quesinberry, Investor Relations. Ms. Quesinberry may also be reached by telephone at (404) 407-1898 or by facsimile at (404) 407-1899. In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC at www.sec.gov.


Item 1A.	Risk Factors

Set forth below are the risks we believe investors should consider carefully in evaluating an investment in the securities of Cousins Properties Incorporated.

General Risks of Owning and Operating Real Estate

Our ownership of commercial real estate involves a number of risks, the effects of which could adversely affect our business.

General economic and market risks. Our assets are subject to general economic and market risks. As such, in a general economic decline or recessionary climate, our assets may not generate sufficient cash to pay expenses, service debt, or cover maintenance, and, as a result, our results of operations and cash flows may be adversely affected. Factors that may adversely affect the economic performance and value of our properties include, among other things:


•	changes in the national, regional, and local economic climate;


•	local real estate conditions such as an oversupply of rentable space or a reduction in demand for rentable space;


•	the attractiveness of our properties to tenants or buyers;


•	competition from other available properties;


•	changes in market rental rates and related concessions granted to tenants including, but not limited to, free rent, tenant allowances, and tenant improvement allowances; and


•	the need to periodically repair, renovate, and re-lease buildings.

Uncertain economic conditions may adversely impact current tenants in our various markets and, accordingly, could affect their ability to pay rents owed to us pursuant to their leases. In periods of economic uncertainty, tenants are more likely to close less profitable locations and/or to declare bankruptcy; and, pursuant to various bankruptcy laws, leases may be rejected and thereby terminated. Furthermore, our ability to sell or lease our properties at favorable rates, or at all, may be negatively impacted by general or local economic conditions.

Our ability to collect rent from tenants may affect our ability to pay for adequate maintenance, insurance, and other operating costs (including real estate taxes). Also, the expense of owning and operating a property is not necessarily reduced when circumstances such as market factors cause a reduction in income from the property. If a property is mortgaged and we are unable to meet the mortgage payments, the lender could foreclose on the mortgage and take title to the property. In addition, interest rate levels, availability of financing, changes in laws, and governmental regulations (including those governing usage, zoning and taxes) may adversely affect our financial condition.

Impairment risks. We regularly review our real estate assets for impairment; and based on these reviews, we may record impairment losses that have an adverse effect on our results of operations. Negative or uncertain market and economic conditions, as well as market volatility, increase the likelihood of incurring impairment losses. If we decide to sell a real estate asset rather than holding it for long term investment or reduce our estimates of future cash flows on a real estate asset, the risk of impairment increases. The magnitude and frequency with which these charges occur could materially and adversely affect our business, financial condition, and results of operations.

Leasing risk. Our operating revenues are dependent upon entering into leases with, and collecting rents from, our tenants. Tenants whose leases are expiring may desire to decrease the space they lease and/or may be unwilling to continue their lease. When leases expire or are terminated, replacement tenants may not be available upon acceptable terms and market rental rates may be lower than the previous contractual rental rates. Also, our tenants may approach us for additional concessions in order to remain open and operating. The granting of these concessions may adversely affect our results of operations and cash flows to the extent that they result in reduced rental rates, additional capital improvements, or allowances paid to, or on behalf of, the tenants.

Tenant and property concentration risk. As of December 31, 2015, our top 20 tenants represented 41% of our annualized base rental revenues with no single tenant accounting for more than 8% of our annualized base rent. In addition, as of December 31, 2015, 23% of our annualized base rent comes from tenants in the energy sector with no other sector representing more than 17% of our annualized base rent. The inability of any of our significant tenants to pay rent or a decision by a significant tenant to vacate their premises prior to, or at the conclusion of, their lease term could have a significant negative impact on our results of

Table of Contents

operations or financial condition if a suitable replacement tenant is not secured in a timely manner. In addition, a prolonged period of low oil or natural gas prices or other factors negatively impacting the energy industry could have an adverse impact on our energy tenants' ability to pay rent or could cause them to vacate their premises prior to, or at the conclusion of, their lease terms. These events could have a significant adverse impact on our results of operations or financial condition.

For the three months ended December 31, 2015, 45% of our net operating income was derived from the metropolitan Houston area and 41% was derived from the metropolitan Atlanta area. Any adverse economic conditions impacting Houston or Atlanta could adversely affect our overall results of operations and financial condition. Given the fact that the Houston metropolitan area has a significant presence in the energy sector, a prolonged period of low oil or natural gas prices, or other factors negatively impacting the energy industry could have an adverse impact on our ability to maintain the occupancy of our Houston properties or could cause us to lease space at rates below current in-place rents, or at rates below the rates we have leased space in our Houston properties in the prior year. In addition, factors negatively impacting the energy industry could reduce the market values of our Houston properties which could reduce our net asset value and adversely affect our financial condition and results of operations, or cause a decline in the value of our common stock.

Uninsured losses and condemnation costs. Accidents, earthquakes, terrorism incidents, and other losses at our properties could adversely affect our operating results. Casualties may occur that significantly damage an operating property, and insurance proceeds may be less than the total loss incurred by us. Although we maintain casualty insurance under policies we believe to be adequate and appropriate, including rent loss insurance on operating properties, some types of losses, such as those related to the termination of longer-term leases and other contracts, generally are not insured. Certain types of insurance may not be available or may be available on terms that could result in large uninsured losses. Property ownership also involves potential liability to third parties for such matters as personal injuries occurring on the property. Such losses may not be fully insured. In addition to uninsured losses, various government authorities may condemn all or parts of operating properties. Such condemnations could adversely affect the viability of such projects.

Environmental issues. Environmental issues that arise at our properties could have an adverse effect on our financial condition and results of operations. Federal, state, and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product releases at a property. If determined to be liable, the owner or operator may have to pay a governmental entity or third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with the contamination, or perform such investigation and clean-up itself. Although certain legal protections may be available to prospective purchasers of property, these laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the regulated substances. Even if more than one person may have been responsible for the release of regulated substances at the property, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from regulated substances emanating from that site. We are not currently aware of any environmental liabilities at locations that we believe could have a material adverse effect on our business, assets, financial condition, or results of operations. Unidentified environmental liabilities could arise, however, and could have an adverse effect on our financial condition and results of operations.

Joint venture structure risks. Similar to other real estate companies, we have interests in various joint ventures (including partnerships and limited liability companies) and may in the future invest in real estate through such structures. Our venture partners may have rights to take actions over which we have no control, or the right to withhold approval of actions that we propose, either of which could adversely affect our interests in the related joint ventures, and in some cases, our overall financial condition and results of operations. These structures involve participation by other parties whose interests and rights may not be the same as ours. For example, a venture partner might have economic and/or other business interests or goals which are incompatible with our business interests or goals and that venture partner may be in a position to take action contrary to our interests. In addition, such venture partners may default on their obligations, which could have an adverse impact on the financial condition and operations of the joint venture. Such defaults may result in our fulfilling their obligations that may, in some cases, require us to contribute additional capital to the ventures. Furthermore, the success of a project may be dependent upon the expertise, business judgment, diligence, and effectiveness of our venture partners in matters that are outside our control. Thus, the involvement of venture partners could adversely impact the development, operation, ownership, financing, or disposition of the underlying properties.

Liquidity risk. Real estate investments are relatively illiquid and can be difficult to sell and convert to cash quickly. As a result, our ability to sell one or more of our properties, whether in response to any changes in economic or other conditions or in response to a change in strategy, may be limited. In the event we want to sell a property, we may not be able to do so in the desired time period, the sales price of the property may not meet our expectations or requirements, and we may be required to record an impairment loss on the property as a result.

Table of Contents

Compliance or failure to comply with federal, state, and local regulatory requirements could result in substantial costs.

Our properties are subject to various federal, state, and local regulatory requirements, such as the Americans with Disabilities Act and state and local fire, health, and life safety requirements. Compliance with these regulations may involve upfront expenditures and/or ongoing costs. If we fail to comply with these requirements, we could incur fines or other monetary damages. We do not know whether existing requirements will change or whether compliance with existing or future requirements will require significant unanticipated expenditures that will affect our cash flows and results of operations.

Financing Risks

At certain times, interest rates and other market conditions for obtaining capital are unfavorable, and, as a result, we may be unable to raise the capital needed to invest in acquisition or development opportunities, maintain our properties, or otherwise satisfy our commitments on a timely basis, or we may be forced to raise capital at a higher cost or under restrictive terms, which could adversely affect returns on our investments, our cash flows, and results of operations.

We generally finance our acquisition and development projects through one or more of the following: our Unsecured Credit Facility ("Credit Facility"), non-recourse mortgages, the sale of assets, construction loans, joint venture equity, and the issuance of common stock. Each of these sources may be constrained from time to time because of market conditions, and the related cost of raising this capital may be unfavorable at any given point in time. These sources of capital, and the risks associated with each, include the following:

•

Credit facilities. Terms and conditions available in the marketplace for credit facilities vary over time. We can provide no assurance that the amount we need from our Credit Facility will be available at any given time, or at all, or that the rates and fees charged by the lenders will be reasonable. We incur interest under our Credit Facility at a variable rate. Variable rate debt creates higher debt service requirements if market interest rates increase, which would adversely affect our cash flow and results of operations. Our Credit Facility contains customary restrictions, requirements and other limitations on our ability to incur indebtedness, including restrictions on unsecured debt outstanding, restrictions on secured recourse debt outstanding, and requirements to maintain minimum fixed charge coverage ratios. Our continued ability to borrow under our Credit Facility is subject to compliance with these covenants.

•

Non-recourse mortgages. The availability of financing is dependent upon various conditions, including the willingness of mortgage lenders to lend at any given point in time. Interest rates and loan-to-value ratios may also be volatile, and we may from time to time elect not to proceed with mortgage financing due to unfavorable terms offered by lenders. Inability to access the mortgage market could adversely affect our ability to finance acquisition or development activities. In addition, if a property is mortgaged to secure payment of indebtedness and we are unable to make the mortgage payments, the lender may foreclose, resulting in loss of income and asset value. We may not be able to refinance debt secured by our properties at the same levels or on the same terms, which could adversely affect our business, financial condition and results of operations. Further, at the time a mortgage matures, the property may be worth less than the mortgage amount and, as a result, we may determine not to refinance the mortgage and permit foreclosure, generating a loss to us and defaults on other mortgages.

