What changed in this filing

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Item 1. Business

2021-02-11 compared with 2020-02-05 · 70 added, 54 removed, 48 unchanged (72% of the section changed)

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Cousins conducts substantially all of its business through Cousins Properties LP ("CPLP"), a Delaware limited partnership.

Cousins owns approximately 99% of CPLP, and CPLP is consolidated with Cousins for financial reporting purposes.

Cousins owns in excess of 99% of CPLP, and CPLP is consolidated with Cousins for financial reporting purposes.

CPLP also owns 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.

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Company Strategy

Our strategy is to create value for our stockholders through ownership of the premier urban office portfolio in the Sunbelt markets of the United States, with a particular focus on Georgia, Texas, North Carolina, Arizona, and Florida.

Our strategy is to create value for our stockholders through ownership of the premier office portfolio in the Sun Belt markets of the United States, with a particular focus on Atlanta, Austin, Charlotte, Phoenix, Tampa, and Dallas.

This strategy is based on a disciplined approach to capital allocation that includes value-add acquisitions, selective development projects, and timely dispositions of non-core assets.

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To implement this strategy, we leverage our strong local operating platforms within each of our major markets.

Recent Notable Business Developments

In recent years, we have experienced several significant business developments resulting from transactions that represent a direct outgrowth of our company strategy to create value for our stockholders.

These transactions have driven significant portfolio growth and repositioning of our portfolio through entries into new core markets, exits of prior core markets, and rebalancing among all core markets.

During 2019, through a strategic merger with TIER REIT, Inc.

("TIER") ("Merger"), we added nine operating office properties containing 5.8 million square feet of space, two office properties under development, and seven strategically located land parcels on which up to 2.5 million square feet of additional space could be developed.

We believe that this Merger created a company with an attractive portfolio of trophy office assets balanced across the premier Sun Belt markets and enhanced our position in our existing markets of Austin and Charlotte, provided a strategic entry into Dallas, and balanced our exposure in Atlanta.

The Merger also enhanced growth and provided value-add opportunities as a result of TIER's active and attractive development portfolio and land bank.

Additional details of the Merger are discussed in "Item 1.

Business" of our 2019 Annual Report on Form 10-K .

During 2016, we completed a merger with Parkway Properties, Inc.

("Parkway") and simultaneous spin-off of the combined companies' Houston business into a separate public company, Parkway, Inc.

("New Parkway").

As a result of the merger and spin-off, we added 16 properties and 1.6 million square feet of space to our pre-merger portfolio on a net basis.

We added properties in our existing markets of Atlanta, Charlotte, and Austin and in new markets including Phoenix, Tampa, and Orlando.

Additional details of the merger with Parkway and spin-off are discussed in "Item 1.

Business" of our 201 6 Annual Report on Form 10-K .

2020 Activities

Our 2019 activities were highlighted by the merger with TIER REIT, Inc.

("TIER") on June 14, 2019 (the "Merger").

As a result of the Merger, we added nine operating office properties containing 5.8 million square feet of space, two office properties under development that are expected to add 620,000 square feet of space upon completion, and land parcels on which up to 2.5 million square feet of additional space may be developed.

Strategically, we believe that the Merger created an unmatched portfolio of trophy office assets balanced across the premier Sunbelt markets.

In addition, we believe that the Merger has enhanced our position in our existing markets of Austin and Charlotte, provided a strategic entry into Dallas, and balanced our exposure in Atlanta.

The Merger is also expected to enhance growth and to provide value-add opportunities as a result of TIER's active and attractive development portfolio and land bank.

As a part of this transaction, we issued $650 million in senior unsecured debt at a weighted average interest rate of 3.88%, which effectively replaced the majority of the TIER debt assumed and repaid in the Merger.

Immediately following the Merger, on June 14, 2019, we restated and amended our articles of incorporation to effect a reverse stock split of the issued and outstanding shares of our common stock pursuant to which, (1) each four shares of our issued and outstanding common stock were combined into one share of our common stock, and (2) the authorized number of our common stock was proportionally reduced to 175 million shares.

Fractional shares of common stock resulting from the reverse stock split were settled in cash.

