##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from

to
 Commission file number: 001-11312
 COUSINS PROPERTIES INCORPORATED
  GEORGIA
    
    58-0869052(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)191 Peachtree Street, Suite 3600, Atlanta, Georgia
    
    30303-1740(Address of principal executive offices)
    
    (Zip Code)
 (404) 407-1000
 þ o
 o o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
  Class
    
    Outstanding at August 4, 2010Common Stock, $1 par value per share
    
    101,767,204 shares




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##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    4Item 1. Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    33PART II  OTHER INFORMATION
    
    
    33Item 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3. Defaults upon Senior Securities
    
    
    34Item 4. (Removed and Reserved)
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    36SIGNATURES
    
    
    37EX-10.1EX-31.1EX-31.2EX-32. 1EX-32.2
  2




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    the Companys business and financial strategy;
    
    the Companys ability to obtain future financing arrangements;
    
    the Companys understanding of its competition and its ability to compete effectively;
    
    projected operating results;
    
    market and industry trends;
    
    estimates relating to future distributions;
    
    projected capital expenditures; and
    
    interest rates.
  
    
    availability and terms of capital and financing, both to fund operations and to
refinance indebtedness as it matures;
    
    risks and uncertainties related to the national and local economic conditions, the
real estate industry in general and in specific markets, and the commercial,
residential and condominium markets in particular;
    
    the potential for recognition of additional impairments due to continued adverse
market and economic conditions;
    
    leasing risks, including an inability to obtain new tenants or renew tenants on
favorable terms, or at all, upon the expiration of existing leases and the ability
to lease newly developed or currently unleased space;
    
    financial condition of existing tenants;
    
    rising interest and insurance rates;
    
    the availability of sufficient development or investment opportunities;
    
    competition from other developers or investors;
    
    the risks associated with development projects (such as construction delays, cost
overruns and leasing/ sales risk of new properties);
    
    potential liability for uninsured losses, condemnation or environmental liability;
    
    potential liability for a failure to meet regulatory requirements;
    
    the financial condition and liquidity of, or disputes with, joint venture partners;
    
    any failure to comply with debt covenants under credit agreements; and
    
    any failure to continue to qualify for taxation as a real estate investment trust.
  3




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30, 2010
    
    
    December 31, 2009(Unaudited)ASSETSPROPERTIES:Operating properties, net of accumulated depreciation
of $251,250 and $233,091 in 2010 and 2009, respectively
    
    $
    911,954
    
    
    $
    1,006,760Land held for investment or future development
    
    
    126,149
    
    
    
    137,233Residential lots
    
    
    63,496
    
    
    
    62,825Multi-family units held for sale
    
    
    15,050
    
    
    
    28,504Total properties
    
    
    1,116,649
    
    
    
    1,235,322OPERATING PROPERTY AND RELATED ASSETS HELD FOR SALE,
net of accumulated depreciation of $8,201
    
    
    78,475
    
    
    
    CASH AND CASH EQUIVALENTS
    
    
    17,137
    
    
    
    9,464RESTRICTED CASH
    
    
    4,944
    
    
    
    3,585NOTES AND OTHER RECEIVABLES,net of allowance for
doubtful accounts of $6,172 and $5,734 in 2010 and 2009, respectively
    
    
    45,345
    
    
    
    49,678INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
    
    
    158,955
    
    
    
    146,150OTHER ASSETS
    
    
    47,517
    
    
    
    47,353TOTAL ASSETS
    
    $
    1,469,022
    
    
    $
    1,491,552LIABILITIES AND EQUITYNOTES PAYABLE
    
    $
    580,378
    
    
    $
    590,208ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
    
    
    46,237
    
    
    
    56,577DEFERRED GAIN
    
    
    4,334
    
    
    
    4,452DEPOSITS AND DEFERRED INCOME
    
    
    16,702
    
    
    
    7,465LIABILITIES OF OPERATING PROPERTY HELD FOR SALE
    
    
    1,984
    
    
    
    TOTAL LIABILITIES
    
    
    649,635
    
    
    
    658,702COMMITMENTS AND CONTINGENT LIABILITIESREDEEMABLE NONCONTROLLING INTERESTS
    
    
    12,686
    
    
    
    12,591STOCKHOLDERS INVESTMENT:Preferred stock, 20,000,000 shares authorized, $1 par value:7.75% Series A cumulative redeemable preferred stock, $25 liquidation
preference; 2,993,090 shares issued and outstanding in 2010 and 2009
    
    
    74,827
    
    
    
    74,8277.50% Series B cumulative redeemable preferred stock, $25 liquidation
preference; 3,791,000 shares issued and outstanding in 2010 and 2009
    
    
    94,775
    
    
    
    94,775Common stock, $1 par value, 150,000,000 shares authorized, 105,337,286 and
103,352,382 shares issued in 2010 and 2009, respectively
    
    
    105,337
    
    
    
    103,352Additional paid-in capital
    
    
    673,663
    
    
    
    662,216Treasury stock at cost, 3,570,082 shares in 2010 and 2009
    
    
    (86,840
    )
    
    
    (86,840
    )Accumulated other comprehensive loss on derivative instruments
    
    
    (9,376
    )
    
    
    (9,517
    )Distributions in excess of net income
    
    
    (78,487
    )
    
    
    (51,402
    )TOTAL STOCKHOLDERS INVESTMENT
    
    
    773,899
    
    
    
    787,411Nonredeemable noncontrolling interests
    
    
    32,802
    
    
    
    32,848TOTAL EQUITY
    
    
    806,701
    
    
    
    820,259TOTAL LIABILITIES AND EQUITY
    
    $
    1,469,022
    
    
    $
    1,491,552
 See notes to condensed consolidated financial statements.
 4




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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009REVENUES:Rental property revenues
    
    $
    35,992
    
    
    $
    34,573
    
    
    $
    70,799
    
    
    $
    69,554Fee income
    
    
    8,213
    
    
    
    8,172
    
    
    
    16,551
    
    
    
    16,216Multi-family residential unit sales
    
    
    7,943
    
    
    
    1,185
    
    
    
    18,089
    
    
    
    1,185Residential lot and outparcel sales
    
    
    316
    
    
    
    3,328
    
    
    
    14,135
    
    
    
    5,876Other
    
    
    171
    
    
    
    1,239
    
    
    
    295
    
    
    
    2,21852,635
    
    
    
    48,497
    
    
    
    119,869
    
    
    
    95,049COSTS AND EXPENSES:Rental property operating expenses
    
    
    15,393
    
    
    
    14,358
    
    
    
    30,054
    
    
    
    30,836Multi-family residential unit cost of sales
    
    
    6,108
    
    
    
    1,185
    
    
    
    14,078
    
    
    
    1,185Residential lot and outparcel cost of sales
    
    
    275
    
    
    
    2,023
    
    
    
    9,371
    
    
    
    3,753General and administrative expenses
    
    
    8,589
    
    
    
    9,948
    
    
    
    18,539
    
    
    
    19,366Separation expenses
    
    
    33
    
    
    
    2,026
    
    
    
    101
    
    
    
    2,370Reimbursed general and administrative expenses
    
    
    3,591
    
    
    
    4,030
    
    
    
    8,009
    
    
    
    8,258Depreciation and amortization
    
    
    14,372
    
    
    
    14,804
    
    
    
    27,693
    
    
    
    27,290Interest expense
    
    
    10,286
    
    
    
    10,281
    
    
    
    20,067
    
    
    
    19,485Impairment loss
    
    
    586
    
    
    
    36,500
    
    
    
    586
    
    
    
    36,500Other
    
    
    3,197
    
    
    
    4,432
    
    
    
    4,525
    
    
    
    5,97862,430
    
    
    
    99,587
    
    
    
    133,023
    
    
    
    155,021LOSS ON EXTINGUISHMENT OF DEBT
    
    
    
    
    
    
    
    
    
    
    (592
    )
    
    
    LOSS FROM CONTINUING OPERATIONS BEFORE TAXES,
UNCONSOLIDATED JOINT VENTURES AND SALE OF
INVESTMENT PROPERTIES
    
    
    (9,795
    )
    
    
    (51,090
    )
    
    
    (13,746
    )
    
    
    (59,972
    )BENEFIT (PROVISION) FOR INCOME TAXES FROM OPERATIONS
    
    
    (14
    )
    
    
    (11,293
    )
    
    
    1,132
    
    
    
    (7,352
    )INCOME (LOSS) FROM UNCONSOLIDATED JOINT VENTURES:Equity in net income (loss) from unconsolidated joint ventures
    
    
    2,394
    
    
    
    (1,231
    )
    
    
    5,314
    
    
    