•

Property sales. Real estate markets tend to experience market cycles. Because of such cycles, the potential terms and conditions of sales, including prices, may be unfavorable for extended periods of time. In addition, our status as a REIT limits our ability to sell properties, which may affect our ability to liquidate an investment. As a result, our ability to raise capital through property sales in order to fund our acquisition and development projects or other cash needs could be limited. In addition, mortgage financing on a property may prohibit prepayment and/or impose a prepayment penalty upon the sale of that property, which may decrease the proceeds from a sale or refinancing or make the sale or refinancing impractical.

•

Construction loans. Construction loans generally relate to specific assets under construction and fund costs above an initial equity amount deemed acceptable to the lender. Terms and conditions of construction facilities vary, but they generally carry a term of two to five years, charge interest at variable rates, require the lender to be satisfied with the nature and amount of construction costs prior to funding, and require the lender to be satisfied with the level of pre-leasing prior to closing. Construction loans frequently require a portion of the loan to be recourse to us in addition to being recourse to the equity in the asset. In addition, construction loans generally require a completion guarantee by the borrower. While construction lending is generally competitive and offered by many financial institutions, there may be times when these facilities are not available or are only available upon

Table of Contents

unfavorable terms which could have an adverse effect on our ability to fund development projects or on our ability to achieve the returns we expect.


•	Joint ventures. Joint ventures, including partnerships or limited liability companies, tend to be complex arrangements, and there are only a limited number of parties willing to undertake such investment structures. There is no guarantee that we will be able to undertake these ventures at the times we need capital.

•

Common stock. Common stock offerings may have a dilutive effect on our earnings per share and funds from operations per share. The actual amount of dilution, if any, from any future offering of common stock will be based on numerous factors, particularly the use of proceeds and any return generated thereby, and cannot be determined at this time. The per share trading price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market in connection with an offering, or otherwise, or as a result of the perception or expectation that such sales could occur. We can also provide no assurance that conditions will be favorable for future issuances of common stock when we need the capital, which could have an adverse effect on our ability to fund acquisition and development activities.

As a result of any additional indebtedness incurred to consummate investment activities, we may experience a potential material adverse effect on our financial condition and results of operations.

The incurrence of new indebtedness could have adverse consequences on our business, such as:


•	requiring us to use a substantial portion of our cash flow from operations to service our indebtedness, which would reduce the available cash flow to fund working capital, capital expenditures, development projects, and other general corporate purposes and reduce cash for distributions;


•	limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures, or other debt service requirements or for other purposes;


•	increasing the costs of incurring additional debt;


•	increasing our exposure to floating interest rates;


•	limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;


•	restricting us from making strategic acquisitions, developing properties, or exploiting business opportunities;


•	restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;


•	exposing us to potential events of default (if not cured or waived) under covenants contained in our debt instruments that could have a material adverse effect on our business, financial condition, and operating results;


•	increasing our vulnerability to a downturn in general economic conditions; and


•	limiting our ability to react to changing market conditions in our industry.

The impact of any of these potential adverse consequences could have a material adverse effect on our results of operations, financial condition, and liquidity.

Covenants contained in our Credit Facility and mortgages could restrict or hinder our operational flexibility, which could adversely affect our results of operations.

Our Credit Facility imposes financial and operating covenants on us. These covenants may be modified from time to time, but covenants of this type typically include restrictions and limitations on our ability to incur debt, as well as limitations on the amount of our unsecured debt and on the amount of joint venture activity in which we may engage. These covenants may limit our flexibility in making business decisions. If we fail to comply with these covenants, our ability to borrow may be impaired, which could potentially make it more difficult to fund our capital and operating needs. Our failure to comply with such covenants could cause a default, and we may then be required to repay our outstanding debt with capital from other sources. Under those circumstances, other sources of capital may not be available to us or may be available only on unattractive terms, which could materially and adversely affect our financial condition and results of operations. In addition, the cross default provision on the Credit Facility may affect business decisions on other mortgage debt.

Some of our property mortgages contain customary negative covenants, including limitations on our ability, without the lender’s prior consent, to further mortgage that property, to enter into new leases, to modify existing leases, or to sell the property. Compliance with these covenants and requirements could harm our operational flexibility and financial condition.

Table of Contents

Our degree of leverage could limit our ability to obtain additional financing or affect the market price of our securities.

Total debt as a percentage of either total asset value or total market capitalization is often used by analysts to gauge the financial health of equity REITs such as us. If our degree of leverage is viewed unfavorably by lenders or potential joint venture partners, it could affect our ability to obtain additional financing. In general, our degree of leverage could also make us more vulnerable to a downturn in business or the economy. In addition, increases in our debt to market capitalization ratio, which is in part a function of our stock price, or to other measures of asset value used by financial analysts may have an adverse effect on the market price of common stock.

The repurchase of our shares of common stock may not result in benefits to our shareholders.

In 2015, we initiated a plan to repurchase shares of our common stock. We repurchase shares in our discretion based on the price of our common stock and the relative expected profitability of other investment options available to us, including acquisition and development properties. As with any investment, there can be no assurance that the benefits of repurchasing our common stock will be superior to other investment options available to us.

Real Estate Acquisition and Development Risks

We face risks associated with the development of real estate, such as delay, cost overruns, and the possibility that we are unable to lease a portion of the space that we build, which could adversely affect our results.

Development activities contain certain inherent risks. Although we seek to minimize risks from commercial development through various management controls and procedures, development risks cannot be eliminated. Some of the key factors affecting development of commercial property are as follows:

•

The availability of sufficient development opportunities. Absence of sufficient development opportunities could result in our experiencing slower growth in earnings and cash flows. Development opportunities are dependent upon a wide variety of factors. Availability of these opportunities can be volatile as a result of, among other things, economic conditions and product supply/demand characteristics in a particular market.

•

Abandoned predevelopment costs. The development process inherently requires that a large number of opportunities be pursued with only a few actually being developed. We may incur significant costs for predevelopment activity for projects that are later abandoned, which would directly affect our results of operations. For projects that are later abandoned, we must expense certain costs, such as salaries, that would have otherwise been capitalized. We have procedures and controls in place that are intended to minimize this risk, but it is likely that we will incur predevelopment expense on subsequently abandoned projects on an ongoing basis.

•

Project costs. Construction and leasing of a project involves a variety of costs that cannot always be identified at the beginning of a project. Costs may arise that have not been anticipated or actual costs may exceed estimated costs. These additional costs can be significant and could adversely impact our return on a project and the expected results of operations upon completion of the project. Also, construction costs vary over time based upon many factors, including the demand for building materials. We attempt to mitigate the risk of unanticipated increases in construction costs on our development projects through guaranteed maximum price contracts and pre-ordering of certain materials, but we may be adversely affected by increased construction costs on our current and future projects.

•

Construction delays. Real estate development carries the risk that the project could be delayed due to a number of issues that may arise including, but not limited to, weather and other forces of nature, availability of materials, availability of skilled labor, and the financial health of general contractors or sub-contractors. Construction delays could cause adverse financial impacts to us which could include higher interest and other carrying costs than originally budgeted, monetary penalties from tenants pursuant to their leases, and higher construction costs. Delays could also result in a violation of terms of construction loans that could increase fees, interest, or trigger additional recourse of the loan to us.

•

Leasing risk. The success of a commercial real estate development project is heavily dependent upon entering into leases with acceptable terms within a predefined lease-up period. Although our policy is to achieve pre-leasing goals (which vary by market, product type, and circumstances) before committing to a project, it is expected that not all the space in a project will be leased at the time we commit to the project. If the additional space is not leased on schedule and upon the expected terms and conditions, our returns, future earnings, and results of operations

Table of Contents

from the project could be adversely impacted. Whether or not tenants are willing to enter into leases on the terms and conditions we project and on the timetable we expect will depend upon a number of factors, many of which are outside our control. These factors may include:


•	general business conditions in the local or broader economy or in the prospective tenants’ industries;


•	supply and demand conditions for space in the marketplace; and


•	level of competition in the marketplace.

•

Reputation risks. We have historically developed and managed a significant portion of our real estate portfolio and believe that we have built a positive reputation for quality and service with our lenders, joint venture partners, and tenants. If we were viewed as developing underperforming properties, suffered sustained losses on our investments, defaulted on a significant level of loans or experienced significant foreclosure or deed in lieu of foreclosure of our properties, our reputation could be damaged. Damage to our reputation could make it more difficult to successfully develop or acquire properties in the future and to continue to grow and expand our relationships with our lenders, joint venture partners and tenants, which could adversely affect our business, financial condition, and results of operations.


•	Governmental approvals. All necessary zoning, land-use, building, occupancy, and other required governmental permits and authorization may not be obtained, may only be obtained subject to onerous conditions or may not be obtained on a timely basis resulting in possible delays, decreased profitability, and increased management time and attention.

We may face risks associated with property acquisitions.

The risks associated with property acquisitions are similar to those described above for real estate development. However, certain additional risks may be present for property acquisitions. These risks may include:


•	difficulty finding properties that are consistent with our strategy and that meet our standards;


•	difficulty negotiating with new or existing tenants;


•	the extent of competition in a particular market for attractive acquisitions may hinder our desired level of property acquisitions or redevelopment projects;


•	the costs and timing of repositioning or redeveloping acquired properties may be greater than our estimates;


•	the occupancy levels, lease-up timing, and rental rates may not meet our expectations;


•	the acquired properties may fail to meet internal projections or otherwise fail to perform as expected;


•	the acquired property may be in a market that is unfamiliar to us and could present additional unforeseen business challenges;


•	the timing of property acquisitions may not match the timing of property dispositions, leading to periods of time where projects' proceeds are not invested as profitably as we desire or where we increase short-term borrowings until sales proceeds become available;


•	the inability to obtain financing for acquisitions on favorable terms or at all;


•	the inability to successfully integrate the operations, maintain consistent standards, controls, policies and procedures, or realize the anticipated benefits of acquisitions within the anticipated time frames or at all;


•	the inability to effectively monitor and manage our expanded portfolio of properties, retain key employees or attract highly qualified new employees;


•	the possible decline in value of the acquired assets;


•	the diversion of our management’s attention away from other business concerns; and


•	the exposure to any undisclosed or unknown issues, expenses, or potential liabilities relating to acquisitions.

