UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September 30, ~~2015~~2016



o		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 (State or other jurisdiction of incorporation or organization)	58-0869052 (I.R.S. Employer Identification No.)
191 Peachtree Street, Suite 500, Atlanta, Georgia (Address of principal executive offices)	30303-1740 (Zip Code)

(404) 407-1000

(Registrant’s telephone number, including area code)

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 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

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



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

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

Yes o No þ

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 ~~22, 2015~~27, 2016
Common Stock, $1 par value per share		~~214,670,759~~393,383,468 shares

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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/A~~10-K for the year ended December 31, ~~2014.~~2015 and as itemized herein. These forward-looking statements include information about possible or assumed future results of the business and our 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:

our business and financial strategy;

•our ability to obtain future financing arrangements;

•future acquisitions and future dispositions of operating assets;

•future acquisitions of land;

•future development and redevelopment opportunities;

•future dispositions of land and other non-core assets;

•future repurchases of ~~our~~ common stock;

•projected operating results;

•market and industry trends;

•future distributions;

•projected capital expenditures; ~~and~~

•interest ~~rates.~~rates;

statements about the benefits of the transactions involving us and Parkway Properties, Inc. ("Parkway"), including future financial and operating results, plans, objectives, expectations and intentions;

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

benefits of the transactions with Parkway to tenants, employees, stockholders and other constituents of the combined company; and

•integrating Parkway with us.

Any forward-looking statements are based upon management's beliefs, assumptions, and expectations of our future performance, taking into account information 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 and financing;

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 and investments or from dispositions;

the potential dilutive effect of ~~any~~ common stock offerings;

the failure to achieve benefits from the repurchase of ~~our~~ common stock;

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

~~risks related to the geographic concentration of our portfolio, including, but not limited to, metropolitan Houston and metropolitan Atlanta;~~

~~risks related to industry concentration of our portfolio including, but, not limited to, the energy industry;~~

risks and uncertainties related to national and local economic conditions, the real estate industry in general, and the commercial real estate markets in particular;

changes to our strategy with regard to land and other non-core holdings that require impairment losses to be recognized;

leasing risks, including the ability to obtain new tenants or renew expiring tenants, ~~and~~ the ability to lease newly developed and/or recently acquired ~~space;~~space, and the risk of declining leasing rates;

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

volatility in interest rates and insurance rates;

~~the availability of sufficient investment opportunities;~~

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);

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; ~~and~~

any failure to continue to qualify for taxation as a real estate investment ~~trust.~~trust and meet regulatory requirements;

the ability to successfully integrate our operations and employees in connection with the transactions with Parkway;

the ability to realize anticipated benefits and synergies of the transactions with Parkway;

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risks associated with litigation resulting from the transactions with Parkway and from liabilities or contingent liabilities assumed in the transactions with Parkway;

risks associated with any errors or omissions in financial or other information of Parkway that has been previously provided to the public;

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

potential changes to tax legislation;

changes in demand for properties;

risks associated with the acquisition, development, expansion, leasing and management of properties;

significant costs related to uninsured losses, condemnation, or environmental issues;

the amount of the costs, fees, expenses and charges related to the transactions with Parkway; and

those additional risks and factors discussed in reports filed with the Securities and Exchange Commission (“SEC”) by the Company, Parkway, and Parkway, Inc.

The words “believes,” “expects,” “anticipates,” “estimates,” “plans,” “may,” “intend,” “will,” or similar expressions are intended to identify forward-looking statements. Although we believe that our 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.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)	COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)						COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)

	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
	(unaudited)						(unaudited)
Assets:
Real estate assets:
Operating properties, net of accumulated depreciation of $385,657 and $324,543 in 2015 and 2014, respectively	$	2,160,655		$	2,181,684
Operating properties, net of accumulated depreciation of $328,790 and $352,350 in 2016 and 2015, respectively							$	2,014,548		$	2,194,781
Projects under development	53,118			91,615			111,768			27,890
Land	17,829			21,646			9,669			17,829
	2,231,602			2,294,945			2,135,985			2,240,500
Real estate assets and other assets held for sale, net of accumulated depreciation and amortization of $60,078 in 2015	50,491			—
Real estate assets and other assets held for sale, net of accumulated depreciation and amortization of $119,670 and $7,200 in 2016 and 2015, respectively							203,735			7,246

Cash and cash equivalents	5,331			—			97,241			2,003
Restricted cash	4,486			5,042			6,566			4,304
Notes and accounts receivable, net of allowance for doubtful accounts of $1,736 and $1,643 in 2015 and 2014, respectively	9,513			10,732
Notes and accounts receivable, net of allowance for doubtful accounts of $1,128 and $1,353 in 2016 and 2015, respectively							12,215			10,828
Deferred rents receivable	63,738			57,939			60,094			67,258
Investment in unconsolidated joint ventures	103,470			100,498			116,933			102,577
Intangible assets, net of accumulated amortization of $96,349 and $76,050 in 2015 and 2014, respectively	131,858			163,244
Intangible assets, net of accumulated amortization of $110,679 and $103,458 in 2016 and 2015, respectively							105,015			124,615
Other assets	37,118			34,930			22,950			35,989
Total assets	$	2,637,607		$	2,667,330		$	2,760,734		$	2,595,320
Liabilities:
Notes payable	$	779,570		$	792,344		$	789,378		$	718,810
Liabilities of real estate assets held for sale							106,135			1,347
Accounts payable and accrued expenses	66,049			76,240			84,641			71,739
Deferred income	24,132			23,277			34,604			29,788
Intangible liabilities, net of accumulated amortization of $24,464 and $16,897 in 2015 and 2014, respectively	62,019			70,020
Intangible liabilities, net of accumulated amortization of $32,922 and $26,890 in 2016 and 2015, respectively							52,127			59,592
Other liabilities	30,407			31,991			28,412			30,629
Liabilities of real estate assets held for sale	2,843			—
Total liabilities	965,020			993,872			1,095,297			911,905
Commitments and contingencies	—			—
Equity:
Stockholders' investment:
Common stock, $1 par value, 350,000,000 shares authorized, 220,255,502 and 220,082,610 shares issued in 2015 and 2014, respectively	220,256			220,083
Preferred stock, $1 par value, 20,000,000 shares authorized, -0- shares issued and outstanding in 2016 and 2015							—			—
Common stock, $1 par value, 350,000,000 shares authorized, 220,498,850 and 220,255,676 shares issued in 2016 and 2015, respectively							220,499			220,256
Additional paid-in capital	1,721,856			1,720,972			1,723,552			1,722,224
Treasury stock at cost, 5,584,743 and 3,570,082 shares in 2015 and 2014, respectively	(105,531		)	(86,840		)
Treasury stock at cost, 10,329,082 and 8,742,181 shares in 2016 and 2015, respectively							(148,373		)	(134,630		)
Distributions in excess of cumulative net income	(163,994		)	(180,757		)	(132,766		)	(124,435		)
Total stockholders' investment							1,662,912			1,683,415
Nonredeemable noncontrolling interests							2,525			—
Total equity	1,672,587			1,673,458			1,665,437			1,683,415
Total liabilities and equity	$	2,637,607		$	2,667,330		$	2,760,734		$	2,595,320

See accompanying notes.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)


	Three Months Ended					Nine Months Ended						Three Months Ended				Nine Months Ended
	September 30,					September 30,						September 30,				September 30,
	2015		2014			2015			2014			2016		2015		2016		2015
Revenues:
Rental property revenues	$	96,016	$	86,857		$	282,226		$	244,375		$	92,621	$	96,016	$	271,832	$	282,226
Fee income	1,686		1,802			5,206			6,165			1,945		1,686		5,968		5,206
Other	444		439			593			4,786			153		444		858		593
	98,146		89,098			288,025			255,326			94,719		98,146		278,658		288,025
Costs and expenses:
Rental property operating expenses	41,331		38,685			120,672			109,501			37,760		41,331		112,051		120,672
Reimbursed expenses	686		783			2,514			2,703			795		686		2,463		2,514
General and administrative expenses	2,971		5,021			12,502			16,388			4,368		2,976		17,301		12,405
Interest expense	7,673		6,817			23,219			20,954			7,710		7,673		22,457		23,219
Depreciation and amortization	32,538		32,704			103,564			101,979			31,843		32,538		96,192		103,564
Acquisition and related costs	19		644			104			815
Acquisition and merger costs												1,940		19		4,383		104
Other	175		481			873			1,936			173		170		681		970
	85,393		85,135			263,448			254,276			84,589		85,393		255,528		263,448
Income from continuing operations before taxes, unconsolidated joint ventures, and gain on sale of investment properties	12,753		3,963			24,577			1,050
Benefit (provision) for income taxes from operations	—		(1		)	—			20
Income from continuing operations before taxes, unconsolidated joint ventures, and sale of investment properties												10,130		12,753		23,130		24,577
Income from unconsolidated joint ventures	3,716		2,030			7,088			5,343			1,527		3,716		5,144		7,088
Income from continuing operations before gain on sale of investment properties	16,469		5,992			31,665			6,413			11,657		16,469		28,274		31,665
Gain on sale of investment properties	37,145		81			37,674			1,569			—		37,145		13,944		37,674
Income from continuing operations	53,614		6,073			69,339			7,982			11,657		53,614		42,218		69,339
Income (loss) from discontinued operations:
Income (loss) from discontinued operations	6		348			(14		)	1,806			—		6		—		(14		)
Gain (loss) on sale from discontinued operations	—		12,993			(551		)	19,372
Income (loss) on sale from discontinued operations												—		—		—		(551		)
	6		13,341			(565		)	21,178			—		6		—		(565		)
Net income	53,620		19,414			68,774			29,160			$	11,657	$	53,620	$	42,218	$	68,774
Net income attributable to noncontrolling interests	—		(92		)	—			(376		)
Net income attributable to controlling interests	53,620		19,322			68,774			28,784
Dividends to preferred stockholders	—		—			—			(2,955		)
Preferred share original issuance costs	—		—			—			(3,530		)
Net income available to common stockholders	$	53,620	$	19,322		$	68,774		$	22,299
Per common share information — basic and diluted:
Income from continuing operations attributable to controlling interest	$	0.25	$	0.03		$	0.32		$	—
Income from continuing operations												$	0.06	$	0.25	$	0.20	$	0.32
Income from discontinued operations	—		0.06			—			0.11			—		—		—		—
Net income available to common stockholders	$	0.25	$	0.09		$	0.32		$	0.11
Net income												$	0.06	$	0.25	$	0.20	$	0.32
Weighted average shares — basic	216,261		209,839			216,485			200,073			210,170		216,261		210,400		216,485
Weighted average shares — diluted	216,374		210,111			216,625			200,325			210,326		216,374		210,528		216,625
Dividends declared per common share	$	0.080	$	0.075		$	0.240		$	0.225		$	0.08	$	0.08	$	0.24	$	0.24

See accompanying notes.

Table of Contents

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015

(unaudited, in thousands)

Preferred
Stock

Common
Stock

Additional
Paid-In
Capital

Treasury
Stock

Distributions in
Excess of
Net Income

Stockholders’
Investment

Nonredeemable
Noncontrolling
Interests

Total
Equity
Balance December 31, 2014 $ —
$ 220,083
$ 1,720,972
$ (86,840 ) $ (180,757 ) $ 1,673,458
$ —
$ 1,673,458
Net income —
—
—
—
68,774
68,774
—
68,774
Common stock issued pursuant to:

Director stock grants —
79
686
—
—
765
—
765
Stock option exercises —
4
(19 ) —
—
(15 ) —
(15 )
Restricted stock grants, net of amounts withheld for income taxes —
90
(911 ) —
—
(821 ) —
(821 )
Amortization of stock options and restricted stock, net of forfeitures —
—
1,104
—
—
1,104
—
1,104
Repurchase of common stock —
—
—
(18,691 ) —
(18,691 ) —
(18,691 )
Common dividends —
—
—
—
(52,011 ) (52,011 ) —
(52,011 )
Other —
—
24
—
—
24
—
24
Balance September 30, 2015 $ —
$ 220,256
$ 1,721,856
$ (105,531 ) $ (163,994 ) $ 1,672,587
$ —
$ 1,672,587

Balance December 31, 2013 $ 94,775
$ 193,236
$ 1,420,951
$ (86,840 ) $ (164,721 ) $ 1,457,401
$ 1,571
$ 1,458,972
Net income —
—
—
—
28,784
28,784
376
29,160
Common stock issued pursuant to:

Director stock grants —
55
598
—
—
653
—
653
Stock option exercises —
40
(267 ) —
—
(227 ) —
(227 )
Common stock offering, net of issuance costs —
26,700
295,212
—
—
321,912
—
321,912
Restricted stock grants, net of amounts withheld for income taxes —
53
(978 ) —
—
(925 ) —
(925 )
Amortization of stock options and restricted stock, net of forfeitures —
(5 ) 1,513
—
—
1,508
—
1,508
Distributions to nonredeemable noncontrolling interests —
—
—
—
—
—
(369 ) (369 )
Redemption of preferred shares (94,775 ) —
3,530
—
(3,530 ) (94,775 ) —
(94,775 )
Preferred dividends —
—
—
—
(2,955 ) (2,955 ) —
(2,955 )
Common dividends —
—
—
—
(45,351 ) (45,351 ) —
(45,351 )
Balance September 30, 2014 $ —
$ 220,079
$ 1,720,559
$ (86,840 ) $ (187,773 ) $ 1,666,025
$ 1,578
$ 1,667,603



	Common Stock			Additional Paid-In Capital			Treasury Stock			Distributions in Excess of Net Income			Stockholders’ Investment			Nonredeemable Noncontrolling Interests		Total Equity
Balance December 31, 2015	$	220,256		$	1,722,224		$	(134,630	)	$	(124,435	)	$	1,683,415		$	—	$	1,683,415
Net income	—			—			—			42,218			42,218			—		42,218
Common stock issued pursuant to stock based compensation	257			76			—			—			333			—		333
Amortization of stock options and restricted stock, net of forfeitures	(14		)	1,252			—			—			1,238			—		1,238
Contributions from nonredeemable noncontrolling interests	—			—			—			—			—			2,525		2,525
Repurchase of common stock	—			—			(13,743		)	—			(13,743		)	—		(13,743		)
Common dividends ($0.24 per share)	—			—			—			(50,549		)	(50,549		)	—		(50,549		)
Balance September 30, 2016	$	220,499		$	1,723,552		$	(148,373	)	$	(132,766	)	$	1,662,912		$	2,525	$	1,665,437

Balance December 31, 2014	$	220,083		$	1,720,972		$	(86,840	)	$	(180,757	)	$	1,673,458		$	—	$	1,673,458
Net income	—			—			—			68,774			68,774			—		68,774
Common stock issued pursuant to stock based compensation	173			(244		)	—			—			(71		)	—		(71		)
Repurchase of common stock	—			—			(18,691		)	—			(18,691		)	—		(18,691		)
Amortization of stock options and restricted stock, net of forfeitures	—			1,104			—			—			1,104			—		1,104
Common dividends ($0.24 per share)	—			—			—			(52,011		)	(52,011		)	—		(52,011		)
Other	—			24			—			—			24			—		24
Balance September 30, 2015	$	220,256		$	1,721,856		$	(105,531	)	$	(163,994	)	$	1,672,587		$	—	$	1,672,587

See accompanying notes.

