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Section 1: 10-Q (10-Q)

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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, 2017
OR
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.)
3344 Peachtree Road NE, Suite 1800, Atlanta, Georgia
(Address of principal executive offices)
30326-4802
(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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
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 20, 2017
Common Stock, $1 par value per share
 
420,020,538 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 for the year ended December 31, 2016 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;
future acquisitions and dispositions of operating assets;
future acquisitions of land;
future development and redevelopment opportunities;
future dispositions of land and other non-core assets;
projected operating results;
market and industry trends;
future distributions;
projected capital expenditures; 
interest rates;
the impact of the transaction involving us, Parkway Properties, Inc. ("Parkway"), and Parkway, Inc. ("New 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;
impact of the transactions with Parkway and New Parkway on tenants, employees, stockholders, and other constituents of the combined companies; 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;
the ability to refinance or repay indebtedness as it matures;
the failure of purchase, sale, or other contracts to ultimately close;
the failure to achieve anticipated benefits from acquisitions, investments, or dispositions;
the potential dilutive effect of common stock or operating partnership unit issuances;
the availability of buyers and pricing with respect to the disposition of assets;
risks and uncertainties related to national and local economic conditions, the real estate industry, and the commercial real estate markets in which we operate, particularly in Atlanta, Charlotte, Austin, and Phoenix where we have high concentrations of our annualized lease revenue;
changes to our strategy with regard to land and other non-core holdings that may require impairment losses to be recognized;
leasing risks, including the ability to obtain new tenants or renew expiring tenants, the ability to lease newly developed and/or recently acquired space, 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;
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;
any failure to continue to qualify for taxation as a real estate investment trust and to meet regulatory requirements;
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;

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the ability to successfully integrate our operations and employees in connection with the transactions with Parkway and New Parkway;
the ability to realize anticipated benefits and synergies of the transactions with Parkway and New Parkway;
potential changes to state, local, or federal regulations applicable to our business;
material changes in the dividend rates on securities or the ability to pay dividends on common shares or other securities;
potential changes to the tax laws impacting REITs and real estate in general;
significant costs related to uninsured losses, condemnation, or environmental issues; and
those additional risks and factors discussed in reports filed with the Securities and Exchange Commission by the Company.
The words “believes,” “expects,” “anticipates,” “estimates,” “plans,” “may,” “intend,” “will,” or similar expressions are intended to identify forward-looking statements. Although we believe that 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)
 
September 30, 2017
 
December 31, 2016
 
(unaudited)
 
 
Assets:
 
 
 
Real estate assets:
 
 
 
Operating properties, net of accumulated depreciation of $253,362 and $215,856 in 2017 and 2016, respectively
$
3,490,181

 
$
3,432,522

Projects under development
248,242

 
162,387

Land
4,221

 
4,221

 
3,742,644

 
3,599,130

 
 
 
 
Cash and cash equivalents
62,167

 
35,687

Restricted cash
437

 
15,634

Notes and accounts receivable, net of allowance for doubtful accounts of $626 and $1,167 in 2017 and 2016, respectively
16,291

 
27,683

Deferred rents receivable
53,483

 
39,464

Investment in unconsolidated joint ventures
109,222

 
179,397

Intangible assets, net of accumulated amortization of $99,063 and $53,483 in 2017 and 2016, respectively
211,786

 
245,529

Other assets
28,170

 
29,083

Total assets
$
4,224,200

 
$
4,171,607

Liabilities:


 


Notes payable
$
1,095,177

 
$
1,380,920

Accounts payable and accrued expenses
160,101

 
109,278

Deferred income
35,918

 
33,304

Intangible liabilities, net of accumulated amortization of $25,709 and $12,227 in 2017 and 2016, respectively
76,299

 
89,781

Other liabilities
39,385

 
44,084

Total liabilities
1,406,880

 
1,657,367

Commitments and contingencies


 


Equity:
 
 
 
Stockholders' investment:
 
 
 
Preferred stock, $1 par value, 20,000,000 shares authorized, 6,867,357 shares issued and outstanding in 2017 and 2016
6,867

 
6,867

Common stock, $1 par value, 700,000,000 shares authorized, 430,349,620 and 403,746,938 shares issued in 2017 and 2016, respectively
430,350