In addition, we may acquire properties subject to liabilities with no, or limited, recourse against the prior owners or other third parties. As a result, if a liability were asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it, which might not be fully covered by owner's title insurance policies. Any of these risks could cause a failure to realize the intended benefits of our acquisitions and could have a material adverse effect on our financial condition, results of operations, and the market price of our common stock.

General Business Risks

Table of Contents

We are dependent upon the services of certain key personnel, the loss of any of whom could adversely impair our ability to execute our business.

One of our objectives is to develop and maintain a strong management group at all levels. At any given time, we could lose the services of key executives and other employees. None of our key executives or other employees is subject to employment contracts. Further, we do not carry key person insurance on any of our executive officers or other key employees. The loss of services of any of our key employees could have an adverse effect upon our results of operations, financial condition, and our ability to execute our business strategy.

Our restated and amended articles of incorporation contain limitations on ownership of our stock, which may prevent a change in control that might otherwise be in the best interests of our stockholders.

Our restated and amended articles of incorporation impose limitations on the ownership of our stock. In general, except for certain individuals who owned stock at the time of adoption of these limitations, and except for persons that are granted waivers by our Board of Directors, no individual or entity may own more than 3.9% of the value of our outstanding stock. We provide waivers to this limitation on a case by case basis, which could result in increased voting control by a shareholder. The ownership limitation may have the effect of delaying, inhibiting, or preventing a transaction or a change in control that might involve a premium price for our stock or otherwise be in the best interest of our stockholders.

The market price of our common stock may fluctuate.

The market prices of shares of our common stock have been, and may continue to be, subject to fluctuation due to many events and factors such as those described in this report including:


•	actual or anticipated variations in our operating results, funds from operations, or liquidity;


•	the general reputation of real estate as an attractive investment in comparison to other equity securities and/or the reputation of the product types of our assets compared to other sectors of the real estate industry;


•	material changes in the energy industry or other significant tenant industry concentration;


•	the general stock and bond market conditions, including changes in interest rates or fixed income securities;


•	changes in tax laws;


•	changes to our dividend policy;


•	changes in market valuations of our properties;


•	adverse market reaction to the amount of our outstanding debt at any time, the amount of our maturing debt, and our ability to refinance such debt on favorable terms;


•	any failure to comply with existing debt covenants;


•	any foreclosure or deed in lieu of foreclosure of our properties;


•	additions or departures of key executives and other employees;


•	actions by institutional stockholders;


•	uncertainties in world financial markets;


•	the realization of any of the other risk factors described in this report; and


•	general market and economic conditions, in particular, market and economic conditions of Atlanta, Georgia and Houston, Texas.

Many of the factors listed above are beyond our control. Those factors may cause market prices of shares of our common stock to decline, regardless of our financial performance, condition, and prospects. The market price of shares of our common stock may fall significantly in the future, and it may be difficult for our stockholders to resell our common stock at prices they find attractive.

If our future operating performance does not meet the projections of our analysts or investors, our stock price could decline.

Independent securities analysts publish quarterly and annual projections of our financial performance. These projections are developed independently by third-party securities analysts based on their own analyses, and we undertake no obligation to monitor, and take no responsibility for, such projections. Such estimates are inherently subject to uncertainty and should not be relied upon as being indicative of the performance that we anticipate for any applicable period. Our actual revenues, net income, and funds from operations may differ materially from what is projected by securities analysts. If our actual results do not meet analysts’ guidance, our stock price could decline significantly.

Table of Contents

We face risks associated with security breaches through cyber attacks, cyber intrusions, or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.

We face risks associated with security breaches or disruptions, whether through cyber attacks or cyber intrusions over the internet, malware, computer viruses, attachments to emails, persons inside our organization, or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants. There can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving our IT networks and related systems could adversely impact our financial condition, results of operations, cash flows, liquidity, and the market price of our common stock.

Federal Income Tax Risks

Any failure to continue to qualify as a REIT for federal income tax purposes could have a material adverse impact on us and our stockholders.

We intend to continue to operate in a manner to qualify as a REIT for federal income tax purposes. Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code (the “Code”), for which there are only limited judicial or administrative interpretations. Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT. In addition, we can provide no assurance that legislation, new regulations, administrative interpretations, or court decisions will not adversely affect our qualification as a REIT or the federal income tax consequences of our REIT status.

If we were to fail to qualify as a REIT, we would not be allowed a deduction for distributions to stockholders in computing our taxable income. In this case, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Unless entitled to relief under certain Code provisions, we also would be disqualified from operating as a REIT for the four taxable years following the year during which qualification was lost. As a result, we would be subject to federal and state income taxes which could adversely affect our results of operations and distributions to stockholders. Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax, or other considerations may cause us to revoke the REIT election.

In order to qualify as a REIT, under current law, we generally are required each taxable year to distribute to our stockholders at least 90% of our net taxable income (excluding any net capital gain). To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our other taxable income, we are subject to tax on the undistributed amounts at regular corporate rates. In addition, we are subject to a 4% nondeductible excise tax to the extent that distributions paid by us during the calendar year are less than the sum of the following:


•	85% of our ordinary income;


•	95% of our net capital gain income for that year; and


•	100% of our undistributed taxable income (including any net capital gains) from prior years.

We generally intend to make distributions to our stockholders to comply with the 90% distribution requirement to avoid corporate-level tax on undistributed taxable income and to avoid the nondeductible excise tax. Distributions could be made in cash, stock or in a combination of cash and stock. Differences in timing between taxable income and cash available for distribution could require us to borrow funds to meet the 90% distribution requirement, to avoid corporate-level tax on undistributed taxable income, and to avoid the nondeductible excise tax. Satisfying the distribution requirements may also make it more difficult to fund new investment or development projects.

Certain property transfers may be characterized as prohibited transactions, resulting in a tax on any gain attributable to the transaction.

From time to time, we may transfer or otherwise dispose of some of our properties. Under the Code, any gains resulting from transfers or dispositions, from other than our taxable REIT subsidiary, that are deemed to be prohibited transactions would be subject to a 100% tax on any gain associated with the transaction. Prohibited transactions generally include sales of assets that constitute inventory or other property held for sale to customers in the ordinary course of business. Since we acquire properties primarily for investment purposes, we do not believe that our occasional transfers or disposals of property are deemed to be prohibited transactions. However, whether or not a transfer or sale of property qualifies as a prohibited transaction depends on

Table of Contents

all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by us are prohibited transactions. While we believe that the Internal Revenue Service would not prevail in any such dispute, if the Internal Revenue Service were to argue successfully that a transfer or disposition of property constituted a prohibited transaction, we would be required to pay a tax equal to 100% of any gain allocable to us from the prohibited transaction. In addition, income from a prohibited transaction might adversely affect our ability to satisfy the income tests for qualification as a REIT for federal income tax purposes.

Disclosure Controls and Internal Control over Financial Reporting Risks

Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting.

The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements, or misrepresentations. In addition, new system implementations, such as our recent conversion from the JD Edwards information system to the Yardi information system, increase the risk that undetected errors in publicly disclosed financial information could occur. While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives at all times. Deficiencies, including any material weakness, in our internal control over financial reporting which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operations, financial condition, or liquidity.


Item 1B.	Unresolved Staff Comments

Not applicable.


Item 2.	Properties

The following table sets forth certain information related to operating properties in which we have an ownership interest. Information presented in note 5 to the consolidated financial statements provides additional information related to our unconsolidated joint ventures. Except as noted, all information presented is as of December 31, 2015:

Table of Contents

Operating Properties



						Company's Share
	Property Description	Metropolitan Area	Rentable Square Feet	Financial Statement Presentation	Company's Ownership Interest	End of Period Leased	Weighted Average Occupancy (1)	% of Total Net Operating Income (2)	Property Level Debt ($000)		Annualized Base Rents (7)
I.	OFFICE PROPERTIES
	Greenway Plaza (3)	Houston	4,348,000	Consolidated	100%	89.8%	88.7%	33%	$	—
	Post Oak Central (3)	Houston	1,280,000	Consolidated	100%	95.4%	95.7%	12%	181,770
	816 Congress	Austin	435,000	Consolidated	100%	93.4%	91.6%	4%	85,000
	Colorado Tower	Austin	373,000	Consolidated	100%	100.0%	76.8%	4%	—
	Research Park V (4)	Austin	173,000	Consolidated	100%	29.9%	—%	—%	—
	TEXAS		6,609,000					53%	266,770

	Northpark Town Center (3)	Atlanta	1,528,000	Consolidated	100%	84.5%	85.2%	10%	—
	191 Peachtree Tower	Atlanta	1,225,000	Consolidated	100%	91.5%	89.4%	8%	100,000
	Promenade	Atlanta	777,000	Consolidated	100%	93.0%	91.0%	5%	108,203
	The American Cancer Society Center	Atlanta	996,000	Consolidated	100%	86.6%	86.6%	5%	129,342
	Terminus 100	Atlanta	659,000	Unconsolidated	50%	92.3%	90.5%	3%	64,608
	Terminus 200	Atlanta	566,000	Unconsolidated	50%	92.2%	90.4%	3%	41,000
	Meridian Mark Plaza	Atlanta	160,000	Consolidated	100%	98.2%	97.7%	2%	24,978
	Emory University Hospital Midtown Medical Office Tower	Atlanta	358,000	Unconsolidated	50%	98.8%	99.7%	2%	37,143
	100 North Point Center East (5)	Atlanta	129,000	Consolidated	100%	99.9%	99.9%	1%	—
	GEORGIA		6,398,000					39%	505,274

	Fifth Third Center	Charlotte	698,000	Consolidated	100%	94.6%	84.5%	6%	—
	Gateway Village	Charlotte	1,065,000	Unconsolidated	50%	100.0%	100%	—%	8,768
	NORTH CAROLINA		1,763,000					6%	8,768

	TOTAL OFFICE PROPERTIES		14,770,000					98%	$	780,812	$	241,719	(8)

II.	OTHER PROPERTIES
	Emory Point Apartments (Phase I) (6)	Atlanta	404,000	Unconsolidated	75%	95.7%	96.0%	2%	$	36,123
	Emory Point Retail (Phase I)	Atlanta	80,000	Unconsolidated	75%	84.7%	76.8%	—%	7,399
	Emory Point Retail (Phase II)	Atlanta	45,000	Unconsolidated	75%	69.1%	64.7%	—%	4,602
	Emory Point Apartments (Phase II) (6)	Atlanta	257,000	Unconsolidated	75%	42.7%	36.4%	—%	26,081
	TOTAL OTHER PROPERTIES		786,000					2%	74,205		$	8,717
	TOTAL PORTFOLIO		15,556,000					100%	$	855,017


(1)	Weighted average economic occupancy represents an average of the square footage occupied at the property during the year. If the property was purchased during the year, average economic occupancy is calculated from the date of purchase forward.


