Edgar Filing: COUSINS PROPERTIES INC

Document

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, 2016



¨	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, 2016, the aggregate market value of the common stock of Cousins Properties Incorporated held by non-affiliates was $2,054,466,742 based on the closing sales price as reported on the New York Stock Exchange. As of February 9, 2017, 393,648,519 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 April 25, 2017 are incorporated by reference into Part III of this Form 10-K.

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PART I
Item 1.	Business	2

Item 1A.	Risk Factors	4

Item 1B.	Unresolved Staff Comments	14

Item 2.	Properties	14

Item 3.	Legal Proceedings	17

Item 4.	Mine Safety Disclosures	17

Item X.	Executive Officers of the Registrant	17

PART II
Item 5.	Market for Registrant’s Common Stock and Related Stockholder Matters	18

Item 6.	Selected Financial Data	19

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 7A.	Quantitative and Qualitative Disclosure about Market Risk	35

Item 8.	Financial Statements and Supplementary Data	36

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	37

Item 9A.	Controls and Procedures	37

Item 9B.	Other Information	39
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	39

Item 11.	Executive Compensation	39

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	39

Item 13.	Certain Relationships and Related Transactions, and Director Independence	39

Item 14.	Principal Accountant Fees and Services	39

PART IV
Item 15.	Exhibits and Financial Statement Schedules	39

SIGNATURES		44

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FORWARD-LOOKING STATEMENTS

Certain matters contained in this report are “forward-looking statements” within the meaning of the federal securities laws and are subject to uncertainties and risks, as itemized in Item 1A included in the Annual Report on Form 10-K for the year ended December 31, 2016 and as itemized herein. These forward-looking statements include information about possible or assumed future results of the business and our 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 issuances and repurchases of common stock;

•projected operating results;

•market and industry trends;

•future distributions;

•projected capital expenditures;

•interest rates;


•	the impact of the transactions involving us, Parkway Properties, Inc. ("Parkway") and Parkway, Inc. ("New Parkway"), including future financial and operating results, plans, objectives, expectations and intentions;


•	operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to creating value for stockholders;


•	impact of the transactions with Parkway and New Parkway on tenants, employees, stockholders and other constituents of the combined company; and

•integrating Parkway with us.

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 common or preferred stock offerings;


•	the impact of future financing arrangements including secured and unsecured indebtedness;


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


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


•	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, the ability to lease newly developed and/or recently acquired space, and the risk of declining leasing rates;


•	the adverse change in the financial condition of one or more of our major tenants;


•	volatility in interest rates and insurance rates;


•	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;


•	any failure to continue to qualify for taxation as a real estate investment trust and meet regulatory requirements;


•	the ability to successfully integrate our operations and employees in connection with the transactions with Parkway and New Parkway;


•	the ability to realize anticipated benefits and synergies of the transactions with Parkway and New Parkway;


•	risks associated with litigation resulting from the transactions with Parkway and from liabilities or contingent liabilities assumed in the transactions with Parkway and New Parkway;


•	risks associated with any errors or omissions in financial or other information of Parkway that has been previously provided to the public;


•	material changes in the dividend rates on securities or the ability to pay dividends on common shares or other securities;


•	potential changes to tax legislation;


•	potential changes to state, local or federal regulations applicable to our business;


•	changes in demand for properties;


•	risks associated with the acquisition, development, expansion, leasing and management of properties;


•	significant costs related to uninsured losses, condemnation, or environmental issues;


•	the amount of the costs, fees, expenses and charges related to the transactions with Parkway; and


•	those additional risks and factors discussed in reports filed with the Securities and Exchange Commission (“SEC”) by us.

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.

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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 October 5, 2016, Cousins conducted all of its business on its own account or through wholly or partially owned entities, some of which were consolidated with Cousins and some of which were not consolidated and were accounted for under the equity method. One of the consolidated entities was Cousins TRS Services LLC ("CTRS"), a taxable entity which owns and manages its own real estate portfolio and performs certain real estate related services for other parties. In connection with a series of transactions with Parkway Properties, Inc. ("Parkway") and Parkway, Inc. ("New Parkway"), including a merger and spin-off, Cousins Properties LP ("CPLP") was formed. On October 6, 2016, the closing date of the merger with Parkway, Cousins contributed, or caused to be contributed, substantially all of Parkway's and Cousins' assets and liabilities not pertaining to the ownership of real properties in Houston, Texas to CPLP, including CTRS, and began conducting substantially all of its operations through CPLP. Cousins owns approximately 98% of CPLP, and CPLP is consolidated with Cousins. On October 7, 2016, the closing date of the spin-off of New Parkway, Cousins contributed all of Cousins' assets and liabilities pertaining to the ownership of real properties in Houston, Texas, to a subsidiary of New Parkway. Cousins, CPLP, their subsidiaries 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 type and geographical area. For financial information related to each of our operating segments, see note 18 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, North Carolina, Florida, and Arizona. 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.

2016 Activities

Our 2016 activities were highlighted by the merger with Parkway and simultaneous spin-off of the combined companies' Houston business into a separate public company, New Parkway. As a result of the merger and spin-off and as a result of the activities listed below, we added, on a net basis, 16 properties and 1.6 million square feet of space to our pre-merger portfolio. We added properties in our existing markets of Atlanta, Charlotte, and Austin and added properties in new markets including Phoenix, Tampa, and Orlando. After the merger and spin-off but before December 31, 2016, we executed a series of transactions associated with the new properties and new entities that we acquired in the merger with Parkway. These transactions included the following:


•	Sold Two Liberty Place, a 941,000 square-foot office building in Philadelphia for gross proceeds of $219 million. Two Liberty Place was acquired in the merger with Parkway and was owned in a joint venture in which the Company had a 19% interest.