    589Impairment loss on investment in unconsolidated joint ventures
    
    
    
    
    
    
    (28,130
    )
    
    
    
    
    
    
    (28,130
    )2,394
    
    
    
    (29,361
    )
    
    
    5,314
    
    
    
    (27,541
    )LOSS FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE
OF INVESTMENT PROPERTIES
    
    
    (7,415
    )
    
    
    (91,744
    )
    
    
    (7,300
    )
    
    
    (94,865
    )GAIN ON SALE OF INVESTMENT PROPERTIES
    
    
    1,061
    
    
    
    801
    
    
    
    1,817
    
    
    
    168,235INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    (6,354
    )
    
    
    (90,943
    )
    
    
    (5,483
    )
    
    
    73,370INCOME FROM DISCONTINUED OPERATIONS:Income from discontinued operations
    
    
    1,570
    
    
    
    911
    
    
    
    2,879
    
    
    
    808Gain on extinguishment of debt
    
    
    
    
    
    
    12,498
    
    
    
    
    
    
    
    12,498Gain on sale of investment properties
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    1461,570
    
    
    
    13,555
    
    
    
    2,879
    
    
    
    13,452NET INCOME (LOSS)
    
    
    (4,784
    )
    
    
    (77,388
    )
    
    
    (2,604
    )
    
    
    86,822NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
    
    
    (584
    )
    
    
    (698
    )
    
    
    (1,110
    )
    
    
    (1,110
    )NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST
    
    
    (5,368
    )
    
    
    (78,086
    )
    
    
    (3,714
    )
    
    
    85,712DIVIDENDS TO PREFERRED STOCKHOLDERS
    
    
    (3,227
    )
    
    
    (3,227
    )
    
    
    (6,454
    )
    
    
    (6,454
    )NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS
    
    $
    (8,595
    )
    
    $
    (81,313
    )
    
    $
    (10,168
    )
    
    $
    79,258PER COMMON SHARE INFORMATION  BASIC AND DILUTED:Income (loss) from continuing operations
    
    $
    (0.10
    )
    
    $
    (1.84
    )
    
    $
    (0.13
    )
    
    $
    1.28Income from discontinued operations
    
    
    0.02
    
    
    
    0.26
    
    
    
    0.03
    
    
    
    0.26Net income (loss) available to common shareholders  basic and diluted
    
    $
    (0.09
    )
    
    $
    (1.58
    )
    
    $
    (0.10
    )
    
    $
    1.54DIVIDENDS DECLARED PER COMMON SHARE
    
    $
    0.09
    
    
    $
    0.25
    
    
    $
    0.18
    
    
    $
    0.50WEIGHTED AVERAGE SHARES  BASIC AND DILUTED
    
    
    101,001
    
    
    
    51,615
    
    
    
    100,538
    
    
    
    51,483
 See notes to condensed consolidated financial statements.
 5




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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Six Months Ended June 30, 2010 and 2009
(Unaudited, in thousands)
 Accumulated
    
    CumulativeOther
    
    UndistributedComprehensive
    
    Net IncomeAdditional
    
    
    
    
    
    Income (Loss)
    
    (Distributions in
    
    Total
    
    NonredeemablePreferred
    
    Common
    
    Paid-In
    
    Treasury
    
    on Derivative
    
    Excess of
    
    Stockholders
    
    Noncontrolling
    
    TotalStock
    
    Stock
    
    Capital
    
    Stock
    
    Instruments
    
    Net Income)
    
    Investment
    
    Interests
    
    EquityBalance December 31, 2009
    
    $
    169,602
    
    
    $
    103,352
    
    
    $
    662,216
    
    
    $
    (86,840
    )
    
    $
    (9,517
    )
    
    $
    (51,402
    )
    
    $
    787,411
    
    
    $
    32,848
    
    
    $
    820,259Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,714
    )
    
    
    (3,714
    )
    
    
    1,140
    
    
    
    (2,574
    )Change in fair value of derivative
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    
    
    
    
    141
    
    
    
    
    
    
    
    141Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    (3,714
    )
    
    
    (3,573
    )
    
    
    1,140
    
    
    
    (2,433
    )Common stock issued pursuant to:Stock dividend, net of issuance costs
    
    
    
    
    
    
    1,686
    
    
    
    10,284
    
    
    
    
    
    
    
    
    
    
    
    (12,030
    )
    
    
    (60
    )
    
    
    
    
    
    
    (60
    )Grants under director stock plan
    
    
    
    
    
    
    35
    
    
    
    215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    250Restricted stock and director option
grants
    
    
    
    
    
    
    264
    
    
    
    (124
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    140Amortization of stock options and
restricted stock,
net of forfeitures
    
    
    
    
    
    
    
    
    
    
    1,072
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,072
    
    
    
    
    
    
    
    1,072Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,186
    )
    
    
    (1,186
    )Change in fair value of redeemable
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,144
    
    
    
    1,144
    
    
    
    
    
    
    
    1,144Cash preferred dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,454
    )
    
    
    (6,454
    )
    
    
    
    
    
    
    (6,454
    )Cash common dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,031
    )
    
    
    (6,031
    )
    
    
    
    
    
    
    (6,031
    )Balance June 30, 2010
    
    $
    169,602
    
    
    $
    105,337
    
    
    $
    673,663
    
    
    $
    (86,840
    )
    
    $
    (9,376
    )
    
    $
    (78,487
    )
    
    $
    773,899
    
    
    $
    32,802
    
    
    $
    806,701Balance December 31, 2008
    
    $
    169,602
    
    
    $
    54,922
    
    
    $
    368,829
    
    
    $
    (86,840
    )
    
    $
    (16,601
    )
    
    $
    (23,189
    )
    
    $
    466,723
    
    
    $
    37,539
    
    
    $
    504,262Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,712
    
    
    
    85,712
    
    
    
    1,229
    
    
    
    86,941Change in fair value of derivative
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,512
    
    
    
    
    
    
    
    3,512
    
    
    
    
    
    
    
    3,512Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,512
    
    
    
    85,712
    
    
    
    89,224
    
    
    
    1,229
    
    
    
    90,453Common stock issued pursuant to:Stock dividend, net of issuance costs
    
    
    
    
    
    
    927
    
    
    
    7,551
    
    
    
    
    
    
    
    
    
    
    
    (8,551
    )
    
    
    (73
    )
    
    
    
    
    
    
    (73
    )Grants under director stock plan
    
    
    
    
    
    
    24
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    
    
    
    
    121Amortization of stock options and
restricted stock, net of forfeitures
    
    
    
    
    
    
    (10
    )
    
    
    2,912
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,902
    
    
    
    
    
    
    
    2,902Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,905
    )
    
    
    (5,905
    )Change in fair value of redeemable
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180
    )
    
    
    (180
    )
    
    
    
    
    
    
    (180
    )Cash preferred dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,454
    )
    
    
    (6,454
    )
    
    
    
    
    
    
    (6,454
    )Cash common dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,121
    )
    
    
    (17,121
    )
    
    
    
    
    
    
    (17,121
    )Balance June 30, 2009
    
    $
    169,602
    
    
    $
    54,936
    
    
    $
    371,838
    
    
    $
    (86,840
    )
    
    $
    (13,089
    )
    
    $
    38,768
    
    
    $
    535,215
    
    
    $
    32,863
    
    
    $
    568,078
 See notes to condensed consolidated financial statements.
 6




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##### Table of Contents



COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (2,604
    )
    
    $
    86,822Adjustments to reconcile net income to net cash flows provided by operating activities:Gain on sale of investment properties
    
    
    (1,817
    )
    
    
    (168,381
    )Loss (gain) on extinguishment of debt
    
    
    592
    
    
    
    (12,498
    )Impairment loss
    
    
    586
    
    
    
    36,500Impairment loss on investment in unconsolidated joint ventures
    
    
    
    
    
    
    28,130Losses on abandoned predevelopment projects
    
    
    1,949
    
    
    
    4,072Depreciation and amortization
    
    
    28,459
    
    
    
    28,437Amortization of deferred financing costs
    
    
    911
    
    
    
    776Stock-based compensation
    
    
    1,462
    
    
    
    3,023Change in deferred income taxes, net of valuation allowance
    
    
    
    
    
    
    8,897Effect of recognizing rental revenues on a straight-line or market basis
    
    
    (2,225
    )
    
    
    (2,203
    )Income from unconsolidated joint ventures
    
    
    (5,314
    )
    
    
    (589
    )Operating distributions from unconsolidated joint ventures
    
    
    4,838
    
    
    
    3,938Residential lot, outparcel and multi-family cost of sales, net of closing costs paid
    
    
    21,581
    
    
    
    4,809Residential lot, outparcel and multi-family acquisition and development expenditures
    