 
403,747

Additional paid-in capital
3,604,269

 
3,407,430

Treasury stock at cost, 10,329,082 shares in 2017 and 2016
(148,373
)
 
(148,373
)
Distributions in excess of cumulative net income
(1,127,813
)
 
(1,214,114
)
Total stockholders' investment
2,765,300

 
2,455,557

Nonredeemable noncontrolling interests
52,020

 
58,683

Total equity
2,817,320

 
2,514,240

Total liabilities and equity
$
4,224,200

 
$
4,171,607

 
 
 
 
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
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Rental property revenues
$
109,569

 
$
46,575

 
$
336,093

 
$
138,382

Fee income
2,597

 
1,945

 
6,387

 
5,968

Other
993

 
153

 
9,593

 
570

 
113,159

 
48,673

 
352,073

 
144,920

Expenses:
 

 
 

 
 

 
 

Rental property operating expenses
40,688

 
18,122

 
123,715

 
55,451

Reimbursed expenses
895

 
795

 
2,667

 
2,463

General and administrative expenses
7,193

 
4,368

 
21,993

 
17,301

Interest expense
7,587

 
5,754

 
25,851

 
16,562

Depreciation and amortization
47,622

 
16,622

 
152,546

 
49,804

Acquisition and transaction costs
(677
)
 
1,446

 
1,499

 
3,889

Other
423

 
173

 
1,063

 
681

 
103,731

 
47,280

 
329,334

 
146,151

Gain on extinguishment of debt
429

 

 
2,258

 

Income (loss) from continuing operations before unconsolidated joint ventures and gain (loss) on sale of investment properties
9,857

 
1,393

 
24,997

 
(1,231
)
Income from unconsolidated joint ventures
2,461

 
1,527

 
43,362

 
5,144

Income from continuing operations before gain (loss) on sale of investment properties
12,318

 
2,920

 
68,359

 
3,913

Gain (loss) on sale of investment properties
(33
)
 

 
119,729

 
13,944

Income from continuing operations
12,285

 
2,920

 
188,088

 
17,857

Income from discontinued operations

 
8,737

 

 
24,361

Net income
12,285

 
11,657

 
188,088

 
42,218

Net income attributable to noncontrolling interests
(218
)
 

 
(3,181
)
 

Net income available to common stockholders
$
12,067

 
$
11,657

 
$
184,907

 
$
42,218

Per common share information — basic and diluted:
 
 
 

 
 
 
 

Income from continuing operations
$
0.03

 
$
0.01

 
$
0.45

 
$
0.08

Income from discontinued operations

 
0.05

 

 
0.12

Net income
$
0.03

 
$
0.06

 
$
0.45

 
$
0.20

Weighted average shares — basic
419,998

 
210,170

 
414,123

 
210,400

Weighted average shares — diluted
427,300

 
210,326

 
421,954

 
210,528

Dividends declared per common share
$
0.06

 
$
0.08

 
$
0.24

 
$
0.24


See accompanying notes.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Nine Months Ended September 30, 2017 and 2016
(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, 2016
 
$
6,867

 
$
403,747

 
$
3,407,430

 
$
(148,373
)
 
$
(1,214,114
)
 
$
2,455,557

 
$
58,683

 
$
2,514,240

Net income
 

 

 

 

 
184,907

 
184,907

 
3,181

 
188,088

Common stock issued pursuant to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock offering, net of
issuance costs
 

 
25,000

 
186,774

 

 

 
211,774

 

 
211,774

Director stock grants
 

 
121

 
889

 

 

 
1,010

 

 
1,010

Stock based compensation
 

 
282

 
(1,168
)
 

 

 
(886
)
 

 
(886
)
Spin-off of Parkway, Inc.
 