(2)	Net operating income represents rental property revenues less rental property operating expenses for the three months ended December 31, 2015.


(3)	Contains multiple buildings that are grouped together for reporting purposes.


(4)	Research Park V became operational on December 1, 2015.


(5)	100 North Point Center East was sold in January 2016.


(6)	Phase I consists of 443 units and Phase II consists of 307 units.


(7)	Annualized base rents represents the sum of the annualized rent each tenant is paying as of the end of the reporting period. If a tenant is not paying rent due to a free rent concession, annualized base rent is calculated based on the annualized base rent the tenant will pay in the first period it is required to pay rent.


(8)	Included in this amount is $9.6 million of Annualized Base Rent for tenants in a free rent period.

Office Lease Expirations

As of December 31, 2015, our portfolio included 16 operating office properties. The weighted average remaining lease term of these office properties was 7 years as of December 31, 2015. Most of the major tenant leases in these properties provide for pass through of operating expenses and contractual rents which escalate over time. The leases expire as follows:

Table of Contents



Year of Expiration	Number of Tenants	Square Feet Expiring (1)	% of Leased Space		Annual Contractual Rents ($000's) (1)(2)		% of Total Annual Contractual Rents		Annual Contractual Rent/Sq. Ft. (2)

2016	123	657,081	5.3	%	$	12,454	4.2	%	$	18.95
2017	112	877,583	7.2	%	18,904		6.5	%	21.54
2018	90	602,005	4.9	%	13,882		4.8	%	23.06
2019	96	1,576,714	13.0	%	35,505		12.2	%	22.52
2020	74	761,835	6.3	%	17,501		6.0	%	22.97
2021	68	1,204,654	9.9	%	30,115		10.3	%	25.00
2022	43	1,309,819	10.8	%	31,009		10.6	%	23.67
2023	44	1,497,307	12.3	%	34,083		11.7	%	22.76
2024	21	731,773	6.0	%	20,878		7.2	%	28.53
2025 &Thereafter	59	2,954,394	24.3	%	77,377		26.5	%	26.19

Total	730	12,173,165	100.0	%	$	291,708	100.0	%	$	23.96



(1) Company's share.
(2) Annual Contractual Rent shown is the rate in the year of expiration. It includes the minimum contractual rent paid by the tenant which may or may not include a base year of operating expenses depending upon the terms of the lease.

Development Pipeline (1)

As of December 31, 2015, we had the following projects under development:



Project	Type	Metropolitan Area	Company's Ownership Interest		Project Start Date	Number of Square Feet /Apartment Units	Estimated Project Cost (2) ($ in thousands)		Project Cost Incurred to Date (2) ($ in thousands)		Percent Leased		Initial Occupancy (3)	Estimated Stabilization (4)

Carolina Square	Mixed	Chapel Hill, NC	50	%	2Q15		$	123,000	$	14,698
Office						159,000					67	%	2Q17	2Q18
Retail						43,000					—	%	2Q17	2Q18
Apartments						246					—	%	2Q17	2Q18


NCR Phase I	Office	Atlanta, GA	100	%	3Q15	485,000	200,000		27,890		100	%	1Q18	1Q18

Total							$	323,000	$	42,588



(1)	This schedule shows projects currently under active development through the substantial completion of construction. Amounts included in the estimated project cost column represent the estimated costs of the project through stabilization. Significant estimation is required to derive these costs, and the final costs may differ from these estimates. The projected stabilization dates are also estimates and are subject to change as the project proceeds through the development process.
(2)	Amount represents 100% of the estimated project cost. Carolina Square is expected to be funded with a combination of equity from the partners and up to $80.0 million from a construction loan, which has no outstanding balance as of December 31, 2015.
(3)	Represents the quarter which the Company estimates the first tenant occupies space.
(4)	Stabilization represents the earlier of the quarter in which the Company estimates it will achieve 90% economic occupancy or one year from initial occupancy.

Table of Contents

Land Holdings

As of December 31, 2015, we owned the following land holdings, either directly, or indirectly, through joint ventures:



	Metropolitan Area	Company's Ownership Interest	Total Developable Land (Acres)		Company's Share
Commercial

North Point	Atlanta	100.00%	32
Wildwood Office Park	Atlanta	50.00%	22
The Avenue Forsyth-Adjacent Land	Atlanta	100.00%	10
NCR Phase II (1)	Atlanta	100.00%	1
Georgia			65

Victory Center	Dallas	75.0%	3
Texas			3

Commercial Land Held (Acres)			68		56

Cost Basis of Commercial Land Held			$	39,364	$	20,577

Residential (2)

Paulding County	Atlanta	50.00%	478
Callaway Gardens (3)	Atlanta	100.00%	218
Georgia			696

Padre Island	Corpus Christi	50.00%	15
Texas			15

Residential Land Held (Acres)			711		465

Cost Basis of Residential Land Held			$	11,899	$	8,363

Grand Total Land Held (Acres)			779		521

Grand Total Cost Basis of Land Held			$	51,263	$	28,940



(1)	Represents land adjacent to NCR Development project. Upon completion of the NCR development project, NCR is required to pay rent on this land.
(2)	Residential represents land that may be sold to third parties as lots or in large tracts for residential development.
(3)	Company's ownership interest is shown at 100% as Callaway Gardens is owned in a joint venture which is consolidated with the Company.


Item 3.	Legal Proceedings

We are 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. We record 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, we accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, we accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, we disclose the nature of the litigation and indicate 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, we disclose the nature and estimate of the possible loss of the litigation. We do 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 our liquidity, results of operations, business, or financial condition.


Item 4.	Mine Safety Disclosures

Not applicable.


Item X.	Executive Officers of the Registrant

The Executive Officers of the Registrant as of the date hereof are as follows:

Table of Contents



Name	Age	Office Held
Lawrence L. Gellerstedt III	59	President, Chief Executive Officer
Gregg D. Adzema	51	Executive Vice President, Chief Financial Officer
M. Colin Connolly	39	Executive Vice President, Chief Investment Officer
John S. McColl	53	Executive Vice President
John D. Harris, Jr.	56	Senior Vice President, Chief Accounting Officer, Treasurer and Assistant Secretary
Pamela F. Roper	42	Senior Vice President, General Counsel and Corporate Secretary

Family Relationships

There are no family relationships among the Executive Officers or Directors.

Term of Office

The term of office for all officers expires at the annual stockholders’ meeting. The Board retains the power to remove any officer at any time.

Business Experience

Mr. Gellerstedt was appointed President and Chief Executive Officer and Director in July 2009. From February 2009 to July 2009, Mr. Gellerstedt served as President and Chief Operating Officer. From May 2008 to February 2009, Mr. Gellerstedt served as Executive Vice President and Chief Development Officer.

Mr. Adzema was appointed Executive Vice President and Chief Financial Officer in November 2010. Prior to joining the Company, Mr. Adzema served as Chief Investment Officer of Hayden Harper Inc., an investment advisory and hedge fund company, from October 2009 to November 2010.

Mr. Connolly was appointed Executive Vice President and Chief Investment Officer in December 2015. From May 2013 to December 2015, Mr. Connolly served as Senior Vice President and Chief Investment Officer. From September 2011 to May 2013, Mr. Connolly served as Senior Vice President. Prior to joining the Company, Mr. Connolly served as Executive Director with Morgan Stanley from December 2009 to August 2011 and as Vice President with Morgan Stanley from December 2006 to December 2009.

Mr. McColl was appointed Executive Vice President in December 2011. From February 2010 to December 2011, Mr. McColl served as Executive Vice President-Development, Office Leasing and Asset Management. From May 1997 to February 2010, Mr. McColl served as Senior Vice President.

Mr. Harris was appointed Senior Vice President and Chief Accounting Officer in February 2005. In May 2005, Mr. Harris was appointed Assistant Secretary. In December 2014, Mr. Harris was appointed Treasurer.

Ms. Roper was appointed Senior Vice President, General Counsel and Corporate Secretary in October 2012. From February 2008 to October 2012, Ms. Roper served as Senior Vice President, Associate General Counsel and Assistant Secretary.

PART II

Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters

Market Information

The high and low sales prices for our common stock and dividends declared per common share were as follows:



	2015 Quarters								2014 Quarters
	First		Second		Third		Fourth		First		Second		Third		Fourth
High	$	11.63	$	10.96	$	10.89	$	10.37	$	11.77	$	12.50	$	13.30	$	13.20
Low	$	10.01	$	9.40	$	8.68	$	8.87	$	10.10	$	11.23	$	11.95	$	10.69
Dividends	$	0.080	$	0.080	$	0.080	$	0.080	$	0.075	$	0.075	$	0.075	$	0.075
Payment Date	2/23/2015		5/28/2015		8/24/2015		12/18/2015		2/24/2014		5/28/2014		8/25/2014		12/19/2014

Holders

Table of Contents

Our common stock trades on the New York Stock Exchange (ticker symbol CUZ). On February 5, 2016, there were 730 common stockholders of record.

Purchases of Equity Securities

For information on our equity compensation plans, see note 12 of the accompanying consolidated financial statements, which is incorporated herein.

We purchased the following common shares during the fourth quarter of 2015:



	Total Number of Shares Purchased (1)	Average Price Paid per Share (1)
October 1 - 31	1,351	$	10.25
November 1 - 30	—	$	—
December 1 - 31	3,157,438	$	9.20
	3,158,789	$	9.20


(1)	All activity for the fourth quarter of 2015 is related to the remittances of shares for option exercises and share repurchases. Share repurchases were made under our $100 million share repurchase program initiated in September 2015. Share repurchases may be executed in the open market, through private negotiations, or other transactions permitted by law.

Performance Graph

The following graph compares the five-year cumulative total return of our common stock with the NYSE Composite Index, the FTSE NAREIT Equity Index, and the SNL US REIT Office Index. The graph assumes a $100 investment in each of the indices on December 31, 2010 and the reinvestment of all dividends.

COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE COMPANIES, PEER

Table of Contents

GROUPS, INDUSTRY INDICES AND/OR BROAD MARKETS



	Fiscal Year Ended
Index	12/31/2010	12/31/2011	12/31/2012	12/31/2013	12/31/2014	12/31/2015
Cousins Properties Incorporated	100.00	78.77	105.01	131.86	150.06	127.92
NYSE Composite Index	100.00	96.33	111.89	141.41	151.12	145.12
FTSE NAREIT Equity Index	100.00	108.29	127.85	131.01	170.49	175.94
SNL US REIT Office Index	100.00	99.10	113.54	120.99	152.53	153.87


Item 6.	Selected Financial Data

The following selected financial data sets forth consolidated financial and operating information on a historical basis. This data has been derived from our consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto. The data below has been restated for discontinued operations detailed in note 3 of the consolidated financial statements.

Table of Contents



	For the Years Ended December 31,
	2015			2014			2013			2012			2011
	(in thousands, except per share amounts)
Rental property revenues	$	373,068		$	343,910		$	194,420		$	114,208		$	94,704
Fee income	7,297			12,519			10,891			17,797			13,821
Other	1,278			4,954			5,430			4,841			9,600
Total revenues	381,643			361,383			210,741			136,846			118,125
Rental property operating expenses	156,157			155,934			90,498			50,329			40,817
Reimbursed expenses	3,430			3,652			5,215			7,063			6,208
General and administrative expenses	17,099			19,969			22,460			23,208			24,166
Interest expense	30,723			29,110			21,709			23,933			26,677
Depreciation and amortization	135,416			140,018			76,277			39,424			30,666
Impairment losses	—			—			—			488			96,818
Other	1,299			4,674			11,177			7,922			9,951
Total expenses	344,124			353,357			227,336			152,367			235,303
Loss on extinguishment of debt and interest rate swaps	—			—			—			(94		)	—
Benefit (provision) for income taxes from operations	—			20			23			(91		)	186
Income (loss) from unconsolidated joint ventures	8,302			11,268			67,325			39,258			(18,299		)
Gain on sale of investment properties	80,394			12,536			61,288			4,053			3,494
Income (loss) from continuing operations	126,215			31,850			112,041			27,605			(131,797		)
Income (loss) from discontinued operations	(586		)	21,158			14,788			20,314			8,330
Net income (loss)	125,629			53,008			126,829			47,919			(123,467		)
Net income attributable to noncontrolling interests	(111		)	(1,004		)	(5,068		)	(2,191		)	(4,958		)
Preferred share original issuance costs	—			(3,530		)	(2,656		)	—			—
Preferred dividends	—			(2,955		)	(10,008		)	(12,907		)	(12,907		)
Net income (loss) available to common stockholders	$	125,518		$	45,519		$	109,097		$	32,821		$	(141,332	)
Net income (loss) from continuing operations attributable to controlling interest per common share—basic and diluted	$	0.58		$	0.12		$	0.66		$	0.12		$	(1.44	)
Net income (loss) per common share—basic and diluted	$	0.58		$	0.22		$	0.76		$	0.32		$	(1.36	)
Dividends declared per common share	$	0.32		$	0.30		$	0.18		$	0.18		$	0.18
Total assets (at year-end)	$	2,597,803		$	2,667,330		$	2,273,206		$	1,124,242		$	1,235,535
Notes payable (at year-end)	$	721,293		$	792,344		$	630,094		$	425,410		$	5,394,423
Stockholders’ investment (at year-end)	$	1,683,415		$	1,673,458		$	1,457,401		$	620,342		$	603,692
Common shares outstanding (at year-end)	211,513			216,513			189,666			104,090			103,702


Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the selected financial data and the consolidated financial statements and notes.

Overview of 2015 Performance and Company and Industry Trends

Table of Contents

and North Carolina. During 2015, we completed the development of two office projects and one mixed-use project and commenced development activities on two other development projects, all within our target markets. To fund our investment activities, we completed the disposition of three of our non-core office assets and several land holdings.

Investment Activity

Our investment strategy is to purchase Class A office assets or locate opportunistic development or redevelopment projects in our core markets to which we can add value through relationships, capital, or market expertise. During 2015, we purchased land and commenced construction on the NCR corporate headquarters, a 485,000 square foot office tower in the midtown sub-market of Atlanta, which is expected to cost $200.0 million. With a joint venture partner, we also commenced construction of Carolina Square, a mixed-use property containing 159,000 square feet of office space, 246 apartments, and 43,000 square feet of retail space. The total estimated project costs for Carolina Square are $123.0 million.

In 2015, we substantially completed construction and opened Colorado Tower, a 373,000 square foot office tower, and Research Park V, a 173,000 square foot office tower, in Austin, Texas. Colorado Tower is currently 100% leased and Research Park is 30% leased. We also substantially completed construction and opened the second phase of Emory Point, a mixed-use project containing 307 apartments and 45,000 square feet of retail space. The apartments at Emory Point Phase II are 43% leased and the retail portion of the project is 69% leased.

We are currently conducting pre-development activities on projects in Decatur, Georgia; Alpharetta, Georgia; Dallas, Texas; and Charlotte, North Carolina. We are pursuing additional development opportunities that may result in projects that commence in 2016 or thereafter.

We have grown significantly over the past two to three years through acquisition and development activities that management believes provide opportunity to increase value through leasing and superior management of the properties. We believe that the number of similar acquisition and development opportunities will be lower in 2016, and management will focus on leasing, renewing, and servicing tenants at our existing properties.

In addition to these traditional investment activities, we also initiated a stock repurchase plan in 2015 which provides that management may repurchase up to $100.0 million of shares over the next two years. In determining the timing and amount of shares to be repurchased, we assess the returns from investing in our common stock against other investment options. In 2015, we repurchased 5.2 million shares totaling $47.8 million at an average per share price of $9.22.

Disposition Activity

We funded the investment activity discussed above primarily with the sale of certain non-core assets in 2015. We sold 2100 Ross, an 844,000 square foot office tower in Dallas, Texas, for $131.0 million. We sold The Points at Waterview, a 203,000 square foot office tower in Dallas, Texas, for $26.8 million. We also sold 200, 333, and 555 North Point Center East, office buildings located in Atlanta, Georgia, containing 411,000 square feet, for $70.3 million. Subsequent to year end, we sold our final building at North Point, 100 North Point Center East, containing 129,000 square feet, for $22.0 million.

Throughout 2015, we sold 8,643 acres of land, including the sale of land in Wildwood, 549/555/557 Peachtree Street, Paulding County, and Blalock Lakes, which generated gross proceeds of $20.9 million.

Financing Activity

We entered 2015 with a strong balance sheet, and one of our ongoing strategic objectives is to maintain a strong balance sheet that provides us with the flexibility to act on investment opportunities as they arise. As a result of the fact that we used proceeds from disposition activities to fund our development activities, our credit ratios remain strong. Our debt to total undepreciated assets ratio at December 31, 2015 was 27.5%, down from 29.5% at December 31, 2014. Also, our fixed charges coverage ratio improved to 4.8 times for 2015, up from 4.3 times in 2014. Our debt to annualized EBITDA ratio remained consistent and strong at 4.0.

Portfolio Activity

In 2015, we leased or renewed approximately 3.0 million square feet of office space. The weighted average net effective rent per square foot, representing base rent less operating expense reimbursements and leasing costs, for new or renewed non-amenity leases with terms greater than one year was $14.66 per square foot in 2015. Cash basis net effective rent per square foot increased 19.8% on spaces that have been previously occupied in the past year. Cash basis net effective rent represents net rent at the end of the term paid by the prior tenant compared to the net rent at the beginning of the term paid by the current tenant. The same property leasing percentage remained stable throughout the year.

Table of Contents

Market Conditions

We continue to target high barrier-to-entry submarkets in Atlanta, Austin, Charlotte, Dallas, and Houston. We believe these Sunbelt cities possess some of the most robust economic and market fundamentals including above-average population and job growth, steady office absorption, positive rent growth, and limited new supply.

Atlanta is currently our strongest market in terms of total new employment. After averaging 64,000 new jobs per year in 2013 and 2014, Atlanta added over 78,000 new jobs in 2015, which ranks fourth in total job growth nationally. Office fundamentals are equally strong. 2015 net absorption eclipsed 3.6 million square feet for the first time in the last 30 years, and due to limited new supply, vacancy rates reached 12.1%, the lowest level since 2000.

Austin’s economy continues to grow well ahead of the national pace. Job growth in Austin over the past year was 3.8%, and its unemployment rate at the end of 2015 was 3.1%, below the national average of 4.8%, and one of the lowest in the country. Although new construction is increasing in and around Austin, our Austin portfolio is well leased and market-wide vacancy rates have dropped to 8.0%.

The Charlotte office market continues to gain momentum as the low cost, business-friendly environment which has helped sustain increased demand in 2015. Charlotte’s employment has passed the pre-recession peak of 2007, and 2015 job growth is among the best in the nation at 3.3%. Multiple high-profile relocations and expansions have been announced over the last year in a vast array of industries signaling a more diversified Charlotte economy.

Dallas ranks third nationally in total job growth adding more than 100,000 new jobs in 2015. A number of corporate relocations and expansions has translated into strong demand leading to vacancy compression in the best submarkets. Class A office net absorption has been the best in recent years at over 7 million square feet in 2015. Management expects market fundamentals to remain strong in 2016; but with an increasing amount of speculative construction underway, we will continue to view Dallas as a more opportunistic market.

Houston’s office market showed signs of slowing over the course of 2015. However, our portfolio is defensively positioned for the near and long term, and operating results and leasing metrics posted strong numbers during the year. Our 5.6 million square foot portfolio is 91% leased with approximately 6.5 years in average remaining lease term and no significant expirations until late 2019. In addition, of our top 10 customers in Houston, representing 52% of the entire Houston portfolio, eight carry an investment grade rating. With this tenant roster and limited roll-over exposure, management believes that it is well-positioned in Houston.

Going forward, we expect to generate returns and create stockholder value through the lease up of our existing portfolio, through the execution of our development pipeline, and through opportunistic acquisition and development investments within our core markets.