    
    (894
    )
    
    
    (3,005
    )Changes in other operating assets and liabilities:Change in other receivables and other assets, net
    
    
    (1,647
    )
    
    
    (2,032
    )Change in accounts payable and accrued liabilities
    
    
    3,297
    
    
    
    (1,180
    )Net cash provided by operating activities
    
    
    49,174
    
    
    
    15,516CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investment property sales
    
    
    14,788
    
    
    
    2,220Property acquisition, development and other capital expenditures
    
    
    (12,185
    )
    
    
    (28,643
    )Investment in unconsolidated joint ventures
    
    
    (3,624
    )
    
    
    (3,007
    )Distributions from unconsolidated joint ventures
    
    
    3,685
    
    
    
    2,500Payment of debt guarantee for unconsolidated joint venture
    
    
    (17,250
    )
    
    
    Investment in notes receivable, net of collections
    
    
    88
    
    
    
    (640
    )Change in other assets
    
    
    (1,629
    )
    
    
    (2,012
    )Change in restricted cash
    
    
    (1,359
    )
    
    
    (644
    )Net cash used in investing activities
    
    
    (17,486
    )
    
    
    (30,226
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from credit facility
    
    
    
    
    
    
    158,200Repayment of credit facility
    
    
    
    
    
    
    (71,200
    )Payment of loan issuance costs
    
    
    (1,723
    )
    
    
    Repayment of notes payable
    
    
    (9,830
    )
    
    
    (71,561
    )Common stock issuance costs
    
    
    (60
    )
    
    
    (73
    )Cash common dividends paid
    
    
    (6,031
    )
    
    
    (17,121
    )Cash preferred dividends paid
    
    
    (6,454
    )
    
    
    (6,454
    )Contributions from noncontrolling interests
    
    
    1,269
    
    
    
    6Distributions to noncontrolling interests
    
    
    (1,186
    )
    
    
    (5,929
    )Net cash used in financing activities
    
    
    (24,015
    )
    
    
    (14,132
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    7,673
    
    
    
    (28,842
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    9,464
    
    
    
    82,963CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    17,137
    
    
    $
    54,121
 See notes to condensed consolidated financial statements.
 7




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##### Table of Contents



COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
(UNAUDITED)
 1. BASIS OF PRESENTATION AND NEW ACCOUNTING PRONOUNCEMENTS
 Basis of Presentation
    New Accounting Pronouncement
 Amendments to FASB Interpretation
No. 46(R)),
 8




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##### Table of Contents



2. NOTES PAYABLE, INTEREST EXPENSE AND COMMITMENTS AND CONTINGENCIES
  Term/Amortization
    
    
    
    Outstanding atDescription
    
    Interest Rate
    
    Period (Years)
    
    Maturity
    
    June 30, 2010
    
    
    December 31, 2009Credit Facility, unsecured (see note)
    
    LIBOR + 1.75% to 2.25%
    
    4/N/A
    
    8/29/11
    
    $
    40,000
    
    
    $
    40,000Term Facility, unsecured (see note)
    
    Swapped rate of 5.01% + 1.75% to 2.25%
    
    5/N/A
    
    8/29/12
    
    
    100,000
    
    
    
    100,000Terminus 100 mortgage note (interest only)
    
    6.13%
    
    5/N/A
    
    10/1/12
    
    
    180,000
    
    
    
    180,000The American Cancer Society Center
mortgage
note (interest only until October 1, 2011)
    
    6.4515%
    
    5/30
    
    9/1/17
    
    
    136,000
    
    
    
    136,000333/555 North Point Center East
mortgage note
    
    7.00%
    
    10/25
    
    11/1/11
    
    
    26,857
    
    
    
    27,287100/200 North Point Center East mortgage
note
(interest only until July 1, 2010)
    
    5.39%
    
    5/30
    
    6/1/12
    
    
    25,000
    
    
    
    25,000Meridian Mark Plaza mortgage note (see
note)
    
    8.27%
    
    10/28
    
    9/1/10
    
    
    22,025
    
    
    
    22,279Lakeshore Park Plaza mortgage note
    
    5.89%
    
    4/25
    
    8/1/12
    
    
    17,726
    
    
    
    17,903The Points at Waterview mortgage note
    
    5.66%
    
    10/25
    
    1/1/16
    
    
    16,811
    
    
    
    17,024600 University Park Place mortgage note
    
    7.38%
    
    10/30
    
    8/10/11
    
    
    12,416
    
    
    
    12,536Handy Road Associates, LLC (see note)
    
    Prime + 1%, but not < 6%
    
    5/N/A
    
    3/30/11
    
    
    3,374
    
    
    
    3,340Glenmore Garden Villas, LLC (see note)
    
    LIBOR + 2.25%
    
    3/N/A
    
    10/3/10
    
    
    
    
    
    
    8,674Other miscellaneous notes
    
    Various
    
    Various
    
    Various
    
    
    169
    
    
    
    165$
    580,378
    
    
    $
    590,208
  9




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##### Table of Contents



Credit Facility Amendment
   Credit and Term Facilities
    
    Credit Facility
    
    Term Facility ApplicableApplicable Spread  As
    
    Applicable Spread 
    
    Spread  BeforeLeverage Ratio
    
    Amended
    
    Before Amendment
    
    Amendment≤35%
    
    
    1.75
    %
    
    
    0.75
    %
    
    
    0.70
    %>35%
but ≤ 45%
    
    
    2.00
    %
    
    
    0.85
    %
    
    
    0.80
    %>45%
but ≤ 50%
    
    
    2.25
    %
    
    
    0.95
    %
    
    
    0.90
    %>50%
but ≤ 55%
    
    
    2.25
    %
    
    
    1.10
    %
    
    
    1.05
    %>55%
    
    
    N/A
    
    
    
    1.25
    %
    
    
    1.20
    %
   Derivative Instruments and Hedging Activities
   10




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##### Table of Contents



Floating Rate,LIBOR-basedTerm Loan
    
    Borrowings
    
    TotalBalance, December 31, 2009
    
    $
    8,662
    
    
    $
    855
    
    
    $
    9,517Change in fair value
    
    
    358
    
    
    
    (499
    )
    
    
    (141
    )Balance, June 30, 2010
    
    $
    9,020
    
    
    $
    356
    
    
    $
    9,376
 Other Debt Information
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Total interest expensed
    
    $
    10,286
    
    
    $
    11,815
    
    
    $
    20,067
    
    
    $
    24,071Interest
expensed-discontinued
operations
    
    
    
    
    
    
    (279
    )
    
    
    
    
    
    
    (1,505
    )Interest capitalized
    
    
    
    
    
    
    (1,255
    )
    
    
    
    
    
    
    (3,081
    )Total interest incurred
    
    $
    10,286
    
    
    $
    10,281
    
    
    $
    20,067
    
    
    $
    19,485
  Fair Value
  3. EARNINGS PER SHARE
  11




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Weighted average shares  basic and diluted
    
    
    101,001
    
    
    
    51,615
    
    
    
    100,538
    
    
    
    51,483Weighted average anti-dilutive options not included
    
    
    7,174
    
    
    
    6,295
    
    
    
    7,185
    
    
    
    6,287
 4. STOCK-BASED COMPENSATION
    12




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##### Table of Contents



5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
  CompanysTotal Assets
    
    
    Total Debt
    
    
    Total Equity
    
    
    Investment2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009SUMMARY OF FINANCIAL
POSITION:CP Venture IV LLC entities
    
    $
    318,588
    
    
    $
    324,402
    
    
    $
    34,727
    
    
    $
    35,451
    
    
    $
    271,135
    
    
    $
    277,063
    
    
    $
    15,531
    
    
    $
    15,933Charlotte Gateway Village, LLC
    
    
    157,646
    
    
    
    160,266
    
    
    
    103,670
    
    
    
    110,101
    
    
    
    51,414
    
    
    
    48,214
    
    
    
    10,384
    
    
    
    10,401CF Murfreesboro Associates
    
    
    131,226
    
    
    
    139,782
    
    
    
    105,059
    
    
    
    113,476
    
    
    
    24,232
    
    
    
    23,231
    
    
    
    14,328
    
    
    
    13,817Palisades West LLC
    
    
    123,107
    
    
    
    125,537
    
    
    
    
    
    
    
    
    
    
    
    74,732
    
    
    
    74,237
    
    
    
    39,272
    
    
    
    39,104CL Realty, L.L.C.
    