Table of Contents

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2016			2015
Cash flows from operating activities:
Net income	$	68,774		$	29,160		$	42,218		$	68,774
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of investment properties, including discontinued operations	(37,123		)	(20,941		)	(13,944		)	(37,123		)
Depreciation and amortization, including discontinued operations	103,614			102,481			96,192			103,614
Amortization of deferred financing costs	1,073			604			1,063			1,073
Amortization of stock options and restricted stock, net of forfeitures	1,104			1,508
Stock-based compensation expense, net of forfeitures							1,571			1,104
Effect of certain non-cash adjustments to rental revenues	(21,907		)	(21,740		)	(15,966		)	(21,907		)
Income from unconsolidated joint ventures	(7,087		)	(5,343		)	(5,144		)	(7,087		)
Operating distributions from unconsolidated joint ventures	5,570			5,195			5,893			5,570
Land and multi-family cost of sales, net of closing costs paid	—			302
Changes in other operating assets and liabilities:
Change in other receivables and other assets, net	(6,452		)	(1,912		)	1,824			(6,452		)
Change in operating liabilities	(4,526		)	5,282			5,544			(4,526		)
Net cash provided by operating activities	103,040			94,596			119,251			103,040
Cash flows from investing activities:
Proceeds from investment property sales	136,498			53,827			21,088			136,498
Property acquisition, development, and tenant asset expenditures	(151,384		)	(351,657		)	(122,357		)	(151,384		)
Investment in unconsolidated joint ventures	(7,486		)	(10,578		)	(24,918		)	(7,486		)
Distributions from unconsolidated joint ventures	6,318			7,433			4,150			6,318
Change in notes receivable and other assets	1,149			(1,818		)	(5,699		)	1,149
Change in restricted cash	293			(1,834		)	(3,667		)	293
Net cash used in investing activities	(14,612		)	(304,627		)	(131,403		)	(14,612		)
Cash flows from financing activities:
Proceeds from credit facility	269,000			395,175			182,800			269,000
Repayment of credit facility	(275,200		)	(347,550		)	(274,800		)	(275,200		)
Proceeds from other notes payable	—			68
Proceeds from issuance of notes payable							270,000			—
Repayment of notes payable	(6,574		)	(6,713		)	(7,239		)	(6,574		)
Payment of loan issuance costs	—			(3,176		)	(1,604		)	—
Common stock issued, net of expenses	8			321,912			—			8
Contributions from noncontrolling interests							2,525			—
Repurchase of common stock	(18,320		)	—			(13,743		)	(18,320		)
Redemption of preferred shares	—			(94,775		)
Common dividends paid	(52,011		)	(45,351		)	(50,549		)	(52,011		)
Preferred dividends paid	—			(2,955		)
Distributions to noncontrolling interests	—			(369		)
Net cash provided by (used in) financing activities	(83,097		)	216,266			107,390			(83,097		)
Net increase in cash and cash equivalents	5,331			6,235			95,238			5,331
Cash and cash equivalents at beginning of period	—			975			2,003			—
Cash and cash equivalents at end of period	$	5,331		$	7,210		$	97,241		$	5,331

Interest paid, net of amounts capitalized	$	22,579		$	20,450		$	20,792		$	22,579

Significant non-cash transactions:
Change in accrued property acquisition, development, and tenant asset expenditures	$	(4,118	)	$	3,055
Transfer from operating properties to real estate assets and other assets held for sale	50,491			181,116			$	203,735		$	50,491
Transfer from operating properties to liabilities of real estate assets held for sale	2,843			—			106,135			2,843
Transfer from projects under development to operating properties	93,019			—			—			93,019
Change in accrued property acquisition, development, and tenant asset expenditures							11,384			(4,118		)
Transfer from land held to projects under development							8,099			—
Transfer from investment in unconsolidated joint ventures to projects under development							5,880			—

See accompanying notes.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2015~~2016

(Unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

~~Description of Business~~

Cousins Properties Incorporated (“Cousins”), a Georgia corporation, is a self-administered and self-managed real estate investment trust (“REIT”). Through December 31, 2014, Cousins Real Estate Corporation (“CREC”) was a taxable entity wholly-owned by and consolidated with Cousins. CREC owned, developed, and managed its own real estate portfolio and performed certain real estate related services for other parties. On December 31, 2014, CREC merged into Cousins and coincident with this merger, Cousins formed Cousins TRS Services LLC ("CTRS"), is a ~~new~~ taxable entity ~~wholly-owned by Cousins. Upon formation, CTRS received a capital contribution of some of the real estate assets and contracts that were previously~~wholly owned by ~~CREC.~~and consolidated with Cousins. CTRS owns and manages its own real estate portfolio and performs certain real estate related services for other parties. ~~Cousins, CREC, CTRS and their subsidiaries are~~All of the entities included in the condensed consolidated financial statements ~~and~~ are hereinafter referred to collectively as the "Company."

The Company develops, acquires, leases, manages, and owns primarily Class A office ~~properties~~assets and opportunistic mixed-use properties in Sunbelt markets with a focus on Georgia, Texas, and North Carolina. Cousins has elected to be taxed as a ~~real estate investment trust (“REIT”)~~REIT and intends to, among other things, distribute 90% 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.

~~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, ~~2015~~2016 and the results of operations for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015. The results of operations for the three and nine months ended September 30, ~~2015~~2016 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 condensed or 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 thereto included in the Company's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2014.~~2015. The accounting policies employed are substantially the same as those shown in note 2 to the consolidated financial statements included in such Form ~~10-K/A.~~10-K.

For the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015, there were no items of other comprehensive income. Therefore, no presentation of comprehensive income is required.

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 Standards 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.

In July 2015, the Company acquired land and transferred it to a special purpose entity to facilitate a potential Section 1031 exchange under the Internal Revenue Code. To realize the tax deferral available under the Section 1031 exchange, the Company must complete the Section 1031 exchange, and take title to the to-be-exchanged land within 180 days of the acquisition date. The Company ~~has determined~~concluded that ~~this entity~~its joint venture with Callaway Gardens Resort, Inc. is a VIE, and the Company is the primary beneficiary. ~~Therefore,~~Accordingly, the ~~Company consolidates this entity. As of September 30, 2015, this VIE had total~~ assets, ~~of $34.1 million, no significant~~ liabilities and ~~no significant cash flows.~~

~~Certain prior year amounts~~results of operations have been ~~reclassified for consistency with the current period presentation.~~consolidated. In the first quarter of ~~2015,~~2016, the Company ~~concluded that certain liabilities associated with variable stock-based compensation should be classified as other liabilities. Previously, these items~~adopted Accounting Standards Update ("ASU") 2015-02, "Amendments to the Consolidation Analysis," and this adoption had ~~been classified as accounts payable and accrued expenses. This change in classification does not affect~~no material impact on the ~~previously reported Condensed Consolidated Statement of Cash Flows or Condensed Consolidated Statement of Operations for any period.~~

~~Table of Contents~~

~~Recent Accounting Pronouncements~~Company.

In ~~February 2015,~~March 2016, the FASB issued ~~ASC 2015-02 "Consolidation (Topic 810): Amendments~~ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." Under this ASU, the ~~Consolidation Analysis." All legal entities~~additional paid-in capital pool is eliminated, and an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This ASU also eliminated the requirement to defer recognition of an excess tax benefit until all benefits are ~~subject~~realized through a reduction to ~~reevaluation under~~taxes payable. This ASU also changes the ~~revised consolidation model. The amendment modifies~~treatment of excess tax benefits as operating cash flows in the ~~evaluation~~statement of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities. It also eliminates the presumption that a general partner should consolidate a limited partnership. The guidancecash flows. This ASU is effective for ~~public entities with periods~~fiscal years beginning after December 15, ~~2015~~2016 with early adoption permitted. The Company expects to adopt this guidance effective January 1, ~~2016~~2017, and is currently assessing the potential impact of adopting the new guidance.

In ~~April 2015,~~February 2016, the ~~FASB~~Financial Accounting Standards Board issued ASU ~~2015-03, "Simplifying the Presentation of Debt Issuance Costs,~~2016-02, "Leases," which amends the existing standards for lease accounting by requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting and reporting. The new standard will require ~~companies~~lessees to ~~present debt issuance costs~~record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months and classify such leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method (finance leases) or on a straight-line basis over the term of the lease (operating leases). Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct ~~deduction from the related debt rather than as an asset. These costs will continue to be amortized into interest expense.~~financing leases and operating leases. ASU 2016-02 supersedes previous leasing standards. The guidance is effective for ~~periods~~the fiscal years beginning after December 15, ~~2015~~2018 with early adoption permitted. The Company expects to adopt this guidance effective January 1, ~~2016,~~2019, and is currently assessing the ~~Company does not expect~~potential impact of adopting the

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new guidance. The impact of the adoption of this new guidance, if any, will be recorded retrospectively to ~~have a material impact on its consolidated~~all financial ~~statements.~~statements presented.

In ~~April 2015,~~May 2014, the FASB ~~voted to defer~~issued ASU 2014-09, "Revenue from Contracts with ~~Customers (Topic 606).~~Customers." Under the new guidance, companies will recognize revenue when the seller satisfies a performance obligation, which would be when the buyer takes control of the good or service. This new guidance could result in different amounts of revenue being recognized and could result in revenue being recognized in different reporting periods than under the current guidance. The ~~standard~~new guidance specifically excludes revenue associated with lease contracts. ~~The guidance is~~ASU 2015-14, "Revenue from Contracts with Customers," was subsequently issued modifying the effective ~~for~~date to periods beginning after December 15, 2017, with early adoption permitted for periods beginning after December 15, 2016. The standard allows for either "full retrospective" adoption, meaning the standard is applied to all of the periods presented, or "modified retrospective" adoption, meaning the standard is applied only to the most recent period presented in the financial statements. The Company is currently assessing this guidance for future implementation and potential impact of adoption. The Company expects to adopt this guidance effective January 1, ~~2018~~2018.

In the first quarter of 2016, the Company adopted ASU 2015-03, "Simplifying the Presentation of Debt Costs" ("ASU 2015-03"). In accordance with ASU 2015-03, the Company began recording deferred financing costs related to its mortgage notes payable as a reduction in the carrying amount of its notes payable on the condensed consolidated balance sheets. The Company reclassified $2.5 million in deferred financing costs from other assets to notes payable in its December 31, 2015 consolidated balance sheet to conform to the current period's presentation. Deferred financing costs related to the Company’s unsecured revolving credit facility continue to be included in other assets within the Company’s balance sheets in accordance with ASU 2015-15 "Presentation and ~~is currently assessing~~Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements."

Certain prior year amounts have been reclassified to conform with current year presentation on the ~~potential impact~~condensed consolidated statements of ~~adopting~~operations and the ~~new guidance.~~condensed consolidated statements of equity. Separation expenses on the condensed consolidated statements of operations have been reclassified from general and administrative expenses to other expenses. On the condensed consolidated statements of equity, all components of common stock issued pursuant to stock-based compensation are aggregated into one line item. These changes do not affect the previously reported total costs and expenses in the condensed consolidated statements of operations or the total equity in the condensed consolidated statements of equity for any period.

2.TRANSACTIONS WITH PARKWAY PROPERTIES, INC.

On October 6, 2016, pursuant to the Agreement and Plan of Merger, dated April 28, 2016, (as amended or supplemented from time to time, the “Merger Agreement”), by and among Cousins, Parkway Properties, Inc. ("Parkway") and subsidiaries of Cousins and Parkway, Parkway merged with and into a wholly-owned subsidiary of the Company (the "Merger"), with this subsidiary continuing as the surviving corporation of the Merger. In accordance with the terms and conditions of the Merger Agreement, each outstanding share of Parkway common stock and each outstanding share of Parkway limited voting stock was converted into 1.63 shares of Cousins common stock or limited voting preferred stock, respectively. In the Merger, former Parkway common stockholders received approximately 183 million shares of Cousins common stock and Parkway limited voting stockholders received approximately 7 million shares of Cousins limited voting preferred stock.

On October 7, 2016, pursuant to the Merger Agreement and the Separation, Distribution and Transition Services Agreement, dated as of October 5, 2016 (the "Separation Agreement"), by and among Cousins, Parkway, New Parkway (as defined below), and certain other parties thereto, Cousins distributed pro rata to its common and limited voting preferred stockholders, including legacy Parkway common and limited voting stockholders, all of the outstanding shares of common and limited voting stock, respectively, of Parkway, Inc. ("New Parkway"), a newly-formed entity that contains the combined businesses relating to the ownership of real properties in Houston, Texas (the "Spin-Off"). In the Spin-Off, Cousins distributed one share of New Parkway common or limited voting stock for every eight shares of common or limited voting preferred stock of Cousins held of record as of the close of business on October 6, 2016. As a result of the Spin-Off, New Parkway is now an independent public company, and its common stock is listed under the symbol "PKY" on the New York Stock Exchange.

In connection with the Merger and Spin-Off, Cousins Properties LP, a Delaware limited partnership ("CPLP"), was formed. As a result of a series of transactions undertaken pursuant to the Separation Agreement (the "Reorganization"), occurring after the Merger but prior to the Spin-Off, substantially all of Parkway's and the Company's assets and liabilities not pertaining to the ownership of real properties in Houston, Texas, were contributed to CPLP. As a result of the Merger and Spin-Off, substantially all of the Company's post-Merger, post-Spin-Off activities will be conducted through CPLP.

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ownership. The Company acts as the general partner in CPLP and has the exclusive right and full authority and responsibility to manage and operate CPLP's business. Limited partners generally do not have any right to participate in or exercise control or management power over the business and affairs of CPLP. Limited partners may redeem partnership units for cash, or at the Company's election, shares of Cousins' common stock on a one-for-one basis, at any time beginning twelve months following the date of the initial issuance of the partnership units, except for partnership units issued in connection with the Reorganization, which may be redeemed at any time. The Company will consolidate the accounts and operations of CPLP in its financial statements.

The Company will account for the Merger as a business combination with the Company as the accounting acquirer. The total value of the transaction is based on the closing stock price of the Company's common stock on October 5, 2016, the day immediately prior to the closing of the Merger, of $10.19 per share. Based on the shares issued in the transaction and on the units of CPLP effectively issued to the Outside Unit Holders in the transaction, the total value of the assets and liabilities assumed in the Merger is estimated to be $1.9 billion. Due to the limited time since the Merger, the initial accounting for this transaction is incomplete and, as such, the Company is unable to provide purchase price allocation and other disclosures associated with the Merger and Spin-Off. During the three and nine months ended September 30, 2016, the Company incurred $1.9 million and $4.4 million, respectively, in merger-related expenses.