 

 

 

 
545

 
545

 

 
545

Common stock redemption by unit holders
 

 
1,203

 
8,865

 

 

 
10,068

 
(10,068
)
 

Amortization of stock options and restricted stock, net of forfeitures
 

 
(3
)
 
1,479

 

 

 
1,476

 

 
1,476

Contributions from nonredeemable noncontrolling interest
 

 

 

 

 

 

 
1,588

 
1,588

Distributions to nonredeemable noncontrolling interest
 

 

 

 

 

 

 
(1,364
)
 
(1,364
)
Common dividends ($0.24 per share)
 

 

 

 

 
(99,151
)
 
(99,151
)
 

 
(99,151
)
Balance September 30, 2017
 
$
6,867

 
$
430,350

 
$
3,604,269

 
$
(148,373
)
 
$
(1,127,813
)
 
$
2,765,300

 
$
52,020

 
$
2,817,320

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

See accompanying notes.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)


 
Nine Months Ended September 30,
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
188,088

 
$
42,218

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Gain on sale of investment properties
(119,729
)
 
(13,944
)
Depreciation and amortization, including discontinued operations
152,546

 
96,192

Amortization of deferred financing costs and premium/discount on notes payable
(2,543
)
 
1,063

Stock-based compensation expense, net of forfeitures
2,486

 
1,571

Effect of certain non-cash adjustments to rental revenues
(33,379
)
 
(15,966
)
Income from unconsolidated joint ventures
(43,362
)
 
(5,144
)
Operating distributions from unconsolidated joint ventures
40,207

 
5,893

Gain on extinguishment of debt
(2,258
)
 

Changes in other operating assets and liabilities:
 
 
 
Change in other receivables and other assets, net
9,707

 
1,824

Change in operating liabilities
3,150

 
5,544

Net cash provided by operating activities
194,913

 
119,251

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Proceeds from investment property sales
171,316

 
21,088

Property acquisition, development, and tenant asset expenditures
(229,811
)
 
(122,357
)
Purchase of tenant in common interest
(13,382
)
 

Collection of notes receivable
5,161

 

Investment in unconsolidated joint ventures
(13,862
)
 
(24,918
)
Distributions from unconsolidated joint ventures
40,939

 
4,150

Change in notes receivable and other assets
(1,348
)
 
(5,699
)
Change in restricted cash
15,105

 
(3,667
)
Net cash used in investing activities
(25,882
)
 
(131,403
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from credit facility
589,300

 
182,800

Repayment of credit facility
(723,300
)
 
(274,800
)
Proceeds from issuance of notes payable
350,000

 
270,000

Repayment of notes payable
(493,774
)
 
(7,239
)
Payment of deferred financing costs
(2,048
)
 
(1,604
)
Shares withheld for payment of taxes on restricted stock vesting
(701
)
 

Common stock issued, net of expenses
211,598

 

Contributions from noncontrolling interests
1,588

 
2,525

Distributions to nonredeemable noncontrolling interests
(1,364
)
 

Repurchase of common stock

 
(13,743
)
Common dividends paid
(73,950
)
 
(50,549
)
Other
100

 

Net cash provided by (used in) financing activities
(142,551
)
 
107,390

NET INCREASE IN CASH AND CASH EQUIVALENTS
26,480

 
95,238

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
35,687

 
2,003

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
62,167

 
$
97,241


 
 


Interest paid, net of amounts capitalized
$
26,927

 
$
20,792

 
 
 
 
Significant non-cash transactions:
 
 
 

Transfer from operating properties to real estate assets and other assets held for sale
$

 
$
203,735

Transfer from operating properties to liabilities of real estate assets held for sale

 
106,135

Transfer from investment in unconsolidated joint ventures to operating properties
68,390

 

Transfer from projects under development to operating properties
58,928

 

Common stock dividends declared
25,201

 

Transfer from investment in unconsolidated joint ventures to projects under development

 
5,880

Transfer from land held to projects under development

 
8,099

Change in accrued property acquisition, development, and tenant asset expenditures
(18,081
)
 
(11,384
)
See accompanying notes.