    
    109,092
    
    
    
    114,598
    
    
    
    3,057
    
    
    
    3,568
    
    
    
    104,633
    
    
    
    109,184
    
    
    
    48,064
    
    
    
    49,825CPV and CPV Two
    
    
    105,336
    
    
    
    101,209
    
    
    
    
    
    
    
    
    
    
    
    103,431
    
    
    
    99,133
    
    
    
    3,716
    
    
    
    3,270Terminus 200 LLC
    
    
    
    
    
    
    27,537
    
    
    
    
    
    
    
    76,762
    
    
    
    
    
    
    
    (47,921
    )
    
    
    
    
    
    
    MSREF/Terminus 200 LLC
    
    
    55,093
    
    
    
    
    
    
    
    39,483
    
    
    
    
    
    
    
    13,140
    
    
    
    
    
    
    
    2,628
    
    
    
    Temco Associates, LLC
    
    
    60,498
    
    
    
    60,752
    
    
    
    2,996
    
    
    
    3,061
    
    
    
    56,948
    
    
    
    57,484
    
    
    
    22,449
    
    
    
    22,716Crawford Long  CPI, LLC
    
    
    35,320
    
    
    
    35,277
    
    
    
    49,213
    
    
    
    49,710
    
    
    
    (15,447
    )
    
    
    (15,280
    )
    
    
    (6,482
    )
    
    
    (6,396
    )Ten Peachtree Place Associates
    
    
    22,218
    
    
    
    22,971
    
    
    
    27,065
    
    
    
    27,341
    
    
    
    (5,561
    )
    
    
    (4,846
    )
    
    
    (4,240
    )
    
    
    (3,887
    )Wildwood Associates
    
    
    21,236
    
    
    
    21,263
    
    
    
    
    
    
    
    
    
    
    
    21,164
    
    
    
    21,205
    
    
    
    (1,668
    )
    
    
    (1,647
    )TRG Columbus Dev Venture, Ltd.
    
    
    5,368
    
    
    
    6,802
    
    
    
    
    
    
    
    
    
    
    
    2,724
    
    
    
    2,464
    
    
    
    146
    
    
    
    383Pine Mountain Builders, LLC
    
    
    8,561
    
    
    
    6,807
    
    
    
    1,733
    
    
    
    1,834
    
    
    
    2,931
    
    
    
    3,119
    
    
    
    2,437
    
    
    
    2,631$
    1,153,289
    
    
    $
    1,147,203
    
    
    $
    367,003
    
    
    $
    421,304
    
    
    $
    705,476
    
    
    $
    647,287
    
    
    $
    146,565
    
    
    $
    146,150
   Companys Share ofTotal Revenues
    
    
    Net Income (Loss)
    
    
    Net Income (Loss)2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009SUMMARY OF OPERATIONS:CP Venture IV LLC entities
    
    $
    15,579
    
    
    $
    15,448
    
    
    $
    1,826
    
    
    $
    1,699
    
    
    $
    491
    
    
    $
    588Charlotte Gateway Village, LLC
    
    
    15,933
    
    
    
    15,656
    
    
    
    3,808
    
    
    
    3,390
    
    
    
    588
    
    
    
    588CF Murfreesboro Associates
    
    
    7,182
    
    
    
    6,431
    
    
    
    1,001
    
    
    
    557
    
    
    
    401
    
    
    
    179Palisades West LLC
    
    
    6,730
    
    
    
    6,238
    
    
    
    2,282
    
    
    
    2,714
    
    
    
    1,107
    
    
    
    1,330CL Realty, L.L.C.
    
    
    4,212
    
    
    
    1,757
    
    
    
    1,219
    
    
    
    (4,974
    )
    
    
    1,125
    
    
    
    (2,573
    )CP and CPV Two
    
    
    9,254
    
    
    
    9,242
    
    
    
    4,301
    
    
    
    5,016
    
    
    
    445
    
    
    
    515Terminus 200 LLC
    
    
    533
    
    
    
    144
    
    
    
    55
    
    
    
    (45
    )
    
    
    
    
    
    
    (22
    )MSREF/Terminus 200 LLC
    
    
    245
    
    
    
    
    
    
    
    (480
    )
    
    
    
    
    
    
    (96
    )
    
    
    Temco Associates, LLC
    
    
    1,877
    
    
    
    1,198
    
    
    
    813
    
    
    
    (943
    )
    
    
    406
    
    
    
    (472
    )Crawford Long  CPI, LLC
    
    
    5,688
    
    
    
    5,621
    
    
    
    834
    
    
    
    934
    
    
    
    416
    
    
    
    466Ten Peachtree Place Associates
    
    
    3,847
    
    
    
    3,646
    
    
    
    481
    
    
    
    307
    
    
    
    248
    
    
    
    161Wildwood Associates
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    (65
    )
    
    
    (20
    )
    
    
    (32
    )TRG Columbus Dev. Venture, Ltd.
    
    
    1,071
    
    
    
    29
    
    
    
    392
    
    
    
    23
    
    
    
    162
    
    
    
    1Pine Mountain Builders, LLC
    
    
    1,185
    
    
    
    1,130
    
    
    
    91
    
    
    
    85
    
    
    
    46
    
    
    
    27Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    (5
    )
    
    
    (167
    )$
    73,336
    
    
    $
    66,540
    
    
    $
    16,582
    
    
    $
    8,472
    
    
    $
    5,314
    
    
    $
    589
  13




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##### Table of Contents



6. OTHER ASSETS
  June 30, 2010
    
    
    December 31, 2009Investment in Verde
    
    $
    9,376
    
    
    $
    9,376FF&E and leasehold improvements, net of accumulated depreciation
of $15,229 and $14,195 in 2010 and 2009, respectively
    
    
    5,018
    
    
    
    5,306Predevelopment costs and earnest money
    
    
    6,517
    
    
    
    7,673Lease inducements, net of accumulated amortization of $2,420 and $1,860
in 2010 and 2009, respectively
    
    
    12,327
    
    
    
    12,545Loan closing costs, net of accumulated amortization of $2,723 and $4,177
in 2010 and 2009, respectively
    
    
    3,593
    
    
    
    3,385Prepaid expenses and other assets
    
    
    4,324
    
    
    
    2,631Intangible Assets:Goodwill
    
    
    5,450
    
    
    
    5,450Above market leases, net of accumulated amortization of $8,723 and $8,704
in 2010 and 2009, respectively
    
    
    545
    
    
    
    564In-place leases, net of accumulated amortization of $2,446 and $2,391
in 2010 and 2009, respectively
    
    
    367
    
    
    
    423$
    47,517
    
    
    $
    47,353
  7. CONSOLIDATED STATEMENTS OF CASH FLOWS  SUPPLEMENTAL INFORMATION
  14




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##### Table of Contents



Six Months Ended June 30,2010
    
    2009Interest paid, net of amounts capitalized
    
    $
    18,971
    
    
    $
    21,986Income taxes paid (refunded)
    
    
    121
    
    
    
    (498
    )Non-Cash TransactionsTransfer of assets to held for sale
    
    $
    78,475
    
    
    $
    Issuance of common stock for payment of common dividends
    
    
    12,030
    
    
    
    8,551Land received on note receivable default
    
    
    5,030
    
    
    
    Change in accruals excluded from property development and
acquisition expenditures
    
    
    4,051
    
    
    
    3,700Transfer from land held for investment or future development to
operating properties
    
    
    1,410
    
    
    
    Issuance of note receivable for residential lot sale
    
    
    150
    
    
    
    Change in accumulated other comprehensive income
    
    
    141
    
    
    
    3,512Change in fair value of redeemable noncontrolling interests
    
    
    (1,144
    )
    
    
    180Transfer from note payable to redeemable noncontrolling interests
    
    
    
    
    
    
    7,410Transfer from accrued interest payable to redeemable
noncontrolling interests
    
    
    
    
    
    
    1,357Transfer from investment in joint ventures to land held for
investment or future development
    
    
    
    
    
    
    5,342Transfer from projects under development to operating properties
    
    
    
    
    
    
    114,509Transfer from projects under development to land held for
investment or future development
    
    
    
    
    
    
    5,159Transfer from other assets to land held for investment or future
development
    
    
    
    
    
    
    2,327Issuance of note payable for purchase of townhomes
    
    
    
    
    
    
    3,150
 8. NONCONTROLLING INTERESTS
   Six Months Ended June 30,2010
    
    
    2009Beginning Balance
    
    $
    12,591
    
    
    $
    3,945Net loss attributable to redeemable noncontrolling interests
    
    
    (30
    )
    
    
    (119
    )Contributions from (distributions to) noncontrolling interests
    
    
    1,269
    
    
    
    (18
    )Conversion of note payable and accrued interest to noncontrolling interest
    
    
    
    
    
    
    8,767Change in fair value of noncontrolling interests
    
    
    (1,144
    )
    