3. REAL ESTATE TRANSACTIONS

~~Acquisitions~~

~~In July 2015, the Company acquired~~As of September 30, 2016, 191 Peachtree Tower, a ~~4.16 acre land site located~~1.2 million square-foot office building in Atlanta, Georgia, that is included in the Company's Atlanta/Office operating segment, was held for ~~$27.0 million. An approximately 485,000 square foot office building is expected to be developed~~sale. Consequently, the assets and liabilities were reclassified as held for sale on ~~this site. The site also includes an additional parcel for a second office building development.~~

~~Dispositions~~

Inthe condensed consolidated balance sheet at September ~~2015, the Company~~30, 2016. 191 Peachtree Tower was sold ~~2100 Ross, an 844,000 square foot office tower located~~ in ~~Dallas, Texas~~October 2016 for a gross sales price of ~~$131.0 million and recognized a gain of $36.2 million on this disposition.~~

3. ~~REAL ESTATE ASSETS HELD FOR SALE~~

~~As of September 30, 2015, the following operating properties were classified as held for sale:~~



~~Property~~	~~Property Type~~	~~Location~~	~~Rentable Square Feet~~
~~North Point Center East~~	~~Office~~	~~Atlanta, Georgia~~	~~540,000~~
$268 million. The ~~Points at Waterview~~	~~Office~~	~~Dallas, Texas~~	~~203,000~~

~~In the second quarter of 2014, the Company adopted ASU 2014-08 relating to the reporting of discontinued operations. Since the adoption of the guidance, the Company has determined that the~~ sale ~~of the properties listed above would~~does not represent a strategic shift in operations and, therefore, ~~will be presented~~the results of its operations for the three and nine months ended September 30, 2016 and 2015 have been included in continuing operations in the condensed consolidated statement of operations. The Company expects to recognize a gain on the sale of this asset in the fourth quarter of 2016.

As of December 31, 2015, 100 North Point Center East, a 129,000 square foot office building in Atlanta, Georgia, that was included in the Company's Atlanta/Office operating segment, was held for ~~all periods present.~~ sale. This transaction closed in the first quarter of 2016 for a gross sales price of $22.0 million. The Company recognized a gain on the sale of this asset of $14.2 million.

The Company sold 191 Peachtree Tower and 100 North Point Center East as part of its on-going investment strategy of recycling investment capital to fund investment activity.

The major ~~classes~~components of the assets and liabilities ~~of the properties~~ held for sale ~~as of~~at September 30, 2016 and December 31, 2015 ~~are~~were as follows (in thousands):



	September 30, 2016		December 31, 2015

Real estate and other assets held for sale
Operating properties, net of accumulated depreciation of $100,250 and $7,072 in 2016 and 2015, respectively	$	171,543	$	6,421
Restricted cash	1,405		—
Accounts receivable	1,460		210
Deferred rents receivable	17,606		496
Intangible and other assets, net of accumulated amortization of $19,420 and $128 in 2016 and 2015, respectively	11,721		119
	$	203,735	$	7,246
Liabilities of real estate assets held for sale
Note payable, net of unamortized deferred loan costs of $188 in 2016	$	99,000	$	—
Accounts payable and accrued expenses	5,196		140
Intangible liabilities, net of accumulated amortization of $794 in 2016	638		—
Other liabilities	1,301		1,207
	$	106,135	$	1,347

Following the Merger and Spin-Off, the Company sold Two Liberty Place, a 941,000 square foot office building in Philadelphia, Pennsylvania, that was acquired in the Merger, for a gross sales price of $219.0 million. This property was held in a consolidated joint venture in which the Company owned a 19% interest.

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Real estate assets and related assets held for sale September 30, 2015
Operating Properties, net of accumulated depreciation of $57,967 $ 44,560
Deferred rents receivable 4,239
Other assets, net of accumulated amortization of $2,111 1,086
Notes and accounts receivable 606
$ 50,491

Liabilities of real estate assets held for sale
Accounts payable and accrued expenses $ 2,212
Other liabilities 631
$ 2,843

4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

The Company describes its investments in unconsolidated joint ventures in note 5 of ~~the~~ notes to consolidated financial statements in its Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2014.~~2015. The following table summarizes balance sheet data of the Company's unconsolidated joint ventures as of September 30, ~~2015~~2016 and December 31, ~~2014~~2015 (in thousands):


	Total Assets				Total Debt				Total Equity							Company’s Investment								Total Assets				Total Debt				Total Equity						Company’s Investment
SUMMARY OF FINANCIAL POSITION:	2015		2014		2015		2014		2015			2014				2015				2014				2016		2015		2016		2015		2016			2015			2016				2015
Terminus Office Holdings LLC	$	285,336	$	288,415	$	211,835	$	213,640	$	59,753		$	62,830			$	30,814			$	32,323
Terminus Office Holdings																								$	274,417	$	277,444	$	208,572	$	211,216	$	52,743		$	56,369		$	27,381			$	29,110
EP I LLC	83,256		85,228		58,030		58,029		24,172			26,671				22,249				22,905				81,204		83,115		58,029		58,029		21,006			24,172			19,753				21,502
EP II LLC	70,233		42,772		39,149		12,735		24,818			24,969				19,834				19,905				68,179		70,704		44,736		40,910		22,136			24,331			17,892				19,118
Carolina Square Holdings LP																								51,507		15,729		9,287		—		34,164			12,085			18,256				6,782
Charlotte Gateway Village, LLC	127,373		130,272		22,143		35,530		101,339			92,808				11,193				11,218				120,828		123,531		3,265		17,536		114,038			104,336			11,359				11,190
HICO Victory Center LP	12,883		10,450		—		—		12,835			10,450				9,000				7,572				13,798		13,532		—		—		13,793			13,229			9,419				9,138
Carolina Square Holdings LP	9,959		—		—		—		8,178			—			��	4,778				—
DC Charlotte Plaza LLLP																								15,168		—		—		—		15,164			—			8,188				—
CL Realty, L.L.C.	7,550		7,264		—		—		7,389			7,042				3,724				3,546				7,869		7,872		—		—		7,767			7,662			3,585				3,515
Temco Associates, LLC	967		6,910		—		—		386			6,709				1,070				3,027				5,324		5,284		—		—		5,196			5,133			1,100				977
HICO Avalon LLC	1,130		—		—		—		900			—				806				—
Wildwood Associates	16,501		16,400		—		—		16,384			16,389				(1,108		)	(1)	(1,106		)	(1)	16,378		16,419		—		—		16,298			16,354			(1,125		)	(1)	(1,122		)	(1)
Crawford Long - CPI, LLC	29,900		29,946		74,645		75,000		(46,627		)	(45,762		)		(22,216		)	(1)	(21,931		)	(1)	28,449		29,143		73,193		74,286		(46,667		)	(46,238		)	(22,236		)	(1)	(22,021		)	(1)
AMCO 120 WT Holdings, LLC																								8,288		—		—		—		7,941			—			—				—
Other	1,100		1,411		—		—		880			979				2				2				—		2,107		—		—		—			1,646			—				1,245
	$	646,188	$	619,068	$	405,802	$	394,934	$	210,407		$	203,085			$	80,146			$	77,461			$	691,409	$	644,880	$	397,082	$	401,977	$	263,579		$	219,079		$	93,572			$	79,434

(1) Negative balances are included in deferred income on the balance sheets.

The following table summarizes statement of operations information of the Company's unconsolidated joint ventures for the nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 (in thousands):


	Total Revenues				Net Income (Loss)						Company's Share of Income (Loss)						Total Revenues				Net Income (Loss)						Company's Share of Income (Loss)
SUMMARY OF OPERATIONS:	2015		2014		2015			2014			2015			2014			2016		2015		2016			2015			2016			2015
Terminus Office Holdings LLC	$	30,144	$	29,354	$	1,923		$	314		$	962		$	134
Terminus Office Holdings																	$	31,630	$	30,144	$	3,874		$	1,923		$	1,937		$	962
EP I LLC	9,587		9,024		2,481			2,102			1,864			1,577			7,919		9,587		1,417			2,481			1,206			1,864
EP II LLC	536		—		(150		)	—			(100		)	—			3,605		536		(1,194		)	(150		)	(1,043		)	(100		)
Charlotte Gateway Village, LLC	25,311		25,079		9,438			8,635			883			882			26,245		25,311		11,077			9,438			1,447			883
HICO Victory Center LP																	307		—		300			—			131			—
CL Realty, L.L.C.	674		1,240		346			846			178			410			327		674		105			346			70			178
DC Charlotte Plaza LLLP																	47		—		45			—			24			—
Temco Associates, LLC	9,163		793		2,077			157			2,244			(24		)	180		9,163		83			2,077			122			2,244
Wildwood Associates	—		29		(89		)	(125		)	(45		)	(50		)	—		—		(106		)	(89		)	(53		)	(45		)
Crawford Long - CPI, LLC	9,193		8,905		2,131			2,075			1,071			1,062			9,101		9,193		2,005			2,131			1,003			1,071
Cousins Watkins LLC	—		3,801		—			217			—			1,702
Other	—		5		(95		)	(245		)	31			(350		)	—		—		—			(95		)	300			31
	$	84,608	$	78,230	$	18,062		$	13,976		$	7,088		$	5,343		$	79,361	$	84,608	$	17,606		$	18,062		$	5,144		$	7,088

On March 29, 2016, a 50-50 joint venture, DC Charlotte Plaza LLLP, was formed between the Company and Dimensional Fund Advisors ("DFA") to develop DFA's 282,000 square foot regional headquarters building in Charlotte, North Carolina. Each partner contributed $6.6 million in pre-development costs upon formation of the venture. The Company will account for its investment in this joint venture under the equity method.

On August 26, 2016, the Company and affiliates of AMLI Residential (“AMLI”) formed AMCO 120 WT Holdings, LLC to develop a mixed-use property in Decatur, Georgia. The property is expected to contain approximately 30,000 square feet of office space, 10,000 square feet of retail space and 330 apartment units. Cousins holds a 20% interest in the joint venture, and AMLI holds an 80% interest. Initial contributions to the joint venture for the purchase of land were funded entirely by AMLI. Subsequent contributions will be funded in proportion to the members' percentage interests. The Company will account for its investment in this joint venture under the equity method.

In the Merger, the Company acquired a 74.6% interest in the US Airways Building, a 229,000 square foot office building in Tempe, Arizona. Because the building is owned as a tenancy-in-common, the Company expects to account for its interest in the

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On May 1, 2015, Carolina Square Holdings LP ("Carolina Square") was formed between the Company and NR 123 Franklin LLC ("Northwood Ravin"). Carolina Square is a 50-50 joint venture formed for the purpose of developing and constructing a mixed-use property in Chapel Hill, North Carolina pursuant to a ground lease. Upon formation, each partner contributed $1.7 million in cash towards pre-development costs. Carolina Square also entered into a construction loan agreement, secured by the project, which is expected to provide up to $79.8 million to fund future construction costs. The loan bears interest at LIBOR plus 1.90% and matures on May 1, 2018. The Company and Northwood Ravin will each guarantee 12.5% of the outstanding loan amount. As of September 30, 2015, there is no outstanding balance on this construction loan.

On August 10, 2015, HICO Avalon LLC ("HICO Avalon"), a joint venture between the Company and Hines Avalon Investor LLC ("Hines"), was formed for the purpose of acquiring and potentially developing an office building in Alpharetta, Georgia. Pursuant to the joint venture agreement, all pre-development expenditures, other than land, are funded 75% by Cousins and 25% by Hines. If the project moves forward and HICO Avalon acquires land and commences construction, the acquisition of land and subsequent development expenditures will be funded 90% by Cousins and 10% by Hines. As of September 30, 2015, the Company accounts for its investment in HICO Avalon under the equity ~~method as it does not currently control the activities of the venture. If the project moves to commence construction, the capital accounts and economics of the venture will be adjusted such that~~method. On October 20, 2016, the Company ~~will effectively own~~entered into an agreement to purchase the remaining 25.4% interest for $19.6 million at least 90% of the venture, and Hines will own up to 10%. Additionally, Cousins will have unilateral control over the operational aspects of the venture, and the Company expects to consolidate the venture at that time. The Company's investment in HICO Avalon at September 30, 2015 includes only its share of pre-development expenditures.a date no later than February 28, 2017.

5. INTANGIBLE ASSETS

Intangible assets on the balance sheets as of September 30, ~~2015~~2016 and December 31, ~~2014~~2015 included the following (in thousands):

September 30, 2015 December 31, 2014
In-place leases, net of accumulated amortization of $81,458 and $62,302 in 2015 and 2014, respectively $ 119,539
$ 147,360
Above-market tenant leases, net of accumulated amortization of $14,891 and $13,748 in 2015 and 2014, respectively 8,579
12,017
Goodwill 3,740
3,867
$ 131,858
$ 163,244



	September 30, 2016		December 31, 2015
In-place leases, net of accumulated amortization of $103,352 and $88,035 in 2016 and 2015, respectively	$	95,101	$	112,937
Above-market tenant leases, net of accumulated amortization of $7,327 and $15,423 in 2016 and 2015, respectively	6,288		8,031
Goodwill	3,626		3,647
	$	105,015	$	124,615

~~Goodwill relates entirely to the office reportable segment. As office assets are sold, either by the Company or by joint ventures in which the Company has an ownership interest, goodwill is reduced.~~ The following is a summary of goodwill activity for the nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 (in thousands):


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2016			2015
Beginning balance	$	3,867		$	4,131		$	3,647		$	3,867
Allocated to property sales	(127		)	(74		)	(21		)	(127		)
Ending balance	$	3,740		$	4,057		$	3,626		$	3,740

6. OTHER ASSETS

Other assets on the balance sheets as of September 30, ~~2015~~2016 and December 31, ~~2014~~2015 included the following (in thousands):

September 30, 2015 December 31, 2014
FF&E and leasehold improvements, net of accumulated depreciation of $22,375 and $19,137 in 2015 and 2014, respectively $ 13,283
$ 10,590
Lease inducements, net of accumulated amortization of $7,469 and $5,475 in 2015 and 2014, respectively 13,201
12,245
Loan closing costs, net of accumulated amortization of $3,359 and $2,286 in 2015 and 2014, respectively 5,805
6,878
Prepaid expenses and other assets 4,077
3,428
Predevelopment costs and earnest money 752
1,789
$ 37,118
$ 34,930



	September 30, 2016		December 31, 2015
Furniture, fixtures and equipment, leasehold improvements, and other deferred costs, net of accumulated depreciation of $22,994 and $22,572 in 2016 and 2015, respectively	$	10,784	$	13,523
Lease inducements, net of accumulated amortization of $1,684 and $6,865 in 2016 and 2015, respectively	4,008		13,306
Prepaid expenses and other assets	5,759		4,408
Line of credit deferred financing costs, net of accumulated amortization of $2,033 and $1,380 in 2016 and 2015, respectively	2,320		2,972
Predevelopment costs and earnest money	79		1,780
	$	22,950	$	35,989

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7. NOTES PAYABLE

The following table summarizes the Company's notes payable balance at September 30, 2016 and December 31, 2015 ($ in thousands):



	September 30, 2016			December 31, 2015
Notes payable	$	792,866		$	721,293
Less: deferred financing costs of mortgage debt, net of accumulated amortization of $1,867 and $2,008 in 2016 and 2015, respectively	(3,488		)	(2,483		)
	$	789,378		$	718,810

The following table details the terms and amounts of the Company’s outstanding notes payable at September 30, ~~2015~~2016 and December 31, ~~2014 (in~~2015 ($ in thousands):

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Description	Interest Rate		Maturity	September 30, 2015		December 31, 2014		Interest Rate		Maturity	September 30, 2016			December 31, 2015
Post Oak Central mortgage note	4.26	%	2020	$	182,618	$	185,109	4.26	%	2020	$	179,170		$	181,770
Credit Facility, unsecured	1.29	%	2019	134,000		140,200
Fifth Third Center mortgage note								3.37	%	2026	150,000			—
The American Cancer Society Center mortgage note	6.45	%	2017	129,794		131,083		6.45	%	2017	127,989			129,342
Colorado Tower mortgage note								3.45	%	2026	120,000			—
Promenade mortgage note	4.27	%	2022	108,899		110,946		4.27	%	2022	106,068			108,203
191 Peachtree Tower mortgage note	3.35	%	2018	100,000		100,000		3.35	%	2018	99,188			100,000
816 Congress mortgage note	3.75	%	2024	85,000		85,000		3.75	%	2024	85,000			85,000
Meridian Mark Plaza mortgage note	6.00	%	2020	25,088		25,408		6.00	%	2020	24,639			24,978
The Points at Waterview mortgage note	5.66	%	2016	14,171		14,598
Credit Facility, unsecured								1.63	%	2019	—			92,000
				$	779,570	$	792,344				892,054			721,293
191 Peachtree Tower mortgage note classified as Held for Sale											(99,188		)	—
											$	792,866		$	721,293

Other Debt Information

In September 2016, the Company entered into a $120.0 million non-recourse mortgage secured by Colorado Tower, a 373,000 square foot office building in Austin, Texas. The mortgage bears interest at a fixed annual rate of 3.45% and matures September 1, 2026. Also in September 2016, the Company entered into a $150.0 million non-recourse mortgage secured by Fifth Third Center, a 698,000 square foot office building in Charlotte, North Carolina. The mortgage bears interest at a fixed annual rate of 3.37% and matures October 1, 2026.