•	Sold Lincoln Place, a 140,000 square-foot office building in Miami, for gross proceeds of $80 million.


•	Sold The Forum, a 220,000 square-foot office building in Atlanta, for gross proceeds of $70 million.

•

Purchased Teachers Retirement Systems of Texas' equity interest in Fund II for $279 million. Fund II was comprised of cash from the recent sale of Two Liberty Place in Philadelphia as well as the Hayden Ferry buildings in Phoenix and 3344 Peachtree in Atlanta. Cousins now owns 100% of these buildings. Simultaneously with this purchase, the mortgages secured by Hayden Ferry were repaid and the associated interest rate swaps were terminated.


•	Executed an agreement with American Airlines to terminate their full building lease in Phoenix and simultaneously executed an 11-year lease with ADP to backfill the entire building. As part of the agreement, Cousins will purchase American Airlines' 25% ownership interest in the building for $19.6 million during the first quarter of 2017.


•	Repaid two mortgages totaling $55 million secured by Citrus Center in Orlando and Corporate Center IV in Tampa.

In addition, during 2016, we engaged in other activities that were not directly related to the merger and spin-off with Parkway and New Parkway. The following is a summary of these activities:

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Investment Activity


•	Entered into a 50-50 joint venture named DC Charlotte Plaza LLLP between the Company and Dimensional Fund Advisors ("DFA") for the purpose of developing and constructing a 282,000 square foot building which will serve as DFA's regional headquarters building in Charlotte with a total estimated cost of $94 million. The joint venture entered into a 16-year, build-to-suit lease with DFA.


•	Commenced development of 8000 Avalon, a 224,000 square foot office building in Atlanta with a total estimated cost of $73 million. The project is owned by HICO Avalon LLC, a joint venture in which the Company has a 90% interest.


•	Signed a 16-year, build-to-suit lease with NCR Corporation for the second phase of its world headquarters in Atlanta. Phase II of this development is comprised of a 260,000 square foot office building with a total estimated cost of $119 million.

Disposition Activity


•	Sold 100 North Point Center East, a 129,000 square foot office building in Atlanta, for a gross sales price of $22.0 million.


•	Sold One Ninety One Peachtree, a 1.2 million square foot office building in Atlanta, for a gross sales price of $267.5 million.

Financing Activity


•	Closed two, 10-year mortgages secured by Fifth Third Center and Colorado Tower that generated $270 million in proceeds at a weighted average interest rate of 3.41%.


•	Closed a five-year, $250 million senior unsecured term loan.

Portfolio Activity


•	Leased or renewed 2.4 million square feet of office space.


•	Increased second generation net rent per square foot by 20.0% on a straight-line basis and 10.3% on a cash basis.


•	Increased same property net operating income by 6.1% on a GAAP basis and 8.4% on a cash basis.

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 (including Parkway, where applicable) 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

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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, 2016, we employed 279 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: Investor Relations or 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;


•	uninsured losses as a result of casualty events; 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.

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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 if we 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 want 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, 2016, our top 20 tenants represented 30% of our annualized base rental revenues with no single tenant accounting for more than 6% 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 operations or financial condition if a suitable replacement tenant is not secured in a timely manner. These events could have a significant adverse impact on our results of operations or financial condition.

For the three months ended December 31, 2016, 42% of our net operating income was derived from the metropolitan Atlanta area, 18% was derived from the metropolitan Charlotte area and 17% was derived from the metropolitan Austin area. Any adverse economic conditions impacting Austin, Charlotte, or Atlanta could adversely affect our overall results of operations and financial condition.

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, or our joint venture partners where applicable, 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

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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.

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"), unsecured debt, non-recourse mortgages, construction loans, the sale of assets, joint venture equity, the issuance of common stock, and the issuance of units of CPLP. 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 Facility. Terms and conditions available in the marketplace for unsecured 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.


•	Unsecured Debt. Terms and conditions available in the marketplace for unsecured debt vary over time. The availability of unsecured debt may vary based upon the lending environment with financial institutions. Unsecured debt generally contains restrictive covenants that may place limitations on our ability to conduct our business similar to those placed upon us by our Credit Facility.

•

Non-recourse mortgages. The availability of non-recourse mortgages 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. An inability to access the mortgage market could adversely affect our ability to finance acquisition 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. 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, potentially generating defaults on other debt.


•	Asset 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

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ability to raise capital through asset sales in order could be limited. In addition, mortgage financing on an asset 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 by 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 funding. Construction loans frequently require a portion of the loan to be recourse to us. In addition, construction loans generally require a completion guarantee by the borrower and may require a limited guarantee from the Company. There may be times when construction loans are not available, or are only available upon 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 issuances 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. 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.


•	Operating partnership units. The issuance of units of CPLP in connection with property, portfolio, or business acquisitions could be dilutive to our earnings per share and could have an adverse effect on the per share trading price of our common stock.

•

TPG Entities' shares. The per share trading price of our common stock may decline significantly upon the sale of shares of our common stock pursuant to registration rights granted to TPG Pantera VI and TPG Management LLC (collectively, the "TPG Entities") in connection with the Company Stockholders Agreement with the TPG Entities (the "TPG Agreement"). Under the TPG Agreement, the TPG Entities may (1) at any time after April 6, 2017, make up to three demands for registration and (2) at any time after October 6, 2017, include the common stock they hold in any registration statement we file on account of any of our other security holders. The shares of common stock that may be registered on behalf of the TPG Entities, as described above, represent approximately 9% of our issued and outstanding common stock and of our issued and outstanding common stock and limited voting stock as of December 31, 2016. As a result, a substantial number of shares may be sold pursuant to the registration rights granted to the TPG Entities. The sale of such shares by the TPG Entities, or the perception that such a sale may occur, could materially and adversely affect the per share trading price of our common stock and could dilute our existing stockholders' interests in our company.

