COUSINS PROPERTIES INC [CUZ] Filings

10-Q 1 cuz-20230930.htm 10-Q cuz-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-11312

COUSINS PROPERTIES INCORPORATED

(Exact name of registrant as specified in its charter)

Georgia

58-0869052

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

3344 Peachtree Road NE

Suite 1800

Atlanta

Georgia

30326-4802

(Address of principal executive offices)

(Zip Code)

(404) 407-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1 par value per share

CUZ

New York Stock Exchange

("NYSE")

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at October 20, 2023
Common Stock, $1 par value per share						151,773,774 shares


			Page No.
PART I-FINANCIAL INFORMATION			3
Item 1. Condensed Consolidated Financial Statements (Unaudited)			3
CONSOLIDATED BALANCE SHEETS			3
CONSOLIDATED STATEMENTS OF OPERATIONS			4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME			5
CONSOLIDATED STATEMENTS OF EQUITY			6
CONSOLIDATED STATEMENTS OF CASH FLOWS			8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			31

PART II. OTHER INFORMATION			32
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32

Item 6. Exhibits			33
SIGNATURES			34

FORWARD-LOOKING STATEMENTS

Certain matters contained in this report are “forward-looking statements” within the meaning of the federal securities laws and are subject to uncertainties and risks, as itemized in Item 1A included in the Annual Report on Form 10-K for the year ended December 31, 2022, and as itemized herein. These forward-looking statements include information about the Company's possible or assumed future results of the business and the Company's financial condition, liquidity, results of operations, plans, and objectives. They also include, among other things, statements regarding subjects that are forward-looking by their nature, such as:

•guidance and underlying assumptions;

•business and financial strategy;

•future debt financings;

•future acquisitions and dispositions of operating assets or joint venture interests;

•future acquisitions and dispositions of land, including ground leases;

•future development and redevelopment opportunities, including fee development opportunities;

•future issuances and repurchases of common stock, limited partnership units, or preferred stock;

•future distributions;

•projected capital expenditures;

•market and industry trends;

•entry into new markets, changes in existing market concentrations, or exits from existing markets;

•future changes in interest rates and liquidity of capital markets; and

•all statements that address operating performance, events, investments, or developments that we expect or anticipate will occur in the future — including statements relating to creating value for stockholders.

Any forward-looking statements are based upon management's beliefs, assumptions, and expectations of our future performance, taking into account information that is currently available. These beliefs, assumptions, and expectations may change as a result of possible events or factors, not all of which are known. If a change occurs, our business, financial condition, liquidity, and results of operations may vary materially from those expressed in forward-looking statements. Actual results may vary from forward-looking statements due to, but not limited to, the following:

•the availability and terms of capital;

•the ability to refinance or repay indebtedness as it matures;

•the failure of purchase, sale, or other contracts to ultimately close;

•the failure to achieve anticipated benefits from acquisitions, investments, or dispositions;

•the potential dilutive effect of common stock or operating partnership unit issuances;

•the availability of buyers and pricing with respect to the disposition of assets;

•changes in national and local economic conditions, the real estate industry, and the commercial real estate markets in which we operate (including supply and demand changes), particularly in Atlanta, Austin, Phoenix, Tampa, Charlotte, Dallas, and Nashville, including the impact of high unemployment, volatility in the public equity and debt markets, and international economic and other conditions;

•the impact of a public health crisis and the governmental and third-party response to such a crisis, which may affect our key personnel, our tenants, and the costs of operating our assets;

•sociopolitical unrest such as political instability, civil unrest, armed hostilities, or political activism, which may result in a disruption of day-to-day building operations;

•changes to our strategy in regard to our real estate assets may require impairment to be recognized;

•leasing risks, including the ability to obtain new tenants or renew expiring tenants, the ability to lease newly-developed and/or recently-acquired space, the failure of a tenant to commence or complete tenant improvements on schedule or to occupy leased space, and the risk of declining leasing rates;

•changes in the needs of our tenants brought about by the desire for co-working arrangements, trends toward utilizing less office space per employee, and the effect of employees working remotely;

•any adverse change in the financial condition of one or more of our tenants;

•volatility in interest rates and insurance rates;

•inflation and continuing increases in the inflation rate;

•competition from other developers or investors;

•the risks associated with real estate developments (such as zoning approval, receipt of required permits, construction delays, cost overruns, and leasing risk);

•cyber security breaches;

•changes in senior management, changes in the Board of Directors, and the loss of key personnel;

•the potential liability for uninsured losses, condemnation, or environmental issues;

•the potential liability for a failure to meet regulatory requirements;

•the financial condition and liquidity of, or disputes with, joint venture partners;

•any failure to comply with debt covenants under credit agreements;

•any failure to continue to qualify for taxation as a real estate investment trust or meet regulatory requirements;

•potential changes to state, local, or federal regulations applicable to our business;

•material changes in the rates, or the ability to pay, dividends on common shares or other securities;

•potential changes to the tax laws impacting REITs and real estate in general; and

•those additional risks and factors discussed in reports filed with the Securities and Exchange Commission ("SEC") by the Company.