In October 2016, the Company sold 191 Peachtree Tower and repaid the 191 Peachtree Tower mortgage note in full. In connection with the repayment, the Company paid a $3.7 million prepayment penalty.

In connection with the Spin-Off, the Company distributed the Post Oak Central mortgage note to New Parkway on October 7, 2016.

Fair Value

At September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the aggregate estimated fair values of the Company's notes payable were ~~$806.0~~$915.0 million and ~~$835.4~~$738.1 million,, respectively, calculated by discounting the debt's remaining contractual cash flows at estimated rates at which similar loans could have been obtained at those respective dates. The estimate of the current market rate, which is the most significant input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value ~~relationships.~~relationship. These fair value calculations are considered to be Level 2 under the guidelines as set forth in ASC 820, ~~Fair~~"Fair Value Measurement,," as the Company utilizes market rates for similar type loans from ~~third party~~third-party brokers.

Other Information

For the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015, interest expense was as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014			2016			2015			2016			2015
Total interest incurred	$	8,696		$	7,667		$	25,959		$	22,787		$	8,939		$	8,696		$	25,445		$	25,959
Interest capitalized	(1,023		)	(850		)	(2,740		)	(1,833		)	(1,229		)	(1,023		)	(2,988		)	(2,740		)
Total interest expense	$	7,673		$	6,817		$	23,219		$	20,954		$	7,710		$	7,673		$	22,457		$	23,219

The real estate and other assets of The American Cancer Society Center (the “ACS Center”) are restricted under the ACS Center loan agreement ~~in that~~as they are not available to settle debts of the Company. However, provided that the ACS Center loan has not incurred any uncured event of default, as defined in the loan agreement, the cash flows from the ACS Center, after payments of debt service, operating expenses, and reserves, are available for distribution to the Company.

~~Subsequent Event~~

~~On October 1, 2015, the Company prepaid, without penalty, the $14.2 million The Points at Waterview mortgage note. The note was scheduled to mature on January 1, 2016.~~

8. COMMITMENTS AND CONTINGENCIES

Commitments

At September 30, ~~2015~~2016, the Company had outstanding letters of credit and performance bonds totaling ~~$2.0~~$1.9 million. As a lessor, the Company had ~~$87.6~~$79.0 million in future obligations under leases to fund tenant improvements as of September 30, ~~2015~~2016.

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As a lessee, the Company had future obligations under ground and ~~office~~other operating leases of ~~$145.4~~$143.6 million as of September 30, ~~2015~~2016.

Litigation

The Company is subject to various legal proceedings, claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates

~~Table of Contents~~

concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. The Company does not disclose information with respect to litigation where an unfavorable outcome is considered to be remote or where the estimated loss would not be material. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company.

9. STOCKHOLDERS' EQUITY

~~On September 8,~~In 2015, the Board of Directors of the Company authorized the repurchase of up to $100 million of its outstanding common shares. The plan expires on September 8, 2017. The repurchases may be executed in the open market, through private negotiations, or in other transactions permitted under applicable law. The timing, manner, price, and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements, and other factors. ~~The share repurchase~~In March 2016, the program ~~may be~~was suspended ~~or discontinued at any time.~~due to the announcement of the merger with Parkway.

~~Under this plan, through September 30, 2015,~~Prior to suspension, the Company ~~has~~ repurchased ~~approximately 2.0~~6.8 million shares of its common stock for a total cost of ~~approximately $18.7 million.~~$61.5 million, including broker commissions, under this plan. The share repurchases were funded from cash on hand, ~~and~~ borrowings under ~~its~~the Company's Credit ~~Facility.~~Facility, and proceeds from the sale of assets. The repurchased shares were recorded as treasury shares on the ~~Condensed Consolidated Balance Sheet.~~condensed consolidated balance sheets.

10. STOCK-BASED COMPENSATION

The Company has several types of stock-based compensation - stock options, restricted stock, and restricted stock units (“RSUs”) - which are described in note 1312 of ~~the~~ notes to consolidated financial statements in the Company's Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2014.~~2015. The expense related to a portion of the stock-based compensation awards is fixed. The expense related to other stock-based compensation awards fluctuates from period to period dependent, in part, on the Company's stock price and stock performance relative to its peers. The Company recorded ~~net~~ stock-based compensation expense, net of forfeitures, of $141,000 and a reversal of ~~$683,000 and~~ expense of ~~$2.3 million~~$683,000 for the three months ended September 30, 2016 and 2015, ~~and 2014, respectively, and $1.2 million and $7.2 million of net stock-based compensation expense for~~respectively. For the nine months ended September 30, 2016 and 2015, the Company recorded stock-based compensation expense of $4.8 million and ~~2014,~~$1.2 million, respectively.

The Company maintains the 2009 Incentive Stock Plan (the "2009 Plan") and the 2005 Restricted Stock Unit Plan (the “RSU Plan”)~~, which are described in note 13 of the notes to consolidated financial statements in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2014.~~. Under the 2009 Plan, the Company made restricted stock grants in ~~2015~~2016 of ~~165,922~~234,965 shares to key employees, which vest ratably over a three-year period. Under the RSU Plan, the Company awarded two types of performance-based RSUs to key employees based on the following metrics: (1) Total Stockholder Return of the Company, as defined in the RSU Plan, as compared to the companies in the SNL US REIT Office index (“~~SNL~~TSR RSUs”), and (2) the ratio of cumulative funds from operations per share to targeted cumulative funds from operations per share (“FFO RSUs”) as defined in the RSU Plan. The performance period for both awards is January 1, ~~2015~~2016 to December 31, ~~2017,~~2018, and the targeted units awarded of ~~SNL~~TSR RSUs and FFO RSUs is ~~175,849~~214,151 and ~~68,110,~~97,797, respectively. The ultimate payout of these awards can range from 0% to 200% of the targeted number of units depending on the achievement of the market and performance metrics described above. Both of these RSUs cliff vest on ~~February 2, 2018~~January 29, 2019 and are to be settled in cash with payment dependent on upon ~~the~~ attainment of required service, market, and performance criteria. The number of RSUs vesting will be determined at that date, and the payout per unit will be equal to the average closing price on each trading day during the 30-day period ending on December 31, ~~2017.~~2018. The ~~SNL~~Company expenses an estimate of the fair value of the TSR RSUs ~~are valued~~over the performance period using a quarterly Monte Carlo ~~valuation and are expensed over the vesting period.~~valuation. The FFO RSUs are expensed over the vesting period using the fair market value of the Company's stock at the reporting date multiplied by the anticipated number of units to be paid based on the current estimate of what the ratio is expected to be upon vesting. Dividend equivalents on the TSR RSUs and the FFO RSUs will also be paid based upon the percentage vested.

In addition, in the second quarter of 2016, the Company issued 72,771 shares of common stock at fair value to members of its board of directors in lieu of fees, and recorded $765,000 in general and administrative expense related to these issuances.

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In connection with the Spin-Off, the Company modified its stock-based compensation arrangements in order to preserve the value of outstanding equity awards immediately before and immediately following the Spin-Off. As a result, restricted stock, stock options, and restricted stock units were modified as follows:

Restricted Stock--the Company converted 377,610 restricted stock outstanding immediately prior to the Spin-Off to 498,325 restricted stock.

Restricted Stock Units--the Company converted 981,612 shares of restricted stock units outstanding immediately prior to the Spin-Off to 1,295,417 shares of restricted stock units.

Stock Options--the Company converted 1,730,981 stock options at a weighted average exercise price of $21.99 immediately prior to the Spin-Off to 2,284,346 stock options at a weighted average exercise price of $16.66.

In addition, in connection with the Merger and Spin-Off, the Company effectively issued 672,375 stock options to certain former employees of Parkway at an exercise price of $7.82 per option.

11. EARNINGS PER SHARE

Net income per share-basic is calculated as net income available to common stockholders divided by the weighted average number of common shares outstanding during the period, including nonvested restricted stock which has nonforfeitable dividend rights. Net income per share-diluted is calculated as net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during the period. Diluted weighted average number of common shares uses the same weighted average share number as in the basic calculation and adds the potential dilution, if any, that would occur if stock options (or any other contracts to issue common stock) were exercised and resulted in additional common shares outstanding, calculated using the treasury stock method. ~~The numerator is reduced for the effect of preferred dividends in both the basic and~~

~~Table of Contents~~

~~diluted net income per share calculations.~~ Weighted average shares-basic and diluted for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015, respectively, are as follows (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2014	2015	2014	2016	2015	2016	2015
Weighted average shares — basic	216,261	209,839	216,485	200,073	210,170	216,261	210,400	216,485
Dilutive potential common shares — stock options	113	272	140	252	156	113	128	140
Weighted average shares — diluted	216,374	210,111	216,625	200,325	210,326	216,374	210,528	216,625
Weighted average anti-dilutive stock options	1,553	2,200	1,553	2,200	1,103	1,553	1,110	1,553

Stock options are dilutive when the average market price of the Company's stock during the period exceeds the option exercise price. In periods where the Company is in a net loss position, the dilutive effect of stock options is not included in the diluted weighted average shares total.

Anti-dilutive stock options represent stock options which are outstanding but which are not exercisable during the period because the exercise price exceeded the average market value of the Company's stock. These anti-dilutive stock options are not included in the current calculation of dilutive weighted average shares but could be dilutive in the future.

12. REPORTABLE SEGMENTS

The ~~Company has~~ ~~four~~ ~~reportable segments:~~Company's segments are based on the Company's method of internal reporting which classifies operations by property type and geographical area. The segments by property type are: Office, ~~Retail, Land~~Mixed Use, and Other. The segments by geographical region are: Houston, Atlanta, Austin, Charlotte, and Other. These reportable segments represent an aggregation of operating segments reported to the ~~chief operating decision maker~~Chief Operating Decision Maker based on similar economic characteristics that include the type of ~~product~~property and the ~~nature of service.~~geographical location. Prior period information has been revised to reflect the change in segment reporting as described in the Annual Report on Form 10-K for the year ended December 31, 2015. Each segment includes both consolidated operations and ~~joint ventures, where applicable. The Office and Retail segments show~~ the ~~results for that product type. The Land segment includes results~~Company's share of ~~operations for residential and commercial land holdings. The Other segment includes:~~

~~fee income and related expenses for third party owned properties and~~ joint venture ~~properties for which the Company performs management, development and leasing services;~~

~~operations for mixed-use operating properties;~~

~~compensation for corporate employees;~~

~~general corporate overhead costs;~~

~~interest expense for consolidated and unconsolidated entities;~~

~~income attributable to noncontrolling interests;~~

~~income taxes;~~

~~depreciation; and~~

~~preferred dividends.~~operations.

Company management evaluates the performance of its reportable segments in part based on ~~funds from operations~~net operating income (“NOI”). NOI represents rental property revenues 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 ~~common stockholders (“FFO”). FFO is~~fund cash needs and should not be considered an alternative to cash flows as a ~~supplemental operating performance~~ measure ~~used~~of liquidity. All companies may not calculate NOI in the ~~real estate industry.~~same manner. The Company ~~calculated FFO using the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition of FFO, which is~~considers NOI to be an appropriate supplemental measure to net income ~~(loss) available to common stockholders (computed in accordance with GAAP), excluding extraordinary items, cumulative effect~~as it helps both management and investors understand the core operations of ~~change in accounting principle~~the Company's operating assets. NOI excludes corporate general and ~~gains on sale or impairment losses on depreciable property, plus~~administrative expenses, interest expense, depreciation and amortization, impairments, gains/loss on sales 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, investors and the Company 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 a REIT’s operating performance that excludes historical cost depreciation, among other items, from GAAP net income. Management believes 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, the Company uses FFO, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and other ~~key employees.~~non-operating items.

