What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-03 compared with 2021-02-11 · 127 added, 169 removed, 331 unchanged (47% of the section changed)

2 unchanged sentences

Overview of 2021 Performance and Company and Industry Trends

Cousins Properties Incorporated ("Cousins") (and collectively, with its subsidiaries, the "Company," "we," "our," or "us") is a publicly traded (NYSE:

CUZ), self-administered, and self-managed real estate investment trust, or REIT.

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

Cousins owns in excess of 99% of CPLP and consolidates CPLP.

CPLP owns Cousins TRS Services LLC, a taxable entity which owns and manages its own real estate portfolio and performs certain real estate related services for other parties.

Our strategy is to create value for our stockholders through ownership of the premier urban office portfolio in the Sun Belt markets, 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.

This strategy is based on a disciplined approach to capital allocation that includes opportunistic acquisitions, selective development projects, and timely dispositions of non-core assets with a goal of maintaining a portfolio of new and efficient properties with lower capital expenditure requirements.

This strategy is also based on a simple, flexible, and low-leveraged balance sheet that allows us to pursue compelling growth opportunities at the most advantageous points in the cycle.

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

Consistent with our strategy, on June 14, 2019, we merged with TIER REIT, Inc.

(“TIER”) in a stock-for-stock transaction (the "Merger").

As a result, we acquired an interest in 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 seven strategically located land parcels on which up to 2.5 mil lion square feet of additional space may be developed.

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 in the Merger.

We believe that this merger created a company with an attractive portfolio of trophy office assets balanced across the premier Sun Belt markets.

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 enhancing growth and providing value-add opportunities as a result of TIER's active and attractive development portfolio and land bank.

As of December 31, 2020, our portfolio of real estate assets consisted of interests in 36 operating properties (35 office and one mixed-use), containing 19.4 million square feet space, and five projects (four office and one mixed-use) under active development.

During 2020, we completed multiple strategic acquisitions in our Charlotte market.

During the fourth quarter, we purchased The RailYard, a 329,000 square foot operating property, for $201.3 million, including acquisition costs.

In addition to The RailYard, we also acquired South End Station, a 3.4 acre parcel of land, and 303 Tremont, a 2.4 acre parcel of land, in the South End submarket for a combined gross purchase price of $46.9 million.

During the second quarter, we purchased a 1,550 space parking garage adjacent to multiple of our properties for $85.3 million, including acquisition costs.

We believe that collectively the investments create an advantageous concentration with compelling synergies in one of the best submarkets in the Sun Belt.

During 2020, we completed multiple dispositions of operating properties and interests in joint ventures.

The most significant dispositions were as follows:

• In March 2020, we sold Hearst Tower, a 966,000 square foot office property in Charlotte, to Truist Financial Corporation ("Truist") for gross sales proceeds of $455.5 million upon execution of the purchase option included in the 561,000 square foot lease signed with Truist in 2019.

• In March 2020, we sold our interest in Charlotte Gateway Village, LLC ("Gateway"), a 50-50 joint venture with Bank of America Corporation ("BOA"), to BOA for $52.2 million which represented a 17% internal rate of return on our invested capital, as stipulated in the partnership agreement.

• In February 2020, we sold Woodcrest, a 386,000 square foot non-core office property in Cherry Hill, New Jersey that was acquired in the Merger, for a gross sales price of $25.3 million.

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

During 2021, we completed multiple strategic acquisitions of operating properties and land parcels and entered into two joint ventures.

We acquired 725 Ponce, a 372,000 square foot office property in Midtown Atlanta, for a gross price of $300.2 million;

Heights Union, a 294,000 square foot office property in Tampa, for a gross price of $144.8 million;

and our partners' 50% interest in 300 Colorado, a 369,000 square foot office building in downtown Austin, for a gross price of $162.5 million.

We also acquired a 0.7 acre land parcel in Atlanta for a gross price of $10.0 million related to a potential future development in Midtown Atlanta and a 0.2 acre land parcel in Atlanta, adjacent to our 3344, 3348, and 3350 operating properties, for a gross price of $8.0 million that is held in a 95% owned consolidated joint venture.

We entered into a 50/50 joint venture to develop Neuhoff, a mixed-use project in Nashville, which will include 448,000 square feet of office and retail space as well as 542 multi-family units, for an estimated investment of $281.3 million at our share.

In addition, we entered into a 50/50 joint venture to own 715 Ponce, a land parcel adjacent to 725 Ponce, with an initial contribution of $4.0 million.

During 2021, we completed multiple dispositions of operating properties and interests in joint ventures, using the proceeds to fund the investment activity mentioned above.

We sold 816 Congress, a 435,000 square foot office building in downtown Austin, for a gross price of $174.0 million;

One South at the Plaza, an 891,000 square foot office property in Charlotte, for a gross price of $271.5 million;

Burnett Plaza, a one million square foot office building in Fort Worth, for a gross price of $137.5 million;

and a 0.7 acre land parcel in Phoenix, adjacent to our 100 Mill development, to a hotel developer for a gross price of $6.4 million.

In addition, we sold our 50% investment in Dimensional Place, a 281,000 square foot office property in Charlotte, for a gross price of $60.8 million.

In 2021, we leased or renewed 2.1 million square feet of office space.

The weighted average net effective rent per square foot, representing base rent less operating expense reimbursements and leasing costs, for new or renewed non-amenity leases with terms greater than one year was $24.50 per square foot.

The weighted average net effective rent per square foot, representing base rent excluding operating expense reimbursements and leasing costs, for new or renewed non-amenity leases with terms greater than one year, was $25.55 per square foot.

Cash-basis net effective rent per square foot increased 15.1% on spaces that had been previously occupied in the past year.