Critical Accounting Policies

Our financial statements are prepared in accordance with GAAP as outlined in the Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification ("ASC"), and the notes to consolidated financial statements include a summary of the significant accounting policies for the Company. The preparation of financial statements in accordance with GAAP requires the use of certain estimates, a change in which could materially affect revenues, expenses, assets, or liabilities. Some of the our accounting policies are considered to be critical accounting policies, which are ones that are both important to the portrayal of our financial condition, results of operations, and cash flows, and ones that also require significant judgment or complex estimation processes. Our critical accounting policies are as follows:

Real Estate Assets

Cost Capitalization. We are involved in all stages of real estate ownership, including development. Prior to the point a project becomes probable of being developed (defined as more likely than not), we expense predevelopment costs. After we determine a project is probable, all subsequently incurred predevelopment costs, as well as interest, real estate taxes, and certain internal personnel and associated costs directly related to the project under development, are capitalized in accordance with accounting rules. If we abandon development of a project that had earlier been deemed probable, we charge all previously capitalized costs to expense. If this occurs, our predevelopment expenses could rise significantly. The determination of whether a project is probable requires judgment. If we determine that a project is probable, interest, general and administrative, and other expenses could be materially different than if management determines the project is not probable.

During the predevelopment period of a probable project and the period in which a project is under construction, we capitalize all direct and indirect costs associated with planning, developing, leasing, and constructing the project. Determination

Table of Contents

of what costs constitute direct and indirect project costs requires us, in some cases, to exercise judgment. If we determine certain costs to be direct or indirect project costs, amounts recorded in projects under development on the balance sheet and amounts recorded in general and administrative and other expenses on the statements of operations could be materially different than if we determine these costs are not directly or indirectly associated with the project.

Once a project is constructed and deemed substantially complete and held for occupancy, carrying costs, such as real estate taxes, interest, internal personnel, and associated costs, are expensed as incurred. Determination of when construction of a project is substantially complete and held available for occupancy requires judgment. We consider projects and/or project phases to be both substantially complete and held for occupancy at the earlier of the date on which the project or phase reached economic occupancy of 90% or one year after it is substantially complete. Our judgment of the date the project is substantially complete has a direct impact on our operating expenses and net income for the period.

Operating Property Acquisitions. Upon acquisition of an operating property, we record the acquired tangible and intangible assets and assumed liabilities at fair value at the acquisition date. Fair value is based on estimated cash flow projections that utilize available market information and discount and/or capitalization rates as appropriate. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The acquired assets and assumed liabilities for an acquired operating property generally include, but are not limited to: land, buildings, and identified tangible and intangible assets and liabilities associated with in-place leases, including tenant improvements, leasing costs, value of above-market and below-market leases, and value of acquired in-place leases.

The fair value of land is derived from comparable sales of land within the same submarket and/or region. The fair value of buildings, tenant improvements, and leasing costs are based upon current market replacement costs and other relevant market rate information.

The fair value of the above-market or below-market component of an acquired in-place lease is based upon the present value (calculated using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining term and (ii) management’s estimate of the rents that would be paid using fair market rental rates and rent escalations at the date of acquisition over the remaining term of the lease. In-place leases at acquired properties are reviewed at the time of acquisition to determine if contractual rents are above or below current market rents for the acquired property, and an identifiable intangible asset or liability is recorded if there is an above-market or below-market lease.

The fair value of acquired in-place leases is derived based on our assessment of lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. This fair value is based on a variety of considerations including, but not necessarily limited to: (1) the value associated with avoiding the cost of originating the acquired in-place leases; (2) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed lease-up period; and (3) the value associated with lost rental revenue from existing leases during the assumed lease-up period. Factors considered in performing these analyses include an estimate of the carrying costs during the expected lease-up periods, such as real estate taxes, insurance, and other operating expenses, current market conditions, and costs to execute similar leases, such as leasing commissions, legal, and other related expenses.

The amounts recorded for above-market and in-place leases are included in other assets on the balance sheets, and the amounts for below-market leases are included in other liabilities on the balance sheets. These amounts are amortized on a straight-line basis as an adjustment to rental income over the remaining term of the applicable leases.

The determination of the fair value of the acquired tangible and intangible assets and assumed liabilities of operating property acquisitions requires significant judgments and assumptions about the numerous inputs discussed above. The use of different assumptions in these fair value calculations could significantly affect the reported amounts of the allocation of the acquisition related assets and liabilities and the related amortization and depreciation expense recorded for such assets and liabilities. In addition, since the values of above-market and below-market leases are amortized as either a reduction or increase to rental income, respectively, the judgments for these intangibles could have a significant impact on reported rental revenues and results of operations.

Depreciation and Amortization. We depreciate or amortize operating real estate assets over their estimated useful lives using the straight-line method of depreciation. We use judgment when estimating the life of real estate assets and when allocating certain indirect project costs to projects under development. Historical data, comparable properties, and replacement costs are some of the factors considered in determining useful lives and cost allocations. The use of different assumptions for the estimated useful life of assets or cost allocations could significantly affect depreciation and amortization expense and the carrying amount of our real estate assets.

Table of Contents

Impairment. We review our real estate assets on a property-by-property basis for impairment. This review includes our operating properties and land holdings.

The first step in this process is for us to use judgment to determine whether an asset is considered to be held and used or held for sale, in accordance with accounting guidance. In order to be considered a real estate asset held for sale, we must, among other things, have the authority to commit to a plan to sell the asset in its current condition, have commenced the plan to sell the asset, and have determined that it is probable that the asset will sell within one year. If we determine that an asset is held for sale, it must record an impairment loss if the fair value less costs to sell is less than the carrying amount. All real estate assets not meeting the held for sale criteria are considered to be held and used.

In the impairment analysis for assets held and used, we must use judgment to determine whether there are indicators of impairment. For operating properties, these indicators could include a decline in a property’s leasing percentage, a current period operating loss or negative cash flows combined with a history of losses at the property, a decline in lease rates for that property or others in the property’s market, or an adverse change in the financial condition of significant tenants. For land holdings, indicators could include an overall decline in the market value of land in the region, a decline in development activity for the intended use of the land or other adverse economic and market conditions.

If we determine that an asset that is held and used has indicators of impairment, we must determine whether the undiscounted cash flows associated with the asset exceed the carrying amount of the asset. If the undiscounted cash flows are less than the carrying amount of the asset, we must reduce the carrying amount of the asset to fair value.

In calculating the undiscounted net cash flows of an asset, we must estimate a number of inputs. For operating properties, we must estimate future rental rates, expenditures for future leases, future operating expenses, and market capitalization rates for residual values, among other things. For land holdings, we must estimate future sales prices as well as operating income, carrying costs, and residual capitalization rates for land held for future development. In addition, if there are alternative strategies for the future use of the asset, we must assess the probability of each alternative strategy and perform a probability-weighted undiscounted cash flow analysis to assess the recoverability of the asset. We must use considerable judgment in determining the alternative strategies and in assessing the probability of each strategy selected.

In determining the fair value of an asset, we exercise judgment on a number of factors. We may determine fair value by using a discounted cash flow calculation or by utilizing comparable market information. We must determine an appropriate discount rate to apply to the cash flows in the discounted cash flow calculation. We must use judgment in analyzing comparable market information because no two real estate assets are identical in location and price.

The estimates and judgments used in the impairment process are highly subjective and susceptible to frequent change. If we determine that an asset is held and used, the results of operations could be materially different than if it determines that an asset is held for sale. Different assumptions we use in the calculation of undiscounted net cash flows of a project, including the assumptions associated with alternative strategies and the probabilities associated with alternative strategies, could cause a material impairment loss to be recognized when no impairment is otherwise warranted. Our assumptions about the discount rate used in a discounted cash flow estimate of fair value and our judgment with respect to market information could materially affect the decision to record impairment losses or, if required, the amount of the impairment losses.

Revenue Recognition – Valuation of Receivables

Notes and accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. We review our receivables regularly for potential collection problems in computing the allowance to record against our receivables. This review requires us to make certain judgments regarding collectibility, notwithstanding the fact that ultimate collections are inherently difficult to predict. Economic conditions fluctuate over time, and we have tenants in many different industries which experience changes in economic health, making collectibility prediction difficult. Therefore, certain receivables currently deemed collectible could become uncollectible, and those reserved could ultimately be collected. A change in judgments made could result in an adjustment to the allowance for doubtful accounts with a corresponding effect on net income.

Investment in Joint Ventures

We hold ownership interests in a number of joint ventures with varying structures. We evaluate all of our joint ventures and other variable interests to determine if the entity is a variable interest entity (“VIE”), as defined in accounting rules. If the venture is a VIE, and if we determine that we are the primary beneficiary, we consolidate the assets, liabilities, and results of operations of the VIE. We quarterly reassess our conclusions as to whether the entity is a VIE and whether consolidation is appropriate as required under the rules. For entities that are not determined to be VIEs, we evaluate whether or not we have control or significant influence over the joint venture to determine the appropriate consolidation and presentation. Generally,

Table of Contents

entities under our control are consolidated, and entities over which we can exert significant influence, but do not control, are accounted for under the equity method of accounting.

We use judgment to determine whether an entity is a VIE, whether we are the primary beneficiary of the VIE, and whether we exercise control over the entity. If we determine that an entity is a VIE and we are the primary beneficiary or if we conclude that we exercise control over the entity, the balance sheets and statements of operations would be significantly different than if we concluded otherwise. In addition, VIEs require different disclosures in the notes to the financial statements than entities that are not VIEs. We may also change our conclusions and, thereby, change our balance sheets, statements of comprehensive income, and notes to the financial statements, based on facts and circumstances that arise after the original consolidation determination is made. These changes could include additional equity contributed to entities, changes in the allocation of cash flow to entity partners, and changes in the expected results within the entity.

We perform an impairment analysis of the recoverability of our investments in joint ventures on a quarterly basis. As part of this analysis, we first determine whether there are any indicators of impairment in any joint venture investment. If indicators of impairment are present for any of our investments in joint ventures, we calculate the fair value of the investment. If the fair value of the investment is less than the carrying value of the investment, we must determine whether the impairment is temporary or other than temporary, as defined by GAAP. If we assesses the impairment to be temporary, we do not record an impairment charge. If we conclude that the impairment is other than temporary, we record an impairment charge.