1315

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Segment net income, ~~and the~~ amount of capital expenditures, and total assets are not presented in the following ~~tables. Management~~tables because management does not utilize these measures when analyzing its segments or when making resource allocation ~~decisions, and therefore this information is not provided. FFO is reconciled~~decisions. In the third quarter of 2016, the Company revised its disclosure to add the previously omitted revenues by segment for all periods presented. Information on the Company's segments along with a reconciliation of NOI to net income available to common stockholders ~~on a total Company basis~~is as follows (in thousands):



Three Months Ended September 30, 2016	Office			Mixed-Use		Other			Total
Net Operating Income:
Houston	$	26,408		$	—	$	—		$	26,408
Atlanta	22,593			1,753		—			24,346
Austin	6,023			—		—			6,023
Charlotte	4,905			—		—			4,905
Other	(56		)	—		(5		)	(61		)
Total Net Operating Income	$	59,873		$	1,753	$	(5	)	$	61,621

Three Months Ended September 30, 2015 Office Retail Land Other Total
Net operating income $ 59,328
$ —
$ —
$ 1,488
$ 60,816
Sales less costs of sales —
—
3,016
—
3,016
Fee income —
—
—
1,686
1,686
Other income —
—
—
845
845
General and administrative expenses —
—
—
(2,971 ) (2,971 )
Reimbursed expenses —
—
—
(686 ) (686 )
Interest expense —
—
—
(9,518 ) (9,518 )
Other expenses —
—
—
(721 ) (721 )
Funds from operations available to common stockholders $ 59,328
$ —
$ 3,016
$ (9,877 ) 52,467
Real estate depreciation and amortization, including Company's share of joint ventures (35,014 )
Gain on sale of depreciated investment properties, including Company's share of joint ventures 36,167
Net income available to common stockholders $ 53,620



Three Months Ended September 30, 2015	Office		Mixed-Use		Other			Total
Net Operating Income:
Houston	$	26,039	$	—	$	—		$	26,039
Atlanta	21,255		1,492		—			22,747
Austin	4,424		—		—			4,424
Charlotte	4,072		—		—			4,072
Other	3,539		—		(5		)	3,534
Total Net Operating Income	$	59,329	$	1,492	$	(5	)	$	60,816

Three Months Ended September 30, 2014 Office Retail Land Other Total
Net operating income $ 52,691
$ 1,221
$ —
$ 1,200
$ 55,112
Sales less costs of sales —
—
82
—
82
Fee income —
—
—
1,802
1,802
Other income —
—
—
399
399
General and administrative expenses —
—
—
(5,021 ) (5,021 )
Reimbursed expenses —
—
—
(783 ) (783 )
Interest expense —
—
—
(8,660 ) (8,660 )
Other expenses —
—
—
(1,255 ) (1,255 )
Preferred stock dividends and original issuance costs —
—
—
—
—
Funds from operations available to common stockholders $ 52,691
$ 1,221
$ 82
$ (12,318 ) 41,676
Real estate depreciation and amortization, including Company's share of joint ventures (35,347 )
Gain on sale of depreciated investment properties including the Company's share of joint ventures 12,993
Net income available to common stockholders $ 19,322



Nine Months Ended September 30, 2016	Office			Mixed-Use		Other			Total
Net Operating Income:
Houston	$	76,851		$	—	$	—		$	76,851
Atlanta	66,763			5,101		—			71,864
Austin	16,978			—		—			16,978
Charlotte	14,485			—		—			14,485
Other	(35		)	—		(1		)	(36		)
Total Net Operating Income	$	175,042		$	5,101	$	(1	)	$	180,142

Nine Months Ended September 30, 2015 Office Retail Land Other Total
Net operating income $ 175,331
$ —
$ —
$ 4,312
$ 179,643
Sales less costs of sales —
—
3,502
—
3,502
Fee income —
—
—
5,206
5,206
Other income —
—
—
1,490
1,490
General and administrative expenses —
—
—
(12,502 ) (12,502 )
Reimbursed expenses —
—
—
(2,514 ) (2,514 )
Interest expense —
—
—
(28,712 ) (28,712 )
Other expenses —
—
—
(2,473 ) (2,473 )
Funds from operations available to common stockholders $ 175,331
$ —
$ 3,502
$ (35,193 ) 143,640
Real estate depreciation and amortization, including Company's share of joint ventures (110,759 )
Gain on sale of depreciated investment properties, including Company's share of joint ventures 35,893
Net income available to common stockholders $ 68,774



Nine Months Ended September 30, 2015	Office		Mixed-Use		Other			Total
Net Operating Income:
Houston	$	76,549	$	—	$	—		$	76,549
Atlanta	64,725		4,343		—			69,068
Austin	10,524		—		—			10,524
Charlotte	12,026		—		—			12,026
Other	11,508		—		(32		)	11,476
Total Net Operating Income	$	175,332	$	4,343	$	(32	)	$	179,643

The following reconciles Net Operating Income to Net Income for each of the periods presented (in thousands):

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Nine Months Ended September 30, 2014 Office Retail Land Other Total
Net operating income $ 149,110
$ 3,813
$ —
$ 3,496
$ 156,419
Sales less costs of sales —
—
1,573
42
1,615
Fee income —
—
—
6,165
6,165
Other income —
—
—
4,563
4,563
General and administrative expenses —
—
—
(16,472 ) (16,472 )
Reimbursed expenses —
—
—
(2,703 ) (2,703 )
Interest expense —
—
—
(26,485 ) (26,485 )
Other expenses —
—
—
(2,974 ) (2,974 )
Preferred stock dividends and original issuance costs —
—
—
(6,485 ) (6,485 )
Funds from operations available to common stockholders $ 149,110
$ 3,813
$ 1,573
$ (40,853 ) 113,643
Real estate depreciation and amortization, including Company's share of joint ventures (110,319 )
Gain on sale of depreciated investment properties, including Company's share of joint ventures 18,975
Net income available to common stockholders $ 22,299



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net Operating Income	$	61,621		$	60,816		$	180,142		$	179,643
Net operating income from unconsolidated joint ventures	(6,760		)	(6,131		)	(20,361		)	(18,103		)
Net operating loss from discontinued operations	—			—			—			14
Fee income	1,945			1,686			5,968			5,206
Other income	153			444			858			593
Reimbursed expenses	(795		)	(686		)	(2,463		)	(2,514		)
General and administrative expenses	(4,368		)	(2,976		)	(17,301		)	(12,405		)
Interest expense	(7,710		)	(7,673		)	(22,457		)	(23,219		)
Depreciation and amortization	(31,843		)	(32,538		)	(96,192		)	(103,564		)
Acquisition and merger costs	(1,940		)	(19		)	(4,383		)	(104		)
Other expenses	(173		)	(170		)	(681		)	(970		)
Income from unconsolidated joint ventures	1,527			3,716			5,144			7,088
Gain on sale of investment properties	—			37,145			13,944			37,674
Income (loss) from discontinued operations	—			6			—			(565		)
Net Income	$	11,657		$	53,620		$	42,218		$	68,774

~~When reviewing~~Revenues by reportable segment, including a reconciliation to total revenues on the ~~results~~condensed consolidated statements of operations for ~~the Company, management analyzes the following revenue~~three and ~~income items net of their related costs:~~

~~Rental property operations;~~

~~Land sales;~~nine months ended September 30, 2016 and

~~Gains on sales of investment properties.~~

~~These amounts~~ 2015 are ~~shown in the segment tables above in the same “net” manner~~ as shown to management. In addition, management reviews the operations of discontinued operations and its share of the operations of its joint ventures in the same manner as the operations of its wholly-owned properties included in the continuing operations. Therefore, the information in the tables below include the operations of discontinued operations and its share of joint ventures in the same categories as the operations of the properties included in continuing operations. Certain adjustments are required to reconcile the above segment information to the Company’s consolidated revenues. The following table reconciles information presented in the tables above to the Company’s consolidated revenuesfollows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Net operating income $ 60,816
$ 55,112
$ 179,643
$ 156,419
Sales less cost of sales 3,016
82
3,502
1,615
Fee income 1,686
1,802
5,206
6,165
Other income 845
399
1,490
4,563
Rental property operating expenses 41,331
38,685
120,672
109,501
Cost of sales on residential lot sales —
55
—
325
Net operating income in joint ventures (6,132 ) (6,601 ) (18,102 ) (19,748 )
Sales less cost of sales in joint ventures (2,038 ) —
(2,280 ) (47 )
Net operating (income) loss in discontinued operations —
(341 ) 14
(1,798 )
Other income in discontinued operations and in joint ventures (129 ) (14 ) (479 ) (29 )
Termination fees in discontinued operations and in joint ventures (271 ) —
(419 ) (74 )
Gain on land sales (included in gain on investment properties) (978 ) (81 ) (1,222 ) (1,566 )
Total consolidated revenues $ 98,146
$ 89,098
$ 288,025
$ 255,326



Three Months Ended September 30, 2016	Office			Mixed-Use			Other		Total
Revenues:
Houston	$	46,046		$	—		$	—	$	46,046
Atlanta	36,693			3,197			—		39,890
Austin	10,469			—			—		10,469
Charlotte	6,799			—			—		6,799
Other	(57		)	—			2,098		2,041
Total segment revenues	99,950			3,197			2,098		105,245
Less Company's share of rental property revenues from unconsolidated joint ventures	(7,329		)	(3,197		)	—		(10,526		)
Total revenues	$	92,621		$	—		$	2,098	$	94,719



Three Months Ended September 30, 2015	Office			Mixed-Use			Other		Total
Revenues:
Houston	$	45,117		$	—		$	—	$	45,117
Atlanta	40,898			2,657			—		43,555
Austin	7,505			—			—		7,505
Charlotte	5,704			—			—		5,704
Other	3,875			—			2,130		6,005
Total segment revenues	103,099			2,657			2,130		107,886
Less Company's share of rental property revenues from unconsolidated joint ventures	(7,083		)	(2,657		)	—		(9,740		)
Total revenues	$	96,016		$	—		$	2,130	$	98,146

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Nine Months Ended September 30, 2016	Office			Mixed-Use			Other		Total
Revenues:
Houston	$	133,450		$	—		$	—	$	133,450
Atlanta	110,915			9,200			—		120,115
Austin	29,825			—			—		29,825
Charlotte	19,533			—			—		19,533
Other	(54		)	—			6,826		6,772
Total segment revenues	293,669			9,200			6,826		309,695
Less Company's share of rental property revenues from unconsolidated joint ventures	(21,837		)	(9,200		)	—		(31,037		)
Total revenues	$	271,832		$	—		$	6,826	$	278,658



Nine Months Ended September 30, 2015	Office			Mixed-Use			Other		Total
Revenues:
Houston	$	133,326		$	—		$	—	$	133,326
Atlanta	119,694			7,201			—		126,895
Austin	18,744			—			—		18,744
Charlotte	17,027			—			—		17,027
Other	13,988			—			5,799		19,787
Total segment revenues	302,779			7,201			5,799		315,779
Less Company's share of rental property revenues from unconsolidated joint ventures	(20,553		)	(7,201		)	—		(27,754		)
Total revenues	$	282,226		$	—		$	5,799	$	288,025

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Overview~~Overview:

Cousins Properties Incorporated ("Cousins") (and collectively, with its subsidiaries, the ~~"Company", "we",~~"Company,"~~our",~~ "we," "our," or "us") is a self-administered and self-managed real estate investment trust, or REIT. Our core focus is on the acquisition, development, leasing, management, and ownership of Class-A office assets and opportunistic mixed-use properties in Sunbelt markets with a ~~particular~~ focus on Georgia, Texas, and North Carolina. As of September 30, ~~2015~~2016, our portfolio of real estate assets consisted of interests in 1615 operating office properties containing ~~15.2~~14.6 million square feet of space, 2two operating mixed-use properties containing 786,000 square feet of space, and 3five projects ~~(two~~(four office and one mixed-use) under active development. We have a comprehensive strategy in place based on a simple platform, trophy assets and ~~opportunistic~~opportunist investments. This streamlined approach enables us to maintain a targeted, ~~asset-specific~~asset specific approach to investing where we seek to leverage our development skills, relationships, market knowledge, and operational expertise. We intend to generate returns and create value for ~~shareholders~~stockholders through the continued lease up of our portfolio, through the execution of our development pipeline, and through opportunistic investments in office and mixed-use projects within our core markets.

We leased or renewed ~~770,009~~970,707 square feet of office space during the third quarter of ~~2015, bringing total square footage leased for the year to 1.7 million. Net~~2016. The weighted average net effective rent of these leases, representing base rent less operating expense reimbursements and leasing costs, ~~on new, renewal and expansion leases~~ was ~~$17.59~~$17.33 per square foot for office properties in the third quarter of 2015 and $15.80 for the first nine months of 2015, excluding the NCR lease. Net rent per square foot for office properties decreased 0.3% during the third quarter of 2015 and increased 11.6% for the first nine months of 2015, compared to prior year periods, on spacesfoot. For those leases that ~~have been~~were previously occupied inwithin the past ~~year.~~year, net effective rent increased 27.9%. Same property net operating income increased by ~~1.1% and 2.6%~~3.6% between the three months ended September 30, 2016 and ~~nine month 2015~~2015.

On October 6, 2016, we completed a merger with Parkway Properties, Inc. (“Parkway”) and ~~2014 periods, respectively. We~~on October 7, 2016, we completed a spin-off of the operations of the combined companies' Houston operations into a separate public company. In addition to increased scale and enhanced portfolio diversity, we believe that these transactions will ~~continue~~enhance our flexibility to ~~target urban high-barrier-to-entry submarkets in Austin, Dallas, Houston, Atlanta, Charlotte,~~meet customer space needs and ~~Raleigh/Durham. We~~allow us to attract and retain quality local market talent that, over time, will drive customer retention and occupancy. In addition, by creating two independent public real estate companies with differentiated assets and strategies, we believe ~~these markets continue to show positive demographic~~that investors will realize greater transparency into the assets and ~~economic trends compared to the national average.~~operations of each company.

Results of Operations

~~Comparison~~The following is based on our condensed consolidated statements of operations for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015:

Net Operating Income

The following ~~results include~~table summarizes rental property revenues, rental property operating expenses and net operating income ("NOI") for each of the ~~performance of~~periods presented, including our ~~Same Property~~same property portfolio. Our ~~Same Property~~same property portfolio ~~includes~~is comprised of 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~~property amounts ~~shown below~~for the 2016 versus 2015 comparison are from properties that have been owned since January 1, ~~2014~~2015 through the end of the current reporting period, excluding dispositions. This information ~~includes revenues~~is presented for consolidated properties only and ~~expenses of only consolidated properties. The Same Property information in the Same Property Net Operating Income section outlined later in this Form 10-Q, includes~~does not include net operating income from our unconsolidated joint ~~venture properties. Amounts shown below are in thousands.~~

~~Rental Property Revenues~~

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 $ Change % Change 2015 2014 $ Change % Change
Rental Property Revenues - Consolidated
Same Property $ 70,685
$ 70,085
$ 600
1 % $ 207,456
$ 202,396
$ 5,060
3 %
Non-Same Property 25,331
16,772
8,559
51 % 74,770
41,979
32,791
78 %
$ 96,016
$ 86,857
$ 9,159
11 % $ 282,226
$ 244,375
$ 37,851
15 %

Same property revenues increased between the nine month 2015 and 2014 periods due to increased occupancy rates and increased recoveries. Non-same property revenues increased between the three and nine month 2015 and 2014 periods mainly due to the 2014 acquisitions of Northpark and Fifth Third Center, and Colorado Tower commencing operations in 2015, offset by the sale of 2100 Ross in the third quarter of 2015 and the sale of 777 Main in the fourth quarter of 2014.ventures.