Cash-basis net effective rent represents net rent at the end of the term paid by the prior tenant compared to the net rent at the beginning of the term paid by the current tenant.

Our same property net operating income for the year decreased 0.5% and increased 0.7% on a cash basis.

As a result of the COVID-19 pandemic, we have entered into lease amendments with certain tenants to provide payment deferrals without lease extensions.

Table of C ontents

In addition, due to state and local regulations responding to the COVID-19 pandemic, we have seen changes in physical occupancy at our properties which is materially impacting net operating income from parking.

Our same property cash basis net operating income adjusted for payment deferrals and excluding parking for the year increased 4.5%.

Our same property net operating income for the year decreased 0.5% on a straight-line basis and increased 3.5% on a cash-basis.

On a regular basis we review and, as appropriate, revise our corporate contingency plan, which addresses the steps necessary to respond to an unexpected interruption of business, including the unavailability of our corporate office space.

2 unchanged sentences

We also have worked closely with essential vendors, including the contractors and others involved in our development projects, to assess potential impact of appropriate and necessary distancing measures upon our operations and our development delivery timelines.

During 2021, many, but not all, of our tenants began to bring employees back to the office at least a few days a week, decreasing the time their teams were working remotely and increasing the physical occupancy at our properties.

Although the impact to our business of the COVID-19 pandemic has not been severe to date, the long-term impact of the pandemic on our tenants or prospective tenants and the world-wide economy is uncertain and will depend on the scope, severity, and duration of the pandemic.

1 unchanged sentence

Market Conditions

We believe that the Sun Belt region, and in particular the six core Sun Belt markets in which we operate, possess some of the most attractive economic and real estate fundamentals in the nation.

We believe that the Sun Belt region, and in particular the seven core Sun Belt markets in which we operate, possess some of the most attractive economic and real estate fundamentals in the nation.

Our markets are located in states that lead the nation in new job growth and net migration as residents relocate from the Northeast, Midwest, and West Coast to our markets.

This migration, when combined with low levels of new supply, has led to steady office absorption and positive rent growth, supporting healthy office fundamentals.

This migration, when combined with relatively low levels of new supply, has led to steady office absorption and positive rent growth, supporting healthy office fundamentals.

We believe that we are well positioned to benefit from, and ultimately outperform in, the current real estate environment.

Our Atlanta portfolio totals 7.9 million square feet, representing 39.8% of our Net Operating Income for the fourth quarter of 2021 and was 89.1% leased at December 31, 2021.

In addition, we h ad two projects under development i n Atlanta at December 31, 2020, one office property and one mixed-use property, in which we hold 90% and 20% interests, respectively.

Decline in nonfarm employment in Atlanta for the year ended December 31, 2020 was 3.0%, below the national average of 6.0%, and construction as a percentage of the total market square footage was 2.0% at year end.

Our portfolio is well located, primarily in the Midtown, Buckhead, and Central Perimeter submarkets, with direct access to mass transit.

Market-wide Class A leasing activity in Atlanta represented 51.3% of total leasing activity in 2021 while representing only 40.7% of total inventory, and construction as a percentage of the total market square footage was 3.0% at December 31, 2021.

Atlanta recorded its highest annual total for construction completions in market history, delivering 3.4 million square feet of new product in 2021;

of which, 81% has already been leased.

We believe our portfolio of operating assets and land holdings for future development, which is well located primarily in the Midtown, Buckhead, and Central Perimeter submarkets, with direct access to mass transit, is well positioned to meet the strong demand in the market.

Our Austin portfolio totals 4.2 million square feet, representing 26.8% of our Net Operating Income for the fourth quarter of 2021 and was 95.5% leased at December 31, 2021.

In addition, we have two projects under development in Austin, one owned in a 50-50 joint venture and one wholly-owned that together total 658,000 square feet and are a combined 92% leased.

Decline in nonfarm employment in Austin for the year ended December 31, 2020 was 1.1%, below the national average of 6.0%, and construction as a percentage of the total market square footage was 7.6%.

Our portfolio is predominantly in the central business district and Northwest submarket where vacancy is 10.5% and 9.3%, respectively.

We believe that our dominant presence in Austin, combined with strong employment relative to the rest of the nation is favorable for our existing portfolio.

In addition, we have two projects under development in Austin.

Domain 9 is a 338,000 square foot project, located in the Domain submarket, and the office portion is 100% leased.

300 Colorado, a 369,000 square foot office property, is located in the central business district and is 88% leased.

Market-wide Class A leasing activity in Austin represented 55.8% of total leasing activity in 2021 while representing only 40.9% of total inventory, and construction as a percentage of the total market square footage was 13.1% at December 31, 2021.

Our portfolio is predominantly in the central business district and Domain submarket where vacancy is 18.7% and 6.0%, respectively.

We believe that our dominant presence in Austin, combined with strong demand for Class A office space, is favorable for our existing portfolio.

Our Charlotte portfolio totals 1.4 million square feet, representing 9.1% of our Net Operating Income for the fourth quarter of 2021 and was 96.3% leased at December 31, 2021.

Decline in nonfarm employment in Charlotte for the year ended December 31, 2020 was 5.4%, below the national average of 6.0%, and construction as a percentage of the total market square footage was 6.1%.

Class A leasing activity in Charlotte represented 47.4% of total leasing activity in 2021 while representing only 41.5% of total inventory, and construction as a percentage of the total market square footage was 8.1% at December 31, 2021.

Our portfolio is located in the Uptown and South End submarkets where rent growth has significantly surpassed the national average.

The overall market has benefited from Charlotte's strong population growth, which has increased at three times the national rate over the past decade.