Each four shares of our issued and outstanding preferred stock were combined into one share of our preferred stock;

fractional shares of preferred stock were redeemed without payout.

Immediately thereafter, we further amended our articles of incorporation to increase the number of authorized shares of our common stock from 175 million to 300 million shares.

In addition, during 2019 we engaged in other activities that were not directly related to the Merger.

The following is a summary of these activities:

During 2020, we completed acquisitions and dispositions of multiple operating properties and land parcels, completed one development project, and commenced development on one project.

At year-end, we had five development projects in process and our share of the total expected costs of these projects totaled $449.4 million.

The following is a summary of our significant 2020 activities:

Investment Activity

Completed the development and commenced operations of Dimensional Place, a 281,000 square foot office building in the South End submarket of Charlotte, that is the East Coast headquarters of Dimensional Fund Advisors ("DFA").

The project was developed and is operated in a 50-50 joint venture with DFA.

We purchased our partner's interest in Terminus Office Holdings LLC ("TOH") for $148 million in a transaction that valued Terminus 100 and Terminus 200 at $503 million , consolidated TOH, recorded the assets and liabilities at fair value, and recognized a gain of $92.8 million on this acquisition achieved in stages.

Continued development of 10000 Avalon, a 251,000 square foot building in Atlanta, adjacent to our existing 8000 Avalon building.

This project is being developed in a joint venture in which we hold a 90% interest, and the project is expected to begin operations in the first quarter of 2020.

Continued development of Domain 12, a 320,000 square foot office building in Austin that was acquired in the Merger.

This project is expected to begin operation in the second quarter of 2020.

Continued development of Domain 10, a 300,000 square foot office building in Austin that was acquired in the Merger.

This project is expected to begin operations in the fourth quarter of 2020.

• Acquired a 329,000 square foot creative office asset in the South End submarket of Charlotte known as The RailYard for a gross purchase price of $201.3 million, including acquisition costs.

• Acquired a 1,550 space parking garage adjacent to multiple of our Charlotte properties for $85.3 million, including acquisition costs.

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• Acquired 3.4 acres of land in the South End submarket of Charlotte for a gross purchase price of $28.1 million.

The Company anticipates developing a 600,000 to 700,000 square foot mixed-use development on the site to be called South End Station.

• Acquired 2.4 acres of land in the South End submarket of Charlotte for a purchase price of $18.8 million to be used for a future development and to be called 303 Tremont.

• Acquired 1.7 acres of land adjacent to existing Domain properties in Austin through a 90% owned joint venture for a purchase price of $11.0 million.

• Completed development and commenced operations of Domain 12, a 320,000 square foot office building in Austin that was acquired in the Merger.

• Continued development of Domain 10, a 300,000 square foot office building in Austin that was acquired in the Merger, which is in the final stages of development.

• Continued development of 120 West Trinity, a 352,000 square foot mixed-use property in Atlanta, which is in the final stages of development.

• Continued development of 10000 Avalon, a 251,000 square foot building in Atlanta, which is in the final stages of development.

This project is adjacent to our existing 8000 Avalon building and is being developed in a joint venture in which we hold a 90% interest.

• Continued development of 300 Colorado, a 358,000 square foot office building in downtown Austin.

This project is being developed in a joint venture in which we hold a 50% interest, and is expected to begin operations in early 2021.

Commenced development of 100 Mill, a 287,000 square foot office building in Tempe, Arizona.

This project is expected to begin operations in early 2022.

• Commenced development of 100 Mill, a 287,000 square foot office building in Tempe.

This project is being developed in a joint venture in which we hold a 90% interest and is expected to begin operations in early 2022.

Disposition Activity

• Sold Hearst Tower, a 966,000 square foot office tower in Charlotte, for gross proceeds of $455.5 million.

• Sold the Compa ny's 50% interest in Gateway Village, a 1 million square foot office property in Charlotte, for gross proceeds of $52.2 million which represented a 17% internal rate of return on our invested capital, as stipulated in the partnership agreement.

• Sold Woodcrest, a 386,000 square foot non-core office property in Cherry Hill, New Jersey that was acquired in the Merger, for gross proceeds of $25.3 million.

• Disposed of various non-core land holdings.