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~~Rental Property Operating Expenses~~


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended September 30,									Nine Months Ended September 30,
	2015		2014		$ Change		% Change		2015		2014		$ Change		% Change		2016		2015		$ Change			% Change		2016		2015		$ Change			% Change
Rental Property Operating Expenses- Consolidated
Rental Property Revenues
Same Property	$	30,687	$	30,510	$	177	1	%	$	89,404	$	87,624	$	1,780	2	%	$	69,817	$	70,198	$	(381	)	(0.5	)%	$	138,442	$	137,280	$	1,162		0.8	%
Non-Same Property	10,644		8,175		2,469		30	%	31,268		21,877		9,391		43	%	22,804		25,818		(3,014		)	(11.7	)%	133,390		144,946		(11,556		)	(8.0	)%
Total Rental Property Revenues																	$	92,621	$	96,016	$	(3,395	)	(3.5	)%	$	271,832	$	282,226	$	(10,394	)	(3.7	)%
	$	41,331	$	38,685	$	2,646	7	%	$	120,672	$	109,501	$	11,171	10	%
Rental Property Operating Expenses
Same Property																	$	30,396	$	30,849	$	(453	)	(1.5	)%	$	58,762	$	59,337	$	(575	)	(1.0	)%
Non-Same Property																	7,364		10,482		(3,118		)	(29.7	)%	53,289		61,335		(8,046		)	(13.1	)%
Total Rental Property Operating Expenses																	$	37,760	$	41,331	$	(3,571	)	(8.6	)%	$	112,051	$	120,672	$	(8,621	)	(7.1	)%

Net Operating Income
Same Property NOI																	$	39,421	$	39,349	$	72		0.2	%	$	79,680	$	77,943	$	1,737		2.2	%
Non-Same Property NOI																	15,440		15,336		104			0.7	%	80,101		83,611		(3,510		)	(4.2	)%
Total NOI																	$	54,861	$	54,685	$	176		0.3	%	$	159,781	$	161,554	$	(1,773	)	(1.1	)%

Same property NOI increased between the nine months ended September 30, 2016 and 2015 periods primarily due to increased occupancy rates at 816 Congress and a decrease in real estate taxes between the periods. Non-same property revenues ~~increased~~and expenses decreased between the three and nine ~~month~~months ended September 30, 2016 and 2015 ~~and 2014~~ periods ~~mainly~~ due to the ~~2014 acquisitions of Northpark and Fifth Third Center, and Colorado Tower commencing operations in 2015, offset by the sale~~sales of 2100 Ross, ~~in the third quarter of 2015~~The Points at Waterview, and the ~~sale of 777 Main in the fourth quarter of 2014.~~

~~Other Revenue~~

~~Other Revenue decreased $4.2 million (88%) between the nine month 2015 and 2014 periods. This decrease was primarily due to lower lease termination fees.~~North Point Center East buildings.

General and Administrative Expenses

General and administrative expenses ~~decreased $2.1~~increased $1.4 million ~~(41%~~(47%) and ~~$3.9~~$4.9 million ~~(24%~~(39%) between the 2016 and 2015three and ninemonth ~~2015 and 2014 periods. This decrease was~~periods, respectively. These increases are primarily ~~due to a reduction~~driven by increases in long-term incentive compensation expense ~~as a result of~~and bonus expense. Long-term incentive compensation expense increased $823,000 and $3.6 million in the ~~decline~~2016 and 2015 three and nine, periods, respectively, due to fluctuations in our common stock price relative to our office peers included in the SNL US Office REIT Index. Bonus expense increased by $697,000 and $900,000 in the 2016 and 2015three and nine month periods, respectively, due to increases in performance measures on which bonuses are based.

Interest Expense

Interest expense, ~~increased $2.3 million (11%~~net of amounts capitalized, decreased $762,000 (3%) between the 2016 and 2015 nine month periods primarily driven by a decline in average borrowings under the Credit Facility, the repayment of The Points at Waterview mortgage loan in October 2015, and ~~2014~~ ~~periods. This~~an increase ~~was primarily due~~in interest capitalized to aprojects under development. These decreases were partially offset by increases from the Fifth Third Center and Colorado Tower mortgage ~~loan on 816 Congress~~notes that closed in ~~2014 and additional average borrowings on our Credit Facility. These increases were was partially offset by an increase in capitalized interest as a result of increased development activities.~~September 2016.

Depreciation and Amortization

Depreciation and amortization ~~increased $1.6~~decreased $7.4 million ~~(2%~~(7%) between the 2016 and 2015 nine month ~~2015~~ ~~and~~ ~~2014~~periods primarily ~~due to the 2014 acquisitions of Fifth Third Center and Northpark Town Center. These increases were partially offset~~driven by the ~~December 2014 sale~~sales of ~~777 Main~~2100 Ross, The Points at Waterview, and three North Point Center East buildings in the second half of 2015, and the sale of ~~2100 Ross~~100 North Point Center East in the first quarter 2016.

Acquisition and Merger Costs

Acquisition and merger costs increased $1.9 million and $4.4 million in the 2016 and 2015 three and nine month periods, respectively, due to costs related to the merger with Parkway that closed in October 2016. The Company expects to incur additional merger-related costs in the fourth quarter of 2016, including all costs that were contingent upon the closing of the transactions.

Income from Unconsolidated Joint Ventures

Income from unconsolidated joint ventures consisted of the following during the three and nine month periods as follows (in thousands):

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	Three Months Ended September 30,									Nine Months Ended September 30,
	2016			2015			$ Change			2016			2015			$ Change
Net operating income	$	6,760		$	6,131		$	629		$	20,361		$	18,103		$	2,258
Land sales less cost of sales	—			2,038			(2,038		)	—			2,280			(2,280		)
Other income, net	72			283			(211		)	612			605			7
Depreciation and amortization	(3,267		)	(2,891		)	(376		)	(9,758		)	(8,406		)	(1,352		)
Interest expense	(2,038		)	(1,845		)	(193		)	(6,071		)	(5,494		)	(577		)
Income from unconsolidated joint ventures	$	1,527		$	3,716		$	(2,189	)	$	5,144		$	7,088		$	(1,944	)

Net operating income from unconsolidated joint ventures increased $629,000 and $2.3 million between the 2016 and 2015 three and nine periods, respectively, primarily due to increased occupancy at Terminus and increased parking revenue at Gateway Village. Land sales less cost of sales decreased $2.0 million in each of the 2016 and 2015 three and nine month periods from land sales at Temco Associates, LLC in the third quarter 2015. The increase in depreciation and amortization is due to the commencement of operations at Emory Point II during the third quarter of 2015.

Gain on Sale of Investment Properties

We sold no properties in the three months ended September 30, 2016, and sold 2100 Ross in the three months ended September 30, 2015, accounting for the gain in that period and in the nine month 2015 period. Gain on sale of investment properties ~~increased $37.1 million and $36.1 million between~~in the ~~three and~~ nine ~~month 2015 and 2014 periods. This increase was primarily due~~months ended September 30, 2016 relates to ~~a $36.2 million gain recognized on~~ the sale of ~~2100 Ross~~100 North Point Center East earlier in ~~the third quarter of 2015.~~2016.

Discontinued Operations

~~Income from discontinued operations decreased $13.3 million and $21.7 million between the three and nine month~~ ~~2015~~ ~~and~~ ~~2014~~ ~~periods, due to new accounting guidance.~~ In April 2014, the Financial Accounting Standards Board issued new guidance on discontinued operations. Under the new guidance, only assets held for sale and disposals representing a major strategic shift in operations will be presented as discontinued operations. ~~This guidance is effective for periods beginning after December 15, 2014 with early adoption permitted.~~ We adopted this new standard in the second quarter of 2014. Therefore, the properties sold subsequently are not reflected as discontinued operations in our ~~Consolidated Statements~~condensed consolidated statements of ~~Operations.~~

~~Dividends to Preferred Stockholders and Preferred Stock Original Issuance Costs~~

~~Dividends to preferred stockholders decreased $3.0 million between~~operations. We expect that the ~~nine month~~ ~~2015~~ ~~and~~ ~~2014~~ ~~periods due to~~Spin-Off (defined below) resulting from the ~~redemption of the 7.5% Series B Cumulative Redeemable Preferred Stock~~transactions with Parkway will result in discontinued operations in the ~~second~~fourth quarter of 2014. We have no remaining outstanding preferred stock and, therefore, no preferred stock dividends. In connection with the redemption of preferred stock, we decreased net income available to common stockholders by $3.5 million (non-cash), which represents the original issuance costs applicable to the shares redeemed.2016.

~~Table of Contents~~

Funds From Operations

The table below shows Funds from Operations ~~Available to Common Stockholders~~ (“FFO”) and the related reconciliation to ~~our~~ net ~~income available to common stockholders.~~income. We calculate 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 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 its officers and other key employees. The reconciliation of net income ~~available to common stockholders~~ to FFO is as follows for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 (in thousands, except per share information):

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Net Income Available to Common Stockholders $ 53,620
$ 19,322
$ 68,774
$ 22,299
Depreciation and amortization of real estate assets:

Consolidated properties 32,123
32,473
102,353
101,361
Share of unconsolidated joint ventures 2,891
2,874
8,406
8,958
(Gain) loss on sale of depreciated properties:

Consolidated properties (36,167 ) —
(35,893 ) —
Discontinued properties —
(12,993 ) —
(19,362 )
Share of unconsolidated joint ventures —
—
—
387
Funds From Operations Available to Common Stockholders $ 52,467
$ 41,676
$ 143,640
$ 113,643
Per Common Share — Basic and Diluted:
Net Income Available $ 0.25
$ 0.09
$ 0.32
$ 0.11
Funds From Operations $ 0.24
$ 0.20
$ 0.66
$ 0.57
Weighted Average Shares — Basic 216,261
209,839
216,485
200,073
Weighted Average Shares — Diluted 216,374
210,111
216,625
200,325

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~~Same Property~~



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015
Net Income	$	11,657	$	53,620		$	42,218		$	68,774
Depreciation and amortization of real estate assets:
Consolidated properties	31,514		32,123			95,152			102,353
Share of unconsolidated joint ventures	3,268		2,891			9,758			8,406
(Gain) loss on sale of depreciated properties:
Consolidated properties	—		(36,167		)	(13,944		)	(35,893		)
Funds From Operations	$	46,439	$	52,467		$	133,184		$	143,640
Per Common Share — Basic and Diluted:
Net Income	$	0.06	$	0.25		$	0.20		$	0.32
Funds From Operations	$	0.22	$	0.24		$	0.63		$	0.66
Weighted Average Shares — Basic	210,170		216,261			210,400			216,485
Weighted Average Shares — Diluted	210,326		216,374			210,528			216,625

Net Operating Income

~~We use Net Operating Income, a non-GAAP financial measure, to measure operating~~

Company management evaluates the performance of ~~our properties. Net Operating Income is also widely used by industry analysts and investors to evaluate performance. Net Operating Income, which is~~its property portfolio in part based on net operating income (“NOI”). NOI represents rental property revenues less rental property operating ~~expenses, excludes certain components from~~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. The Company considers NOI to be an appropriate supplemental measure to net income ~~in order to provide results that are more closely related to a property's results~~as it helps both management and investors understand the core operations of ~~operations. Certain items, such as~~the Company's operating assets. NOI excludes corporate general and administrative expenses, interest expense, ~~while included in FFO~~depreciation and ~~net income, do not affect the operating performance~~amortization, impairments, gains/loss on sales of a real estate, ~~asset~~ and ~~are often incurred at~~other non-operating items.

The following reconciles NOI to Net Income each of the corporate level as opposed to the property level. As a result, management uses only those income and expense items that are incurred at the property level to evaluate a property's performance. Depreciation and amortization are also excluded from Net Operating Income. Same Property Net Operating Income allows analysts, investors and management to analyze continuing operations and evaluate the growth trend of our portfolio.periods presented (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Net Operating Income - Consolidated Properties
Rental property revenues $ 96,016
$ 86,857
$ 282,226
$ 244,375
Rental property expenses (41,331 ) (38,685 ) (120,672 ) (109,501 )
54,685
48,172
161,554
134,874
Net Operating Income - Discontinued Operations
Rental property revenues —
601
4
2,923
Rental property expenses —
(262 ) (18 ) (1,126 )
—
339
(14 ) 1,797
Net Operating Income - Unconsolidated Joint Ventures 6,131

6,601
18,103
19,747
Total Net Operating Income $ 60,816
$ 55,112
$ 179,643
$ 156,418

Net Operating Income
Same Property $ 44,647

$ 44,165
$ 131,841
$ 128,476
Non-Same Property 16,169

10,947
47,802
27,942

$ 60,816
$ 55,112
$ 179,643
$ 156,418
Change in Net Operating Income - Same Property 1.1 % 2.6 %



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net Operating Income	$	54,861		$	54,685		$	159,781		$	161,554
Fee income	1,945			1,686			5,968			5,206
Other income	153			444			858			593
Reimbursed expenses	(795		)	(686		)	(2,463		)	(2,514		)
General and administrative expenses	(4,368		)	(2,976		)	(17,301		)	(12,405		)
Interest expense	(7,710		)	(7,673		)	(22,457		)	(23,219		)
Depreciation and amortization	(31,843		)	(32,538		)	(96,192		)	(103,564		)
Acquisition and merger costs	(1,940		)	(19		)	(4,383		)	(104		)
Other expenses	(173		)	(170		)	(681		)	(970		)
Income from unconsolidated joint ventures	1,527			3,716			5,144			7,088
Gain on sale of investment properties	—			37,145			13,944			37,674
Income (loss) from discontinued operations	—			6			—			(565		)
Net Income	$	11,657		$	53,620		$	42,218		$	68,774

~~Same Property Net Operating Income increased 1.1% and 2.6% between the~~ ~~three and nine~~ ~~month~~ ~~2015~~ ~~and~~ ~~2014~~ periods, respectively. The increases primarily relate to changes in occupancy at Promenade, Terminus 200 and Points at Waterview. In addition, there were increased renewal rates at Post Oak. These increases were offset by vacated space at Greenway and increased expenses at the American Cancer Society Center related to utilities and real estate taxes.

~~Net Rental Rates~~

Average net rental rates for new and renewal tenants for the office portfolio were $20.66 per square foot for the nine months ended September 30, 2015 compared to $18.51 per square foot for the same period in 2014, an increase

Table of 11.6%. This increase is attributable to the fact that there was more leasing activity in 2015 in markets with higher rents. Net rental rates represent average rent per square foot after operating expense reimbursement over the lease term for leased space that has not been vacant for more than one year.Contents

Liquidity and Capital Resources

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

property acquisitions;

expenditures on development projects;

building improvements, tenant improvements, and leasing costs;

principal and interest payments on indebtedness;

repurchase of our common stock; and

common stock dividends.

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

net cash from operations;

sales of assets;

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borrowings under our Credit Facility;

proceeds from mortgage notes payable;

proceeds from construction loans;

proceeds from unsecured term loans;

proceeds from offerings of debt or equity ~~offerings;~~securities; and

joint venture formations.

As of September 30, ~~2015,~~2016, we had ~~$134.0~~no amounts drawn on our Credit Facility. We had $1.0 million drawn under our ~~Credit Facility and $1.0 million outstanding under~~ letters of credit, ~~with~~and the ability to borrow ~~an additional $365.0~~$499.0 million under ~~the~~our Credit Facility.