Strong demand and favorable economics have spurred a high level of new development across the market, specifically in Uptown where approximately 2.7 million square feet is currently under construction.

Strong demand and favorable economics have spurred a high level of new development across the market, specifically in Uptown and South End where approximately 3.0 million square feet is currently under construction.

Our Tampa portfolio totals 2.0 million square feet, representing 9.0% of Net Operating Income for the fourth quarter of 2021 and was 93.1% leased at December 31, 2021.

Market-wide Class A leasing activity in Tampa represented 40.9% of total leasing activity in 2021 while representing only 26.5% of total inventory, and construction as a percentage of the total market square footage was 1.0% at December 31, 2021.

Metro-wide, the Tampa office market is experiencing low vacancy rates, and the Westshore submarket, where the majority of our portfolio is located, continues to achieve some of the highest rents in the metropolitan area, in part due to its central location and proximity to the Tampa airport.

Our Phoenix portfolio totals 1.3 million square feet, representing 7.7% of our Net Operating Income for the fourth quarter of 2021 and was 92.2% leased at December 31, 2021.

Decline in nonfarm employment in Phoenix for the year ended December 31, 2020 was 2.6%, below the national average of 6.0%, and construction as a percentage of the total market square footage was 1.5%.

We have one project under development in Phoenix - 100 Mill, a 287,000 square foot project, is 81% leased.

Market-wide Class A leasing activity in Phoenix represented 38.3% of total leasing activity in 2021 while representing only 33.6% of total inventory, and construction as a percentage of the total market square footage was 2.2% at December 31, 2021.

Phoenix has experienced population growth at more than twice the national average, more than two-thirds of which was from new residents from outside the metropolitan area.

Our portfolio is located in the Tempe submarket, in close proximity to Arizona State University and its 80,000 students, where Class A office vacancy is 8.6%.

Table of C ontents

Our Tampa portfolio totals 1.7 million square feet, representing 7.8% of Net Operating Income for the fourth quarter of 2020 and was 93.4% leased at December 31, 2020.

Decline in nonfarm employment in Tampa for the year ended December 31, 2020 was 4.0%, below the national average of 6.0%, and construction as a percentage of the total market square footage was 1.3%.

Metro-wide, the Tampa office market is experiencing low vacancy rates, and the Westshore submarket, where our portfolio is located, continues to achieve some of the highest rents in the metropolitan area, in part due to its central location and proximity to the Tampa airport.

Our Dallas portfolio totals 516,000 square feet, representing 3.0% of Net Operating Income for the fourth quarter of 2021 and was 91.3% leased at December 31, 2021.

Decline in nonfarm employment in Dallas for the year ended December 31, 2020 was 2.5%, below the national average of 6.0%, and construction as a percentage of the total market square footage was 1.9%.

Critical Accounting Policies

Market-wide Class A leasing activity in Dallas represented 49.5% of total leasing activity in 2021 while representing only 44.0% of total inventory, and construction as a percentage of the total market square footage was 3.0% at December 31, 2021.

Our Nashville portfolio includes a mixed-used development of 448,000 square feet of commercial space and 542 residential units located in the Germantown submarket.

Market-wide Class A leasing activity in Nashville represented 61.1%

of total leasing activity in 2021 while representing only 33.1% of total inventory, and construction as a percentage of total market square footage was 10.2%.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP as outlined in the Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification ("ASC"), and the notes to consolidated financial statements include a summary of the significant accounting policies for the Company.

21 unchanged sentences

We periodically enter into amendments to our leases.

When a lease is amended, we need to determine whether (1) an additional right of use not included in the original lease is being granted as a result of the modification and (2) there is an

Table of C ontents

increase in the lease payments that is commensurate with the standalone price for the additional right of use.

When a lease is amended, we need to determine whether (1) an additional right of use not included in the original lease is being granted as a result of the modification and (2) there is an increase in the lease payments that is commensurate with the standalone price for the additional right of use.

If both of those conditions are met, the amendment is accounted for as a separate contract.

2 unchanged sentences

Termination options in some of our leases allow the customer to terminate the lease prior to the end of the lease term under certain circumstances.

Termination options require advance notification from the tenant and payment of a termination fee that reimburses us for a portion of the remaining rent under the original lease term and the undepreciated lease inception costs such as commissions, tenant improvements and lease incentives.

costs such as commissions, tenant improvements and lease incentives.

Termination fee income, included in rental property revenue, is recognized on a straight-line basis from the date of the executed termination agreement through lease expiration when the amount of the fee is determinable and collectability of the fee is reasonably assured.

26 unchanged sentences

(i) the value associated with avoiding the cost of originating the acquired in-place leases;

(ii) the value associated with lost revenue related to tenant reimbursable operating

Table of C ontents

costs estimated to be incurred during the assumed lease-up period;

(ii) the value associated with lost revenue related to tenant reimbursable operating costs estimated to be incurred during the assumed lease-up period;

and (iii) the value associated with lost rental revenue from existing leases during the assumed lease-up period.

32 unchanged sentences

If the fair value of the investment is less than the carrying value of the investment, we determine whether the impairment is temporary or other than temporary.

If we assess the impairment to be temporary, we do not record

Table of C ontents

an impairment charge.

If we assess the impairment to be temporary, we do not record an impairment charge.

If we conclude that the impairment is other than temporary, we record an impairment charge.

13 unchanged sentences

Determination of when construction of a project is substantially complete and held available for occupancy requires judgment.

We consider projects and/or project phases to be both substantially complete and held for occupancy at the earlier of the date on which the project or phase reached economic occupancy of 90% or one year after its initial occupancy.

Our judgment of the date the project is substantially complete has a direct impact on our operating expenses and net income for the period.