The words “believes,” “expects,” “anticipates,” “estimates,” “plans,” “may,” “intend,” “will,” or similar expressions are intended to identify forward-looking statements. Although we believe that the plans, intentions, and expectations reflected in any forward-looking statements are reasonable, we can give no assurance that such plans, intentions, or expectations will be achieved. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information, or otherwise, except as required under U.S. federal securities laws.

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	September 30, 2023		December 31, 2022
	(unaudited)
Assets:
Real estate assets:
Operating properties, net of accumulated depreciation of $1,258,003 and $1,079,662 in 2023 and 2022, respectively	$	6,730,434	$	6,738,354
Projects under development	126,630		111,400
Land	154,729		158,430
	7,011,793		7,008,184


Cash and cash equivalents	6,926		5,145

Accounts receivable	12,867		8,653
Deferred rents receivable	203,561		184,043
Investment in unconsolidated joint ventures	141,250		112,839
Intangible assets, net	116,092		136,240
Other assets, net	92,820		81,912
Total assets	$	7,585,309	$	7,537,016
Liabilities:
Notes payable	$	2,418,403	$	2,334,606
Accounts payable and accrued expenses	266,632		271,103
Deferred income	174,178		128,636
Intangible liabilities, net	44,295		52,280
Other liabilities	104,495		103,442

Total liabilities	3,008,003		2,890,067
Commitments and contingencies
Equity:
Stockholders' investment:

Common stock, $1 par value per share, 300,000,000 shares authorized, 154,335,798 and 154,019,214 issued, and 151,773,774 and 151,457,190 outstanding in 2023 and 2022, respectively	154,336		154,019
Additional paid-in capital	5,637,406		5,630,327
Treasury stock at cost, 2,562,024 shares in 2023 and 2022	(147,157)		(147,157)
Distributions in excess of cumulative net income	(1,095,597)		(1,013,292)
Accumulated other comprehensive income	5,723		1,767
Total stockholders' investment	4,554,711		4,625,664
Nonredeemable noncontrolling interests	22,595		21,285
Total equity	4,577,306		4,646,949
Total liabilities and equity	$	7,585,309	$	7,537,016

See accompanying notes.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues:
Rental property revenues	$	198,429	$	193,455	$	602,459	$	559,856
Fee income	318		1,677		1,044		5,370
Other	101		38		2,393		2,522
	198,848		195,170		605,896		567,748
Expenses:
Rental property operating expenses	64,838		66,632		203,150		193,725
Reimbursed expenses	149		418		515		1,455
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

Other	623		231		1,484		877
	180,446		171,275		543,485		487,789

Income from unconsolidated joint ventures	582		634		2,008		7,038
Gain on sales of investments in unconsolidated joint ventures	—		56,260		—		56,260
Gain (loss) on investment property transactions	507		(20)		505		(61)
Loss on extinguishment of debt	—		—		—		(100)


Net income	19,491		80,769		64,924		143,096
Net income attributable to noncontrolling interests	(130)		(130)		(746)		(421)
Net income available to common stockholders	$	19,361	$	80,639	$	64,178	$	142,675



Net income per common share — basic and diluted	$	0.13	$	0.53	$	0.42	$	0.95
Weighted average shares — basic	151,774		151,435		151,692		149,670
Weighted average shares — diluted	152,048		151,695		152,018		149,946

See accompanying notes.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited; in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Comprehensive Income:
Net income available to common stockholders	$	19,361	$	80,639	$	64,178	$	142,675
Other comprehensive income (loss):
Unrealized gain (loss) on cash flow hedges	1,503		(715)		6,397		(715)
Amortization of cash flow hedges	(1,345)		63		(2,441)		63
Total other comprehensive income (loss)	158		(652)		3,956		(652)
Total comprehensive income	$	19,519	$	79,987	$	68,134	$	142,023
























See accompanying notes.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in thousands except per share amounts)


Three Months Ended September 30, 2023
		Common Stock		Additional Paid-In Capital		Treasury Stock		Distributions in Excess of Net Income		Accumulated Other Comprehensive Income		Stockholders' Investment		Nonredeemable Noncontrolling Interests		Total Equity
Balance June 30, 2023		$	154,336	$	5,634,996	$	(147,157)	$	(1,066,369)	$	5,565	$	4,581,371	$	22,927	$	4,604,298
Net income		—		—		—		19,361		—		19,361		130		19,491
Other comprehensive income		—		—		—		—		158		158		—		158