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 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;

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•	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, term loans and mortgages could restrict or hinder our operational flexibility, which could adversely affect our results of operations.

Our Credit Facility and our unsecured term loan impose 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 provisions on the Credit Facility and term loan may affect business decisions on other debt.

Some of our mortgages contain customary negative covenants, including limitations on our ability, without the lender’s prior consent, to further mortgage that a specific 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.

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 and our total debt as a multiple of our annualized EBITDA 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.

We have significant debt maturities in 2017 that need to be repaid or refinanced.

As a result of the Parkway Transactions, we assumed four non-recourse mortgage loans with an aggregate principal amount of $360.0 million that mature in 2017. In addition, we have one additional non-recourse mortgage loan with a principal balance of $127.5 million that matures in 2017. We expect to repay these loans when they mature with a combination of sources of capital including, but not limited to, asset sales, unsecured term loans, mortgage loans on these or other properties, or common equity. However, there can be no assurance that these sources will be available and we may be forced to refinance or repay on unfavorable terms.

Real Estate Development and Acquisition 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.

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•

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 cost of 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 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.

•

Competition. We compete for tenants in major U.S. markets by highlighting our locations, rental rates, services, reputation, and the design and condition of our facilities. As the competition for high-credit-quality tenants is intense, we may be required to provide rent abatements, incur charges for tenant improvements and other concessions, or we may not be able to lease vacant space in a timely manner.

We face risks associated with operating property acquisitions.

Operating property acquisitions contain inherent risks. These risks may include:

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•	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.

Parkway Transactions Risks

We may be unable to integrate the business of Parkway successfully or realize the anticipated synergies and related benefits of our merger with Parkway and spin-off of New Parkway or do so within the anticipated time frame.

The ongoing integration of the Parkway business into our own will require significant management and resources. We may encounter difficulties in the integration process or in realizing any of the expected synergies from these transactions, including the following:


•	the inability to successfully combine our business and Parkway’s business in a manner that permits us to achieve the cost savings anticipated to result from the merger, the spin-off or any of the related transactions, which would result in some anticipated benefits of the merger not being realized in the time frame currently anticipated or at all;


•	lost sales and tenants as a result of certain tenants deciding not to do business with us;


•	the complexities associated with managing our business out of several different locations and integrating personnel from the two companies, as well as complexities associated with the separation of personnel at New Parkway;


•	the additional complexities of combining two companies with different histories, cultures, regulatory restrictions, markets and customer bases;


•	our failure to retain key employees of either of the two companies;


•	potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger, the spin-off or any of the related transactions; and


•	performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the merger, the spin-off or any of the related transactions and integrating the companies’ operations.

For all these reasons, it is possible that the integration process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with tenants, customers, vendors and employees or to achieve the

As a result of the merger and spin-off with Parkway and New Parkway (the "Transactions"), the composition of the Board of Directors has changed.

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Concurrent with the closing of the Transaction, the Board of Directors changed and currently consists of nine members, five of which served on the Company's Board of Directors prior to the merger and four of which served on Parkway's Board of Directors prior to the merger. One of the four directors who formerly served on Parkway's board of directors was selected by the TPG Entities, pursuant to the TPG Agreement.

The TPG Agreement grants certain rights to the TPG Entities.

In connection with the Transactions, we have entered into the TPG Agreement, in order to establish various arrangements and restrictions with respect to governance of the Company, and certain rights with respect to shares of common stock of the Company owned by the TPG Entities.

Pursuant to the terms of the TPG Agreement, for so long as the TPG Entities beneficially owns at least 5% of our common stock on an as-converted basis, the TPG Entities will have the right to nominate one director to the Company's Board of Directors. In addition, for so long as the TPG Entities beneficially own at least 5% of our common stock on an as-converted basis, the TPG Entities will have the right to have their nominee to the Company's Board of Directors appointed to the Investment and the Compensation Committees of the Company's Board of Directors. Such committee and board membership can continue up to six months following the first date on which the TPG Entities no longer owns at least 5% of our common stock.

In addition, in connection with the Merger Agreement, the Company's Board of Directors granted to the TPG Entities an exemption from the ownership limit included in our articles of incorporation, establishing for the TPG Entities an aggregate substitute in lieu of the ownership limit to permit them to constructively and beneficially own (without duplication) (i) during the term of the standstill provided by the TPG Agreement (which will expire no later than October 6, 2019), up to 15% of our outstanding voting securities, subject to the terms and conditions of the TPG Agreement, and (ii) following the term of the standstill provided by the TPG Agreement, shares of our common stock held by the TPG Entities at the expiration of the standstill, subject to the terms, conditions, limitations, reductions and terminations set forth in an investor representation letter entered into with the TPG Entities.

The interests of the TPG Entities could conflict with or differ from your interests as a holder of our common stock. For example, the level of ownership and board rights held by TPG could delay, defer or prevent a change of control or impede a merger, takeover or other business combination that our common stockholders may otherwise view favorably. In addition, a sale of all or a substantial number of shares of stock in the future by the TPG Entities could cause a decline in our stock price.

The TPG Entities are significant stockholders and may have conflicts of interest with us in the future.

As of December 31, 2016, the TPG Entities), owned approximately 9% of our issued and outstanding common stock and limited voting stock together. In addition, commencing on October 6, 2017, so long as the TPG Entities own at least 5% of our issued and outstanding common stock, the TPG Entities have a pre-emptive right to participate in our future equity issuances, subject to certain conditions. This concentration of ownership in one stockholder could potentially be disadvantageous to other stockholders' interests. In addition, if the TPG Entities were to sell or otherwise transfer all or a large percentage of its holdings, our stock price could decline and we could find it difficult to raise capital, if needed, through the sale of additional equity securities.