Stock-based Compensation

We have several types of stock-based compensation plans.

For market-based awards, we are required to estimate fair values on the grant date (for equity-classified awards) and at each quarter-end (for liability-classified awards).

The fair values of these awards are estimated using complex pricing valuation models that require a number of estimates and assumptions.

For performance-based awards contingent on our future earnings, we must estimate future earnings quarterly and adjust the compensation costs accordingly.

We use considerable judgments in determining the fair value of market-based awards as well as estimating our progress towards performance-based awards.

Compensation expense associated with these awards could vary significantly based upon these estimates.

Table of C ontents

Results of Operations For The Year Ended December 31, 2021

Our financial results for the year ended December 31, 2020 have been affected by the various acquisitions, dispositions, and completed developments during 2020 as well as the Merger and transactions with Norfolk Southern Railway Company ("NS") in 2019.

Our financial results for the year ended December 31, 2021 have been affected by the various acquisitions, dispositions, and development activities during 2021 as well as the Merger and transactions with Norfolk Southern Railway Company ("NS") in 2019.

Net income available to common stockholders for the year ended 2021 and 2020 was $278.6 million and $237.3 million, respectively.

3 unchanged sentences

The following results include the performance of our Same Property portfolios.

Our Same Property portfolios include office properties that have been fully operational in each of the comparable reporting periods.

A fully operational property is one that has achieved 90% economic occupancy for each of the periods presented or has been substantially complete and owned by us for each of the periods presented.

Same Property amounts for the 2020 versus 2019 comparison are from properties that were owned as of January 1, 2019 through December 31, 2020.

Our Same Property portfolios include office properties that were stabilized and owned by us for the entirety of each comparable reporting periods presented.

A stabilized property is one that has achieved 90% economic occupancy or has been substantially complete and owned by us for one year.

Same Property amounts for the 2021 versus 2020 comparison are from properties that were stabilized and owned as of January 1, 2020 through December 31, 2021.

We use Net Operating Income ("NOI"), a non-GAAP financial measure, to measure the operating performance of our properties.

10 unchanged sentences

Same Property $ 610,918 $ 605,765 $ 5,153 1 %

Legacy TIER Properties 207,302 113,115 94,187 83 %

Other Non-Same Property 71,889 61,076 10,813 18 %

$ 721,883 $ 628,751 $ 93,132 15 %

Non-Same Property 123,040 112,283 10,757 10 %

Termination Fee Income 5,105 3,835 1,270 33 %

Total Rental Property Revenues $ 739,063 $ 721,883 $ 17,180 2 %

Rental Property Operating Expenses

Same Property $ 215,361 $ 207,856 $ 7,505 4 %

Legacy TIER Properties 76,238 42,441 33,797 80 %

Other Non-Same Property 21,741 16,959 4,782 28 %

$ 250,850 $ 222,146 $ 28,704 13 %

Non-Same Property 44,100 44,811 (711) (2) %

3344 Peachtree Legal Expense Recovery — (1,817) 1,817 (100) %

Total Rental Property Operating Expenses $ 259,461 $ 250,850 $ 8,611 3 %

Net Operating Income

Same Property NOI $ 395,557 $ 397,909 $ (2,352) (1) %

Legacy TIER Property NOI 130,874 70,071 60,803 87 %

Non-Same Property NOI 78,940 67,472 11,468 17 %

3344 Peachtree Legal Expense Recovery — 1,817 (1,817) (100) %

Total NOI $ 474,497 $ 467,198 $ 7,299 2 %

Same property rental property revenues decreased between 2020 and 2019 primarily due to a decrease in 2020 parking revenues resulting from decreased physical occupancy at our properties.

Same property rental property operating expenses decreased between 2020 and 2019 primarily due to a decrease in expenses at properties resulting from lower physical occupancy in 2020.

Revenues and expenses for Legacy TIER properties represent amounts recorded for the properties acquired in the June 2019 Merger.

Table of C ontents

Revenues and expenses of Other Non-Same Property increased between 2020 and 2019 primarily as a result of the addition of 1200 Peachtree in March 2019 and of Terminus, which was consolidated in October 2019 when we purchased our partner's interest in Terminus Office Holdings LLC ("TOH"), partially offset by the sale of Hearst Tower in March of 2020.

Same Property rental property revenues increased between 2021 and 2020 primarily due to the increased occupancy at Corporate Center and 3344 Peachtree, offset by a decrease in occupancy at 3350 Peachtree.

Same property rental property operating expenses increased between 2021 and 2020 primarily due to an Atlanta real estate tax credit received in 2020 and an increase in physical occupancy.

Revenues of Non-Same Property increased between 2021 and 2020 primarily as a result of the stabilization of operations at the recently completed developments at the Domain and 10000 Avalon and the addition of The RailYard in December 2020, 725 Ponce in July 2021, Heights Union in October 2021, and 300 Colorado in December 2021, partially offset by the sale of Hearst Tower in 2020 and the sales of One South at the Plaza, Burnett Plaza, and 816 Congress in 2021.

Fee income decreased $2.7 million (14.6%) between 2021 and 2020 primarily driven by timing of fee income related to the 2019 transactions with NS.

General and Administrative Expenses

General and administrative expenses decreased $10.0 million (26.9%) between 2020 and 2019 primarily driven by long-term compensation expense decreases as a result of fluctuations in our common stock price for our liability-classified awards.

General and administrative expenses increased $2.3 million (8.5%) between 2021 and 2020 primarily driven by changes in stock compensation expense related to liability-classified awards, most of which became fully earned as of December 31, 2021.