Amortization of stock-based compensation, net of forfeitures		—		2,410		—		—		—		2,410		—		2,410

Contributions from noncontrolling interests		—		—		—		—		—		—		56		56
Distributions to noncontrolling interests		—		—		—		—		—		—		(518)		(518)

Common dividends ($0.32 per share)		—		—		—		(48,589)		—		(48,589)		—		(48,589)
Balance September 30, 2023		$	154,336	$	5,637,406	$	(147,157)	$	(1,095,597)	$	5,723	$	4,554,711	$	22,595	$	4,577,306

Three Months Ended September 30, 2022
		Common Stock		Additional Paid-In Capital		Treasury Stock		Distributions in Excess of Net Income		Accumulated Other Comprehensive Loss		Stockholders’ Investment		Nonredeemable Noncontrolling Interests		Total Equity
Balance June 30, 2022		$	154,025	$	5,627,133	$	(148,473)	$	(1,020,590)	$	—	$	4,612,095	$	20,600	$	4,632,695
Net income		—		—		—		80,639		—		80,639		130		80,769
Other comprehensive loss		—		—		—		—		(652)		(652)		—		(652)
Common stock issued under the ATM, net of issuance costs		—		13		—		—		—		13		—		13

Amortization of stock-based compensation, net of forfeitures		(6)		1,805		—		4		—		1,803		—		1,803

Contributions from noncontrolling interests		—		—		—		—		—		—		(356)		(356)
Distributions to noncontrolling interests		—		—		—		—		—		—		(15)		(15)
Common dividends ($0.32 per share)		—		—		—		(48,541)		—		(48,541)		—		(48,541)
Balance September 30, 2022	Balance	$	154,019	$	5,628,951	$	(148,473)	$	(988,488)	$	(652)	$	4,645,357	$	20,359	$	4,665,716

See accompanying notes.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in thousands except per share amounts)


Nine Months Ended September 30, 2023
	Common Stock		Additional Paid-In Capital		Treasury Stock		Distributions in Excess of Net Income		Accumulated Other Comprehensive Income		Stockholders’ Investment		Nonredeemable Noncontrolling Interests		Total Equity
Balance December 31, 2022	$	154,019	$	5,630,327	$	(147,157)	$	(1,013,292)	$	1,767	$	4,625,664	$	21,285	$	4,646,949
Net income	—		—		—		64,178		—		64,178		746		64,924
Other comprehensive income	—		—		—		—		3,956		3,956		—		3,956
Common stock issued pursuant to stock-based compensation, net of tax withholding	320		(827)		—		—		—		(507)		—		(507)

Amortization of stock options, restricted stock, and restricted stock units, net of forfeitures	(3)		7,906		—		—		—		7,903		—		7,903

Contributions from noncontrolling interests	—		—		—		—		—		—		1,440		1,440
Distributions to noncontrolling interests	—		—		—		—		—		—		(876)		(876)
Common dividends ($0.96 per share)	—		—		—		(146,483)		—		(146,483)		—		(146,483)
Balance September 30, 2023	$	154,336	$	5,637,406	$	(147,157)	$	(1,095,597)	$	5,723	$	4,554,711	$	22,595	$	4,577,306

Nine Months Ended September 30, 2022
	Common Stock		Additional Paid-In Capital		Treasury Stock		Distributions in Excess of Net Income		Accumulated Other Comprehensive Loss		Stockholders’ Investment		Nonredeemable Noncontrolling Interests		Total Equity
Balance December 31, 2021	$	151,273	$	5,549,308	$	(148,473)	$	(985,338)	$	—	$	4,566,770	$	33,630	$	4,600,400
Net income	—		—		—		142,675		—		142,675		421		143,096
Other comprehensive loss	—		—		—		—		(652)		(652)		—		(652)
Common stock issued under the ATM, net of issuance costs	2,632		100,488		—		—		—		103,120		—		103,120
Common stock issued pursuant to stock-based compensation, net of tax withholding	120		490		—		—		—		610		—		610

Amortization of stock-based compensation, net of forfeitures	(6)		6,303		—		8		—		6,305		—		6,305
Acquisition of partners' noncontrolling interest	—		(27,638)		—		—		—		(27,638)		(15,749)		(43,387)
Contributions from noncontrolling interests	—		—		—		—		—		—		2,164		2,164
Distributions to noncontrolling interests	—		—		—		—		—		—		(107)		(107)
Common dividends ($0.96 per share)	—		—		—		(145,833)		—		(145,833)		—		(145,833)
Balance September 30, 2022	$	154,019	$	5,628,951	$	(148,473)	$	(988,488)	$	(652)	$	4,645,357	$	20,359	$	4,665,716

