# Cousins Properties Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Cousins Properties Inc](/companies/cuz.md) (CIK 25232)
- Form: 10-Q
- Filed: 2023-10-26
- Accepted by EDGAR: Oct 26, 2023, 16:17 ET
- Period: 2023-09-30
- Accession: 0000025232-23-000059
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/25232/000002523223000059/cuz-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/25232/000002523223000059/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $198.8m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $605.9m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $64.8m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $203.2m | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $134.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $396.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $27.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $78.0m | us-gaap:InterestExpense |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $19.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $64.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.13 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.42 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.13 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.42 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 152,048,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 152,018,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $277.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $145.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-09-30 | $6.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $7.59bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $3.01bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $2.42bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $4.55bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,709 characters.

### Overview of 2023 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 that 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, Phoenix, Tampa, Charlotte, Dallas, and Nashville. This strategy is based on a disciplined approach to capital allocation that includes opportunistic acquisitions, selective developments, and timely dispositions of non-core assets with a goal of maintaining a portfolio of newer and more 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.

During the quarter, we leased or renewed 548,000 square feet of office space. Straight-line basis net rent per square foot increased 28.7% for those office spaces that were under lease within the past year. Same property net operating income (defined below) for consolidated properties and our share of unconsolidated properties increased 4.1% between the three months ended September 30, 2023 and 2022.

For the nine months ended September 30, 2023, we leased or renewed 1.2 million square feet of office space, including 691,000 (56%) of new and expansion leases. Straight-line basis net rent per square foot increased 24.8% for those office spaces that were under lease within the past year. Same property net operating income (defined below) for consolidated properties and our share of unconsolidated properties increased 5.3% between the nine months ended September 30, 2023 and 2022.

As noted above, we continue to execute new, renewal, and expansion leases with net rent increases during this current period of several socio-economic challenges. While policies and practices of employers regarding hybrid work arrangements continue to evolve, we believe our customers will prioritize a culture that fosters collaboration, innovation, and productivity, and that our customers will, accordingly, expect their employees to be present in person on a more consistent basis within our high-quality and well-amenitized properties. We have seen an increase in physical occupancy in 2023, which has driven an increase in parking revenue and certain operating expenses. Although difficult to estimate, we expect this gradual increase will continue. Factors that could cause actual results to differ materially from our current expectations are set forth under "Disclosure Regarding Forward Looking Statements."

### Results of Operations For The Three and Nine Months Ended September 30, 2023

### General

Net income available to common stockholders for the three and nine months ended September 30, 2023 was $19.4 million and $64.2 million, respectively. For the three and nine months ended September 30, 2022, the net income available to common stockholders was $80.6 million and $142.7 million, respectively. We detail below material changes in the components of net income available to common stockholders for the three and nine months ended September 30, 2023 compared to 2022.

### Rental Property Revenue, Rental Property Operating Expenses, and Net Operating Income

The following results include the performance of our Same Property portfolio. Our Same Property portfolio includes office properties that were stabilized and owned by us for the entirety of each comparable reporting period presented. A project is stabilized when it is substantially complete and held for occupancy, which is the earlier of (1) the date on which the project achieves 90% economic occupancy or (2) one year from cessation of major construction activity on the core building development or redevelopment. Same Property amounts for the 2023 versus 2022 comparison are from properties that were stabilized and owned as of January 1, 2022 through September 30, 2023.

We use Net Operating Income ("NOI"), a non-GAAP financial measure, to assess the operating performance of our properties. NOI is also widely used by industry analysts and investors to evaluate performance. NOI, which is rental property revenues (excluding termination fees) less rental property operating expenses, excludes certain components from net income in order to provide results that are more closely related to a property's results of operations. Certain items, such as interest expense, while included in net income, do not affect the operating performance of a real estate asset and are often incurred at the corporate level as opposed to the property level. As a result, we use only those income and expense items that are incurred at the property level to evaluate a property's performance. Depreciation, amortization, as well as gains or losses on sales of depreciated investment assets and impairment are also excluded from NOI. Same Property NOI allows analysts, investors, and management to analyze continuing operations and evaluate the growth trend of our portfolio.