Interest Expense

Interest expense, net of amounts capitalized, increased $6.6 million (12.3%) between 2020 and 2019 primarily due to interest incurred on the unsecured senior notes issued in June 2019.

Interest expense, net of amounts capitalized, increased $6.4 million (10.6%) between 2021 and 2020 primarily due to a decrease in interest capitalized in 2021 as a result of the start of preliminary operational activity for projects completing development in the second and third quarters of 2021 and an increase in interest related to the increased borrowings from the amended and restated Term Loan and an increase in our average outstanding balance on our Line of Credit, partially offset by lower interest rates compared to 2020.

Depreciation and Amortization

4 unchanged sentences

Same Property $ 242,352 $ 240,116 $ 2,236 1 %

Legacy TIER Properties 100,247 55,192 45,055 82 %

Other Non-Same Property 30,649 37,640 (6,991) (19) %

Non-Same Property 45,117 47,844 (2,727) (6) %

Non-Real Estate Assets 623 688 (65) (9) %

Total Depreciation and Amortization $ 288,092 $ 288,648 $ (556) — %

Depreciation and amortization for Legacy TIER properties represent amounts recorded on the properties acquired in the June 2019 Merger.

Depreciation and amortization of Other Non-Same Property decreased between 2020 and 2019 primarily as a result of the sale of Hearst in the first quarter of 2020;

offset by Terminus, which was consolidated in the fourth quarter of 2019 when we purchased our partner's interest in TOH.

Transaction Costs

Included in transaction costs in both 2020 and 2019 are the costs associated with the Merger.

These costs included legal, accounting, and financial advisory fees as well as the cost of due diligence work and the costs of combining the operations of TIER with the Company.

Table of C ontents

Depreciation and amortization of Same Property increased between 2021 and 2020 primarily due to the accelerated depreciation of tenant improvements owned by us resulting from an early termination at the Domain.

Depreciation and amortization of Non-Same Property decreased between 2021 and 2020 primarily due to the sales of One South at the Plaza and Burnett Plaza in 2021, partially offset by the recently completed developments at the Domain and 10000 Avalon and the additions of The RailYard in December 2020 and 725 Ponce in July 2021.

Income from Unconsolidated Joint Ventures

3 unchanged sentences

Net operating income

Same Property $ 6,203 $ 5,795 $ 408 7 %

Non-Same Property 13,020 13,041 (21) — %

Termination fee income 81 9 72 800 %

2 unchanged sentences

Interest expense (2,911) (2,071) (840) (41) %

Net loss on sale of investment property (148) (15) (133) (887) %

Net gain (loss) on sale of investment property (39) (148) 109 74 %

Income from unconsolidated joint ventures $ 6,801 $ 7,947 $ (1,146) (14) %

Net operating income, depreciation and amortization, and interest expense from unconsolidated joint ventures decreased between 2020 and 2019 primarily due to the consolidation of Terminus in October 2019 when we purchased our partner's interest in TOH and the sale of our interest in Gateway Village in March of 2020.

Income from unconsolidated joint ventures decreased between 2021 and 2020 primarily due to increased interest from the issuance of the Carolina Square $135.7 million non-recourse mortgage note which was used to fund the repayment in full of its $77.5 million construction loan and an increase in depreciation expense from 300 Colorado which began operations in 2021 prior to being consolidated.

Gain on Sales of Investments in Unconsolidated Joint Ventures

The gain on sales of investments in unconsolidated joint ventures for the year ended December 31, 2021 primarily includes the sale of our interest in the Dimensional Place joint venture.

The gain on investment property transactions for the year ended December 31, 2020 primarily includes the sale of our interests in the Wildwood Associates and Gateway Village joint ventures.

The capitalization rate of Gateway Village was not a determinant of the sales price as, per the joint venture agreement, our interest was valued at a 17% internal rate of return on our invested capital.

There was no capitalization rate associated with the sale of our interest in the Wildwood Associates joint venture as the underlying asset was land.

Gain on Investment Property Transactions

The gain on investment property transactions for the year ended December 31, 2020 includes the sale of Hearst Tower.

The combined sales prices of the Heart Tower and Woodcrest dispositions represented a weighted average capitalization rate of 5.1%.

The gain on investment property transactions for the year ended December 31, 2021 primarily includes the sales of 816 Congress in December 2021, One South at the Plaza in July 2021, and Burnett Plaza in April 2021, as well as the gain resulting from the consolidation of 300 Colorado in December 2021.

The gain on investment property transactions for the year ended December 31, 2020 primarily includes the sale of Hearst Tower.

The combined sales prices of the 816 Congress, One South at the Plaza, and Burnett Plaza dispositions in 2021 and the Hearst Tower and Woodcrest dispositions in 2020 represented weighted average capitalization rates of 5.4% and 5.1%, respectively.

Capitalization rates are calculated by dividing projected annualized NOI by the sales price.

1 unchanged sentence

Net income attributable to noncontrolling interests includes the outside parties' share of the net income of CPLP as well as that of certain other consolidated entities.

Net income attributable to noncontrolling interests decreased $1.4 million (63.1%) between 2020 and 2019 primarily driven by the redemption of 1.7 million limited partnership units in CPLP completed in the first quarter of 2020, partially offset by the increase in net income in 2020.

Table of C ontents

Net income attributable to noncontrolling interests decreased $426,000 (51.0%) between 2021 and 2020 primarily driven by the redemption of 1.7 million limited partnership units in CPLP completed in the first quarter of 2020, partially offset by the increase in net income in 2021.

Funds from Operations

The table below shows Funds from Operations Available to Common Stockholders (“FFO”), a non-GAAP financial measure, and the related reconciliation to net income available to common stockholders for the Company.