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COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(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”). Cousins conducts substantially all of its operations through Cousins Properties LP ("CPLP"). Cousins owns approximately 98% of CPLP and consolidates CPLP. Cousins TRS Services LLC ("CTRS"), which is wholly owned by CPLP, is a taxable entity which owns and manages its own real estate portfolio and performs certain real estate related services for other parties. Cousins, CPLP, CTRS, and their subsidiaries are hereinafter referred to collectively as "the Company."
The Company develops, acquires, leases, manages, and owns Class A office and mixed-use properties in Sunbelt markets with a focus on Arizona, Florida, Georgia, North Carolina, and Texas. Cousins has elected to be taxed as a REIT and intends to, among other things, distribute 100% of its net taxable income to stockholders, thereby eliminating any liability for federal income taxes under current law. Therefore, the results included herein do not include a federal income tax provision for Cousins.
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, 2017 and the results of operations for the three and nine months ended September 30, 2017 and 2016. The results of operations for the three and nine months ended September 30, 2017 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 for the year ended December 31, 2016. The accounting policies employed are substantially the same as those shown in note 2 to the consolidated financial statements included therein.
For the three and nine months ended September 30, 2017 and 2016, there were no items of other comprehensive income. Therefore, no presentation of comprehensive income is required.
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with 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. ASU 2015-14, "Revenue from Contracts with Customers," was subsequently issued modifying the effective 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 expects to adopt this guidance effective January 1, 2018 and is in the process of analyzing the impact of the adoption of this guidance. Based on the results of this analysis to date, the Company believes that its management, development, and leasing fees from third parties and with its unconsolidated joint ventures, as well as parking revenue, will be impacted by the new standard. The new guidance specifically excludes revenue associated with lease contracts. However, the Company believes that certain non-lease components of revenue from leases may be impacted by the adoption of the new revenue standard beginning January 1, 2019, the effective date of the new leasing standard (see below). 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; however, the Company expects that the majority of its non-lease revenues will continue to be recognized during the periods in which services are performed. The Company expects to adopt this guidance using the "modified retrospective" method effective January 1, 2018. The Company is still analyzing potential disclosures that will clearly identify the sources of revenue and the periods over which each is recognized.
In February 2016, the FASB issued ASU 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 lessees to 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

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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 financing leases, and operating leases. ASU 2016-02 supersedes previous leasing standards. The guidance is effective for the fiscal years beginning after December 15, 2018, with early adoption permitted. The Company expects to adopt this guidance using the "modified retrospective" method effective January 1, 2019, and is currently assessing the potential impact of adopting the new guidance.
In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15") which updated ASC Topic 230, "Statement of Cash Flows." ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Company expects to adopt this standard in the fourth quarter of 2018 and expects that the adoption of this standard will change the classification of cash flows from its equity method investments.
In November 2016, the FASB issued ASU 2016-18, "Restricted Cash" ("ASU 2016-18") which updated ASC Topic 230, "Statement of Cash Flows." ASU 2016-18 will require companies to include restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Company expects to adopt this standard in the fourth quarter of 2018, which will result in a change in the presentation of cash and cash equivalents on the statements of cash flows.
Effective January 1, 2017, the Company adopted ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." Under this ASU, the 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 realized through a reduction to taxes payable. In the first quarter of 2017, the Company changed the treatment of excess tax benefits as operating cash flows in the statement of cash flows. This ASU also stipulates that cash payments to tax authorities in connection with shares withheld to meet statutory tax withholding requirements be presented as a financing activity in the statement of cash flows. This ASU was adopted prospectively effective January 1, 2017; therefore, prior periods have not been restated to conform to the current period presentation.
In January 2017, the FASB issued ASU 2017-01, "Clarifying the Definition of a Business," which provides a more narrow definition of a business to be used in determining the accounting treatment of an acquisition. As a result, many acquisitions that previously qualified as business combinations will be treated as asset acquisitions. For asset acquisitions, acquisition costs may be capitalized, and the purchase price may be allocated on a relative fair value basis. ASU 2017-01 is effective prospectively for the Company on January 1, 2018, with early adoption permitted. The Company expects that most of its future acquisitions will qualify as asset acquisitions.
In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”). ASU 2017-05 updates the definition of an “in substance nonfinancial asset” and clarifies the derecognition guidance for nonfinancial assets to conform with the new revenue recognition standard. The Company is currently assessing the potential impact that the adoption of ASU 2017-05 will have on its consolidated financial statements. This ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The Company expects to adopt this guidance using the "modified retrospective" method effective January 1, 2018.
In May 2017, FASB issued ASU 2017-09, "Scope of Modification Accounting," which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. This update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Company expects to adopt this standard on January 1, 2018. The Company does not believe that the adoption of this standard will have a material impact on its financial statements.
2. REAL ESTATE TRANSACTIONS
On June 15, 2017, the American Cancer Society Center (the “ACS Center”), a 996,000 square foot office building in Atlanta, Georgia that was included in the Company's Atlanta/Office operating segment, was sold for a gross sales price of $166.0 million.