Our future results will suffer if we do not effectively manage our expanded portfolio of properties following the Transactions and any failure by us to effectively manage our portfolio could have a material and adverse effect on our business and our ability to make distributions to shareholders, as required for us to continue to qualify as a REIT.

As a result of the transactions with Parkway, the size of our business has increased. Our future success depends, in part, upon our ability to manage this expanded business, which will pose challenges for management, including challenges related to acting as landlord to a larger portfolio of properties and associated increased costs and complexity. Additionally, we have entered new markets, including Orlando, Tampa, and Phoenix. We may face challenges in adapting our business to different market conditions in such new markets. There can be no assurances that we will be successful.

General Business Risks

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.

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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 any 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, Austin, Charlotte, Tampa, Orlando, and Phoenix.

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.

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

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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 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.

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Potential changes to the U.S tax laws could have a significant negative impact on our business operations, financial condition and earnings.

We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be issued, nor is the long-term impact of proposed tax reforms (including future reforms that may be part of any enacted tax reform) on the real estate industry clear. Furthermore, potential tax reforms may negatively impact our tenants' operating results, financial condition and future business plans. Investors are urged to consult their tax advisors regarding the effect of potential changes to the U.S. federal tax laws on an investment in our shares. A reform of the U.S. tax law by the new administration may be enacted in a manner that negatively impacts our operating results, financial condition and business operations, and is adverse to our stockholders.

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, the complex accounting issues and integration challenges associated with the Transactions, increases the risk that we could incorrectly apply an accounting standard and 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 6 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, 2016:

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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 (5)
I.	OFFICE PROPERTIES
	Colorado Tower	Austin	373,000	Consolidated	100%	100.0%	96.5%	4.5%	119,069
	816 Congress	Austin	435,000	Consolidated	100%	93.2%	92.3%	3.1%	84,231
	Research Park V	Austin	173,000	Consolidated	100%	97.1%	23.7%	0.6%	—
	One Eleven Congress	Austin	519,000	Consolidated	100%	90.6%	80.5%	4.3%	130,002
	San Jacinto Center	Austin	406,000	Consolidated	100%	98.9%	93.7%	4.6%	102,562
	AUSTIN		1,906,000					17.1%	$	435,864

	Northpark Town Center (3)	Atlanta	1,528,000	Consolidated	100%	85.2%	84.8%	7.8%	—
	The American Cancer Society Center	Atlanta	996,000	Consolidated	100%	85.9%	84.6%	4.3%	127,451
	Promenade	Atlanta	777,000	Consolidated	100%	94.5%	89.2%	4.7%	104,996
	Terminus 100	Atlanta	660,000	Unconsolidated	50%	90.6%	92.1%	2.4%	63,256
	Terminus 200	Atlanta	566,000	Unconsolidated	50%	96.4%	91.5%	2.2%	40,408
	Meridian Mark Plaza	Atlanta	160,000	Consolidated	100%	100.0%	96.6%	1.3%	24,427
	Emory University Hospital Midtown Medical Office Tower	Atlanta	358,000	Unconsolidated	50%	96.2%	96.7%	1.3%	36,258
	3344 Peachtree	Atlanta	484,000	Consolidated	100%	96.1%	96.0%	4.7%	80,258
	One Buckhead Plaza	Atlanta	461,000	Consolidated	100%	94.2%	93.9%	3.7%	—
	3350 Peachtree	Atlanta	413,000	Consolidated	100%	92.9%	92.7%	2.7%	—
	3348 Peachtree	Atlanta	258,000	Consolidated	100%	91.2%	93.1%	2.0%	—
	Two Buckhead Plaza	Atlanta	210,000	Consolidated	100%	83.1%	84.9%	1.8%	53,515
	ATLANTA		6,871,000					38.9%	$	530,569

	Gateway Village	Charlotte	1,061,000	Unconsolidated	50%	99.3%	98.8%	1.3%	—
	Fifth Third Center	Charlotte	698,000	Consolidated	100%	96.7%	91.6%	5.9%	148,866
	Hearst Tower	Charlotte	966,000	Consolidated	100%	98.7%	94.7%	7.9%	—
	NASCAR Plaza	Charlotte	394,000	Consolidated	100%	98.2%	95.3%	3.3%	—
	CHARLOTTE		3,119,000					18.4%	$	148,866

	Hayden Ferry (3)	Phoenix	789,000	Consolidated	100%	93.8%	87.9%	5.2%	—
	Tempe Gateway	Phoenix	264,000	Consolidated	100%	98.4%	98.6%	2.6%	—
	111 West Rio (American Airlines)	Phoenix	225,000	Unconsolidated	75%	100.0%	83.3%	0.3%	—
	PHOENIX		1,278,000					8.1%	—

	Corporate Center (3)	Tampa	1,224,000	Consolidated	100%	84.4%	80.8%	6.7%	—
	The Pointe	Tampa	253,000	Consolidated	100%	96.2%	94.3%	1.6%	23,369
	Harborview Plaza	Tampa	205,000	Consolidated	100%	98.0%	76.1%	1.2%	—
	TAMPA		1,682,000					9.5%	$	23,369

	Bank of America Center	Orlando	421,000	Consolidated	100%	87.7%	92.1%	1.9%	—
	One Orlando Centre	Orlando	356,000	Consolidated	100%	82.4%	73.2%	1.1%	—
	Citrus Center	Orlando	261,000	Consolidated	100%	94.3%	90.8%	1.4%	—
	ORLANDO		1,038,000					4.4%	—