We use considerable judgment in the determination of whether there are indicators of impairment present and in the assumptions, estimations, and inputs used in calculating the fair value of the investment. These judgments are similar to those outlined above in the impairment of real estate assets. We also use judgment in making the determination as to whether the impairment is temporary or other than temporary. We utilize guidance provided by the SEC in making the determination of whether the impairment is temporary. The guidance indicates that companies consider the length of time that the impairment has existed, the financial condition of the joint venture, and the ability and intent of the holder to retain the investment long enough for a recovery in market value. Our judgment as to the fair value of the investment or on the conclusion of the nature of the impairment could have a material impact on our financial condition, results of operations, and cash flows.

Income Taxes – Valuation Allowance

We establish a valuation allowance against deferred tax assets if, based on the available evidence, it is more likely than not that such assets will not be realized. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carryforward periods under tax law. We periodically assesses the need for valuation allowances for deferred tax assets based on the "more likely than not" realization threshold criterion. In the assessment, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment requires considerable judgment by management and includes, among other matters, the nature, frequency, and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards, and tax planning alternatives. If management determines that we require a valuation allowance on our deferred tax assets, income tax expense or benefit could be materially different than if we determine no such valuation allowance is necessary.

Recoveries from Tenants

Recoveries from tenants for operating expenses are determined on a calendar year and on a lease-by-lease basis. The most common types of cost reimbursements in our leases are utility expenses, building operating expenses, real estate taxes, and insurance, for which the tenant pays its pro rata share in excess of a base year amount, if applicable. The computation of these amounts is complex and involves numerous judgments, including the interpretation of lease terms and other customer lease provisions. Leases are not uniform in dealing with such cost reimbursements and there are many variations in the computation. We accrue income related to these payments each month. We make monthly accrual adjustments, positive or negative, to recorded amounts to our best estimate of the annual amounts to be billed and collected with respect to the cost reimbursements. After the end of the calendar year, we compute each customer's final cost reimbursements and, after considering amounts paid by the tenant during the year, issue a bill or credit for the appropriate amount to the tenant. The differences between the amounts billed less previously received payments and the accrual adjustments are recorded as increases or decreases to revenues when the final bills are prepared, which occurs during the first half of the subsequent year.

Stock-based Compensation

We have several types of stock-based compensation plans. These plans are described in note 12, as are the accounting policies by type of award. Compensation cost for all stock-based awards requires measurement at estimated fair value on the grant date, and compensation cost is recognized over the service vesting period, which represents the requisite service period. For compensation plans that contain market performance measures, we must estimate the fair value of the awards on a quarterly

Table of Contents

basis and must adjust compensation expense accordingly. The fair values of these awards are estimated using complex pricing valuation models that require a number of estimates and assumptions. For awards that are based on our future earnings, we must estimate future earnings and adjust the estimated fair value of the awards accordingly.

We use considerable judgments in determining the fair value of these awards. Compensation expense associated with these awards could vary significantly based upon these estimates.

Discussion of New Accounting Pronouncements

In 2015, the FASB issued ASC 2015-02 "Consolidation (Topic 810): Amendments to the Consolidation Analysis." All legal entities are subject to reevaluation under the revised consolidation model. The amendment modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities. It also eliminates the presumption that a general partner should consolidate a limited partnership. The guidance is effective for public entities with periods beginning after December 15, 2015 with early adoption permitted. We adopted this guidance effective January 1, 2016, and expect no material impact to our financial statements.

In 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which will require companies to present debt issuance costs as a direct deduction from the related debt rather than as an asset. These costs will continue to be amortized into interest expense. The guidance is effective for periods beginning after December 15, 2015 with early adoption permitted. ASU 2015-15 was issued further clarifying that entities may defer and present debt costs as an asset and amortize the deferred debt issuance costs ratably over the term for line of credit arrangements, regardless of the outstanding balance. We adopted this guidance in ASU 2015-03 effective January 1, 2016 for mortgage debt and have elected to defer adoption for costs related to line of credit arrangements. We expect no material impact to our financial statements.

In 2015, the FASB voted to defer ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." 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 under the current guidance. The standard specifically excludes revenue associated with lease contracts. The guidance is effective for periods beginning after December 15, 2017, with early adoption permitted for periods beginning after December 15, 2016. We expect to adopt this guidance effective January 1, 2018, and we are currently assessing the potential impact of adopting the new guidance.

Results of Operations For The Three Years Ended December 31, 2015

General

Our financial results have historically been significantly affected by purchase and sale transactions. Accordingly, our historical financial statements may not be indicative of future operating results. During 2014, we purchased Fifth Third Center and Northpark Town Center (collectively, the "2014 Acquisitions"). During 2013, we purchased Greenway Plaza, 777 Main, 816 Congress, and Post Oak Central (collectively, the "2013 Acquisitions"). There were no operating property acquisitions in 2015. During 2015, we sold 2100 Ross, The Points at Waterview, and 200, 333, and 555 North Point Center East (collectively, the "2015 Dispositions"). During 2014, we sold 600 University Park Place, Lakeshore Park Plaza, Mahan Village, and 777 Main (collectively, the "2014 Dispositions"). During 2013, we sold Terminus 100 to the Terminus Office Holdings LLC joint venture, Tiffany Springs MarketCenter, and Inhibitex (collectively, the "2013 Dispositions").

Rental Property Net Operating Income

The following results include the performance of our Same Property portfolio. Our Same Property portfolio includes office properties that have been fully operational in each of the comparable reporting periods. A fully operational property is one that has achieved 90% economic occupancy for each of the periods presented or has been substantially complete and owned by us for each of the periods presented. Same Property amounts for the 2015 vs 2014 comparison are from properties that have been owned since January 1, 2014 through the end of the current reporting period, excluding dispositions. Same Property amounts for the 2014 vs 2013 comparison are from properties that were owned from January 1, 2013 to December 31, 2014, excluding dispositions. This information includes revenues and expenses of only consolidated properties.

We use Net Operating Income ("NOI"), a non-GAAP financial measure, to measure operating performance of our properties. NOI is also widely used by industry analysts and investors to evaluate performance. NOI, which is rental property revenues less rental property operating expenses, excludes certain components from net income in order to provide results that are more closely related to a property's results of operations. Certain items, such as interest expense, while included in FFO and net income, do not affect the operating performance of a real estate asset and are often incurred at the corporate level as opposed to the property level. As a result, management uses only those income and expense items that are incurred at the property level to evaluate a

Table of Contents

property's performance. Depreciation and amortization are also excluded from NOI. Same Property NOI allows analysts, investors, and management to analyze continuing operations and evaluate the growth trend of our portfolio.

NOI increased $28.9 million between the 2015 and 2014 periods as follows:



	Year Ended December 31,
	2015		2014		$ Change			% Change
Rental Property Revenues
Same Property	$	260,634	$	260,055	$	579		0.2	%
Non-Same Property	112,434		83,855		28,579			34.1	%
	$	373,068	$	343,910	$	29,158		8.5	%

Rental Property Operating Expenses
Same Property	$	110,209	$	114,691	$	(4,482	)	(3.9	)%
Non-Same Property	45,948		41,243		4,705			11.4	%
	$	156,157	$	155,934	$	223		0.1	%

Same Property NOI	$	150,425	$	145,364	$	5,061		3.5	%
Non-Same Property NOI	$	66,486	$	42,612	$	23,874		56.0	%
Total NOI	$	216,911	$	187,976	$	28,935		59.5	%

The increase in Same Property NOI was primarily driven by decreased real estate tax expense in 2015 from Greenway Plaza and Post Oak Central.

The increase in Non-Same Property NOI is primarily due to commencement of operations at Colorado Tower and the 2014 Acquisitions, offset by decreases from the 2015 and 2014 Dispositions.

NOI increased $84.1 million between the 2014 and 2013 periods as follows:



	Year Ended December 31,
	2014		2013		$ Change			% Change
Rental Property Revenues
Same Property	$	73,558	$	72,584	$	974		1.3	%
Non-Same Property	270,352		121,836		148,516			121.9	%
	$	343,910	$	194,420	$	149,490		76.9	%

Rental Property Operating Expenses
Same Property	$	32,925	$	33,109	$	(184	)	(0.6	)%
Non-Same Property	123,009		57,389		65,620			114.3	%
	$	155,934	$	90,498	$	65,436		72.3	%

Same Property NOI	$	40,633	$	39,475	$	1,158		2.9	%
Non-Same Property NOI	$	147,343	$	64,447	$	82,896		128.6	%
Total NOI	$	187,976	$	103,922	$	84,054		131.5	%

The increase in Same Property NOI was primarily caused by increased occupancy at American Cancer Society Center and 191 Peachtree. These increases were offset by lower occupancy at The Points at Waterview.

The increase in Non-Same Property NOI was primarily due to the 2014 and 2013 Acquisitions, and an increase in average occupancy at 2100 Ross, offset by decreases from the 2014 and 2013 Dispositions.

Fee Income

Table of Contents

Fee income decreased $5.2 million (41.7%) between 2015 and 2014 and increased $1.6 million (14.9%) between 2014 and 2013. Fee income for 2014 was higher than 2015 and 2013 because the 2014 amount includes a $4.5 million participant interest related to a contract that was assumed in the acquisition of an entity several years ago. In addition, between 2013 and 2015, we have fewer third party development fee engagements on which we receive management fees.

Other Revenues

Other revenues decreased $3.7 million (74.2%) between 2015 and 2014 and decreased by $476,000 (8.8%) between 2014 and 2013. These decreases were primarily due to lower lease termination fees recognized in 2015 and 2014 compared to the prior periods.

Reimbursed Expenses

Reimbursed expenses decreased $222,000 (6.1%) between 2015 and 2014 and decreased $1.6 million (30.0%) between 2014 and 2013. Reimbursed expenses are primarily incurred on projects where we pay various expenses on third party and joint venture management and development fee engagements that are later reimbursed by the client. The offsetting income related to these expenses is recorded in fee income. The decreases are a result of fewer third party development engagements and fewer joint ventures on which we receive management fees.

General and Administrative Expenses

General and administrative expenses decreased $2.9 million (14.4%) between 2015 and 2014 and decreased $2.5 million (11.1%) between 2014 and 2013 primarily as a result of fluctuations in stock-based compensation expense due to the volatility in our stock price relative to office peers included in the SNL US Office REIT Index. Additionally, in 2015 and 2014 there were higher capitalized salaries associated with software implementation and development activities as compared to 2013.