The Company calculates FFO in accordance with the National Association of Real Estate Investment Trusts’ ("NAREIT") definition, which is net income available to common stockholders (computed in accordance with GAAP), excluding extraordinary items, cumulative effect of change in accounting principle and gains on sale or impairment on depreciable property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

The Company calculates FFO in accordance with Nareit's definition, which is net income available to common stockholders (computed in accordance with GAAP), excluding extraordinary items, cumulative effect of change in accounting principle and gains on sale or impairment on depreciable property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

FFO is used by industry analysts and investors as a supplemental measure of a REIT’s operating performance.

17 unchanged sentences

Partners' share of real estate depreciation (929) — (0.01) (742) — —

(Gain)/loss on sale of depreciated properties:

Loss (gain) on sale of depreciated properties:

Consolidated properties (152,611) — (1.01) (90,105) — (0.61)

3 unchanged sentences

Funds From Operations $ 409,201 148,891 $ 2.75 $ 413,247 148,636 $ 2.78

Table of C ontents

Net Operating Income

5 unchanged sentences

NOI excludes corporate general and administrative expenses, interest expense, depreciation and amortization, impairments, gains/loss on sales of real estate, and other non-operating items.

The following table reconciles net income (loss) to NOI for consolidated properties for each periods (in thousands):

The following table reconciles net income to NOI for consolidated properties for each period (in thousands):

Year Ended December 31,

32 unchanged sentences

• joint venture formations.

While we expect to have sufficient liquidity to meet our obligations for the foreseeable future, the COVID-19 pandemic and associated responses could adversely impact our future cash flows and financial condition.

Table of C ontents

Our material cash needs for 2022 include $223.8 million of unfunded tenant improvements and construction obligations and $102.4 million of debt maturities.

Those and other 2022 cash needs are expected to be met by a combination of some or all of the sources noted above.

Financial Condition

3 unchanged sentences

We also had $10.2 million in cash, cash equivalents, and restricted cash on hand at December 31, 2021.

Contractual Obligations and Commitments

The following table sets forth information as of December 31, 2021 with respect to our outstanding contractual obligations and commitments (in thousands):

8 unchanged sentences

Ground leases 189,228 2,083 4,183 4,288 178,675

Other operating leases 211 149 62 — —

Total contractual obligations $ 2,981,600 $ 164,187 $ 1,061,647 $ 816,229 $ 939,538

Unfunded tenant improvements and construction obligations $ 255,634 $ 223,849 $ 31,785 $ — $ —

Performance bonds 577 577 — — —

Total commitments $ 255,634 $ 223,849 $ 31,785 $ — $ —

(1) Interest on variable rate obligations is based on rates effective as of December 31, 2021.

In addition, we have several standing or renewable service contracts mainly related to the operation of our buildings.

These contracts were entered into in the ordinary course of business and are generally one year or less.

These contracts are not included in the above table and are usually reimbursed in whole or in part by tenants.

Debt Associated with the Merger

In connection with the Merger, we assumed and immediately repaid $679.0 million in unsecured variable rate debt of TIER with our credit facility.

We also assumed the Legacy Union One mortgage note with a $66.0 million principal balance and a fixed interest rate of 4.24%.

Subsequent to the Merger, we closed a $650 million private placement of unsecured senior notes which were issued in three tranches with maturities from eight to ten years and a weighted average fixed interest rate of 3.88%.

Proceeds from the unsecured senior notes were used to repay amounts outstanding under the credit facility incurred in the Merger.

Other Loan Activity

In February 2020, we prepaid in full the $23.0 million Meridian Mark Plaza mortgage note, without penalty.

In 2019, we purchased our partner's interest in TOH.

With this transaction, we consolidated TOH and recorded the assets and liabilities at fair value, assuming the venture's mortgage notes.

Terminus 100 has a $115.0 million mortgage note, which is due in 2023 and has a 5.25% fixed interest rate.

Terminus 200 has a $74.4 million mortgage note, which is due in 2023 and has a 3.79% fixed interest rate.

Table of C ontents

Credit Facility

7 unchanged sentences

We are in compliance with all covenants of the Credit Facility.

We expect to negotiate a new credit facility prior to the current maturity date which will have a borrowing capacity that meets or exceeds the current facility and extends the maturity date.

The interest rate applicable to the Credit Facility varies according to our leverage ratio, and may, at our election, be determined based on either (1) the current LIBOR plus a spread of between 1.05% and 1.45%, or (2) the greater of Bank of America's prime rate, the federal funds rate plus 0.50%, or the one-month LIBOR plus 1.0% (the "Base Rate"), plus a spread of between 0.10% or 0.45%, based on leverage.

2 unchanged sentences

The total available borrowing capacity under the Credit Facility was $771.5 million at December 31, 2021.

On June 28, 2021, we entered into an Amended and Restated Term Loan Agreement (the "Term Loan") that amended the former term loan agreement.

Under the Term Loan, we have borrowed $350 million that matures on August 30, 2024 with options to, on up to four successive occasions, extend the maturity date for an additional 180 days.

The Term Loan has financial covenants consistent with those of the Credit Facility.

The interest rate applicable to the Term Loan varies according to our leverage ratio and may, at our election, be determined based on either (1) the Eurodollar Rate Loans plus a spread of between 1.05% and 1.65%, (2) the current LIBOR Daily Floating plus a spread of between 1.05% and 1.65%, or (3) the

interest rate applicable to Base Rate Loans plus a spread of between 0.05% and 0.65%.

At December 31, 2021, the Term Loan's spread over LIBOR was 1.05%.

We are in compliance with all covenants of the Term Loan.

Unsecured Senior Notes

1 unchanged sentence

The weighted average fixed interest rates on these notes is 3.91%.