See accompanying notes.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)


	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	64,924	$	143,096
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sales of investment in unconsolidated joint ventures	—		(56,260)
Loss (gain) on investment property transactions	(505)		61

Depreciation and amortization	235,531		219,721
Amortization of deferred financing costs and premium on notes payable	3,102		(317)
Equity-classified stock-based compensation expense, net of forfeitures	9,209		7,526
Effect of non-cash adjustments to rental revenues	(36,679)		(29,524)
Income from unconsolidated joint ventures	(2,008)		(7,038)
Operating distributions from unconsolidated joint ventures	2,869		4,584
Loss on extinguishment of debt	—		100

Changes in other operating assets and liabilities:
Change in receivables and other assets, net	(6,979)		487
Change in operating liabilities, net	8,054		(10,088)
Net cash provided by operating activities	277,518		272,348
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment property sales, net	3,917		—
Proceeds from sale of interest in unconsolidated joint ventures, net	—		38,831
Property acquisition, development, and tenant asset expenditures	(198,254)		(262,822)

Return of capital distributions from unconsolidated joint ventures	10,924		10,752
Contributions to unconsolidated joint ventures	(28,681)		(35,193)




Net cash used in investing activities	(212,094)		(248,432)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility	291,300		340,000
Repayment of credit facility	(203,400)		(267,300)



Repayment of mortgages	(6,178)		(12,719)
Common stock issued under the ATM	—		103,120
Payment of deferred financing costs	(71)		(5,299)

Purchase of partners' interest in consolidated joint venture	—		(43,387)
Common dividends paid	(145,858)		(143,818)
Contributions from noncontrolling interests	1,440		2,164
Distributions to noncontrolling interests	(876)		(107)
Net cash used in financing activities	(63,643)		(27,346)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	1,781		(3,430)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	5,145		10,168
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	6,926	$	6,738

See accompanying notes.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business: Cousins Properties Incorporated (“Cousins”), a Georgia corporation, is a fully integrated, self-administered, and self-managed real estate investment trust (“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 wholly owns Cousins TRS Services LLC ("CTRS"), a taxable entity which owns and manages its own real estate portfolio and performs certain real estate-related services for other parties.

Cousins, CPLP, CTRS, and their subsidiaries (collectively, the “Company”) develop, acquire, lease, manage, and own primarily Class A office properties and opportunistic mixed-use developments in the Sun Belt markets of the United States with a focus on Atlanta, Austin, Phoenix, Tampa, Charlotte, Dallas, and Nashville. Cousins has elected to be taxed as a REIT and intends to, among other things, distribute at least 100% of its net taxable income to stockholders, thereby eliminating any liability for federal income taxes under current law. Therefore, the results included herein do not include a federal income tax provision for Cousins. As of September 30, 2023, the Company's operating portfolio of real estate assets consisted of interests in 18.8 million square feet of office space and 310,000 square feet of multi-family space.

Basis of Presentation: The condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these financial statements reflect all adjustments necessary (which adjustments are of a normal and recurring nature) for the fair presentation of the Company's financial position as of September 30, 2023 and December 31, 2022, and the results of operations for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of results expected for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. The accounting policies employed are substantially the same as those shown in note 2 of the notes to consolidated financial statements included therein.

The Company evaluates all partnerships, joint ventures, and other arrangements with variable interests to determine if the entity or arrangement qualifies as a variable interest entity ("VIE"), as defined in the Financial Accounting Standard Board's ("FASB") Accounting Standards Codification ("ASC"). If the entity or arrangement qualifies as a VIE and the Company is determined to be the primary beneficiary, the Company is required to consolidate the assets, liabilities, and results of operations of the VIE. The Company had no investments or interests in any VIEs as of September 30, 2023 or December 31, 2022.

2. REAL ESTATE

In September 2023, the Company sold a 10.4 acre land parcel in Atlanta for a gross sales price of $4.25 million and recorded a gain of $507,000.

Impairment

The Company tests buildings held for investment, by disposal groups, for impairment whenever changes in circumstances indicate a disposal group’s carrying value may not be recoverable. The test is conducted using undiscounted cash flows for the shorter of the building’s estimated hold period or its remaining useful life. When testing for recoverability of value of buildings held for investment, projected cash flows are used over its expected hold period. If the expected hold period includes some likelihood of shorter-term hold period from a potential sale, the probability of a sale is layered into the analysis. If any building's held-for-investment analysis were to fail the impairment test, its book value would be written down to its then current estimated fair value, before any selling expense, and that building would continue to depreciate over its remaining useful life. None of the Company’s held-for-investment buildings were impaired during any periods presented in the accompanying statement of operations while under the held-for-investment classification.