Consolidated rental property revenues, rental property operating expenses, and NOI changed between the 2023 and 2022 periods as follows ($ in thousands):

| Rental Property Revenues | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change | Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Same Property | **$184,478** | $183,551 | $927 | 0.5% | **$558,515** | $535,152 | $23,363 | 4.4% |
| Non-Same Property | **13,680** | 9,662 | 4,018 | 41.6% | **36,967** | 22,551 | 14,416 | 63.9% |
|  | **198,158** | 193,213 | 4,945 | 2.6% | **595,482** | 557,703 | 37,779 | 6.8% |
| Termination Fee Income | **271** | 242 | 29 |  | **6,977** | 2,153 | 4,824 |  |
| **Total Rental Property Revenues** | **$198,429** | $193,455 | $4,974 |  | **$602,459** | $559,856 | $42,603 |  |
| **Rental Property Operating Expenses** |  |  |  |  |  |  |  |  |
| Same Property | **$61,153** | $65,051 | $(3,898) | (6.0)% | **$193,194** | $188,260 | $4,934 | 2.6% |
| Non-Same Property | **3,685** | 1,581 | 2,104 | 133.1% | **9,956** | 5,465 | 4,491 | 82.2% |
| **Total Rental Property Operating Expenses** | **$64,838** | $66,632 | $(1,794) | (2.7)% | **$203,150** | $193,725 | $9,425 | 4.9% |
| **Net Operating Income** |  |  |  |  |  |  |  |  |
| Same Property NOI | **$123,325** | $118,500 | $4,825 | 4.1% | **$365,321** | $346,892 | $18,429 | 5.3% |
| Non-Same Property NOI | **9,995** | 8,081 | 1,914 | 23.7% | **27,011** | 17,086 | 9,925 | 58.1% |
| **Total NOI** | **$133,320** | $126,581 | $6,739 | 5.3% | **$392,332** | $363,978 | $28,354 | 7.8% |

Same Property Rental Property Revenues increased for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to an increase in economic occupancy at our Domain and Buckhead Plaza office properties and related increases in revenues recognized from tenant funded improvements owned by us. Our tenants are increasingly funding capital improvements at our buildings in excess of their tenant improvement allowances as they look to highly amenitized and creative office spaces to attract employees back into the office.

Same Property Operating Expenses decreased for the three months ended September 30, 2023 compared to the same period in the prior year primarily due to decreases in real estate tax expense. This decrease in real estate tax expense also results in a related decrease in recoveries from tenants included Same Property revenues for the three months ended September 30, 2023.

Non-Same Property Rental Property Revenues, operating expenses, and NOI increased for the three and nine months ended September 30, 2023 compared to the same period in the prior year primarily due to operations at our 100 Mill and Heights Union operating properties as they reached stabilization in 2022 and commencement of operations following a full building redevelopment project at Promenade Central in November 2022. These increases are partially offset by a decrease in revenues related to the write-down of net assets associated with SVB Financial Group's ("SVB Financial") bankruptcy and the impact of the rejection in bankruptcy of SVB Financial's lease at our Hayden Ferry 1 building. For more information related to this write-down, see note 11 of the notes to condensed consolidated financial statements. Hayden Ferry 1 was moved to Non-Same Property during the three months ended June 30, 2023, due to the lack of comparability driven by the financial disruption related to SVB lease rejection and our plans to remove the property from operations in the fourth quarter of 2023 for redevelopment.

Termination Fee income increased for the nine months ended September 30, 2023 compared to the same period in the prior year and is recorded based on the timing of termination notices or negotiated agreements and expected move outs. The increase in termination fee income is driven by an increase in negotiated early terminations that were largely contemporaneous with the timing of leases executed with replacement tenants for the same leased space.

### Fee Income

Fee income decreased $1.4 million, or 81.0%, and $4.3 million, or 80.6%, for the three and nine months ended September 30, 2023 compared to the same period in the prior year. The decrease is primarily due to the completion of the Norfolk Southern transactions during the third quarter of 2022. For more information related to the Norfolk Southern transactions, see note 3 of the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

### Interest Expense

Interest expense, net of amounts capitalized, increased $8.6 million, or 46.9%, and $27.6 million, or 54.6%, for the three and nine months ended September 30, 2023, compared to the same period in the prior year. This increase is primarily due to the issuance of the 2022 Term Loan in October of 2022, refinancing of the mortgage loans on our Terminus operating properties in December 2022, increases in the interest rates on other variable rate debt, and an increase in average outstanding balance on our line of credit. These increases were partially offset by the repayment of our mortgage loans at Promenade Tower and Legacy Union One in October 2022.