The unsecured senior notes contain financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 1.75x;

a fixed charge coverage ratio of at least 1.50x;

an overall leverage ratio of no more than 60%;

and a secured leverage ratio of no more than 40%.

The unsecured senior notes contain financial covenants that are consistent with those of our Credit Facility.

The senior notes also contain customary representations and warranties and affirmative and negative covenants, as well as customary events of default.

We are in compliance with all covenants of the unsecured senior notes.

We have a $250 million term loan that matures on December 2, 2021 (the "Term Loan").

The Term Loan contains financial covenants consistent with those of the Credit Facility.

The Term Loan bears interest at LIBOR plus a spread, based on our leverage ratio, as defined in the Term Loan.

Secured Mortgage Notes

In June 2021, the Company executed a collateral substitution for the mortgage previously secured by the Company's 816 Congress property in Austin.

The mortgage is now secured by the Company's Domain 10 property in Austin.

All other terms of the note were unchanged.

On February 3, 2020, the Company prepaid in full, without penalty, the $23.0 million Meridian Mark Plaza mortgage note.

As of December 31, 2021, the Company had $661.5 million outstanding on seven non-recourse mortgage notes.

All interest rates on the secured mortgage notes are fixed.

Assets with depreciated carrying values of $1.1 billion were pledged as security on these mortgage notes payable.

Joint Venture Commitments and Debt

We have a number of off balance sheet joint ventures with varying structures, as described in note 7 to our consolidated financial statements.

The joint ventures in which we have an interest are involved in the ownership and/or development of real estate.

A venture will fund capital requirements or operational needs with cash from operations or financing proceeds.

If additional capital is deemed necessary, a venture may request a contribution from the partners, and we will evaluate such request.

Except as previously discussed, based on the nature of the activities conducted in these ventures, management cannot estimate with any degree of accuracy amounts that we may be required to fund in the short or long-term.

However, management does not believe that additional funding of these ventures will have a material adverse effect on our financial condition or results of operations.

At December 31, 2021, our unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $225.6 million.

This debt represents mortgage or construction loans, most of which are non-recourse to us.

In addition, in certain instances, we provide “non-recourse carve-out guarantees” on these non-recourse loans.

Other Debt Information

Our existing mortgage debt is primarily non-recourse, fixed-rate mortgage notes secured by various real estate assets.

We expect to either refinance our non-recourse mortgage loans at maturity or repay the mortgage loans with other capital resources, includin g ou r credit facility, unsecured debt, non-recourse mortgages, construction loans, the sale of assets, joint venture equity, the issuance of common stock, the issuance of preferred stock, or the issuance of units of CPLP.

We expect to either refinance our non-recourse mortgage loans at maturity or repay the mortgage loans with other capital sources, includin g ou r credit facility, unsecured debt, non-recourse mortgages, construction loans, the sale of assets, joint venture equity, the issuance of common stock, the issuance of preferred stock, or the issuance of units of CPLP.

Many of our non-recourse mortgages contain covenants which, if not satisfied, could result in acceleration of the maturity of the debt.

2 unchanged sentences

75% of our debt bears interest at a fixed rate.

Our variable-interest debt instruments, including our Credit Facility and Term Loan, may use LIBOR as a benchmark for establishing the rate.

LIBOR has been the subject of regulatory guidance and proposals for reform and in July 2017, the United Kingdom's Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

Our variable-interest debt instruments, including our Credit Facility and Term Loan, may use LIBOR, SOFR, or other indexes as allowed as a benchmark for establishing the rate.

LIBOR has been the subject of regulatory guidance and proposals for reform and in March 2021, the United Kingdom's Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after June 30, 2023.

These reforms may cause LIBOR to no longer be provided or to perform differently than in the past.

Recent proposals for LIBOR reforms may result in the establishment of new methods of calculating LIBOR or the establishment of one or more alternative benchmark rates.

If LIBOR is no longer widely available, or otherwise at our option, our variable-interest debt instruments, including our Credit Facility and term loan facilities, provide for alternate interest rate calculations.

There can be no assurances as to what alternative interest rates may be and whether such interest rates will be more or less favorable than LIBOR and any other unforeseen impacts of the potential discontinuation of LIBOR.

The Company intends to continue monitoring the developments with respect to the planned phasing out of LIBOR after 2021 and work with its lenders to ensure any transition away from LIBOR will have minimal impact on its financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR.

Table of C ontents

The Company intends to continue monitoring the developments with respect to the planned phasing out of LIBOR after 2022 and work with

its lenders to ensure any transition away from LIBOR will have minimal impact on its financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR.

Future Capital Requirements

To meet capital requirements for future investment activities over the long-term, we intend to actively manage our portfolio of properties and strategically sell assets to exit our non-core holdings and reposition our portfolio of income-producing assets geographically.

We expect to continue to utilize cash retained from operations as well third-party sources of capital such as indebtedness to fund future commitments as well as utilize construction facilities for some development assets, if available and under appropriate terms.

We may also generate capital through the issuance of securities that include common or preferred stock, warrants, debt securities, depositary shares or the issuance of CPLP limited partnership units.

Our business model is dependent upon raising or recycling capital to meet obligations and to fund development and acquisition activity.

We expect to continue to utilize cash retained from operations as well as third-party sources of capital such as indebtedness to fund future commitments as well as utilize construction facilities for some development assets, if available and under appropriate terms.

We may also generate capital through the issuance of securities that include common or preferred stock, warrants, debt securities, depository shares or the issuance of CPLP limited partnership units.

Our business model also includes raising or recycling capital which can assist in meeting obligations and funding development and acquisition activity.