The Company also reviews held-for-sale buildings, if any, for impairments. In order to be considered a real estate asset held-for-sale, the Company must, among other things, have the authority to commit to a plan to sell the asset in its current condition, have commenced the plan to sell the asset, and have determined that it is probable that the asset will sell within one year. If book value is in excess of estimated fair value less estimated selling costs, we impair those assets to fair value less estimated selling costs. There were

no held-for-sale buildings as of September 30, 2023 or December 31, 2022 or during any periods presented in the accompanying statements of operations.

The Company also reviews land and projects under development for impairment whenever changes in circumstances indicate the assets' carrying value may not be recoverable. None of the Company's investments in land or projects under development were impaired as of September 30, 2023 or December 31, 2022 or during any periods presented in the accompanying statement of operations.

The Company may record impairment charges in future periods if the economy and the office industry weakens, the operating results of individual buildings are materially different from our forecasts, or we shorten our contemplated hold period for any operating buildings.

3. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

The following information summarizes financial data and principal activities of the Company's unconsolidated joint ventures. The information included in the following table entitled summary of financial position is as of September 30, 2023 and December 31, 2022 ($ in thousands).


SUMMARY OF FINANCIAL POSITION
	Total Assets				Total Debt				Total Equity (Deficit)				Company's Investment
	2023		2022		2023		2022		2023		2022		2023			2022
Operating Properties:
AMCO 120 WT Holdings, LLC	$	80,362	$	81,136	$	—	$	—	$	79,203	$	80,509	$	14,526		$	14,856
Crawford Long - CPI, LLC (1)	22,435		22,857		82,296		62,856		(62,593)		(39,691)		(30,686)		(2)	(19,173)		(2)
Under Development:
Neuhoff Holdings LLC (3)	455,070		321,338		200,640		115,940		225,130		177,734		122,391			93,647
Land:
715 Ponce Holdings LLC	8,610		8,333		—		—		8,477		8,332		4,333			4,261
Sold and Other:

HICO Victory Center LP	—		158		—		—		—		5,818		—			75



	$	566,477	$	433,822	$	282,936	$	178,796	$	250,217	$	232,702	$	110,564		$	93,666

(1) In May 2023, Crawford Long - CPI, LLC refinanced the mortgage loan for the Medical Offices at Emory Hospital property. This $83.0 million interest-only mortgage loan has a fixed interest rate of 4.80% and matures in June 2032.

(2) Negative investment basis included in deferred income on the consolidated balance sheets.

(3) Neuhoff Holdings LLC has a construction loan with a borrowing capacity up to $312.7 million that matures in September 2025. The interest rate applicable to the construction loan is based on the Secured Overnight Financing Rate ("SOFR") plus 3.45% with a minimum rate of 3.60%.

The information included in the summary of operations table is for the nine months ended September 30, 2023 and 2022 ($ in thousands).


SUMMARY OF OPERATIONS
	Total Revenues				Net Income (Loss)			Company's Income from Investment
	2023		2022			2023		2022		2023		2022
Operating Properties:
AMCO 120 WT Holdings, LLC	$	8,337	$	8,005		$	2,698	$	2,335	$	537	$	454
Crawford Long - CPI, LLC	9,754		9,811			2,911		3,419		1,352		1,603
Under Development:
Neuhoff Holdings LLC	105		107			59		79		30		39
Land:
715 Ponce Holdings LLC	210		220			145		156		72		78
Sold and Other:
Carolina Square Holdings LP	—		12,140			48		600		24		215
HICO Victory Center LP	—		6,873			(14)		6,871		(7)		4,546


Other	—		28			—		(12)		—		103
	$	18,406	$	37,184		$	5,847	$	13,448	$	2,008	$	7,038

In May 2023, Crawford Long refinanced the mortgage loan for the Medical Offices at Emory Hospital property. Proceeds from the refinancing were used to repay in full its $62.4 million mortgage loan that was set to mature in June 2023. The new $83.0 million mortgage loan has a fixed interest rate of 4.80% and matures in June 2032.

In September 2022, the Company sold its 50% joint venture interest in Carolina Square Holdings LP ("Carolina Square"), which owned a mixed-used property in Chapel Hill, to its partner for a gross sales price of $105.0 million. The Company recognized a gain of $56.3 million on the sale of its interest in Carolina Square.

In June 2022, HICO Victory Center LP sold a 3.0 acre land parcel, in Uptown Dallas, held in an unconsolidated joint venture for a gross price of $23.1 million. The Company's share of the gain from the transaction was $4.5 million and is included in income from unconsolidated joint ventures on the statements of operations.