	Courvoisier Centre (3)	Miami	343,000	Unconsolidated	20%	86.5%	80.8%	0.6%	22,309
	MIAMI		343,000					0.6%	$	22,309

	TOTAL OFFICE PROPERTIES		16,237,000					97.0%	$	1,160,977	$	345,308	(6)

II.	OTHER PROPERTIES
	Emory Point Apartments (Phase I) (4)	Atlanta	404,000	Unconsolidated	75%	90.0%	86.5%	1.4%	$	36,328
	Emory Point Retail (Phase I)	Atlanta	80,000	Unconsolidated	75%	95.9%	95.3%	0.4%	7,194
	Emory Point Apartments (Phase II) (4)	Atlanta	257,000	Unconsolidated	75%	76.9%	75.0%	0.2%	28,701
	Emory Point Retail (Phase II)	Atlanta	45,000	Unconsolidated	75%	91.9%	87.9%	1.0%	5,026
	TOTAL OTHER PROPERTIES		786,000					3.0%	$	77,249	$	12,731
	TOTAL PORTFOLIO		17,023,000					100.0%	$	1,238,226	$	358,039


(1)	Weighted average occupancy represents an average of the square footage occupied at the property during the year.


(2)	Net operating income represents rental property revenues less rental property operating expenses for the three months ended December 31, 2016.


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


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


(5)	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.


(6)	Included in this amount is $14.9 million of Annualized Base Rent for tenants in a free rent period.

Office Lease Expirations (1)

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As of December 31, 2016, our leases expire as follows:



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

2017	169	754,792	5.6	%	$	21,143	5.1	%	$	28.01
2018	151	997,019	7.4	%	29,353		7.1	%	29.44
2019	139	1,116,486	8.3	%	31,847		7.7	%	28.52
2020	116	1,021,135	7.6	%	30,563		7.4	%	29.93
2021	119	1,789,478	13.3	%	53,535		13.0	%	29.92
2022	91	2,065,821	15.3	%	58,220		14.2	%	28.18
2023	61	1,001,575	7.4	%	30,595		7.5	%	30.55
2024	49	918,063	6.8	%	33,029		8.1	%	35.98
2025 & Thereafter	111	3,802,231	28.3	%	122,426		29.9	%	32.20

Total	1,006	13,466,600	100.0	%	$	410,711	100.0	%	$	30.49



(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, 2016, we had the following projects under development ($ in thousands):



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

Carolina Square	Mixed	Chapel Hill, NC	50	%	2Q15		$	123,000	$	66,845
Office						158,000					74	%	3Q17 / 3Q18
Retail						44,000					61	%	3Q17 / 3Q18
Apartments						246					—	%	3Q17 / 3Q18

864 Spring Street (NCR Phase I)	Office	Atlanta, GA	100	%	3Q15	502,000	219,000		103,994		100	%	1Q18 / 1Q18

8000 Avalon	Office	Atlanta, GA	90	%	1Q16	224,000	73,000		42,152		19	%	2Q17 / 2Q18

858 Spring Street (NCR Phase II)	Office	Atlanta, GA	100	%	4Q16	260,000	119,000		16,242		100	%	4Q18 / 4Q18

Dimensional Place	Office	Charlotte, NC	50	%	4Q16		94,000		18,549
Office						266,000					100	%	4Q18 / 4Q18
Retail						16,000					—	%	4Q18 / 4Q18

Total							$	628,000	$	247,782



(1)	This schedule shows projects currently under active development and/or projects with a contractual obligation 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 $79.8 million from a construction loan, which has $23.7 million outstanding as of December 31, 2016.
(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.

Land Holdings

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As of December 31, 2016, 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	100.0%	12
Wildwood Office Park	Atlanta	50.0%	22
The Avenue Forsyth-Adjacent Land	Atlanta	100.0%	10
120 West Trinity	Atlanta	20.0%	5
Georgia			49

Victory Center	Dallas	75.0%	3
Texas			3

Corporate Center	Tampa	100.0%	7
Florida			7

Commercial Land Held (Acres)			59		43
Cost Basis of Commercial Land Held			$	41,726	$	16,386

Residential (1)

Callaway Gardens (2)	Atlanta	100.0%	217
Georgia			217

Padre Island	Corpus Christi	50.0%	15
Texas			15

Residential Land Held (Acres)			232		225
Cost Basis of Residential Land Held			$	6,850	$	3,544

Grand Total Land Held (Acres)			291		268
Grand Total Cost Basis of Land Held			$	48,576	$	19,930



(1)	Residential represents land that may be sold to third parties as lots or in large tracts for residential development.
(2)	Callaway Gardens was a consolidated joint venture. In January 2017, the Company withdrew from the joint venture. The Company no longer owns the land, but maintains a participation interest in future lot sales.


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:

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Name	Age	Office Held
Lawrence L. Gellerstedt III	60	President, Chief Executive Officer
Gregg D. Adzema	52	Executive Vice President, Chief Financial Officer
M. Colin Connolly	40	Executive Vice President, Chief Operating Officer
John S. McColl	54	Executive Vice President
Pamela F. Roper	43	Executive Vice President, General Counsel and Corporate Secretary
John D. Harris, Jr.	57	Senior Vice President, Chief Accounting Officer, Treasurer and Assistant 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 Operating Officer in July 2016. From December 2015 to July 2016, Mr. Connolly served as Executive Vice President and Chief Investment Officer. 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.

Ms. Roper was appointed Executive Vice President, General Counsel and Corporate Secretary in February 2017. From October 2012 to February 2017, Ms. Roper served as Senior Vice President, General Counsel and Corporate Secretary. From February 2008 to October 2012, Ms. Roper served as Senior Vice President, Associate General Counsel and Assistant Secretary.