### Depreciation and Amortization

Depreciation and amortization changed between the 2023 and 2022 periods as follows ($ in thousands):

| Depreciation and Amortization | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change | Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Same Property | **$72,364** | $75,207 | $(2,843) | (3.8)% | **$214,623** | $210,012 | $4,611 | 2.2% |
| Non-Same Property | **7,015** | 3,771 | 3,244 | 86.0% | **20,576** | 9,258 | 11,318 | 122.3% |
| Non-Real Estate Assets | **113** | 138 | (25) | (18.1)% | **332** | 451 | (119) | (26.4)% |
| **Total Depreciation and Amortization** | **$79,492** | $79,116 | $376 | 0.5% | **$235,531** | $219,721 | $15,810 | 7.2% |

Same Property depreciation and amortization decreased for the three months ended September 30, 2023 and increased for the nine months ended September 30, 2023 compared to the same periods in the prior year due to the timing of accelerated depreciation related to shortening of estimated useful lives of lease related assets, including tenant improvements, resulting from early termination of leases.

Non-Same Property depreciation and amortization increased for the three and nine months ended September 30, 2023 compared to the same period in the prior year. The increase is primarily due to increased depreciation at our 100 Mill and Heights Union operating properties as they reached stabilization in 2022, and at Promenade Central following a full building redevelopment project completed in November 2022.

### Income and Net Operating Income from Unconsolidated Joint Ventures

Income from unconsolidated joint ventures consisted of the Company's share of the following ($ in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change | Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Income from unconsolidated joint ventures | **$582** | $634 | $(52) | (8.2)% | **$2,008** | $7,038 | $(5,030) | (71.5)% |
| Depreciation and amortization | **485** | 1,189 | (704) | (59.2)% | **1,440** | 3,424 | (1,984) | (57.9)% |
| Gain on sale of depreciated investment property | **—** | — | — | —% | **—** | (84) | 84 | (100.0)% |
| Loss (gain) on sale of undepreciated property | **—** | 22 | (22) | (100.0)% | **—** | (4,478) | 4,478 | (100.0)% |
| Interest expense | **508** | 1,010 | (502) | (49.7)% | **1,150** | 2,316 | (1,166) | (50.3)% |
| Other expense | **24** | 19 | 5 | 26.3% | **44** | 46 | (2) | (4.3)% |
| Other income | **(35)** | (55) | 20 | (36.4)% | **(110)** | (182) | 72 | (39.6)% |
| **Net operating income from unconsolidated joint ventures** | **$1,564** | $2,819 | $(1,255) | (44.5)% | **$4,532** | $8,080 | $(3,548) | (43.9)% |
| Net operating income: |  |  |  |  |  |  |  |  |
| Same Property | **1,235** | 1,197 | 38 | 3.2% | **3,601** | 3,588 | 13 | 0.4% |
| Non-Same Property | **329** | 1,622 | (1,293) | (79.7)% | **931** | 4,492 | (3,561) | (79.3)% |
| **Net operating income from unconsolidated joint ventures** | **$1,564** | $2,819 | $(1,255) | (44.5)% | **$4,532** | $8,080 | $(3,548) | (43.9)% |

Income from unconsolidated joint ventures decreased for the three and nine months ended September 30, 2023 primarily due to the gain on sale of land parcel by a joint venture in 2022 and due to a decrease in income and decrease in depreciation and amortization as a result of the sale of our interest in the Carolina Square joint venture in September 2022.

Non-Same Property NOI from unconsolidated joint ventures decreased for the three and nine months ended September 30, 2023 primarily due to the sale of our interest in the Carolina Square joint venture in September 2022.

### Gain on Sales of Investments in Unconsolidated Joint Ventures and Investment Properties

In September 2022, we sold our 50% joint venture interest in Carolina Square Holdings LP ("Carolina Square") for a gross sales price of $105.0 million and recognized a gain of $56.3 million on the sale.