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The Company recognized a net gain of $119.8 million on the sale of the ACS Center. The associated debt was repaid on the date of sale.
The Company has decided to sell three properties totaling 1,038,000 square feet in Orlando, Florida, and determined that these properties met the criteria for held for sale in October 2017. The Company expects to sell these assets in the fourth quarter of 2017 or first quarter of 2018.

3. 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.
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, Parkway, Inc. ("New Parkway"), 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 New Parkway, a newly-formed entity that contained the combined businesses relating to the ownership of real properties in Houston, Texas and certain other businesses of Parkway (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. New Parkway became an independent public company.
As a result of the Spin-Off, the historical results of operations of the Company's properties that were contributed to New Parkway have been presented as discontinued operations in the consolidated statements of operations. The following table includes a summary of discontinued operations of the Company for the three and nine months ended September 30, 2016 (in thousands):
 
 
 
Three Months Ended September 30, 2016
 
Nine Months Ended September 30, 2016
 
 
 
Rental property revenues
 
$
46,046

 
$
133,450

Rental property operating expenses
 
(19,638
)
 
(56,598
)
Other revenues
 

 
288

Interest expense
 
(1,956
)
 
(5,896
)
Depreciation and amortization
 
(15,221
)
 
(46,389
)
Acquisition and transaction costs
 
(494
)
 
(494
)
Income from discontinued operations
 
$
8,737

 
$
24,361

 
 
 
 
 
Cash provided by operating activities
 
$
26,589

 
$
43,601

Cash used in investing activities
 
$
(11,130
)
 
$
(29,242
)
4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Company describes its investments in unconsolidated joint ventures in note 6 of notes to consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016. The following table summarizes balance sheet data of the Company's unconsolidated joint ventures as of September 30, 2017 and December 31, 2016 (in thousands):

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Total Assets
 
Total Debt
 
Total Equity
 
Company’s Investment
 
SUMMARY OF FINANCIAL POSITION:
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
Terminus Office Holdings
$
268,531

 
$
268,242

 
$
204,390

 
$
207,545

 
$
50,633

 
$
49,476

 
$
26,204

 
$
25,686

 
EP I LLC
1,517

 
78,537

 

 
58,029

 
1,269

 
18,962

 
738

 
18,551

 
EP II LLC
392

 
67,754

 

 
44,969

 
296

 
21,743

 
130

 
17,606

 
Charlotte Gateway Village, LLC
129,109

 
119,054

 

 

 
124,012

 
116,809

 
15,397

 
11,796

 
HICO Victory Center LP
14,294

 
14,124

 

 

 
14,290

 
13,869

 
9,695

 
9,506

 
Carolina Square Holdings LP
102,370

 
66,922

 
62,180

 
23,741

 
34,080

 
34,173

 
18,843

 
18,325

 
CL Realty, L.L.C.
8,287

 
8,047

 

 

 
8,156

 
7,899

 
2,852

 
3,644

 
DC Charlotte Plaza LLLP
39,156

 
17,940

 

 

 
34,255

 
17,073

 
17,475

 
8,937

 
Temco Associates, LLC
4,426

 
4,368

 

 

 
4,323

 
4,253

 
864

 
829

 
Wildwood Associates
16,368

 
16,351

 

 

 
16,227

 
16,314

 
(1,186
)
(1)
(1,143
)
(1)
Crawford Long - CPI, LLC
28,621

 
27,523

 
71,690

 
72,822

 
(44,787
)
 
(45,928
)
 
(21,296
)
(1)
(21,866
)
(1)
111 West Rio Building

 
59,399

 

 
12,852

 

 
32,855

 

 
52,206

 
Courvoisier Centre JV, LLC
182,262

 
172,197

 
106,500

 
106,500

 
68,480

 
69,479

 
11,719

 
11,782

 
HICO Avalon II, LLC
987

 

 

 

 
532

 

 
4,366

 

 
AMCO 120 WT Holdings, LLC
13,286

 
10,446

 

 

 
12,678

 
9,136

 
939

 
184

 
Other

 

 

 

 

 

 