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.

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:



	2016 Quarters								2015 Quarters
	First		Second		Third		Fourth		First		Second		Third		Fourth
High	$	10.43	$	11.07	$	11.40	$	10.50	$	11.63	$	10.96	$	10.89	$	10.37
Low	$	7.53	$	10.00	$	10.02	$	7.09	$	10.01	$	9.40	$	8.68	$	8.87
Dividends	$	0.080	$	0.080	$	0.080	$	—	$	0.080	$	0.080	$	0.080	$	0.080
Payment Date	2/22/2016		5/27/2016		9/6/2016		1/19/2017		2/23/2015		5/28/2015		8/24/2015		12/18/2015

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We declared and paid our fourth quarter 2016 common dividend in January 2017 in the amount of $0.06 per share.

Holders

Our common stock trades on the New York Stock Exchange (ticker symbol CUZ). On February 9, 2017, there were 1,758 stockholders of record of our common stock.

Purchases of Equity Securities

There were no purchases of common stock by the Company during the fourth quarter of 2016.

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, 2011 and the reinvestment of all dividends.

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

GROUPS, INDUSTRY INDICES AND/OR BROAD MARKETS



	Fiscal Year Ended
Index	12/31/2011	12/31/2012	12/31/2013	12/31/2014	12/31/2015	12/31/2016
Cousins Properties Incorporated	100.00	133.31	167.40	190.50	162.40	208.51
NYSE Composite Index	100.00	116.15	146.80	156.87	150.64	168.63
FTSE NAREIT Equity Index	100.00	118.06	120.97	157.43	162.46	176.30
SNL US REIT Office Index	100.00	114.56	122.09	153.91	155.26	173.26


Item 6.	Selected Financial Data

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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. Prior year disclosures have been restated for discontinued operations as described in note 3 of the consolidated financial statements.



	For the Years Ended December 31,
	2016			2015			2014			2013			2012
	(in thousands, except per share amounts)
Revenues:
Rental property revenues	$	249,814		$	196,244		$	164,123		$	122,672		$	114,208
Fee income	8,347			7,297			12,519			10,891			17,797
Other	1,050			828			919			4,681			4,841
	259,211			204,369			177,561			138,244			136,846
Costs and expenses:
Rental property operating expenses	96,908			82,545			76,963			58,949			50,329
Reimbursed expenses	3,259			3,430			3,652			5,215			7,063
General and administrative expenses	25,592			16,918			19,784			21,986			23,208
Interest expense	26,650			22,735			20,983			19,091			23,933
Depreciation and amortization	97,948			71,625			62,258			47,131			39,424
Acquisition and merger costs	24,521			299			1,130			3,626			793
Other	5,888			1,181			3,729			4,167			7,617
	280,766			198,733			188,499			160,165			152,367
Loss on extinguishment of debt	(5,180		)	—			—			—			(94		)
Income (loss) from continuing operations before benefit for income taxes, income from unconsolidated joint ventures, and gain on sale of investment properties	(26,735		)	5,636			(10,938		)	(21,921		)	(15,615		)
Benefit (expense) for income taxes from operations	—			—			20			23			(91		)
Income from unconsolidated joint ventures	10,562			8,302			11,268			67,325			39,258
Income (loss) from continuing operations before gain on sale of investment properties	(16,173		)	13,938			350			45,427			23,552
Gain on sale of investment properties	77,114			80,394			12,536			61,288			4,053
Income from continuing operations	60,941			94,332			12,886			106,715			27,605
Income (loss) from discontinued operations:
Income from discontinued operations	19,163			31,848			20,764			8,625			1,907
Income (loss) on sale from discontinued operations	—			(551		)	19,358			11,489			18,407
Income from discontinued operations	19,163			31,297			40,122			20,114			20,314
Net income	80,104			125,629			53,008			126,829			47,919
Net income attributable to noncontrolling interests	(995		)	(111		)	(1,004		)	(5,068		)	(2,191		)
Net income attributable to controlling interests	79,109			125,518			52,004			121,761			45,728
Preferred share original issuance costs	—			—			(3,530		)	(2,656		)	—
Dividends to preferred stockholders	—			—			(2,955		)	(10,008		)	(12,907		)
Net income available to common stockholders	$	79,109		$	125,518		$	45,519		$	109,097		$	32,821
Net income from continuing operations attributable to controlling interest per common share - basic and diluted	$	0.24		$	0.44		$	0.02		$	0.62		$	0.13
Net income per common share - basic and diluted	$	0.31		$	0.58		$	0.22		$	0.76		$	0.32
Dividends declared per common share	$	0.24		$	0.32		$	0.30		$	0.18		$	0.18
Total assets (at year-end)	$	4,171,607		$	2,595,320		$	2,664,295		$	2,270,493		$	1,122,701
Notes payable (at year-end)	$	1,380,920		$	718,810		$	789,309		$	627,381		$	423,869
Stockholders' investment (at year-end)	$	2,455,557		$	1,683,415		$	1,673,458		$	1,457,401		$	620,342
Common shares outstanding (at year-end)	393,418			211,513			216,513			189,666			104,090


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

Table of Contents

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

Overview of 2016 Performance and Company and Industry Trends

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. During 2016, we completed a merger with Parkway and a spin-off of the combined companies' Houston, Texas operations and certain other legal businesses of Parkway into a separate public company, New Parkway. In addition, we commenced the development of two office projects in Atlanta, Georgia and one office project in Charlotte, North Carolina. As a result of these activities, we believe that our increased scale and enhanced portfolio diversity will enhance our flexibility to meet customer space needs and allow us to attract and retain quality local market talent that, over time, will drive customer retention and occupancy. We further believe that these transactions will complement our strategy of maintaining a simple platform, trophy assets, opportunistic investments and a strong balance sheet.