### Funds From Operations

The table below shows Funds from Operations (“FFO”) and the related reconciliation from net income available to common stockholders. We calculate FFO in accordance with the Nareit definition, which is net income available to common stockholders (computed in accordance with GAAP), excluding extraordinary items, cumulative effect of change in accounting principle, and gains on sale or impairment losses on depreciable property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

FFO is used by industry analysts and investors as a supplemental measure of a REIT’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, Nareit created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income. The use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Company management evaluates operating performance, in part, based on FFO. Additionally, we use FFO, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to our officers and other key employees.

The reconciliation of net income to FFO is as follows for the three and nine months ended September 30, 2023 and 2022 ($ in thousands, except per share information):

|  | Three Months Ended September 30, 2023 Dollars | Weighted Average Common Shares | Per Share Amount | 2022 Dollars | Weighted Average Common Shares | Per Share Amount |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **Net Income Available to Common Stockholders** | **$19,361** | **151,774** | **$0.13** | $80,639 | 151,435 | $0.53 |
| Noncontrolling interest related to unitholders | **4** | **25** | **—** | 26 | 25 | — |
| Conversion of unvested restricted stock units | **—** | **249** | **—** | — | 235 | — |
| **Net Income — Diluted** | **19,365** | **152,048** | **0.13** | 80,665 | 151,695 | 0.53 |
| Depreciation and amortization of real estate assets: |  |  |  |  |  |  |
| Consolidated properties | **79,379** | **—** | **0.52** | 78,978 | — | 0.52 |
| Share of unconsolidated joint ventures | **485** | **—** | **—** | 1,189 | **—** | 0.01 |
| Partners' share of real estate depreciation | **(257)** | **—** | **—** | (182) | — | — |
| Loss (gain) on sale of depreciated properties: |  |  |  |  |  |  |
| Consolidated properties | **—** | **—** | **—** | 20 | — | — |
| Investments in unconsolidated joint ventures | **—** | **—** | **—** | (56,260) | — | (0.37) |
| **Funds From Operations** | **$98,972** | **152,048** | **$0.65** | $104,410 | 151,695 | $0.69 |

27

|  | Nine Months Ended September 30, 2023 Dollars | Weighted Average Common Shares | Per Share Amount | 2022 Dollars | Weighted Average Common Shares | Per Share Amount |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **Net Income Available to Common Stockholders** | **$64,178** | **151,692** | **$0.42** | $142,675 | 149,670 | $0.95 |
| Noncontrolling interest related to unitholders | **11** | **25** | **—** | 38 | 25 | — |
| Conversion of unvested restricted stock units | **—** | **301** | **—** | — | 251 | — |
| **Net Income — Diluted** | **64,189** | **152,018** | **0.42** | 142,713 | 149,946 | 0.95 |
| Depreciation and amortization of real estate assets: |  |  |  |  |  |  |
| Consolidated properties | **235,199** | **—** | **1.55** | 219,270 | — | 1.46 |
| Share of unconsolidated joint ventures | **1,440** | **—** | **—** | 3,424 | — | 0.02 |
| Partners' share of real estate depreciation | **(813)** | **—** | **—** | (558) | — | — |
| Loss (gain) on sale of depreciated properties: |  |  |  |  |  |  |
| Consolidated properties | **2** | **—** | **—** | 61 | — | — |
| Share of unconsolidated joint ventures | **—** | **—** | **—** | (84) | — | — |
| Investments in unconsolidated joint ventures | **—** | **—** | **—** | (56,260) | — | (0.37) |
| **Funds From Operations** | **$300,017** | **152,018** | **$1.97** | $308,566 | 149,946 | $2.06 |

### Net Operating Income

Company management evaluates the performance of its property portfolio, in part, based on NOI. NOI represents rental property revenues, less termination fees, less rental property operating expenses. NOI is not a measure of cash flows or operating results as measured by GAAP, is not indicative of cash available to fund cash needs, and should not be considered an alternative to cash flows as a measure of liquidity. All companies may not calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income as it helps both management and investors understand the core operations of our operating assets. NOI excludes corporate general and administrative expenses, interest expense, depreciation and amortization, impairments, gains/losses on sales of real estate, and other non-operating items.