If one or more sources of capital are not available when required, we may be forced to reduce the number of projects we acquire or develop and/or raise capital on potentially unfavorable terms, or we may be unable to raise capital, which could have an adverse effect on our financial position or results of operations.

6 unchanged sentences

Net cash used in investing activities (191,066) (132,463) (58,603)

Net cash provided by (used in) financing activities (230,095) 69,160 (299,255)

Net cash used in financing activities (194,382) (230,095) 35,713

The reasons for significant increases and decreases in cash flows between the periods are as follows:

Cash Flows from Operating Activities.

Cash provided by operating activities increased $47.9 million between the 2020 and 2019 periods primarily due to net cash received from operations of properties acquired in the Merger in June 2019, of 1200 Peachtree, which was acquired in March 2019, of Terminus, which was consolidated in October 2019 when we purchased our partner's interest in TOH, and of The RailYard, which was acquired in December 2020.

The increases are partially offset by the disposition of operations at Hearst Tower, Woodcrest, and the Gateway Village joint venture which were sold in the first quarter of 2020, and by decreased parking revenue earned at properties resulting from decreased physical occupancy at our properties.

Cash provided by operating activities increased $38.4 million between the 2021 and 2020 periods primarily due to net cash received from operations at the recently stabilized developments at the Domain and 10000 Avalon and the addition of The RailYard in November 2020, 725 Ponce in July 2021, Heights Union in October 2021, and 300 Colorado in December 2021 partially offset by the sale of Hearst Tower in 2020 and the sales of One South at the Plaza, Burnett Plaza, and 816 Congress in 2021.

Cash Flows from Investing Activities.

Cash used in investing activities decreased $225.0 million between the 2020 and 2019 periods primarily due to cash received from the sales of the Hearst Tower and Woodcrest operating properties, combined with the sales of our interests in the Gateway Village and Wildwood Associates joint ventures, which partially offsets the acquisitions of The RailYard and a parking garage in Charlotte as well as an increase in building and tenant improvements.

Cash used in investing activities increased $58.6 million between the 2021 and 2020 periods primarily due to cash used in the purchase of 725 Ponce, Heights Union, and our partners interest in 300 Colorado, partially offset by the cash received from the sales of 816 Congress, Burnett Plaza, and One South at the Plaza in 2021.

Cash Flows from Financing Activities.

Cash flows from financing activities decreased $299.3 million between the 2020 and 2019 periods primarily due to funding of the Unsecured Senior Notes in 2019.

Table of C ontents

Cash flows used in financing activities decreased $35.7 million between the 2021 and 2020 periods primarily due to the $250 million repayment of our prior Term Loan and issuance of the $350 million Amended and Restated Term Loan in 2021 offset partially by repayment of the 300 Colorado construction loan assumed in the acquisition.

Capital Expenditures.

11 unchanged sentences

Total property acquisition, development and tenant asset expenditures $ 787,810 $ 619,602

Capital expenditures increased $137.0 million between December 31, 2020 and 2019 primarily due to continued building and tenant improvements at Domain 12, which began recognizing income in the second quarter of 2020, and due to tenant improvements at Terminus, Northpark, 10000 Avalon, and Corporate Center.

These increases were partially offset by a decrease in development expenditures at 120 West Trinity, 10000 Avalon, and Domain 10 which have begun preliminary operational activity and are in the final stages of development.

Capital expenditures increased $168.2 million between December 31, 2021 and 2020 primarily due to the acquisitions of 725 Ponce, Heights Union, our partners' interest in 300 Colorado, and the start of development of a new office property at the Domain, partially offset by a decrease in building improvements at operating properties and decrease in land purchases.

Tenant improvements and leasing costs, as well as related capitalized personnel costs, are a function of the number and size of executed new leases or renewals of existing leases.

The amount of tenant improvements and leasing costs on a per square foot basis for 2020 and 2019 were as follows:

The amount of tenant improvements and leasing costs on a per square foot basis for 2021 and 2020 was as follows:

New leases $10.58 $12.04

2 unchanged sentences

The amounts of tenant improvement and leasing costs on a per square foot basis vary by lease and by market.

Average leasing costs during 2020 increased for new leases primarily due to a 2019 full-building lease at 1200 Peachtree with NS that has lower than average tenant improvement and leasing costs, and due to a 2020 multi-floor, longer term lease that has higher than average tenant improvements and leasing costs.

We paid common dividends of $182.8 million and $176.3 million in 2021 and 2020, respectively.

6 unchanged sentences

We routinely monitor the status of our common dividend payments in light of the covenants of our credit agreements.

Effects of Inflation.

We attempt to minimize the effects of inflation on income from operating properties by providing periodic fixed-rent increases and/or pass-through of certain operating expenses of properties to tenants or, in certain circumstances, rents tied to tenants’ sales.

Table of C ontents

Off Balance Sheet Arrangements

We have a number of off balance sheet joint ventures with varying structures, as described in note 8 to our consolidated financial statements.

The joint ventures in which we have an interest are involved in the ownership and/or development of real estate.

A venture will fund capital requirements or operational needs with cash from operations or financing proceeds.

If additional capital is deemed necessary, a venture may request a contribution from the partners, and we will evaluate such request.

However, management does not believe that additional funding of these ventures will have a material adverse effect on our financial condition or results of operations.

At December 31, 2020, our unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $230.3 million.

This debt represents mortgage or construction loans, most of which are non-recourse to us.

In addition, in certain instances, we provide “non-recourse carve-out guarantees” on these non-recourse loans.

We guarantee 12.5% of the loan amount related to the Carolina Square construction loan, which has a lending capacity of $79.7 million, and $77.0 million outstanding at December 31, 2020.

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 7. Management’s Discussion and Analysis