In ~~July 2015,~~September 2016, we ~~purchased land~~entered into a $120.0 million non-recourse mortgage secured by Colorado Tower, a 373,000 square foot office building in ~~Atlanta, Georgia, for $27.0~~Austin, Texas. The mortgage bears interest at a fixed annual rate of 3.45% and matures September 1, 2026. Also in September 2016, we entered into a $150.0 million ~~to be used~~non-recourse mortgage secured by Fifth Third Center, a 698,000 square foot office building in Charlotte, North Carolina. The mortgage bears interest at a ~~project to develop a headquarters building for NCR. We initially funded this purchase with borrowings under our Credit Facility. These borrowings were~~fixed annual rate of 3.37% and matures October 1, 2026.

In October 2016, we sold 191 Peachtree Tower and repaid ~~with proceeds from~~ the ~~sale of 2100 Ross. We expect to fund the additional costs of this development~~191 Peachtree Tower mortgage note in full. In connection with the ~~additional proceeds from~~repayment, we paid a $3.7 million prepayment penalty.

In the ~~2100 Ross sale as well as the sale~~first quarter of ~~one or more~~2016, we commenced development of ~~our~~an office project and continued development on two other ~~operating properties which may close~~projects. We commenced development of two office projects in the ~~last~~third quarter of ~~2015 or in~~ 2016.

In ~~September 2015,~~the first quarter of 2016, we ~~initiated a $100~~repurchased 1.6 million ~~stock repurchase plan. Under this plan, we may repurchase~~ shares of common stock ~~through September 8, 2017. The~~under our stock repurchase program for an aggregate total price of $13.7 million, and there were no repurchases ~~may be executed~~of common stock in the ~~open market, through private negotiations,~~second or third quarters 2016. The repurchase program was suspended in ~~other transactions permitted under applicable law. The timing, manner, price and amount of any repurchases will be in our discretion and will be subject~~March 2016 due to economic and market conditions, stock price, applicable legal requirements and other factors. Through September 30, 2015, we repurchased approximately 2.0 million shares for a total aggregate cost of approximately $18.7 million. Subsequent to quarter-end, we repurchased an additional 17,000 shares for a total cost of $152,000.the merger with Parkway. The repurchased shares ~~were~~are recorded as treasury shares on the ~~Condensed Consolidated Balance Sheet.~~condensed consolidated balance sheets. We ~~may discontinue or suspend repurchases at any time.~~

~~We will continue to pursue acquisition~~funded these activities with cash from operations, proceeds from asset sales and ~~development opportunities that are consistent with our strategy. We expect to fund any additional future investments with one or more of the following: sale of additional non-core assets, additional~~ borrowings under our Credit ~~Facility, additional mortgage loans secured~~Facility.

In connection with the transactions with Parkway (see below), we assumed ten consolidated mortgages with an aggregate stated principal balance of $542.0 million and an average stated interest rate of 5.24% as of October 6, 2016.

As of October 31, 2016, we had $200 million outstanding under our Credit Facility.

Transactions with Parkway Properties, Inc.

On October 6, 2016, pursuant to the Agreement and Plan of Merger, dated April 28, 2016, (as amended or supplemented from time to time, the “Merger Agreement”), by ~~existing~~and among Cousins, Parkway Properties, Inc. ("Parkway") and subsidiaries of Cousins and Parkway, Parkway merged with and into a subsidiary of the Company (the "Merger"), with this subsidiary continuing as the surviving corporation of the Merger. In accordance with the terms and conditions of the Merger Agreement, each outstanding share of Parkway common stock and each outstanding share of Parkway limited voting stock was converted into 1.63 shares of Cousins common stock or ~~newly acquired~~limited voting preferred stock, respectively. In the Merger, former Parkway common stockholders received approximately 183 million shares of Cousins common stock and Parkway limited voting stockholders received approximately 7 million shares of Cousins limited voting preferred stock.

On October 7, 2016, pursuant to the Merger Agreement and the Separation, Distribution and Transition Services Agreement, dated as of October 5, 2016 (the "Separation Agreement"), by and among Cousins, Parkway, New Parkway (as defined below) and certain other parties thereto, Cousins distributed pro rata to its common and limited voting preferred stockholders, including legacy Parkway common and limited voting stockholders, all of the outstanding shares of common and limited voting stock, respectively, of Parkway, Inc. ("New Parkway"), a newly-formed entity that contains the combined businesses relating to the ownership of real properties ~~construction loans,~~in Houston, Texas (the "Spin-Off"). In the Spin-Off, Cousins distributed one share of New Parkway

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common or limited voting stock for every eight shares of common or limited voting preferred stock of Cousins held of record as of the close of business on October 6, 2016. As a result of the Spin-Off, New Parkway is now an independent public company and its common stock is listed under the symbol "PKY" on the New York Stock Exchange.

Approximately 98% of the partnership units of CPLP are owned by the Company, and approximately 2% are owned by legacy outside unit holders of Parkway LP (the "Outside Unit Holders"). Ownership of partnership units in CPLP will generally entitle the holder to share in cash distributions from, and in the profits and losses of, CPLP in proportion to such holder's percentage ownership. The Company acts as the general partner in CPLP and has the exclusive right and full authority and responsibility to manage and operate CPLP's business. Limited partners generally do not have any right to participate in or exercise control or management power over the business and affairs of CPLP. Limited partners may redeem partnership units for cash, or at the Company's election, shares of Cousins' common stock on a one-for-one basis, at any time beginning twelve months following the date of the initial issuance of the partnership units, except for partnership units issued in connection with the Reorganization, which may be redeemed at any time. The Company will consolidate the accounts and operations of CPLP in its financial statements.

The Company will account for the Merger as a business combination with the Company as the accounting acquirer. The total value of the transaction is based on the closing stock price of the Company's common ~~equity,~~stock on October 5, 2016, the day immediately prior to the closing of the Merger, of $10.19 per share. Based on the shares issued in the transaction and ~~joint ventures~~on the units of CPLP effectively issued to the Outside Unit Holders in the transaction, the total value of the assets and liabilities assumed in the Merger is estimated to be $1.9 billion. Due to the limited time since the Merger, the initial accounting for this transaction is incomplete and, as such, the Company is unable to provide purchase price allocation and other disclosures associated with ~~third parties.~~the Merger and Spin-Off. During the three and nine months ended September 30, 2016, the Company incurred $1.9 million and $4.4 million, respectively, in merger-related expenses.

Contractual Obligations and Commitments

The following table sets forth information as of September 30, ~~2015~~2016 with respect to our outstanding contractual obligations and commitments (in thousands):


	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 years		Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 years
Contractual Obligations:
Company debt:
Unsecured Credit Facility and construction facility	$	134,000	$	—	$	—	$	134,000	$	—
Unsecured Credit Facility											$	—	$	—	$	—	$	—	$	—
Mortgage notes payable	645,570		23,497		149,238		136,887		335,948		892,054		141,007		123,990		212,919		414,138
Interest commitments (1)	160,846		54,823		51,295		34,449		20,279		183,844		37,432		53,669		40,072		52,671
Ground leases	145,085		1,646		3,305		3,315		136,819		143,438		1,651		3,310		3,320		135,157
Other operating leases	320		166		150		4		—		119		40		79		—		—
Total contractual obligations	$	1,085,821	$	80,132	$	203,988	$	308,655	$	493,046	$	1,219,455	$	180,130	$	181,048	$	256,311	$	601,966
Commitments:
Unfunded tenant improvements and other	$	87,624	$	54,269	$	17,007	$	16,348	$	—	$	79,045	$	62,887	$	5,158	$	11,000	$	—
Letters of credit	1,000		1,000		—		—		—		1,000		1,000		—		—		—
Performance bonds	1,049		216		—		—		833		945		945		—		—		—
Total commitments	$	89,673	$	55,485	$	17,007	$	16,348	$	833	$	80,990	$	64,832	$	5,158	$	11,000	$	—


(1)	Interest on variable rate obligations is based on rates effective as of September 30, ~~2015~~. 2016.

In October 2016, we repaid the 191 Peachtree mortgage note in the amount of $99.2 million which was scheduled to mature in 2018.

In connection with the Spin-Off, the Company distributed the Post Oak Central mortgage note to New Parkway on October 7, 2016.

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

Other Debt Information

The real estate and other assets of The American Cancer Society Center (the “ACS Center”) are restricted under the ACS Center loan agreement in that they are not available to settle our debts. However, provided that the ACS Center loan has not

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incurred any uncured event of default, as defined in the loan agreement, the cash flows from the ACS Center, after payments of debt service, operating expenses and reserves, are available for distribution to us.

Our existing mortgage debt is primarily non-recourse, fixed-rate mortgage notes secured by various real estate assets. Many of ~~the~~our non-recourse mortgages contain covenants which, 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 or other financings.

Future Capital Requirements

Over the long term, we intend to actively manage our portfolio of properties and strategically sell assets to exit non-core holdings, reposition the portfolio geographically and by product type, and generate capital for future investment activities. We expect to continue to utilize indebtedness to fund future commitments, ~~and expect to place long-term mortgages on selected assets as well as to utilize construction financing for some development assets,~~ if available and under appropriate terms.

We may also ~~generate~~seek equity capital ~~through the issuance of securities that include common or preferred stock, warrants, debt securities or depositary shares. In March 2013, we filed a shelf registration statement~~and capital from joint venture partners to ~~allow for the issuance of such securities through March 2016.~~implement our strategy.

Our business model is dependent upon raising or recycling capital to meet ~~obligations.~~obligations and to fund 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 ~~Flow~~Flows Summary

We report and analyze our cash flows based on operating activities, investing activities and financing activities. ~~Cash and cash equivalents were $5.3 million and $7.2 million at September 30, 2015 and September 30, 2014.~~ The following table sets forth the changes in cash flows (in thousands):


	Nine Months Ended September 30,									Nine Months Ended September 30,
	2015			2014			Change			2016			2015			Change
Net cash provided by operating activities	$	103,040		$	94,596		$	8,444		$	119,251		$	103,040		$	16,211
Net cash used in investing activities	(14,612		)	(304,627		)	290,015			(131,403		)	(14,612		)	(116,791		)
Net cash provided by (used in) financing activities	(83,097		)	216,266			(299,363		)	107,390			(83,097		)	190,487

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

Cash Flows from Operating Activities. Cash ~~provided by~~flows from operating activities increased ~~$8.4~~$16.2 million between the 2016 and 2015 nine month ~~2015~~periods due to a decrease in lease inducements extended to tenants and ~~2014 periods. This difference is primarily caused by an increase in cash provided from property operations and operating cash provided from unconsolidated joint ventures.~~lower software development costs.

Cash Flows from Investing Activities. Cash flows ~~used in~~from investing activities decreased ~~$290.0~~$116.8 million between the 2016 and 2015 nine month ~~2015 and 2014 periods. This~~periods primarily ~~relates~~due to ~~proceeds from sales of 2100 Ross and land parcels during 2015 and~~ a decrease in proceeds from asset sales and an increase in contributions to unconsolidated joint ventures. These decreases were offset by lower property acquisition, development and tenant asset expenditures ~~during 2015.~~between the periods.

Cash Flows from Financing Activities. Cash flows ~~provided by~~from financing activities ~~decreased $299.4~~increased $190.5 million between the 2016 and 2015 nine month ~~2015~~periods, primarily due to the closing of the mortgage notes payable on Fifth Third Center and ~~2014 periods. This primarily relates to decreased~~Colorado Tower in the third quarter 2016, partially offset by an increase in net ~~borrowings~~repayments under ~~our~~the Credit ~~Facility, stock repurchases, and the 2014 common stock issuance and preferred share redemptions.~~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 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 condensed consolidated statements of cash flows. Amounts accrued are removed from the table below (accrued capital adjustment) to show the components of these costs on a cash basis. Components of costs included in this line item for the nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 are as follows (in thousands):

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	Nine Months Ended September 30,					Nine Months Ended September 30,
	2015		2014			2016			2015
Acquisition of property	$	—	$	234,471
Development	53,781		55,250			$	69,899		$	53,781
Operating — building improvements	65,801		49,294			2,063			65,801
Operating — leasing costs	17,539		7,611			53,425			17,539
Capitalized interest	2,740		1,833			2,988			2,740
Capitalized salaries	5,945		5,226
Accrued capital adjustment	5,578		(2,028		)
Capitalized personnel costs						5,366			5,945
Change in accrued capital expenditures						(11,384		)	5,578
Total property acquisition and development expenditures	$	151,384	$	351,657		$	122,357		$	151,384

Capital expenditures decreased in ~~2015 primarily~~2016 mainly due to ~~a decrease in property acquisitions compared to~~decreased building improvement costs over the prior year. This decrease was offset by an increase in development expenditures and tenant leasing costs. Tenant improvements and leasing costs, as well as related capitalized personnel costs, are a function of the number and size of newly executed leases or renewals of existing leases. The amounts of tenant improvement and leasing costs for our office portfolio on a per square foot basis were as follows:



		Nine Months Ended September 30, ~~2015~~2016
New leases		$~~5.79~~4.39
Renewal leases		$~~4.49~~4.07
Expansion leases		$~~5.70~~6.48

The amounts of tenant improvement and leasing costs on a per square foot basis vary by lease and by market. Given the level of expected leasing and renewal activity, ~~in future periods~~ management expects tenant improvements and leasing costs per square foot in future periods to remain consistent with those experienced in the first nine months of ~~2015.~~2016.

Dividends. We paid common dividends of ~~$52.0~~$50.5 million and ~~$45.4~~$52.0 million in the 2016 and 2015 nine month ~~2015~~ ~~and~~ ~~2014~~periods, respectively. ~~We paid preferred dividends of~~ ~~$3.0 million~~ ~~in the~~ ~~nine~~ ~~month~~ ~~2014~~ ~~period.~~ We funded the dividends with cash provided by operating activities. We expect ~~that~~to fund our future quarterly distributions to common stockholders with cash ~~flows~~provided by operating activities, proceeds from ~~operations and~~investment property sales, distributions from unconsolidated joint ventures, ~~will fund our common dividends in the remaining quarter of 2015.~~and indebtedness, 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 our Credit Facility which could limit the amount of dividends paid. In general, dividends of any amount can be paid as long as leverage, as defined in the facility, is less than 60% and we are not in default under our facility. Certain conditions also apply in which we can still pay dividends if leverage is above that amount. We routinely monitor the status of our dividend payments in light of our Credit Facility covenants.

Off Balance Sheet Arrangements

General. We have a number of off balance sheet joint ventures with varying structures, as described in note 5 of ~~the notes to consolidated financial statements in~~ our ~~2014~~2015 Annual Report on Form ~~10-K/A~~10-K and note 4 of ~~the notes to condensed consolidated financial statements in~~ this Form 10-Q. 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, ~~2015~~2016, our unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of ~~$227.2~~$397.1 million. These loans are generally mortgage or construction loans, most of which are non-recourse to us except as described in the paragraph below. 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.