The following table reconciles NOI for consolidated properties from net income for each of the periods presented ($ in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Net Income** | **$19,491** | $80,769 | **$64,924** | $143,096 |
| Fee income | **(318)** | (1,677) | **(1,044)** | (5,370) |
| Termination fee income | **(271)** | (242) | **(6,977)** | (2,153) |
| Other income | **(101)** | (38) | **(2,393)** | (2,522) |
| General and administrative expenses | **8,336** | 6,498 | **24,795** | 21,557 |
| Interest expense | **27,008** | 18,380 | **78,010** | 50,454 |
| Depreciation and amortization | **79,492** | 79,116 | **235,531** | 219,721 |
| Reimbursed expenses | **149** | 418 | **515** | 1,455 |
| Other expenses | **623** | 231 | **1,484** | 877 |
| Income from unconsolidated joint ventures | **(582)** | (634) | **(2,008)** | (7,038) |
| Gain on sale of investment in unconsolidated joint ventures | **—** | (56,260) | **—** | (56,260) |
| Loss (gain) on investment property transactions | **(507)** | 20 | **(505)** | 61 |
| Loss on extinguishment of debt | **—** | — | **—** | 100 |
| **Net Operating Income** | **$133,320** | $126,581 | **$392,332** | $363,978 |

28

### Liquidity and Capital Resources

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

- property operating expenses;
- property and land acquisitions;
- expenditures on development and redevelopment projects;
- building improvements, tenant improvements, and leasing costs;
- principal and interest payments on indebtedness;
- general and administrative costs; and
- common stock dividends and distributions to outside unitholders of CPLP.

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

- cash and cash equivalents on hand;
- net cash from operations;
- proceeds from the sale of assets;
- borrowings under our credit facility;
- proceeds from mortgage notes payable;
- proceeds from construction loans;
- proceeds from unsecured loans;
- proceeds from offerings of equity securities; and
- joint venture formations.

Our material capital expenditure commitments as of September 30, 2023 include $161.7 million of unfunded tenant improvements and construction costs. As of September 30, 2023, we had $144.5 million drawn under our credit facility with the ability to borrow the remaining $855.5 million, as well as $6.9 million of cash and cash equivalents. We expect to have sufficient liquidity to meet our obligations for the foreseeable future.

### Other Debt Information

In addition to our $1 billion unsecured Credit Facility (with $144.5 million outstanding as of September 30, 2023), we also have unsecured debt from two term loans totaling $750 million and five tranches of unsecured senior notes totaling $1 billion. Our existing mortgage debt is comprised of 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, including our 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 that, if not satisfied, could result in acceleration of the maturity of the debt. We expect to either refinance the non-recourse mortgages at maturity or repay the mortgages with proceeds from asset sales, debt, or other capital resources. 86% of our consolidated debt bears interest at a fixed rate. The 14% of consolidated debt that bears interest at a floating rate is based on SOFR.

We are in compliance with all covenants of our existing unsecured and secured debt.

### 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. 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.

### Cash Flows

We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following table sets forth the changes in cash flows ($ in thousands):

|  | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Net cash provided by operating activities | **$277,518** | $272,348 | $5,170 |
| Net cash used in investing activities | **(212,094)** | (248,432) | 36,338 |
| Net cash used in financing activities | **(63,643)** | (27,346) | (36,297) |

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

**Cash Flows from Operating Activities.** Cash flows provided by operating activities increased $5.2 million between the 2023 and 2022 nine month periods primarily due to the following: timing of receipt of prepaid rents from tenants; increase in physical occupancy at our Domain and Buckhead Plaza properties; the stabilization in 2022 of 100 Mill and Heights Union.

**Cash Flows from Investing Activities.** Cash flows used in investing activities decreased $36.3 million between the 2023 and 2022 nine month periods primarily due to a decrease in capital expenditures related to our 2022 redevelopment activity at two of our operating properties, including a full building redevelopment of Promenade Central, and a decrease in contributions to our Neuhoff Holdings LLC ("Neuhoff") joint venture needed to fund our equity share of the development of the Nashville mixed-used project.

**Cash Flows from Financing Activities.** Cash flows used in financing activities increased $36.3 million between the 2023 and 2022 nine month periods primarily due to cash provided by the settlement of forward contracts sold under our Equity Distribution Agreement known as at-the-market stock offering program ("ATM Program") in June 2022, partially offset by cash used for the purchase of our partner's 10% interest in a joint venture in April 2022 and an increase in net borrowings on our credit facility.