Transactions with Parkway

On October 6, 2016, we merged with Parkway, and on October 7, 2016, we spun off the operations of the combined companies' Houston business into a separate publicly traded company, New Parkway. Subsequent to the merger and spin-off, we sold three properties we acquired in the merger, sold one additional existing property, and purchased the outside partner's interest in a consolidated joint venture that owned four properties, increasing our ownership from approximately 30% to 100%. As a result of these activities, our owned square footage of operating properties increased from 15.4 million square feet immediately before the merger and spin-off to 17.0 million at December 31, 2016. In addition to adding properties to our existing markets of Atlanta, Charlotte and Austin, we also added properties in the new markets of Phoenix, Orlando and Tampa.

In the merger, we assumed Parkway indebtedness and subsequent to the merger but before December 31, 2016 we repaid $251.9 million in assumed Parkway mortgages. We funded the repayments and the purchase of the partnership interest discussed above with property sales and proceeds from a new, unsecured term loan totaling $250.0 million.

Other 2016 Activity

In addition to the transactions with Parkway, we continued to implement our strategy of selectively investing in Class A office assets in our core markets by commencing development activities on two new projects and adding a second phase to an existing development project. We entered into a joint venture with DFA to develop a 282,000 square foot regional headquarters for DFA. Total costs for this project are estimated at $94 million and we estimate a fourth quarter of 2018 completion. We also commenced development of a 224,000 square-foot office building in Atlanta that is expected to cost $73 million and is scheduled for a second quarter 2017 completion. In addition, we commenced the second phase of a build-to-suit project with NCR Corporation in Atlanta. This project will become NCR's world headquarters and the second phase is expected to cost $119 million and to be completed in the fourth quarter of 2018. In addition to continuing the development of the first phase of the NCR project, we continued the development of Carolina Square, a 123,000 square foot, mixed-use project in Chapel Hill, North Carolina. We are currently conducting pre-development activities on a project in Decatur, Georgia and are pursuing additional development opportunities that may result in projects that commence in 2017 or thereafter.

We also repurchased 1.6 million shares of our common stock for $13.7 million in the first portion of 2016 under a plan approved in 2015 which provides management with the ability to repurchase up to $100.0 million of shares through September 2017.

We sold our final building at North Point, 100 North Point Center East, early in 2016 for $22.0 million, sold One Ninety One Peachtree in the fourth quarter of 2016 for $268 million, and sold 20 acres of land at North Point in the fourth quarter for $4.8 million.

We leased or renewed approximately 2.4 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 $18.17 per square foot. Cash basis net effective rent per square foot increased 10.3% 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. Our same property net operating income for the year increased by 6.1% on a GAAP basis and 8.4% on a cash basis. The same property leasing percentage remained stable throughout the year.

Market Conditions

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As a result of the transactions with Parkway, we enhanced our geographic diversification with a deepened presence in Atlanta, Austin, and Charlotte while entering the new markets of Phoenix, Tampa, and Orlando. We believe these Sunbelt markets possess robust economic and market fundamentals. Employment growth in all six markets is ahead of the US average, while new office construction is below the 10-year historical average. As a result of these healthy office fundamentals, we believe our portfolio will benefit as we further drive occupancy and rental rate growth.

In Atlanta, we currently own a 6.9 million square foot, Class A office portfolio with a significant concentration in Buckhead, as well as assets in Midtown and Central Perimeter. Atlanta economic fundamentals remain strong. The city produced approximately 70,000 jobs in 2016, which is in the top four nationally. Office fundamentals are equally strong. While vacancy rates declined to 12%, the lowest level since 2001, development remained consistent. As of December 31, 2016, less than 1.2 million square feet of speculative office space was under construction across Atlanta, which represents just 1% of the city’s 124 million square foot Class A office market. These are historically low numbers for Atlanta at this point in the real estate cycle.

Austin real estate fundamentals also remain healthy. The city’s economy continued to grow well ahead of the national pace. Job growth remains robust with a 1.7% increase over the past year. Austin’s unemployment rate at the end of 2016 was 3.0%, below the national average of 4.7%, and one of the lowest in the country. Although new office supply remains slightly elevated in Austin, with 2.6 million square feet under construction, we do not believe this new supply poses a significant risk to our portfolio which was 96% leased and had 6.4 years of weighted-average lease term as of December 31, 2016.

Charlotte also continues to deliver steady growth. The city’s unemployment rate at the end of 2016 was 4.6%, its lowest level since 2007. Charlotte’s low cost, business-friendly environment continued to push demand for office space in 2016 with over 622,000 square feet of net absorption during 2016 and historically low vacancy rates at the top-tier office assets. Developers have responded to these healthy office fundamentals as approximately 2.3 million square feet of new supply is now under construction. However, similar to Austin, we believe that our portfolio is well-positioned as we are approximately 98% leased with approximately 8.4 years of remaining weighted average lease term.

In Phoenix, we now own 1.3 million square feet in the high-growth Tempe submarket. Our portfolio of Tempe assets is located within walking distance of Arizona State University and its 80,000 students. While Phoenix saw impressive job growth in 2016, the Tempe submarket has been particularly strong with high-tech software and services job growth. With the increase in demand in Tempe and little new supply, office rents have hit historical highs while vacancy in the Class A market is less than 3%.

In our Florida markets, we see similar themes as it relates to job growth and supply/demand characteristics as we see in our other Sun Belt markets. Our new Tampa portfolio consists of 1.7 million square feet of Class A office product in the Westshore submarket. Westshore, which is located in close proximity to the airport, leads Tampa with the highest rents and the lowest vacancy levels at approximately 8.4%. In Orlando, we currently own approximately 1 million square feet of Class A assets in the central business district, which leads the broader market in rental rates. Class A vacancy levels in the central business district has declined to 9%, and there are no office projects under development.