Interest Expense

Interest expense increased $1.6 million (5.5%) between 2015 and 2014 primarily as a result of higher interest expense related the 816 Congress loan which closed in 2014 and higher interest expense on the Credit Facility due to higher average borrowings. These increases were partially offset by higher capitalized interest as a result of increased development expenditures.

Interest expense increased $7.4 million (34.1%) between 2014 and 2013 primarily as a result of higher interest expense on the Post Oak and Promenade loans that closed in 2013 and the 816 Congress loan. In 2014, there was also higher interest expense on the Credit Facility due to higher average borrowings. These increases were offset by higher capitalized interest due to an increase in development expenditures.

Depreciation and Amortization

Depreciation and amortization decreased $4.6 million (3.3%) between 2015 and 2014 primarily due to the 2015 and 2014 Dispositions, partially offset by an increase related to the commencement of operations of Colorado Tower and the 2014 Acquisitions.

Depreciation and amortization increased $63.7 million (83.6%) between 2014 and 2013 primarily due to increases related to the 2014 and 2013 Acquisitions. These increases were partially offset by decreases related to the 2014 and 2013 Dispositions.

Acquisition and Related Costs

Acquisition and related costs decreased $831,000 between 2015 and 2014 and decreased $6.4 million between 2014 and 2013. In 2015, we did not purchase any operating properties. In 2014, we incurred costs related to the 2014 Acquisitions. In 2013, we incurred costs related to the 2013 Acquisitions.

Income from Unconsolidated Joint Ventures

Income from unconsolidated joint ventures consisted of the following in 2015, 2014 and 2013:

Table of Contents



	Year Ended December 31,
	2015			2014			2013
Net operating income	$	24,335		$	25,896		$	27,763
Other income	787			717			501
Depreciation and amortization	(11,645		)	(11,913		)	(13,435		)
Interest expense	(7,455		)	(7,364		)	(7,963		)
Land sales gain	2,280			2,165			115
Other gains	—			1,767			60,344
Income from unconsolidated joint ventures	$	8,302		$	11,268		$	67,325

Income from unconsolidated joint ventures decreased between 2015 and 2014 primarily because of a gain of $1.8 million on the sale of our investment in Cousins Watkins LLC in 2014. Income from unconsolidated joint ventures decreased between 2014 and 2013 primarily as a result of gains totaling $60.3 million on the sale or effective sale of our interests in CP Venture Five LLC, CP Venture Two LLC, and CF Murfreesboro Associates in 2013. NOI, depreciation and amortization, and interest expense decreased in 2014 as a result of these sales.

Gain on Sale of Investment Properties

Gain on sale of investment properties increased $67.9 million between 2015 and 2014 and decreased $48.8 million between 2014 and 2013. The variance is due to increased operating property sales in 2015 and 2013. The 2015 amount includes gains on the sales of 200, 333, and 555 North Point Center East, The Points at Waterview, and 2100 Ross of $35.7 million, $6.7 million, and $36.2 million, respectively. The combined sales prices of these assets represents a weighted average capitalization rate of 6.5%. Capitalization rates are calculated by dividing projected annualized NOI by the sales price. The 2014 amount includes gains of the sale of 777 Main and Mahan Village of $6.2 million and $4.6 million, respectively. The 2013 amount includes a gain on the sale of our 50% interest in Terminus 100 of $37.1 million, a gain on the acquisition of Terminus 200, which was acquired in stages, of $19.7 million, and the recognition of a deferred gain associated with the sale of our interest in CP Venture Two LLC of $3.6 million.

Discontinued Operations

Income from discontinued operations decreased $21.7 million between the 2015 and 2014 periods and increased $6.4 million between 2014 and 2013. The 2015 decrease is due to new accounting guidance issued by the FASB on discontinued operations. Under the new guidance, only assets held for sale and disposals representing a major strategic shift in operations will be presented as discontinued operations. We adopted this new standard in the second quarter of 2014. Therefore, the properties sold subsequently are not reflected as discontinued operations in our consolidated statements of operations.

Discontinued operations includes the operations and gains or losses associated with the 2014 dispositions of 600 University Park Place and Lakeshore Park Plaza and the 2013 dispositions of Tiffany Springs MarketCenter and Inhibitex. The combined sales prices of the 2014 Dispositions represents a weighted average capitalization rate of 6.3%. The capitalization rate on the sale of Tiffany Springs MarketCenter was 7.9% and the capitalization rate on Inhibitex was 9.1%.

Net Income Attributable to Noncontrolling Interest

We consolidate certain entities and allocate the partner's share of those entities' results to net income attributable to noncontrolling interests on the consolidated statements of operations. The noncontrolling interests' share of our net income decreased $893,000 between 2015 and 2014, and decreased $4.1 million between 2014 and 2013. The 2015 and 2014 amounts represented amounts that were allocated to the noncontrolling partner in the entity that sold Mahan Village. The 2013 amount includes $3.4 million that was allocated to the noncontrolling partner in CP Venture Six LLC in connection with our purchase of the partner's interest.

Preferred Stock Original Issuance Costs

In 2014, we redeemed all outstanding shares of our 7.5% Series B Cumulative Redeemable Preferred Stock. In connection with the redemption of Preferred Stock, net income available for common shareholders decreased by $3.5 million (non-cash), which represents the original issuance costs applicable to the shares redeemed.

Table of Contents

In 2013, we redeemed all outstanding shares of our 7.75% Series A Cumulative Redeemable Preferred Stock. In connection with the redemption of Preferred Stock, net loss available for common shareholders decreased by $2.7 million (non-cash), which represents the original issuance costs applicable to the shares redeemed.

Dividends to Preferred Stockholders

We redeemed Series B preferred stock in 2014 and redeemed Series A preferred stock in 2013. We had no remaining outstanding preferred stock as of December 31, 2014 and, as a result, in future periods will have no preferred stock dividends.

Funds from Operations

The table below shows Funds from Operations Available to Common Stockholders (“FFO”), a non-GAAP financial measure, and the related reconciliation to net income available to common stockholders for the Company. The Company calculates FFO in accordance with the National Association of Real Estate Investment Trusts’ ("NAREIT") definition, which is net income 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 and investors 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 REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income. 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. Our management evaluates operating performance in part based on FFO. Additionally, the our management uses FFO, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to our officers and other key employees. The reconciliation of net income (loss) available to common stockholders to FFO is as follows for the years ended December 31, 2015, 2014, and 2013 (in thousands, except per share information):



	Year Ended December 31,
	2015				2014			2013
Net Income Available to Common Stockholders	$	125,518			$	45,519		$	109,097
Depreciation and amortization:
Consolidated properties	133,796			—	139,151			78,607
Share of unconsolidated joint ventures	11,645				11,915			13,434
Gain on sale of depreciated properties:
Consolidated properties	(78,210		)		(30,188		)	(67,056		)
Share of unconsolidated joint ventures	—				(1,767		)	(60,345		)
Noncontrolling interest related to the sale of depreciated properties	—				574			3,397
Funds From Operations Available to Common Stockholders	$	192,749			$	165,204		$	77,134
Per Common Share—Basic and Diluted:
Net Income Available	$	0.58			$	0.22		$	0.76
Funds From Operations	$	0.89			$	0.81		$	0.53
Weighted Average Shares—Basic	215,827				204,216			144,255
Weighted Average Shares—Diluted	215,979				204,460			144,420

Liquidity and Capital Resources

Our primary short-term and long-term liquidity needs include the following:


•	property acquisitions;


•	expenditures on development projects;


•	building improvements, tenant improvements, and leasing costs;


•	principal and interest payments on indebtedness;


•	repurchase of our common stock; and


•	common stock dividends.

Table of Contents

We may satisfy these needs with one or more of the following:


•	net cash from operations;


•	sales of assets;


•	borrowings under our Credit Facility;


•	proceeds from mortgage notes payable;


•	proceeds from equity offerings; and


•	joint venture formations.

Financial Condition

A key component of our strategy is to maintain a conservative balance sheet with leverage ratios that will enable us to be positioned for future growth. During 2015, we acquired no operating properties but commenced two development projects and completed three previously commenced development projects. Expenditures on these development projects, along with capital improvements on our existing projects totaled $195.0 million. In addition, in 2015, we initiated a $100 million stock repurchase plan. Under this plan, we may repurchase shares of common stock through September 8, 2017. The repurchases may be executed in the open market, through private negotiations, or in other transactions permitted under applicable law. The timing, manner, price and amount of any repurchases will be in our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. Through December 31, 2015, we repurchased approximately 5.2 million shares for a total aggregate cost of approximately $47.8 million. Subsequent to year-end, through January 31, 2016, we repurchased an additional 192,800 shares for a total cost of $1.6 million. The repurchased shares were recorded as treasury shares on the consolidated balance sheets. We may discontinue or suspend repurchases at any time.

We funded these investment activities with cash from operations and with proceeds from the 2015 Dispositions. In addition, we reduced overall consolidated indebtedness by $71.1 million thereby maintaining and improving our already strong leverage ratios. As of December 31, 2015, we had $92.0 million outstanding under our Credit Facility, down from $140.2 million at December 31, 2014, and had the ability to borrow an additional $407.0 million under the Credit Facility.

We will continue to pursue acquisition and development opportunities that are consistent with our strategy. We expect to fund any additional future investments with one or more of the following: sale of additional non-core assets, additional borrowings under our Credit Facility, additional mortgage loans secured by existing or newly acquired properties, construction loans, the issuance of common equity, and joint ventures with third parties.

Contractual Obligations and Commitments

At December 31, 2015, we were subject to the following contractual obligations and commitments (in thousands):



	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 years
Contractual Obligations:
Company debt:
Unsecured Credit Facility	$	92,000	$	—	$	—	$	92,000	$	—
Mortgage notes payable	629,293		10,070		243,929		204,469		170,825
Interest commitments (1)	149,988		53,373		47,893		33,174		15,548
Ground leases	144,674		1,648		3,306		3,316		136,404
Other operating leases	262		136		126		—		—
Total contractual obligations	$	1,016,217	$	65,227	$	295,254	$	332,959	$	322,777
Commitments:
Unfunded tenant improvements and other	82,400		48,943		17,299		16,158		—
Letters of credit	1,000		1,000		—