    
    180Ending Balance
    
    $
    12,686
    
    
    $
    12,755
  15




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##### Table of Contents



Six Months Ended June 30,2010
    
    
    2009Net income (loss) attributable to controlling interest
    
    $
    (3,714
    )
    
    $
    85,712Net income attributable to nonredeemable noncontrolling interests
    
    
    1,140
    
    
    
    1,229Net loss attributable to redeemable noncontrolling interests
    
    
    (30
    )
    
    
    (119
    )Net income (loss)
    
    $
    (2,604
    )
    
    $
    86,822
 9. REPORTABLE SEGMENTS
  
    
    fee income, salary reimbursements and expenses for joint venture properties that the
Company manages, develops and/or leases;
    
    compensation for corporate employees, other than those in the Third-Party Management
segment;
    
    general corporate overhead costs, interest expense for consolidated entities (as
financing decisions are made at the corporate level, with the exception of joint
venture interest expense, which is included in joint venture results in the respective
segment);
    
    income attributable to noncontrolling interests;
    
    income taxes;
    
    depreciation;
    
    preferred dividends; and
    
    operations of the Industrial properties, which are not material for separate
presentation.
   16




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##### Table of Contents



Third PartyThree Months Ended June 30, 2010
    
    Office
    
    
    Retail
    
    
    Land
    
    
    Management
    
    
    Multi-Family
    
    
    Other
    
    
    TotalNet rental property revenues
less rental property operating
expenses
    
    $
    14,992
    
    
    $
    6,735
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    615
    
    
    $
    22,342Fee income, net of reimbursed
expenses
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    1,971
    
    
    
    
    
    
    
    2,525
    
    
    
    4,622Residential lot, multi-family
unit, tract and outparcel sales,
net of cost
of sales, including gain on sale
of undepreciated investment
properties
    
    
    
    
    
    
    (8
    )
    
    
    175
    
    
    
    
    
    
    
    1,835
    
    
    
    876
    
    
    
    2,878Other income
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    190General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,795
    )
    
    
    
    
    
    
    (6,827
    )
    
    
    (8,622
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,286
    )
    
    
    (10,286
    )Depreciation and amortization of
non-real estate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (463
    )
    
    
    (463
    )Other expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,197
    )
    
    
    (3,197
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (586
    )
    
    
    
    
    
    
    (586
    )Funds from operations from
unconsolidated joint ventures
    
    
    2,426
    
    
    
    1,644
    
    
    
    727
    
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    4,842Income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (584
    )
    
    
    (584
    )Provision for income taxes from
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,227
    )
    
    
    (3,227
    )Funds from operations available to
common stockholders
    
    $
    17,418
    
    
    $
    8,404
    
    
    $
    1,028
    
    
    $
    176
    
    
    $
    1,294
    
    
    $
    (20,425
    )
    
    
    7,895Real estate depreciation and
amortization, including Companys
share of joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,549
    )Gain on sale of depreciated
investment properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59Net loss available to common
stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (8,595
    )
 17




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##### Table of Contents



Third PartyThree Months Ended June 30, 2009
    
    Office
    
    
    Retail
    
    
    Land
    
    
    Management
    
    
    Multi-Family
    
    
    Other
    
    
    TotalNet rental property revenues less rental property
operating expenses
    
    $
    15,233
    
    
    $
    6,334
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    369
    
    
    $
    21,936Fee income, net of reimbursed expenses
    
    
    
    
    
    
    
    
    
    
    285
    
    
    
    2,265
    
    
    
    
    
    
    
    1,592
    
    
    
    4,142Residential lot, multi-family unit, tract and
outparcel sales, net of cost
of sales, including gain on sale of undepreciated
investment properties
    
    
    
    
    
    
    1,126
    
    
    
    925
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,051Other income
    
    
    188
    
    
    
    909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188
    
    
    
    1,285General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,835
    )
    
    
    
    
    
    
    (10,139
    )
    
    
    (11,974
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,560
    )
    
    
    (10,560
    )Depreciation and amortization of non-real estate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (938
    )
    
    
    (938
    )Other expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,432
    )
    
    
    (4,432
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,500
    )
    
    
    
    
    
    
    (36,500
    )Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,498
    
    
    
    12,498Funds from operations from unconsolidated joint
ventures
    
    
    2,508
    
    
    
    1,598
    
    
    
    (3,064
    )
    
    
    
    
    
    
    (82
    )
    
    
    (15
    )
    
    
    945Impairment loss on investment in unconsolidated joint
ventures
    
    
    
    
    
    
    
    
    
    
    (27,000
    )
    
    
    
    
    
    
    (1,130
    )
    
    
    
    
    
    
    (28,130
    )Income attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (698
    )
    
    
    (698
    )Provision for income taxes from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,293
    )
    
    
    (11,293
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,227
    )
    
    
    (3,227
    )Funds from operations available to common stockholders
    
    $
    17,929
    
    
    $
    9,967
    
    
    $
    (28,854
    )
    
    $
    430
    
    
    $
    (37,712
    )
    
    $
    (26,655
    )
    
    
    (64,895
    )Real estate depreciation and amortization, including
Companys
share of joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,603
    )Gain on sale of depreciated investment properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185Net loss available to common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (81,313
    )
 Third PartySix Months Ended June 30, 2010
    
    Office
    
    
    Retail
    
    
    Land
    
    
    Management
    
    
    Multi-Family
    
    
    Other
    
    
    TotalNet rental property revenues less rental
property operating expenses
    
    $
    29,710
    
    
    $
    13,513
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,148
    
    
    $
    44,371Fee income, net of reimbursed expenses
    
    
    
    
    
    
    
    
    
    
    294
    
    
    
    4,066
    
    
    
    
    
    
    
    4,182
    
    
    
    8,542Residential lot, multi-family unit, tract and
outparcel sales, net of cost
of sales, including gain on sale of
undepreciated investment propertie
    
    
    
    
    
    
    4,585
    
    
    
    674
    
    
    
    
    
    
    
    4,011
    
    
    
    1,204
    
    
    
    10,474Other income
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    314General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,696
    )
    
    
    
    
    
    
    (14,944
    )
    
    
    (18,640
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,067
    )
    
    
    (20,067
    )Depreciation and amortization of non-real
estate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,034
    )
    
    
    (1,034
    )Other expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (466
    )
    
    
    
    
    
    
    (4,059
    )
    
    
    (4,525
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (586
    )
    
    
    
    
    
    
    (586
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (592
    )
    
    
    (592
    )Funds from operations from unconsolidated
joint ventures
    
    
    4,842
    
    
    
    3,447
    
    
    
    1,599
    
    
    
    
    
    
    
    162
    
    
    
    
    
    
    
    10,050Income attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,110
    )
    
    
    (1,110
    )Benefit for income taxes from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,132
    
    
    
    1,132Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,454
    )
    
    
    (6,454
    )Funds from operations available to common
stockholders
    
    $
    34,552
    
    
    $
    21,586
    
    
    $
    2,567
    
    
    $
    (96
    )
    
    $
    3,587
    
    
    $
    (40,321
    )
    
    
    21,875Real estate depreciation and amortization,
including Companys
share of joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,161
    )Gain on sale of depreciated investment
properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118Net loss available to common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (10,168
    )
 18




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##### Table of Contents



Third PartySix Months Ended June 30, 2009
    
    Office
    
    
    Retail
    
    
    Land
    
    
    Management
    
    
    Multi-Family
    
    
    Other
    
    
    TotalNet rental property revenues less rental
property operating expenses
    
    $
    28,937
    
    
    $
    12,464
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    724
    
    
    $
    42,125Fee income, net of reimbursed expenses
    
    
    
    
    
    
    
    
    
    
    285
    
    
    
    4,425
    
    
    
    
    
    
    
    3,248
    
    
    
    7,958Residential lot, multi-family unit, tract and
outparcel sales, net of cost
of sales, including gain on sale of
undepreciated investment properties
    
    
    
    
    
    
    1,804
    
    
    
    1,161
    
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    3,078Other income
    
    
    190
    
    
    
    1,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    815
    
    
    
    2,271General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,614
    )
    
    
    
    
    
    
    (18,122
    )
    
    
    (21,736
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,990
    )
    
    
    (20,990
    )Depreciation and amortization of non-real
estate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,906
    )
    
    
    (1,906
    )Other expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,978
    )
    
    
    (5,978
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,500
    )
    
    
    
    
    
    
    (36,500
    )Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,498
    
    
    
    12,498Funds from operations from unconsolidated
joint ventures
    
    
    4,861
    
    
    
    3,202
    
    
    
    (3,022
    )
    
    
    
    
    
    
    (118
    )
    