 
345

 
 
$
809,606

 
$
930,904

 
$
444,760

 
$
526,458

 
$
324,444

 
$
366,113

 
$
86,740

 
$
156,388

 
(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, 2017 and 2016 (in thousands):
 
Total Revenues
 
Net Income (Loss)
 
Company's Share of Income (Loss)
 
SUMMARY OF OPERATIONS:
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
Terminus Office Holdings
$
33,503

 
$
31,630

 
$
4,907

 
$
3,874

 
$
2,453

 
$
1,937

 
EP I LLC
4,094

 
7,919

 
44,865

 
1,417

 
28,479

 
1,206

 
EP II LLC
2,644

 
3,605

 
13,023

 
(1,194
)
 
9,768

 
(1,043
)
 
Charlotte Gateway Village, LLC
20,125

 
26,245

 
7,202

 
11,077

 
3,601

 
1,447

 
HICO Victory Center LP
320

 
307

 
320

 
300

 
171

 
131

 
Carolina Square Holdings LP
640

 

 
(100
)
 

 
19

 

 
CL Realty, L.L.C.
2,899

 
327

 
2,657

 
105

 
408

 
70

 
DC Charlotte Plaza LLLP
2

 
47

 
2

 
45

 
1

 
24

 
Temco Associates, LLC
144

 
180

 
70

 
83

 
35

 
122

 
Wildwood Associates

 

 
(86
)
 
(106
)
 
(43
)
 
(53
)
 
Crawford Long - CPI, LLC
9,017

 
9,101

 
2,285

 
2,005

 
1,142

 
1,003

 
111 West Rio Building

 

 

 

 
(2,592
)
 

 
Courvoisier Centre JV, LLC
12,701

 

 
(1,000
)
 

 
(80
)
 

 
HICO Avalon II, LLC

 

 
(68
)
 

 

 

 
AMCO 120 WT Holdings, LLC

 

 
(22
)
 

 

 

 
Other

 

 

 

 

 
300

 
 
$
86,089

 
$
79,361

 
$
74,055

 
$
17,606

 
$
43,362

 
$
5,144

 
On May 3, 2017, EP I LLC and EP II LLC sold the properties that they owned for a combined gross sales price of $199.0 million. After repayment of debt, the Company received a distribution of $70.0 million and recognized a gain of $37.9 million, which is recorded in income from unconsolidated joint ventures.

In June 2017, HICO Avalon II, LLC ("Avalon II"), a joint venture between the Company and Hines Avalon II Investor, LLC ("Hines II") was formed for the purpose of acquiring and potentially developing an office building in Alpharetta, Georgia. Pursuant to the joint venture agreement, all predevelopment expenditures are funded 75% by Cousins and 25% by Hines II. The Company has accounted for its investment in Avalon II using the equity method as the Company does not currently control the activities of the venture. If Avalon II commences construction, subsequent development expenditures will be funded 90% by Cousins and 10% by Hines II. Additionally, Cousins will have control over the operational aspects of the venture, and the Company expects to consolidate the venture at that time.

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5. INTANGIBLE ASSETS
Intangible assets on the balance sheets as of September 30, 2017 and December 31, 2016 included the following (in thousands):
 
 
September 30, 2017
 
December 31, 2016
In-place leases, net of accumulated amortization of $85,806 and $46,899 in 2017 and 2016, respectively
 
$
158,395

 
$
185,251

Above-market tenant leases, net of accumulated amortization of $12,981 and $6,515 in 2017 and 2016, respectively
 
33,580

 
40,260

Below-market ground lease, net of accumulated amortization of $276 and $69 in 2017 and 2016, respectively
 
18,137

 
18,344

Goodwill
 
1,674

 
1,674

 
 
$
211,786

 
$
245,529


The following is a summary of goodwill activity for the nine months ended September 30, 2017 and 2016 (in thousands):
 
Nine Months Ended September 30,
 
2017
 
2016
Beginning balance
$
1,674

 
$
3,647

Allocated to property sales

 
(21
)
Ending balance
$
1,674

 
$
3,626

6. OTHER ASSETS
Other assets on the balance sheets as of September 30, 2017 and December 31, 2016 included the following (in thousands):
 