4. INTANGIBLE ASSETS AND LIABILITIES

At September 30, 2023 and December 31, 2022, intangible assets included the following ($ in thousands):


	2023		2022
In-place leases, net of accumulated amortization of $132,411 and $131,021 in 2023 and 2022, respectively	$	84,762	$	102,080
Below-market ground leases, net of accumulated amortization of $2,160 and $1,860 in 2023 and 2022, respectively	17,092		17,393
Above-market leases, net of accumulated amortization of $24,273 and $25,085 in 2023 and 2022, respectively	12,564		15,093
Goodwill	1,674		1,674
	$	116,092	$	136,240

At September 30, 2023 and December 31, 2022, intangible liabilities were the following ($ in thousands):


	2023		2022
Below-market leases, net of accumulated amortization of $49,540 and $48,994 in 2023 and 2022, respectively	$	44,295	$	52,280

The amortization of the above asset and liabilities are recorded as follows ($ in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Rental property revenues, net (Below-market and Above-market leases)	$	1,371	$	1,538	$	5,455	$	4,979

Expenses:
Depreciation and amortization (In-place leases)	4,849		7,274		17,319		21,664
Rental property operating and other expenses (Below-market ground leases)	100		100		300		310

Over the next five years and thereafter, aggregate amortization of these intangible assets and liabilities is anticipated to be as follows ($ in thousands):


	In-Place Leases		Below-Market Ground Leases		Above-Market Leases		Below-Market Leases
2023 (three months)	$	4,531	$	100	$	646	$	(2,104)
2024	17,069		400		2,425		(8,234)
2025	14,782		400		2,119		(7,728)
2026	12,382		400		1,726		(6,509)
2027	9,799		400		1,317		(4,973)
Thereafter	26,199		15,392		4,331		(14,747)
	$	84,762	$	17,092	$	12,564	$	(44,295)

5. OTHER ASSETS

Other assets on the consolidated balance sheets as of September 30, 2023 and December 31, 2022 included the following ($ in thousands):


	2023		2022

Predevelopment costs	$	55,562	$	50,009
Prepaid expenses and other assets	13,961		6,438
Furniture, fixtures and equipment and other deferred costs, net of accumulated depreciation of $18,994 and $18,860 in 2023 and 2022, respectively	10,586		11,824
Lease inducements, net of accumulated amortization of $5,740 and $5,129 in 2023 and 2022, respectively	8,117		8,091
Credit Facility deferred financing costs, net of accumulated amortization of $1,809 and $135 in 2023 and 2022, respectively	4,594		5,550
	$	92,820	$	81,912

Predevelopment costs represent amounts that are capitalized related to predevelopment projects that the Company determined are probable of future development.

Lease inducements are incentives paid to tenants in conjunction with leasing space, such as moving costs, sublease arrangements of prior space, and other costs. These amounts are amortized into rental revenues over the individual underlying lease terms.

6. NOTES PAYABLE

The following table summarizes the terms of notes payable outstanding at September 30, 2023 and December 31, 2022 ($ in thousands):


Description	Interest Rate (1)	Maturity (2)	2023		2022
Unsecured Notes:
Credit Facility	6.31%	April 2027	$	144,500	$	56,600
Term Loan	(3)	March 2025	400,000		400,000
Term Loan	5.38%	August 2024	350,000		350,000
Senior Note	3.95%	July 2029	275,000		275,000
Senior Note	3.91%	July 2025	250,000		250,000
Senior Note	3.86%	July 2028	250,000		250,000
Senior Note	3.78%	July 2027	125,000		125,000
Senior Note	4.09%	July 2027	100,000		100,000
			1,894,500		1,806,600
Secured Mortgage Notes:
Terminus (4)	6.34%	January 2031	221,000		221,000
Fifth Third Center	3.37%	October 2026	127,464		130,168
Colorado Tower	3.45%	September 2026	107,543		109,552

Domain 10	3.75%	November 2024	73,056		74,521



			529,063		535,241
			$	2,423,563	$	2,341,841


Unamortized loan costs			(5,160)		(7,235)
Total Notes Payable			$	2,418,403	$	2,334,606

(1) Interest rate as of September 30, 2023.

(2) Weighted average maturity of notes payable outstanding at September 30, 2023 was 3.3 years.

(3) In April 2023, the Company entered into a floating-to-fixed interest rate swap with respect to $200 million of the $400 million Term Loan. As of September 30, 2023, the fixed interest rate was 5.45%, and the floating interest rate was 6.46%.

(4) Represents $123.0 million and $98.0 million non-cross-collateralized mortgages secured by the Terminus 100 and Terminus 200 buildings, respectively.