    
    (38
    )
    
    
    4,885Impairment loss on investment in
unconsolidated joint ventures
    
    
    
    
    
    
    
    
    
    
    (27,000
    )
    
    
    
    
    
    
    (1,130
    )
    
    
    
    
    
    
    (28,130
    )Income attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,110
    )
    
    
    (1,110
    )Provision for income taxes from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,352
    )
    
    
    (7,352
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,454
    )
    
    
    (6,454
    )Funds from operations available to common
stockholders
    
    $
    33,988
    
    
    $
    18,736
    
    
    $
    (28,576
    )
    
    $
    811
    
    
    $
    (37,748
    )
    
    $
    (44,552
    )
    
    
    (57,341
    )Real estate depreciation and amortization,
including Companys
share of joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,839
    )Gain on sale of depreciated investment
properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167,438Net income available to common stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    79,258
   
    
    Rental property operations, including discontinued;
    
    Reimbursements of third-party and joint venture personnel costs;
    
    Residential, tract and outparcel sales;
    
    Multi-family sales; and
    
    Gains on sales of investment properties.
  Reconciliation to Revenues on Condensed Consolidated Income Statements
    
    Three Months Ended June 30,
    
    
    Six Months Ended June 30,(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net rental property revenues less rental property operating expenses
    
    $
    22,342
    
    
    $
    21,936
    
    
    $
    44,371
    
    
    $
    42,125Plus rental property operating expenses
    
    
    15,393
    
    
    
    14,358
    
    
    
    30,054
    
    
    
    30,836Fee income, net of reimbursed expenses
    
    
    4,622
    
    
    
    4,142
    
    
    
    8,542
    
    
    
    7,958Reimbursements of third-party and joint venture personnel included in fee
income
    
    
    3,591
    
    
    
    4,030
    
    
    
    8,009
    
    
    
    8,258Residential lot, multi-family unit, tract, and outparcel sales, net of
cost of sales, including
gain on sale of undepreciated investment properties
    
    
    2,878
    
    
    
    2,051
    
    
    
    10,474
    
    
    
    3,078Less gain on sale of undepreciated investment properties
    
    
    (1,002
    )
    
    
    (746
    )
    
    
    (1,699
    )
    
    
    (955
    )Plus residential lot, multi-family unit, tract, and outparcel cost of sales
    
    
    6,383
    
    
    
    3,208
    
    
    
    23,449
    
    
    
    4,938Net rental property revenues less rental property operating expenses from
discontinued operations
    
    
    (1,743
    )
    
    
    (1,721
    )
    
    
    (3,626
    )
    
    
    (3,407
    )Other income
    
    
    190
    
    
    
    1,285
    
    
    
    314
    
    
    
    2,271Other income from discontinued operations
    
    
    (19
    )
    
    
    (46
    )
    
    
    (19
    )
    
    
    (53
    )Total consolidated revenues
    
    $
    52,635
    
    
    $
    48,497
    
    
    $
    119,869
    
    
    $
    95,049
 19




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##### Table of Contents



10. PROPERTY TRANSACTION AND PRESENTATION
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Rental property revenues
    
    $
    2,269
    
    
    $
    2,522
    
    
    $
    4,675
    
    
    $
    5,045Other income
    
    
    19
    
    
    
    46
    
    
    
    19
    
    
    
    53Rental property operating expenses
    
    
    (526
    )
    
    
    (801
    )
    
    
    (1,049
    )
    
    
    (1,638
    )Depreciation and amortization
    
    
    (192
    )
    
    
    (577
    )
    
    
    (766
    )
    
    
    (1,147
    )Interest expense
    
    
    
    
    
    
    (279
    )
    
    
    
    
    
    
    (1,505
    )Gain on sale of investment properties
    
    
    
    
    
    
    146
    
    
    
    
    
    
    
    146Gain on extinguishment of debt
    
    
    
    
    
    
    12,498
    
    
    
    
    
    
    
    12,498$
    1,570
    
    
    $
    13,555
    
    
    $
    2,879
    
    
    $
    13,452
  Operating property, net of accumulated depreciation of $8,201
    
    $
    76,970Notes and other receivables
    
    
    1,440Other assets
    
    
    65Total assets
    
    $
    78,475Accounts payable and accrued liabilties
    
    $
    684Deposits and deferred income
    
    
    1,300Total liabilities
    
    $
    1,984
 20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview:
     Highlights for the quarter ended June 30, 2010 included the following :
 
    
    Restructured the Terminus 200 venture, resulting in the full payment of the Companys
loan guarantee, a reduction of the Companys ownership from 50% to 20%, a change in the
Companys venture partner in the venture and an extension of the ventures construction
loan.
    
    Closed the sale of 22 units at 10 Terminus Place, generating gain of approximately $1.8
million.
    
    Sold 44 acres of land at King Mill Distribution Park generating gain of approximately
$876,000.
    
    Sold 5.8 acres of land at North Point/Westside generating gain of approximately
$134,000.
    
    Extended the loan on The Avenue Murfreesboro, a 751,000-square-foot power center in
suburban Nashville, to July 2013.
 21




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##### Table of Contents




    
    Executed a 459,000-square-foot lease at Jefferson Mill Business Park, bringing this
building to 100% leased.
    
    Executed leases for 150,000 square feet at Terminus 200.
    
    Executed or renewed leases covering an additional 171,000 square feet of office space
and 143,000 square feet of retail space.
 Other highlights subsequent to quarter end included the following :
 
    
    Sold San Jose MarketCenter, a 213,000-square-foot power center, for $85 million,
generating an estimated net gain of $6.5 million.
    
    Obtained a new $27 million loan on Meridian Mark Plaza, a 160,000-square-foot medical
office building in Atlanta, maturing in 2020 at an interest rate of 6%, and repaid the
prior $22 million loan, which had an interest rate of 8.27% and was scheduled to mature in
September 2010.
    
    Repaid the Companys $100 million Term Loan under its Credit Facility and eliminated
the interest rate swap associated with the term loan for a cost of approximately $9.2
million. Repayment of this loan correspondingly increased the Companys borrowing
capacity under its Credit Facility.
 Results of Operations:
 Rental Property Revenues.
 
    
    Increase of $1.4 million and $3.4 million in the three and six month 2010 periods,
respectively, related to 191 Peachtree Tower, where average economic occupancy for the
six month periods increased from 51% in 2009 to 72% in 2010;
    
    Increase of $521,000 and $915,000 in the three and six month 2010 periods,
respectively, from The Avenue Forsyth, where average economic occupancy for the six month
periods increased from 56% in 2009 to 67% in 2010;
    
    Decrease of $515,000 and $1.8 million in the three and six month 2010 periods,
respectively, from the American Cancer Society Center (the ACS Center), where average
economic occupancy for the six month periods decreased from 97% in 2009 to 84% in 2010.
This decrease is the result of the expiration of the Bell South lease in the third
quarter of 2009;
    
    Decrease of $473,000 in the six month 2010 period from Terminus 100 where average
economic occupancy for the six month periods decreased from 95% in 2009 to 92% in 2010.
The results for the three month 2010 period were fairly consistent with the three month
2009 period;
    
    Decrease of $112,000 and $548,000 in the three and six month 2010 periods,
respectively, related to The Avenue Carriage Crossing due to a decrease in revenues
associated with an anticipated reduction in real estate tax expense (and consequently
recoveries) for 2010 and a decrease in recoveries of tenant bill back expenses; and
    
    Decrease of $81,000 and $310,000 in the three and six month 2010 periods,
respectively, related to 8995 Westside Parkway where average economic occupancy for the
six month periods decreased from 53% in 2009 to 23% in 2010. As of June 30, 2010, the
building is vacant.
 Rental Property Operating Expenses.
 22




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##### Table of Contents




    
    Increase of $1.1 million and $95,000 in the three and six month 2010 periods,
respectively, at Terminus 100 due to an increase in bad debt expense between the periods,
partially offset by the receipt of a refund of prior year property taxes in the 2010
period and a decrease in occupancy in the 2010 period compared to 2009;
    
    Increase of $199,000 and $139,000 in the three and six month 2010 periods,
respectively, at 191 Peachtree, due to an increase in occupancy and an increase in real
estate taxes; and
    
    Decrease of $360,000 and $741,000 in the three and six month 2010 periods,
respectively, from The Avenue Carriage Crossing due to a lower accrual for 2010 taxes
based on an anticipated reduction in real estate tax expense mentioned above and a
reduction in insurance and other operating expenses.
 Fee Income.
 Multi-family Residential Sales and Cost of Sales
 Residential Lot and Outparcel Sales and Cost of Sales.
 Residential Lot Sales and Cost of Sales
 2010
    
    2009Consolidated projects
    
    
    7
    
    
    
    7Temco
    
    
    1
    
    
    
    CL Realty
    
    
    164
    
    
    
    66Total
    
    
    172
    
    
    
    73
  23




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##### Table of Contents



Outparcel Sales and Cost of Sales
 Interest and Other Income.
 General and Administrative Expense, Separation Expense and Reimbursements (G&A).
 