**Capital Expenditures**. We incur costs related to our real estate assets that include acquisition of properties, development of new properties, redevelopment of existing or newly purchased properties, leasing costs (including tenant improvements) for new or replacement tenants, and ongoing property repairs and maintenance.

Capital expenditures for assets we develop or acquire and then hold and operate are included in the property acquisition, development, and tenant asset expenditures line item within investing activities on the consolidated statements of cash flows. The change in amounts accrued are removed from the table below to show the components of these costs on a cash basis. Components of costs included in this line item for the three and nine months ended September 30, 2023 and 2022 are as follows ($ in thousands):

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating — leasing costs | **$102,768** | $153,321 |
| Operating — building improvements | **49,636** | 68,491 |
| Development | **15,825** | 75,094 |
| Capitalized interest | **10,093** | 8,801 |
| Capitalized personnel costs | **5,678** | 6,136 |
| Change in accrued capital expenditures | **14,254** | (49,021) |
| Total property acquisition, development, and tenant asset expenditures | **$198,254** | $262,822 |

Capital expenditures decreased $64.6 million between the 2023 and 2022 periods primarily due to decreased spending (i) on leasing costs from commissions and tenant improvements, (ii) on building improvements largely related to renovations at 3350 Peachtree, Promenade Central, and Promenade Tower in 2022, and (iii) on developments driven by the approaching completion of development activities at Domain 9 and completion of development activities at our 100 Mill property that stabilized in the fourth quarter of 2022. These decreases were partially offset by a decrease in accrued capital expenditures during the year.

The amounts of tenant improvement and leasing costs for our office portfolio on a per square foot basis for the three months ended September 30, 2023 and 2022 were as follows:

|  | 2023 | 2022 |
| --- | ---: | ---: |
| New leases | $12.64 | $12.33 |
| Renewal leases | $9.12 | $8.74 |
| Expansion leases | $11.07 | $12.63 |

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

**Dividends.** We paid common dividends of $145.9 million and $143.8 million in the nine months ended September 30, 2023 and 2022, respectively. We expect to fund our future quarterly common dividends with cash provided by operating activities, also using proceeds from investment property sales, distributions from unconsolidated joint ventures, indebtedness, and proceeds from offerings of equity and other securities, if necessary.

On a quarterly basis, we review the amount of the common dividend in light of current and projected future cash flows from the sources noted above and also consider the requirements needed to maintain our REIT status. In addition, we have certain covenants under credit agreements that could limit the amount of common dividends paid. In general, common dividends of any amount can be paid as long as leverage, as defined in our credit agreements, is less than 60% and we are not in default. Certain conditions also apply in which we can still pay common dividends if leverage is above that amount. We routinely monitor the status of our common dividend payments in light of the covenants of our credit agreements.

### Off Balance Sheet Arrangements

**General.** We have a number of off balance sheet joint ventures with varying structures, as described in note 6 of the notes to consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 and in note 3 of the notes to condensed consolidated financial statements. The joint ventures in which we have an interest are involved in the ownership, acquisition, and/or development of real estate. A venture will fund capital requirements or operational needs with cash from operations or financing proceeds, if possible. If additional capital is deemed necessary, a venture may request a contribution from the partners, and we will evaluate such request.

**Debt.** At September 30, 2023, our unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $282.9 million. These loans are generally mortgage or construction loans, which are non-recourse to us. In addition, in certain instances, we provide “non-recourse carve-out guarantees” on these non-recourse loans. Certain of these loans have variable interest rates, which creates exposure to the ventures in the form of market risk from interest rate changes.

### Critical Accounting Policies

There have been no material changes in the critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

## Market risk

As filed, 212 characters.

There have been no material changes in the market risk associated with our notes payable at September 30, 2023 compared to that as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

## Controls and procedures

As filed, 1,505 characters.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding our control objectives.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer along with the Chief Financial Officer, of the effectiveness, design, and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon the foregoing, the Chief Executive Officer along with the Chief Financial Officer concluded that our disclosure controls and procedures were effective. In addition, based on such evaluation, we have identified no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 846 characters.

Risk factors that affect our business and financial results are discussed in Part I, "Item 1A. Risk Factors," of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

Filed Oct 26, 2023.
Source: SEC EDGAR, the filing index for accession 0000025232-23-000059. Last ingested by Listed: Oct 29, 2026, 16:44 ET. No prices; not investment advice.