Credit Facility

On May 2, 2022, the Company entered into a Fifth Amended and Restated Credit Agreement (the "Credit Facility") under which the Company may borrow up to $1 billion if certain conditions are satisfied. The Credit Facility contains financial covenants that require, among other things, the maintenance of unencumbered interest coverage ratio of at least 1.75x; a fixed charge coverage ratio of at least 1.50x; a secured leverage ratio of no more than 50%; and an overall leverage ratio of no more than 60%.

The interest rate applicable to the Credit Facility varies according to the Company's leverage ratio and may, at the election of the Company, be determined based on either (1) the Daily SOFR or Term SOFR, plus a SOFR adjustment of 0.10% ("Adjusted SOFR") and a spread of between 0.90% and 1.40%, or (2) the greater of (i) Bank of America's prime rate, (ii) the federal funds rate plus 0.50%, (iii) Term SOFR, plus a SOFR adjustment of 0.10%, and 1.00%, or (iv) 1.00%, plus a spread of between 0.00% and 0.40%, based on leverage. In addition to the interest rate, the Credit Facility is also subject to a facility fee of 0.15% to 0.30%, depending on leverage, on the entire $1 billion capacity.

At September 30, 2023, the Credit Facility's interest rate spread over Adjusted SOFR was 0.90%, and the facility fee spread was 0.15%. The amount that the Company may draw under the Credit Facility is a defined calculation based on the Company's unencumbered assets and other factors. The total available borrowing capacity under the Credit Facility was $855.5 million at September 30, 2023. The amounts outstanding under the Credit Facility may be accelerated upon the occurrence of any events of default.

The Credit Facility replaced a $1 billion prior facility that was set to expire in January 2023. The rate paid under the prior facility from January 1, 2022 through May 1, 2022 was LIBOR plus 1.05%.

Term Loans

On October 3, 2022, the Company entered into a Delayed Draw Term Loan Agreement (the "2022 Term Loan") and borrowed the full $400 million available under the loan. The loan matures on March 3, 2025 with four consecutive options to extend the maturity date for an additional six months. The interest rate provisions are the same as the 2021 Term Loan, and the covenants are the same as the Credit Facility. On April 19, 2023, the Company entered into a floating-to-fixed rate swap with respect to $200 million of the $400 million 2022 Term Loan through the maturity date of March 3, 2025. This swap fixed the underlying SOFR rate at 4.298% (see note 7).

On June 28, 2021, the Company entered into an Amended and Restated Term Loan Agreement (the "2021 Term Loan") that amended the former term loan agreement. Under the 2021 Term Loan, the Company has borrowed $350 million that matures on August 30, 2024 with four consecutive options to extend the maturity date for an additional 180 days. On September 19, 2022, the Company entered into the First Amendment to the 2021 Term Loan. This amendment aligns covenants and available interest rates, including the addition of SOFR, to that of the Credit Facility. Under the terms of this First Amendment the interest rate applicable to the 2021 Term Loan varies according to the Company's leverage ratio and may, at the election of the Company, be determined based on either (1) the Daily SOFR or Term SOFR, plus a SOFR adjustment of 0.10% ("Adjusted SOFR") and a spread of between 1.05% and 1.65%, or (2) the greater of (i) Bank of America's prime rate, (ii) the federal funds rate plus 0.50%, (iii) Term SOFR, plus a SOFR adjustment of 0.10%, and 1.00%, (iv) or 1.00%, plus a spread of between 0.05% and 0.65%, based on leverage. On September 19, 2022, the Company provided notice of our election of the Daily SOFR Rate Loan provisions. On September 27, 2022, the Company entered into a floating-to-fixed interest rate swap with respect to the $350 million 2021 Term Loan through the maturity date of August 30, 2024. This swap effectively fixed the underlying SOFR rate at 4.234% (see note 7).

At September 30, 2023, the Term Loans' spread over the underlying SOFR rates was 1.05%.

Unsecured Senior Notes

The Company has unsecured senior notes of $1.0 billion that were funded in five tranches. The first tranche of $100 million is due in 2027 and has a fixed annual interest rate of 4.09%. The second tranche of $250 million is due in 2025 and has a fixed annual interest rate of 3.91%. The third tranche of $125 million is due in 2027 and has a fixed annual interest rate of 3.78%. The fourth tranche of $250 million is due in 2028 and has a fixed annual interest rate of 3.86%. The fifth tranche of $275 million is due in 2029 and has a fixed annual interest rate of 3.95%.

The unsecured senior notes contain financial covenants that are consistent with those of our Credit Facility, with the exception of a secured leverage ratio of no more than 40%. The senior notes also contain customary representations and warranties and affirmative and negative covenants, as well as customary events of default.