    
    Decrease in salaries and benefits of employees, excluding stock-based compensation, of
$739,000 and $1.2 million in the three and six month 2010 periods, respectively, due to a
decrease in the number of employees at the Company between the periods;
    
    Decrease of $531,000 and $542,000 in the three and six month 2010 periods,
respectively, in stock-based compensation expense, due in part to a decrease in the stock
price between June 30, 2009 and June 30, 2010, as several types of stock-based
compensation are expensed using the closing market price of stock as an estimate of the
value or as an input in the calculation of the value;
    
    Decrease of $173,000 and $256,000 in the three and six month 2010 periods,
respectively, related to corporate airplane costs, as the Companys airplane was sold in
2009;
    
    Decrease in separation expenses of $2.0 million and $2.3 million for the three and six
month 2010 periods, respectively, from expense that was recognized in 2009 for the lump
sum payment and for modifications of stock compensation awards related to the retirement
of the Companys former chief executive officer;
    
    Decrease of $439,000 and $249,000 in reimbursed salaries and expenses, as the square
footage of third party managed properties has decreased slightly between the 2010 and
2009 periods; and
    
    Capitalization of personnel costs to projects under development, which reduces G&A
expense, declined $644,000 and $2.0 million, as the level of development and
predevelopment projects has dropped between the periods, partially offsetting the
decreases noted above.
 Depreciation and Amortization.
 
    
    Decrease of $1.2 million for both the three and six month 2010 periods related to
Terminus 100. In 2009, the amortization of certain tenant assets was accelerated due to
reductions in space or early termination of leases, with no corresponding significant
adjustments in the 2010 periods;
    
    Decrease of $239,000 and $495,000 in the three and six month 2010 periods,
respectively, due to the sale of the Companys airplane in 2009;
 24




---



##### Table of Contents




    
    Decrease of $228,000 and $365,000 in the three and six month 2010 periods,
respectively, due to reduction in depreciation of furniture, fixtures and equipment for
the corporate offices from lower staff and less office space, as well as fully amortized
equipment;
    
    Increase of $543,000 and $1.4 million in the three and six month 2010 periods,
respectively, related to higher tenant improvement amortization from increased occupancy
at 191 Peachtree Tower;
    
    Increase of $668,000 and $681,000 in the three and six month 2010 periods,
respectively, at The Avenue Webb Gin due to accelerated amortization in 2010 of tenant
assets for tenants who terminated their leases prior to the originally scheduled end
date; and
    
    Increase of $241,000 and $548,000 in the three and six month 2010 periods,
respectively, at The Avenue Forsyth as the property became fully operational in May 2009,
and the first quarter of 2009 reflects partial occupancy.
 Interest Expense.
 Impairment Loss.
 Other Expense.
 Loss on Extinguishment of Debt.
 Benefit (Provision) for Income Taxes from Operations.
 25




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##### Table of Contents



Income from Unconsolidated Joint Ventures.
 
    
    Income from the CL Realty joint venture increased $24.0 million for both the three and
six month 2010 periods, compared to the same 2009 periods. CL Realty recognized an
impairment on one of its residential projects in the second quarter of 2009, the
Companys share of which was $2.6 million. In addition, the Company determined that it
had an other-than-temporary decline, in accordance with the definition in accounting
guidance, in its investment in CL Realty. Accordingly, the Company impaired its
investment in the joint venture asset by $20.3 million, also in the second quarter of
2009. No impairments have been recognized in 2010. The increases are also due to CL
Realty recognizing income from mineral deposits and oil and gas reserves on its land, in
addition to an increase in lot sales between 2010 and 2009;
    
    Increase in income from Temco Associates of $6.8 million and $7.6 million in the three
and six month 2010 periods, respectively, compared to the same 2009 periods. The Company
impaired its investment in Temco by $6.7 million in the second quarter of 2009 as it
determined that it had an other-than-temporary decline, in accordance with the
definition in accounting guidance, in its investment. No impairment was recognized in
2010. In addition, Temco received letter of credit proceeds in 2010, which also
increased income from the venture between the years; and
    
    Increase in income of $1.2 million for both the three and six month 2010 periods
compared to 2009 from the Glenmore Garden Villas (Glenmore) joint venture. The Company
determined that it had an other-than-temporary decline, in accordance with the
definition in accounting guidance, in its investment in Glenmore and impaired its
investment by $1.1 million in the second quarter of 2009. The assets of Glenmore were
sold in early 2010.
 Gain on Sale of Investment Properties.
 Discontinued Operations.
 Funds from Operations.
 26




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net Income (Loss) Available to Common Stockholders
    
    $
    (8,595
    )
    
    $
    (81,313
    )
    
    $
    (10,168
    )
    
    $
    79,258Depreciation and amortization:Consolidated properties
    
    
    14,372
    
    
    
    14,804
    
    
    
    27,693
    
    
    
    27,290Discontinued properties
    
    
    192
    
    
    
    577
    
    
    
    766
    
    
    
    1,147Share of unconsolidated joint ventures
    
    
    2,453
    
    
    
    2,174
    
    
    
    4,747
    
    
    
    4,332Depreciation of furniture, fixtures and equipment:Consolidated properties
    
    
    (462
    )
    
    
    (934
    )
    
    
    (1,029
    )
    
    
    (1,898
    )Discontinued properties
    
    
    (1
    )
    
    
    (4
    )
    
    
    (5
    )
    
    
    (8
    )Share of unconsolidated joint ventures
    
    
    (5
    )
    
    
    (14
    )
    
    
    (11
    )
    
    
    (24
    )(Gain) loss on sale of investment properties:Consolidated
    
    
    (1,061
    )
    
    
    (801
    )
    
    
    (1,817
    )
    
    
    (168,235
    )Discontinued properties
    
    
    
    
    
    
    (146
    )
    
    
    
    
    
    
    (146
    )Share of unconsolidated joint ventures
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    (12
    )Gain on sale of undepreciated investment properties
    
    
    1,002
    
    
    
    746
    
    
    
    1,699
    
    
    
    955Funds From Operations Available to Common
Stockholders
    
    $
    7,895
    
    
    $
    (64,895
    )
    
    $
    21,875
    
    
    $
    (57,341
    )Per Common Share  Basic and Diluted:Net Income (Loss) Available
    
    $
    (.09
    )
    
    $
    (1.58
    )
    
    $
    (.10
    )
    
    $
    1.54Funds From Operations
    
    $
    .08
    
    
    $
    (1.26
    )
    
    $
    .22
    
    
    $
    (1.11
    )Weighted Average Shares  Basic and Diluted
    
    
    101,001
    
    
    
    51,615
    
    
    
    100,538
    
    
    
    51,483
 Liquidity and Capital Resources:
  
    
    Cash from operations;
    
    Borrowings under our Credit Facility;
    
    Non-recourse mortgage notes payable on selected assets;
    
    Proceeds from equity offerings;
    
    Joint venture formations; and
    
    Strategic sales of assets.
  
    
    Property operations and corporate expenses;
    
    Expenditures on predevelopment and development projects;
 27




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##### Table of Contents




    
    Payments of tenant improvements and other leasing costs;
    
    Principal and interest payments on debt obligations;
    
    Dividends to common and preferred stockholders; and
    
    Property acquisitions.
 Financial Condition.
    Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 yearsContractual Obligations:Company long-term debt:Unsecured notes payable
    
    $
    140,169
    
    
    $
    169
    
    
    $
    140,000
    
    
    $
    
    
    
    $
    Mortgage notes payable
    
    
    440,209
    
    
    
    27,715
    
    
    
    263,617
    
    
    
    4,347
    
    
    
    144,530Interest commitments under notes payable (1)
    
    
    116,945
    
    
    
    34,762
    
    
    
    44,619
    
    
    
    18,947
    
    
    
    18,617Ground leases
    
    
    15,018
    
    
    
    98
    
    
    
    203
    
    
    
    213
    
    
    
    14,504Other operating leases
    
    
    2,103
    
    
    
    670
    
    
    
    989
    
    
    
    348
    
    
    
    96Total contractual obligations
    
    $
    714,444
    
    
    $
    63,414
    
    
    $
    449,428
    
    
    $
    23,855
    
    
    $
    177,747Commitments:Letters of credit
    
    $
    3,129
    
    
    $
    3,105
    
    
    $
    24
    
    
    $
    
    
    