Portfolio Activity

• Leased or renewed 1.4 million square feet of office space.

Increased second generation net rent per square foot by 21.3% on a GAAP basis and 7.7% on a cash basis.

Increased same property net operating income by 2.6% on a GAAP basis and 4.8% on a cash basis.

Other Activity

Entered into a series of agreements and executed related transactions with Norfolk Southern Railway Company ("NS") in which we sold land to NS for $52.5 million, executed agreements to provide development and consulting services for NS's corporate headquarters for $37 million, and purchased 1200 Peachtree from NS for $82 million that is subject to a three-year lease with NS.

Executed a 15-year, 561,000 square foot lease for the corporate headquarters of Truist Financial Corporation ("Truist") at Hearst Tower in Uptown Charlotte.

The lease contained an option for Truist to purchase the building for $455.5 million.

This option has been exercised by Truist and the sale is expected to close in March 2020.

Sold air rights that cover eight acres in Downtown Atlanta for $13.25 million.

Disposed of various non-core land holdings, including a 9-acre tract of land in Atlanta.

• Increased second generation net rent per square foot by 27.2% on a straight-line basis and 13.1% on a cash basis.

• Increased same property net operating income by 0.7% on a cash basis.

Sustainability

We have been an advocate and practitioner of energy conservation measures and sustainability initiatives for many years, and we operate our business in a manner that seeks to advance energy efficiency and sustainability practices in every area of our company.

We pride ourselves on investing in trophy office buildings located in high-growth Sunbelt markets and managing these properties in a first-class manner while achieving outstanding operational efficiency.

We are committed to developing and acquiring high quality assets, operating them responsibly, and seizing innovative opportunities wherever possible.

In evaluating new acquisition opportunities, we focus carefully on the existing performance of the building in consumption of energy and water resources and the mitigation of resource consumption through recycling and other efforts.

We also evaluate the opportunities for improvement in these areas on a near and long term basis.

In addition, we carefully evaluate the proximity to transit options, with a strong preference for nearby bus and rail transit.

We review characteristics of existing buildings, including acquisition opportunities, to evaluate feasible improvements for operating efficiencies, including improvements in the existing performance of the building in consumption of energy and water resources and the mitigation of resource consumption through recycling and other efforts.

In addition, we evaluate the proximity to transit options, with a strong preference for nearby bus and rail transit.

When planning development projects, we take all of the foregoing into account, and we strive to design highly-sustainable buildings, generally taking advantage of the LEED and/or BOMA 360 certification process and designation.

For us, sustainability means developing and maintaining durable buildings that are operated in an environmentally and socially responsible manner, thereby encouraging office users to select us for their corporate operations, while enhancing the communities in which our buildings are located.

Over the long term, we believe properties that reflect these priorities will remain attractive to office users and investors, and as a result, we anticipate that this philosophy will continue to generate high-quality returns for our stockholders.

Over the long-term, we believe properties that reflect these priorities will remain attractive to office users and investors, and as a result, we anticipate that this philosophy will continue to create value for our stockholders.

In the development and operation of our office buildings, we look to relevant industry standards for guidelines on energy performance and other measures.

In particular, we are influenced by EnergyStar, LEED, and BOMA 360.

As part of our pragmatic approach to sustainability, we carefully consider the guidelines and ratings when designing our new developments and improvements to existing office buildings, and we seek to include the guidelines or ratings where we believe adoption of the guidelines or receipt of ratings will have a positive effect on our operational excellence and resource consumption.

We maintain a report reflecting our corporate social responsibility practices (including sustainability), which is available on the Sustainability page of our website at www.cousins.com.

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believe adoption of the guidelines or receipt of ratings will have a positive effect on our operational excellence and resource consumption.

We publish reports reflecting our corporate social responsibility practices (including sustainability), which is available on the Sustainability page of our website at www.cousins.com.

Since 2016, we have participated in the Global Real Estate Sustainability Benchmark ("GRESB") Annual Survey, which measures the environmental performance of property portfolios around the world and is endorsed by many large institutional investors.

In each of these GRESB Surveys, we received a rating of "Green Star," the highest rating within the Survey, with a total score each year above the GRESB overall participant average.