 
September 30, 2017
 
December 31, 2016
Furniture, fixtures and equipment, leasehold improvements, and other deferred costs, net of accumulated depreciation of $24,008 and $23,135 in 2017 and 2016, respectively
 
$
14,849

 
$
15,773

Lease inducements, net of accumulated amortization of $892 and $1,278 in 2017 and 2016, respectively
 
2,049

 
2,517

Prepaid expenses and other assets
 
9,764

 
8,432

Line of credit deferred financing costs, net of accumulated amortization of $2,905 and $2,264 in 2017 and 2016, respectively
 
1,428

 
2,182

Predevelopment costs and earnest money
 
80

 
179

 
 
$
28,170

 
$
29,083

7. NOTES PAYABLE
The following table details the terms and amounts of the Company’s outstanding notes payable at September 30, 2017 and December 31, 2016 ($ in thousands):

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Description
 
Interest Rate
 
Maturity
 
September 30, 2017
 
December 31, 2016
Term Loan, Unsecured
 
2.43
%
 
2021
 
$
250,000

 
$
250,000

Senior Notes, Unsecured
 
3.91
%
 
2025
 
250,000

 

Fifth Third Center
 
3.37
%
 
2026
 
147,306

 
149,516

Colorado Tower
 
3.45
%
 
2026
 
120,000

 
120,000

Promenade
 
4.27
%
 
2022
 
103,113

 
105,342

Senior Notes, Unsecured
 
4.09
%
 
2027
 
100,000

 

816 Congress
 
3.75
%
 
2024
 
83,702

 
84,872

Meridian Mark Plaza
 
6.00
%
 
2020
 
24,162

 
24,522

The Pointe
 
4.01
%
 
2019
 
22,620

 
22,945

Credit Facility, Unsecured
 
2.33
%
 
2019
 

 
134,000

3344 Peachtree
 
4.75
%
 
2017
 

 
78,971

One Eleven Congress
 
6.08
%
 
2017
 

 
128,000

The ACS Center
 
6.45
%
 
2017
 

 
127,508

San Jacinto Center
 
6.05
%
 
2017
 

 
101,000

Two Buckhead Plaza
 
6.43
%
 
2017
 

 
52,000

 
 
 
 
 
 
1,100,903

 
1,378,676

Unamortized premium, net
 
 
 
 
 
270

 
6,792

Unamortized loan costs
 
 
 
 
 
(5,996
)
 
(4,548
)
Total Notes Payable
 
 
 
 
 
$
1,095,177

 
$
1,380,920


Credit Facility
The Company has a $500 million senior unsecured line of credit (the "Credit Facility") that matures on May 28, 2019. The Credit Facility may be expanded to $750 million at the election of the Company, subject to the receipt of additional commitments from the lenders and other customary conditions.
The Credit Facility contains financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 2.00; a fixed charge coverage ratio of at least 1.50; an overall leverage ratio of no more than 60%; and a minimum shareholders' equity in an amount equal to $1.0 billion, plus a portion of the net cash proceeds from certain equity issuances. The Credit Facility also contains customary representations and warranties and affirmative and negative covenants, as well as customary events of default. The amounts outstanding under the Credit Facility may be accelerated upon the occurrence of any events of default.
The interest rate applicable to the Credit Facility varies according to the Company’s leverage ratio, and may, at the election of the Company, be determined based on either (1) the current London Interbank Offered Rate ("LIBOR") plus a spread of between 1.10% and 1.45%, based on leverage or (2) the greater of Bank of America's prime rate, the federal funds rate plus 0.50% or the one-month LIBOR plus 1.0% (the “Base Rate”), plus a spread of between 0.10% and 0.45%, based on leverage. The Company also pays an annual facility fee on the total commitments under the Credit Facility of between 0.15% and 0.30% based on leverage.
At September 30, 2017, the Credit Facility's spread over LIBOR was 1.1%. The amount that the Company may draw under the Credit Facility is a defined calculation based on the Company's unencumbered assets and other factors. The total available borrowing capacity under the Credit Facility was $499 million at September 30, 2017.
Term Loan
The Company has a $250 million senior unsecured term loan (the "Term Loan") that matures on December 2, 2021. The Term Loan contains financial covenants consistent with those of the Credit Facility. The interest rate applicable to the Term Loan varies according to the Company’s leverage ratio, and may, at the election of the Company, be determined based on either (1) the current London Interbank Offered Rate ("LIBOR") plus a spread of between 1.20% and 1.70%, based on leverage or (2) the greater of Bank of America's prime rate, the federal funds rate plus 0.50% or the one-month LIBOR plus 1.0% (the “Base Rate”), plus a spread of between 0.00% and 0.75%, based on leverage. At September 30, 2017, the Term Loan's spread over LIBOR was 1.2%.
Unsecured Senior Notes
In April 2017, the Company closed a $350 million private placement of senior unsecured notes, which were funded in two tranches. The first tranche of $100 million was funded in April 2017, has a 10-year maturity, and has a fixed annual interest rate of 4.09%. The second tranche of $250 million was funded in July 2017, has an 8-year maturity, and has a fixed annual interest rate of 3.91%.