We guarantee repayment of up to $8.6 million of the EP II construction loan, which has a total capacity of $46.0 million. At September 30, ~~2015~~2016, we guaranteed ~~$2.9~~$3.4 million, based on amounts outstanding under this loan as of that date. This guarantee may be reduced and/or eliminated based on the achievement of certain criteria. We also guarantee 12.5% of the loan amount related to the Carolina Square construction loan, which has a lending capacity of $79.8 million, and noan outstanding balance of $9.3 million as of September 30, ~~2015.~~2016. At September 30, 2016, we guaranteed $1.2 million of the amount outstanding.

Critical Accounting Policies

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~~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/A~~10-K for the year ended December 31, ~~2014.~~2015.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in the market risk associated with our notes payable at September 30, ~~2015~~2016 compared to that as disclosed in our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2014.~~2015.

Item 4. Controls and Procedures.

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 applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s 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 at the reasonable assurance level.~~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 control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Information regarding legal proceedings is described under the subheading "Litigation" in note 8 to the unaudited condensed consolidated financial statements set forth in this Form 10-Q.

Item 1A. Risk ~~Factors.~~Factors

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, 2015. There have been no material changes ~~to the~~in our risk factors asfrom those previously disclosed in our Annual Report other than as set forth below. You should carefully consider the risks described in our Annual Report and below, which could materially affect our business, financial condition or future results. The risks described in our Annual Report and below 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.

As a result of the merger and spin-off with Parkway Properties, Inc. (the "Transactions"), the composition of the Board of Directors has changed.

Concurrent with the closing of the Transaction, the Board of Directors changed and currently consists of nine members, five of which served on ~~Form 10-K/A~~the Company's Board of Directors and four of which served on Parkway's Board of Directors. One of the four directors who formerly served on Parkway's board of directors was selected by TPG Pantera VI ("TPG") and TPG management (collectively with TPG, the "TPG Entities"), pursuant to the Company Stockholders Agreement (as defined below).

Our stockholders agreement with the TPG Parties grants the TPG Parties influence over the Company.

In connection with entering into the Merger Agreement, we have entered into a stockholders agreement with the TPG Parties (the “Company Stockholders Agreement”), in order to establish various arrangements and restrictions with respect to governance of the Company, and certain rights with respect to shares of common stock of the Company owned by TPG.

Pursuant to the terms of the Company Stockholders Agreement, for so long as TPG beneficially owns at least 5% of our common stock on an as-converted basis, TPG will have the right to nominate one director to the Company's Board of Directors. In addition, for so long as TPG beneficially owns at least 5% of our common stock on an as-converted basis, TPG will have the right to have their nominee to the Company's Board of Directors appointed to the Investment and the Compensation Committees of the Company's Board of Directors.

The Company Stockholders Agreement provides that we shall file, within thirty days of the closing of the Transactions, a registration statement registering for sale all of the registrable securities held by TPG. The Company Stockholders Agreement also provides TPG with customary registration rights following the closing of the Merger and the Spin-Off, subject to the terms and conditions of the Company Stockholders Agreement.

In addition, in connection with the Merger Agreement, the Company's Board of Directors granted to the TPG Entities an exemption from the ownership limit included in our articles of incorporation, establishing for the ~~year ended December 31, 2014.~~TPG Entities an aggregate substitute in lieu of the ownership limit to permit them to constructively and beneficially own (without duplication) (i) during the term of the standstill provided by the Company Stockholders Agreement, up to 15% of our outstanding voting securities, subject to the terms and conditions of the Company Stockholders Agreement, and (ii) following the term of the standstill provided by the Company Stockholders Agreement, shares of our common stock held by the TPG Entities at the expiration of the standstill, subject to the terms, conditions, limitations, reductions and terminations set forth in an investor representation letter entered into with the TPG Parties.

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The interests of the TPG Entities could conflict with or differ from your interests as a holder of our common stock. For example, the level of ownership and board rights held by TPG could delay, defer or prevent a change of control or impede a merger, takeover or other business combination that our common stockholders may otherwise view favorably. In addition, a sale of a substantial number of shares of stock in the future by the TPG Entities could cause a decline in our stock price.

Our future results will suffer if we do not effectively manage our expanded portfolio of properties following the Merger and Spin-Off and any failure by us to effectively manage our portfolio could have a material and adverse effect on our business and our ability to make distributions to shareholders, as required for us to continue to qualify as a REIT.

As a result of the Merger and Spin-Off, the size of our business has increased. Our future success depends, in part, upon our ability to manage this expanded business, which will pose challenges for management, including challenges related to acting as landlord to a larger portfolio of properties and associated increased costs and complexity. Additionally, as a result of the Merger and Spin-Off, we have entered new markets, including Orlando, Tampa and Phoenix. We may face challenges in adapting our business to different market conditions in such new markets. There can be no assurances that we will be successful.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~For information on our equity compensation plans, see note 13 of our Annual Report on Form 10-K/A, and note 9 to the unaudited condensed consolidated financial statements set forth in this Form 10-Q.~~ We did not make any sales of unregistered securities during the third quarter of ~~2015~~.2016.

We ~~repurchased~~purchased the following common shares during the third quarter of ~~2015~~2016:


	Total Number of Shares Purchased (1)	Average Price Paid per Share (1)		Total Number of Shares Purchased*	Average Price Paid per Share*
July 1 - 31	—	N/A		—	$	—
August 1 - 31	—	$	—	—	$	—
September 1 - 30	2,014,661	$	9.28	474	$	10.88
	2,014,661	9.28		474	$	—

~~(1)~~ *Activity for the third quarter of ~~2015~~2016 related to the ~~the repurchase~~remittances of shares for income taxes in association with option exercises and restricted stock vestings. For information on our equity compensation plans, see note 12 of our ~~common stock as a part of~~Annual Report on Form 10-K, and note 10 to the ~~share repurchase program that authorizes up to $100 million of common stock through September 2017. Average price paid per share includes broker commission.~~unaudited condensed consolidated financial statements set forth in this Form 10-Q.

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Item 6. Exhibits.




2.1		Agreement and Plan of Merger, dated April 28, 2016, by and among Parkway Properties, Inc., Parkway Properties LP, the Registrant and Clinic Sub Inc, filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on April 29, 2016, and incorporated herein by reference.

3.1		Restated and Amended Articles of Incorporation of the Registrant, as amended August 9, 1999, filed as Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference.

3.1.1		Articles of Amendment to Restated and Amended Articles of Incorporation of the Registrant, as amended July 22, 2003, filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on July 23, 2003, and incorporated herein by reference.

3.1.2		Articles of Amendment to Restated and Amended Articles of Incorporation of the Registrant, as amended December 15, 2004, filed as Exhibit 3(a)(i) to the Registrant’s Form 10-K for the year ended December 31, 2004, and incorporated herein by reference.

3.1.3		Articles of Amendment to Restated and Amended Articles of Incorporation of the Registrant, as amended May 4, 2010, filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed May 10, 2010, and incorporated herein by reference.

3.1.4		Articles of Amendment to Restated and Amended Articles of Incorporation of the Registrant, as amended May 9, 2014, filed as Exhibit 3.1.4 to the Registrant's Form 10-Q for the quarter ended June 30, 2014, and incorporated herein by reference.

3.1.5		Articles of Amendment to Restated and Amended Articles of Incorporation of Cousins, as amended October 6, 2016 (incorporated by reference from Exhibit 3.1 to the Registrant's Current Form 8-K filed on October 7, 2016).

3.1.6		Articles of Amendment to Restated and Amended Articles of Incorporation of Cousins, as amended October 6, 2016 (incorporated by reference from Exhibit 3.1.1 to the Registrant's Current Form 8-K filed on October 7, 2016).

3.2		Bylaws of the Registrant, as amended and restated December 4, 2012, filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on December 7, 2012, and incorporated herein by reference.

10.1		Stockholders Agreement, dated April 28, 2016, by and among the Registrant, TPG VI Pantera Holdings, L.P. and TPG VI Management, LLC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 29, 2016, and incorporated herein by reference.

10.2		Voting Agreement, dated April 28, 2016, by and among the Registrant, TPG VI Pantera Holdings, L.P. and TPG VI Management, LLC, filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on April 29, 2016, and incorporated herein by reference.

11.0	*	Computation of Per Share Earnings.

31.1	†	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	†	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	†	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	†	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	†	The following financial information for the Registrant, formatted in XBRL (Extensible Business Reporting Language): (i) the ~~Condensed Consolidated Balance Sheets,~~condensed consolidated balance sheets, (ii) the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations,~~operations, (iii) the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Equity,~~equity, (iv) the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Cash Flows,~~cash flows, and (v) the ~~Notes~~notes to ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements.



*		Data required by ASC 260, “Earnings per Share,” is provided in note 11 to the condensed consolidated financial statements included in this report.
†		Filed herewith.

2530

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	COUSINS PROPERTIES INCORPORATED
	/s/ Gregg D. Adzema
	Gregg D. Adzema
	Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

Date: ~~October 27, 2015~~November 1, 2016

2631



	Page No.
PART I-FINANCIAL INFORMATION	34
Item 1. Financial Statements (Unaudited)	34
CONDENSED CONSOLIDATED BALANCE SHEETS	34
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	45
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY	56
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	67
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	78
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1619
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2327
Item 4. Controls and Procedures	2327

PART II. OTHER INFORMATION	2428
Item 1. Legal Proceedings	2428
Item 1A. Risk Factors	2428
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2429
Item 6. Exhibits	2530
SIGNATURES	2631



	Preferred Stock			Common Stock			Additional Paid-In Capital			Treasury Stock			Distributions in Excess of Net Income			Stockholders’ Investment			Nonredeemable Noncontrolling Interests			Total Equity
Balance December 31, 2014	$	—		$	220,083		$	1,720,972		$	(86,840	)	$	(180,757	)	$	1,673,458		$	—		$	1,673,458
Net income	—			—			—			—			68,774			68,774			—			68,774
Common stock issued pursuant to:
Director stock grants	—			79			686			—			—			765			—			765
Stock option exercises	—			4			(19		)	—			—			(15		)	—			(15		)
Restricted stock grants, net of amounts withheld for income taxes	—			90			(911		)	—			—			(821		)	—			(821		)
Amortization of stock options and restricted stock, net of forfeitures	—			—			1,104			—			—			1,104			—			1,104
Repurchase of common stock	—			—			—			(18,691		)	—			(18,691		)	—			(18,691		)
Common dividends	—			—			—			—			(52,011		)	(52,011		)	—			(52,011		)
Other	—			—			24			—			—			24			—			24
Balance September 30, 2015	$	—		$	220,256		$	1,721,856		$	(105,531	)	$	(163,994	)	$	1,672,587		$	—		$	1,672,587

Balance December 31, 2013	$	94,775		$	193,236		$	1,420,951		$	(86,840	)	$	(164,721	)	$	1,457,401		$	1,571		$	1,458,972
Net income	—			—			—			—			28,784			28,784			376			29,160
Common stock issued pursuant to:
Director stock grants	—			55			598			—			—			653			—			653
Stock option exercises	—			40			(267		)	—			—			(227		)	—			(227		)
Common stock offering, net of issuance costs	—			26,700			295,212			—			—			321,912			—			321,912
Restricted stock grants, net of amounts withheld for income taxes	—			53			(978		)	—			—			(925		)	—			(925		)
Amortization of stock options and restricted stock, net of forfeitures	—			(5		)	1,513			—			—			1,508			—			1,508
Distributions to nonredeemable noncontrolling interests	—			—			—			—			—			—			(369		)	(369		)
Redemption of preferred shares	(94,775		)	—			3,530			—			(3,530		)	(94,775		)	—			(94,775		)
Preferred dividends	—			—			—			—			(2,955		)	(2,955		)	—			(2,955		)
Common dividends	—			—			—			—			(45,351		)	(45,351		)	—			(45,351		)
Balance September 30, 2014	$	—		$	220,079		$	1,720,559		$	(86,840	)	$	(187,773	)	$	1,666,025		$	1,578		$	1,667,603



	September 30, 2015		December 31, 2014
FF&E and leasehold improvements, net of accumulated depreciation of $22,375 and $19,137 in 2015 and 2014, respectively	$	13,283	$	10,590
Lease inducements, net of accumulated amortization of $7,469 and $5,475 in 2015 and 2014, respectively	13,201		12,245
Loan closing costs, net of accumulated amortization of $3,359 and $2,286 in 2015 and 2014, respectively	5,805		6,878
Prepaid expenses and other assets	4,077		3,428
Predevelopment costs and earnest money	752		1,789
	$	37,118	$	34,930



Three Months Ended September 30, 2015	Office		Retail		Land		Other			Total
Net operating income	$	59,328	$	—	$	—	$	1,488		$	60,816
Sales less costs of sales	—		—		3,016		—			3,016
Fee income	—		—		—		1,686			1,686
Other income	—		—		—		845			845
General and administrative expenses	—		—		—		(2,971		)	(2,971		)
Reimbursed expenses	—		—		—		(686		)	(686		)
Interest expense	—		—		—		(9,518		)	(9,518		)
Other expenses	—		—		—		(721		)	(721		)
Funds from operations available to common stockholders	$	59,328	$	—	$	3,016	$	(9,877	)	52,467
Real estate depreciation and amortization, including Company's share of joint ventures										(35,014		)
Gain on sale of depreciated investment properties, including Company's share of joint ventures										36,167
Net income available to common stockholders										$	53,620



Three Months Ended September 30, 2014	Office		Retail		Land		Other			Total
Net operating income	$	52,691	$	1,221	$	—	$	1,200		$	55,112
Sales less costs of sales	—		—		82		—			82
Fee income	—		—		—		1,802			1,802
Other income	—		—		—		399			399
General and administrative expenses	—		—		—		(5,021		)	(5,021		)
Reimbursed expenses	—		—		—		(783		)	(783		)
Interest expense	—		—		—		(8,660		)	(8,660		)
Other expenses	—		—		—		(1,255		)	(1,255		)
Preferred stock dividends and original issuance costs	—		—		—		—			—
Funds from operations available to common stockholders	$	52,691	$	1,221	$	82	$	(12,318	)	41,676
Real estate depreciation and amortization, including Company's share of joint ventures										(35,347		)
Gain on sale of depreciated investment properties including the Company's share of joint ventures										12,993
Net income available to common stockholders										$	19,322



Nine Months Ended September 30, 2014	Office		Retail		Land		Other			Total
Net operating income	$	149,110	$	3,813	$	—	$	3,496		$	156,419
Sales less costs of sales	—		—		1,573		42			1,615
Fee income	—		—		—		6,165			6,165
Other income	—		—		—		4,563			4,563
General and administrative expenses	—		—		—		(16,472		)	(16,472		)
Reimbursed expenses	—		—		—		(2,703		)	(2,703		)
Interest expense	—		—		—		(26,485		)	(26,485		)
Other expenses	—		—		—		(2,974		)	(2,974		)
Preferred stock dividends and original issuance costs	—		—		—		(6,485		)	(6,485		)
Funds from operations available to common stockholders	$	149,110	$	3,813	$	1,573	$	(40,853	)	113,643
Real estate depreciation and amortization, including Company's share of joint ventures										(110,319		)
Gain on sale of depreciated investment properties, including Company's share of joint ventures										18,975
Net income available to common stockholders										$	22,299