Our scores have steadily improved since 2016.

Since 2017, our total scores for each year have been above the GRESB average for the publicly listed office companies.

In addition, in each of 2019, 2018, and 2017, we scored above our peer group in the GRESB Public Disclosure assessment, which GRESB has indicated is intended to represent an overall measure of disclosure

by listed real estate companies on matters related to the environment, social, and governance practices, based on a selection of indicators aligned with the GRESB Annual Sustainability Benchmark assessment.

Our 2019 scores along with additional information on our sustainability and other corporate social responsibility initiatives is included under the caption “Sustainability and Corporate Responsibility" in the Proxy Statement relating to our 2020 Annual Meeting of Stockholders.

Since 2017, we scored above our peer group average in the GRESB Public Disclosure assessment, which GRESB has indicated is intended to represent an overall measure of disclosure by listed real estate companies on matters related to the environment, social, and governance practices, based on a selection of indicators aligned with the GRESB Annual Sustainability Benchmark assessment.

Our 2020 scores along with additional information on our sustainability and other corporate social responsibility initiatives will be included under the caption "Sustainability and Corporate Responsibility" in the Proxy Statement relating to our 2021 Annual Meeting of Stockholders.

Except for the documents specifically incorporated by reference into this Annual report on Form 10-K, information contained on our website or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K.

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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.

We typically manage this potential liability through performance of Phase I Environmental Site Assessments and, as necessary, Phase II Environmental Site Assessments which include environmental sampling on properties we acquire or develop.

Even with these assessments and testings, no assurance can be given that environmental liabilities do not exist, that the reports revealed all environmental liabilities, or that no prior owner created or permitted any material environmental condition not known to us.

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Risk Factors - "Environmental issues."

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, design and condition of our facilities, operational efficiencies, and availability of amenities.

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, proximity to public transit, reputation, design and condition of our facilities, operational efficiencies, and availability of amenities.

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;

Our executive offices are located at 3344 Peachtree Road NE, Suite 1800, Atlanta, Georgia 30326-4802.

On December 31, 2019 , we employed 331 people.

Human Capital

Our executive offices are located at 3344 Peachtree Road NE, Suite 1800, Atlanta, Georgia 30326-4802, and we maintain regional offices in each of our additional key markets of Charlotte, Austin, Phoenix and Dallas.

We recognize that our achievements and progress on our corporate strategy are made possible by the attraction, development and retention of our dedicated employees.

We regularly evaluate, modify, and enhance our internal processes and technologies to increase employee engagement, productivity and efficiency, which benefits our operations and performance.

We also invest in training and development opportunities to enhance our employees’ engagement, effectiveness and well-being.

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All of our employees are responsible for upholding our Code of Business Conduct and Ethics (the “Code”) and our Core Values, which includes the embrace of diversity in the backgrounds, cultures, interests and experiences within our Company, and we strive to have a workforce that reflects the diversity of qualified talent that is available in the markets we serve.

Our Code and Core Values are available on our website at www.cousins.com.

As of December 31, 2020, we had 316 full time employees, which include the seven executive officers listed on page 22, with women representing 39% of our workforce and with 39% of the workforce self-identifying as a minority.

In addition, as of December 31, 2020, 45% of our supervisors were women and 25% of our Board of Directors, including the Chair of our Audit Committee.

We also recognize the importance of experienced leadership, and as of December 31, 2020, the average tenure for the executive team was ten years.

We are committed to maintaining a healthy environment for our employees that enables them to be productive members of our team.

Our priorities include professional development, health and wellness and community engagement by our employees.

Among our engagement efforts, we conduct regular “townhall” events for all employees, where we update everyone on recent accomplishments and key initiatives, we regularly participate in employee engagement surveys and we sponsor community engagement opportunities and various health challenges.

We also strive to provide pay, benefits and services that help meet the varying needs of our employees.

Our general total rewards packages include market-competitive pay, performance-conditioned annual incentive compensation, stock- and performance-based long-term incentive compensation for key employees, healthcare and retirement benefits, paid time off, and family leave.

Through a combination of Company giving and direct voluntary participation by our employees, we donate funds to support meaningful organizations in communities across our geographical footprint.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business