Secured Mortgage Notes

In December 2022, the Company refinanced mortgages on the Company's two Terminus properties in Atlanta with the existing lender. Under the new mortgages, the maturities were extended from January 2023 to January 2031, the combined principal increased to $221.0 million, up from $178.9 million. The interest rate for each mortgage is 6.34%, up from a combined weighted average interest rate of 4.67%. These mortgages are neither cross-collateralized nor cross-defaulted.

In October 2022, the Company paid off, in full, its Legacy Union One and Promenade Tower mortgages with remaining principal balances of $66.0 million and $86.3 million, respectively. These mortgages had interest rates of 4.24% and 4.27%, respectively.

As of September 30, 2023, the Company had $529.1 million outstanding on five non-recourse mortgage notes. All interest rates on the secured mortgage notes are fixed. Assets with depreciated carrying values of $894.3 million are pledged as security on these mortgage notes payable.

Other Debt Information

The Company is in compliance with all of the covenants related to its unsecured and secured debt.

At September 30, 2023 and December 31, 2022, the estimated fair value of the Company’s notes payable was $2.2 billion, calculated by discounting the debt's remaining contractual cash flows at estimated current market rates at which similar loans could have been obtained at September 30, 2023 and December 31, 2022. The estimate of the current market rates, which is the most significant input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value

relationship. These fair value calculations are considered to be Level 2 under the guidelines as set forth in ASC 820, as the Company utilizes market rates for similar type loans from third party brokers.

For the three and nine months ended September 30, 2023 and 2022, interest expense was recorded as follows ($ in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total interest incurred	$	31,180	$	22,406	$	92,278	$	61,522
Interest capitalized	(4,172)		(4,026)		(14,268)		(11,068)
Total interest expense	$	27,008	$	18,380	$	78,010	$	50,454

7. DERIVATIVE FINANCIAL INSTRUMENTS

On April 19, 2023, the Company entered into a floating-to-fixed interest rate swap with respect to $200 million of the $400 million 2022 Term Loan through the maturity date of March 3, 2025. This swap effectively fixed the underlying SOFR rate at 4.298%.

On September 27, 2022, the Company entered into a floating-to-fixed interest rate swap with respect to the $350 million 2021 Term Loan through the maturity date of August 30, 2024. This swap effectively fixed the underlying SOFR rate at 4.234%.

The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During 2022 and 2023, such derivatives were used to hedge the variable cash flows associated with the 2021 and 2022 Term Loans (referred to as "cash flow hedges").

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings.

The counterparties under these swaps are major financial institutions, and the swaps contain provisions whereby if the Company defaults on certain of its indebtedness, and such default results in repayment of such indebtedness being, or becoming capable of being, accelerated by the lender, then the Company could also be declared in default under the swaps. There are no collateral requirements related to these swaps.

As of September 30, 2023, the fair value of the swap with respect to the 2022 Term Loan was $2.3 million and is included in other assets on the Company's consolidated balance sheets.

As of September 30, 2023 and December 31, 2022, the fair values of the swap with respect to the 2021 Term Loan were $3.5 million and $1.8 million, respectively, and are included in other assets on the Company's consolidated balance sheets.

The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 ($ in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
Cash Flow Hedges:	2023		2022		2023		2022
Amount of income (loss) recognized in accumulated other comprehensive income on interest rate derivatives	$	1,503	$	(715)	$	6,397	$	(715)
Amount of loss (income) reclassified from accumulated other comprehensive income into income as a reduction of interest expense	$	(1,345)	$	63	$	(2,441)	$	63
Total amount of interest expense presented in the consolidated statements of operations	$	27,008	$	18,380	$	78,010	$	50,454

The fair value of these hedges is determined using observable inputs other than quoted prices in active markets, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. These inputs are considered Level 2 inputs in the fair value hierarchy, and the Company engages a third-party expert to determine these inputs. The fair value of the cash flow hedges is determined using the conventional industry methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts made between the Company and its counterparties to the cash flow hedges. These variable cash receipts are based on the expectation of future interest rates which are derived from observed market interest rate curves.

In addition, any credit valuation adjustments are considered in the fair values to account for potential nonperformance risk to the extent they would be significant inputs to the calculations. For the periods presented, credit valuation adjustments were not considered to be significant inputs.

8. OTHER LIABILITIES

Other liabilities on the consolidated balance sheets as of September 30, 2023 and December 31, 2022 included the following ($ in thousands):


	2023		2022
Ground lease liability	$	53,416	$	53,129
Prepaid rent	34,684		33,165
Security deposits	14,953		14,635
Restricted stock unit liability	—		1,048
Other liabilities	1,442		1,465