Business Context and Reporting Period
Company: Cousins Properties Incorporated
Filing Type: Form 8-K (Current Report)
Date of Report: September 28, 2006
Event: Completion of the sale of Bank of America Plaza, a 1.25 million square foot office building in Atlanta, Georgia.
Key Financial Metrics and Transaction Details
The filing details the sale of Bank of America Plaza by CSC Associates, L.P. (a 50/50 joint venture between Cousins Properties and a Bank of America affiliate) to BentleyForbesAcquisitions, LLC.
- Sale Price: Approximately $436 million in cash (before adjustments for fees and closing costs).
- Debt Repayment: The Company repaid a non-recourse mortgage note with an outstanding principal balance of approximately $139 million.
- Defeasance Costs: Approximately $15 million paid by the Company.
- Accounting Method: The Company accounts for its interest in the joint venture under the equity method.
Pro Forma Financial Impact (as of June 30, 2006):
- Total Assets: Adjusted to $1,171,807,000 (down from historical $1,300,989,000).
- Total Liabilities: Adjusted to $349,440,000 (down from historical $635,886,000).
- Notes Payable: Reduced to $120,480,000 from $404,612,000.
- Stockholders' Investment: Increased to $774,648,000 from $606,928,000, reflecting gains on the sale.
Material Changes and Pro Forma Adjustments
The filing includes unaudited pro forma financial statements reflecting the sale of Bank of America Plaza, the sale of Frost Bank Tower, the purchase of interests in 191 Peachtree Tower, and the formation of a joint venture with Prudential Real Estate Investors, as if these transactions occurred on January 1, 2005 (for income statements) and June 30, 2006 (for the balance sheet).
- Balance Sheet: Significant reduction in debt and operating properties, offset by an increase in cash and investment in unconsolidated joint ventures.
- Income Statement (Year Ended Dec 31, 2005): Pro forma income from continuing operations available to common stockholders increased to $46,529,000 (EPS $0.93) from historical $32,930,000 (EPS $0.66).
- Income Statement (Six Months Ended June 30, 2006): Pro forma income from continuing operations available to common stockholders increased to $10,757,000 (EPS $0.21) from historical $4,586,000 (EPS $0.09).
Outlook, Risks, and Management Commentary
Management Commentary: The pro forma information is prepared for informational purposes only and is not necessarily indicative of future results. The purchase of 191 Peachtree Tower is accounted for as a business combination under SFAS No. 141.
Risks and Contingencies:
- Estimates: Intangible assets related to the 191 Peachtree Tower purchase (above- and below-market leases) are estimated at approximately 10% of the purchase price and are subject to change based on further analysis.
- Debt Obligations: The Company assumed full liability for the CSC mortgage note upon the sale.
Key Facts for Investor Verification
- Verify the final net proceeds from the Bank of America Plaza sale after broker fees, advisory fees, and the $15 million defeasance cost.
- Confirm the final allocation of the purchase price for 191 Peachtree Tower between tangible and intangible assets.
- Review the impact of the joint venture formation with Prudential on future cash flows and management fee income.
- Monitor the Company's leverage ratios following the significant reduction in notes payable.