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.

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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 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.

Real Estate 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 judgment 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.

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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, we 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 we determine 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,

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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 by considering, among other things, 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 13, 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 basis and must adjust compensation expense accordingly. The fair values of these awards are estimated using complex pricing

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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 the first quarter of 2016, the Company adopted ASU 2015-03, "Simplifying the Presentation of Debt Costs" ("ASU 2015-03"). In accordance with ASU 2015-03, the Company began recording deferred financing costs related to its mortgage notes payable as a reduction in the carrying amount of its notes payable on the consolidated balance sheets. The Company reclassified $2.5 million in deferred financing costs from other assets to notes payable in its December 31, 2015 consolidated balance sheet to conform to the current period's presentation. Deferred financing costs related to the Company’s unsecured revolving credit facility continue to be included in other assets within the Company’s balance sheets in accordance with ASU 2015-15 "Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements."

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." Under this ASU, the additional paid-in capital pool is eliminated, and an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This ASU also eliminated the requirement to defer recognition of an excess tax benefit until all benefits are realized through a reduction to taxes payable. This ASU also changes the treatment of excess tax benefits as operating cash flows in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016 with early adoption permitted. The Company expects to adopt this guidance effective January 1, 2017, and is currently assessing the potential impact of adopting the new guidance.

In February 2016, the Financial Accounting Standards Board issued ASU 2016-02, "Leases," which amends the existing standards for lease accounting by requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting and reporting. The new standard will require lessees to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months and classify such leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method (finance leases) or on a straight-line basis over the term of the lease (operating leases). Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 supersedes previous leasing standards. The guidance is effective for the fiscal years beginning after December 15, 2018 with early adoption permitted. The Company expects to adopt this guidance effective January 1, 2019, and is currently assessing the potential impact of adopting the new guidance. The impact of the adoption of this new guidance, if any, will be recorded retrospectively to all financial statements presented.

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. The Company adopted this guidance effective January 1, 2016, and it did not have material impact on the consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." Under the new guidance, companies will recognize revenue when the seller satisfies a performance obligation, which would be when the buyer takes control of the good or service. This new guidance could result in different amounts of revenue being recognized and could result in revenue being recognized in different reporting periods than under the current guidance. The new guidance specifically excludes revenue associated with lease contracts. ASU 2015-14, "Revenue from Contracts with Customers," was subsequently issued modifying the effective date to periods beginning after December 15, 2017, with early adoption permitted for periods beginning after December 15, 2016. The standard allows for either "full retrospective" adoption, meaning the standard is applied to all of the periods presented, or "modified retrospective" adoption, meaning the standard is applied only to the most recent period presented in the financial statements. The Company is currently assessing this guidance for future implementation and potential impact of adoption. The Company expects to adopt this guidance using the "modified retrospective" method effective January 1, 2018.

Results of Operations For The Three Years Ended December 31, 2016

General

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Our financial results have been significantly affected by the merger with Parkway (the "Merger") and the spin-off of the combined companies' Houston business to New Parkway (the "Spin-Off") (collectively, the "Parkway Transactions") that occurred in October 2016. Our financial results have also been affected by various purchase and sale transactions during the periods. During 2014, we purchased Fifth Third Center and Northpark Town Center (collectively, the "2014 Acquisitions"). During 2014, we sold 600 University Park Place and Lakeshore Park Plaza which were considered discontinued operations (the "2014 Discontinued Operations Properties"). In addition, we sold Mahan Village, and 777 Main (collectively, the "2014 Dispositions") which were not considered discontinued operations. During 2015, we sold 2100 Ross, The Points at Waterview, and 200, 333, and 555 North Point Center East (collectively, the "2015 Dispositions"). During 2016, we sold 100 North Point Center East and One Ninety One Peachtree (collectively, the "2016 Dispositions"). Accordingly, our historical financial statements may not be indicative of future operating results.

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 2016 versus 2015 comparison are from properties that were owned as of January 1, 2015 through December 31, 2016. Same Property amounts for the 2015 versus 2014 comparison are from properties that were owned as of January 1, 2014 through December 31, 2015. 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 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 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 $39.2 million between the 2016 and 2015 periods as follows:



	Year Ended December 31,
	2016		2015		$ Change		% Change
Rental Property Revenues
Same Property	$	71,802	$	69,012	$	2,790	4.0	%
Non-Same Property	178,012		127,232		50,780		39.9	%
	$	249,814	$	196,244	$	53,570	27.3	%

Rental Property Operating Expenses
Same Property	$	30,783	$	30,402	$	381	1.3	%
Non-Same Property	66,125		52,143		13,982		26.8	%
	$	96,908	$	82,545	$	14,363	17.4	%

Same Property NOI	$	41,019	$	38,610	$	2,409	6.2	%
Non-Same Property NOI	111,887		75,089		36,798		49.0	%
Total NOI	$	152,906	$	113,699	$	39,207	34.5	%

The increase in Same Property NOI was primarily driven by increases in revenues as a result of higher occupancy at 816 Congress and Promenade. Same Property operating expense increased due to these higher occupancy levels. The increase in Non-Same Property NOI is primarily due to the Parkway Transactions offset by the 2016 and 2015 Dispositions.

NOI increased $26.5 million between the 2015 and 2014 periods as follows:

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	Year Ended December 31,
	2015		2014		$ Change		% Change
Rental Property Revenues
Same Property	$	81,696	$	78,151	$	3,545	4.5	%
Non-Same Property	114,548		85,972