    $
    Performance bonds
    
    
    3,433
    
    
    
    3,361
    
    
    
    72
    
    
    
    
    
    
    
    Unfunded tenant improvements and other
    
    
    13,329
    
    
    
    13,329
    
    
    
    
    
    
    
    
    
    
    
    Total commitments
    
    $
    19,891
    
    
    $
    19,795
    
    
    $
    96
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Interest on variable rate obligations is based on rates effective as of June 30, 2010, including the effect of interest rate swaps. Credit Facility Amendment
  28




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##### Table of Contents



Credit and TermFacilities
    
    Credit Facility
    
    Term FacilityApplicable Spread 
    
    Applicable Spread 
    
    Applicable Spread Leverage Ratio
    
    As Amended
    
    Before Amendment
    
    Before Amendment≤ 35%
    
    
    1.75
    %
    
    
    0.75
    %
    
    
    0.70
    %>35% but ≤ 45%
    
    
    2.00
    %
    
    
    0.85
    %
    
    
    0.80
    %>45% but ≤ 50%
    
    
    2.25
    %
    
    
    0.95
    %
    
    
    0.90
    %>50% but ≤ 55%
    
    
    2.25
    %
    
    
    1.10
    %
    
    
    1.05
    %>55%
    
    
    N/A
    
    
    
    1.25
    %
    
    
    1.20
    %
     Derivative Instruments and Hedging Activities
   29




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##### Table of Contents



Floating Rate,LIBOR-basedTerm Loan
    
    Borrowings
    
    TotalBalance, December 31, 2009
    
    $
    8,662
    
    
    $
    855
    
    
    $
    9,517Change in fair value
    
    
    358
    
    
    
    (499
    )
    
    
    (141
    )Balance, June 30, 2010
    
    $
    9,020
    
    
    $
    356
    
    
    $
    9,376
 Additional Financial Condition Information
       30




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##### Table of Contents



Cash Flows.
 Cash Flows from Operating Activities
 
    
    Increase of $15.7 million in net proceeds from multi-family sales, due to an increase in
condominium sales at the Companys 10 Terminus Place condominium project in Atlanta,
Georgia;
    
    Increase of $7.3 million in net proceeds from residential lot and outparcel sales, due
to an increase in the number of outparcels sold in the 2010 period;
    
    Decrease of $2.1 million in residential lot, outparcel and multi-family acquisition and
development expenditures due to a decrease in development activities;
    
    Decrease in cash paid for interest expense of $3.0 million, due to a decrease in average
borrowings between the 2010 and 2009 periods;
    
    Decrease of payments for general and administrative expenses, primarily due to a
decrease in salaries and benefits from a reduced number of employees and from reduced bonus
and profit sharing payments between the periods.
 Cash Flows from Investing Activities
 
    
    Proceeds from property sales, which were mainly land tract sales, increased $12.6
million;
    
    Property acquisition and development expenditures decreased $16.5 million, as the
Company currently does not have any significant projects under development; and
    
    Cash used in investing activities increased $17.3 million due to the payment of the debt
guarantee as a result of the restructuring of the Companys Terminus 200 LLC joint venture.
 Cash Flows from Financing Activities
 
    
    Net borrowings under the Credit Facility were $87.0 million in 2009, and there were no
borrowings or repayments on the Credit Facility in the first six months of 2010;
    
    Payments of loan issuance costs increased $1.7 million in the 2010 period due to the
payment of an administrative fee of approximately $1.6 million related to the amendment of
the Companys Credit Facility;
    
    Repayments of notes payable decreased $61.7 million in 2010. The Company satisfied the
San Jose MarketCenter note in the 2009 period for approximately $70.3 million. In the 2010
period, the Company repaid the $8.7 million Glenmore Garden Villas note in conjunction with
the sale of that property;
 31




---



##### Table of Contents




    
    Cash common dividends paid decreased $11.1 million due to a reduction in the dividend
per share amount from $0.25 per share in the first and second quarters of 2009 to $0.09 per
share in the first and second quarters of 2010. Additionally, the Company paid its
dividends in the first and second quarters of 2010 in a combination of cash and stock. In
the first quarter 2009, the Company paid its dividends in cash and began paying them in a
combination of cash and stock in the second quarter of 2009; and
    
    Distributions to noncontrolling interests decreased $4.7 million from the 2009 to the
2010 period primarily due to a distribution of $4.6 million in the 2009 period to the
partner in the Companys CP Venture Six joint venture.
 Dividends.
 Off Balance Sheet Arrangements
   Critical Accounting Policies
  32




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  33




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##### Table of Contents



COMMON STOCKTOTAL PURCHASES (1)
    
    
    
    PURCHASES INSIDE PLANTotal Number of
    
    
    Maximum Number ofShares Purchased as
    
    
    Shares That May YetTotal Number of
    
    
    Average Price Paid
    
    
    
    Part of Publicly
    
    
    Be Purchased UnderShares Purchased
    
    
    per Share
    
    
    
    Announced Plan (2)
    
    
    Plan (2)April 1 - 30
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    4,121,500May 1 - 31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,121,500June 1 - 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,121,500
    
    
    $
    
    
    
    
    
    
    
    
    
    4,121,500
 PREFERRED STOCKTOTAL PURCHASES
    
    
    
    PURCHASES INSIDE PLANTotal Number of
    
    
    Maximum Number ofShares Purchased as
    
    
    Shares That May YetTotal Number of
    
    
    Average Price Paid
    
    
    
    Part of Publicly
    
    
    Be Purchased UnderShares Purchased
    
    
    per Share
    
    
    
    Announced Plan (3)
    
    
    Plan (3)April 1 - 30
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    6,784,090May 1 - 31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,784,090June 1 - 30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,784,090
    
    
    $
    
    
    
    
    
    
    
    
    
    6,784,090
 
 (1)
    
    The purchases of equity securities generally relate to shares remitted by employees as
payment for option exercises or income taxes due. There was no activity for the second
quarter of 2010.(2)
    
    On May 9, 2006, the Board of Directors of the Company authorized a stock repurchase plan of
up to 5,000,000 shares of the Companys common stock. On November 18, 2008, the expiration of
this plan was extended to May 9, 2011. The Company has purchased 878,500 common shares under
this plan, and no purchases occurred during the second quarter of 2010.(3)
    
    On November 10, 2008, the stock repurchase plan was also expanded to include authorization to
repurchase up to $20 million of preferred shares. This program was expanded on November 18,
2008, to include all 4,000,000 shares of both the Companys Series A and B Preferred stock.
The Company has purchased 1,215,910 preferred shares under this plan, and no purchases
occurred in the second quarter of 2010. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
 
 Item 5. Other Information
 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers
  34




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##### Table of Contents



35




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##### Table of Contents



Item 6. Exhibits
 3.1
    
    Restated and Amended Articles of Incorporation of the Registrant, as amended
August 9, 1999, filed as Exhibit 3.1 to the Registrants Form 10-Q for the quarter
ended June 30, 2002, and incorporated herein by reference.3.1.1
    
    Articles of Amendment to Restated and Amended Articles of Incorporation of
the Registrant, as amended July 22, 2003, filed as Exhibit 4.1 to the Registrants
Current Report on Form 8-K filed on July 23, 2003, and incorporated herein by
reference.3.1.2
    
    Articles of Amendment to Restated and Amended Articles of Incorporation of
the Registrant, as amended December 15, 2004, filed as Exhibit 3(a)(i) to the
Registrants Form 10-K for the year ended December 31, 2004, and incorporated herein
by reference.3.1.3
    
    Articles of Amendment to Restated and Amended Articles of Incorporation of
the Registrant, as amended May 4, 2010, filed as Exhibit 3.1 to the Registrants
Current Report on Form 8-K filed May 6, 2010, and incorporated herein by reference.3.2
    
    Bylaws of the Registrant, as amended and restated June 6, 2009, filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K filed on June 8, 2009, and
incorporated herein by reference.10.1^
    
    Retirement and Consulting Agreement and General Release with James A. Fleming dated
August 9, 2010.11
    
    Computation of Per Share Earnings*31.1
    
    Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Data required by ASC 260, Earnings Per Share, is provided in Note 3 to the Condensed
Consolidated financial statements included in this report.^
    
    Indicates a management contract or compensatory plan or arrangement.
    
    Filed herewith. 36




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##### Table of Contents



SIGNATURES
  COUSINS PROPERTIES INCORPORATED/s/ James A. FlemingJames A. FlemingExecutive Vice President and Chief Financial Officer (Duly
Authorized Officer and Principal Financial Officer)  37