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The senior unsecured notes contain financial covenants that require, among other things, the maintenance of an unencumbered interest coverage ratio of at least 2.00; a fixed charge coverage ratio of at least 1.50; an overall leverage ratio of no more than 60%; and a minimum shareholders' equity in an amount equal to $1.9 billion, plus a portion of the net cash proceeds from certain equity issuances. The senior notes also contain customary representations and warranties and affirmative and negative covenants, as well as customary events of default. The amounts outstanding under the senior notes may be accelerated upon the occurrence of any events of default.
Fair Value
At September 30, 2017 and December 31, 2016, the aggregate estimated fair values of the Company's notes payable were $1.1 billion and $1.4 billion, 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 relationship. These fair value calculations are considered to be Level 2 under the guidelines as set forth in ASC 820, "Fair Value Measurement," as the Company utilizes market rates for similar type loans from third-party brokers.
Other Information
For the three and nine months ended September 30, 2017 and 2016, interest expense was as follows (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Total interest incurred
$
10,288

 
$
8,939

 
$
32,360

 
$
25,446

Less interest - discontinued operations

 
(1,956
)
 

 
(5,896
)
Interest capitalized
(2,701
)
 
(1,229
)
 
(6,509
)
 
(2,988
)
Total interest expense
$
7,587

 
$
5,754

 
$
25,851

 
$
16,562

In April 2017, the Company repaid in full, without penalty, the $128.0 million One Eleven Congress mortgage note and the $101.0 million San Jacinto Center mortgage note. In May 2017, the Company repaid in full, without penalty, the $52.0 million Two Buckhead Plaza mortgage note. In July 2017, the Company repaid in full, without penalty, the $77.9 million 3344 Peachtree mortgage note. In connection with these repayments, the Company recorded gains on extinguishment of debt of $2.3 million, which represented the unamortized premium recorded on the notes at the time of the Merger.
In June 2017, the Company sold the ACS Center. A portion of the proceeds from the sale were used to repay the $127.0 million mortgage note on the associated property, and the Company recorded a loss on extinguishment of debt of $376,000, which represented the remaining unamortized loan costs and other costs associated with repaying the debt.
8. COMMITMENTS AND CONTINGENCIES

Commitments
At September 30, 2017, the Company had outstanding letters of credit and performance bonds totaling $3.7 million. As a lessor, the Company had $188.3 million in future obligations under leases to fund tenant improvements and other future construction obligations at September 30, 2017. As a lessee, the Company had future obligations under ground and other operating leases of $209.5 million at September 30, 2017.
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 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.

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9.    STOCKHOLDERS' EQUITY
On September 19, 2017, the Company declared a cash dividend of $0.06 per common share, which was paid October 12, 2017 to shareholders of record on October 2, 2017.
During the nine months ended September 30, 2017, certain holders of CPLP units redeemed 1,203,286 units in exchange for shares of the Company's common stock. The aggregate value at the time of these transactions was $10.1 million based upon the value of the Company's common stock at the time of the transactions.
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 13 of notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. 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 stock-based compensation expense, net of forfeitures, of $3.3 million and $141,000 for the three months ended September 30, 2017 and 2016, respectively, and $7.9 million and $4.8 million for the nine months ended September 30, 2017 and 2016, respectively.
The Company maintains the 2009 Incentive Stock Plan (the "2009 Plan") and the 2005 Restricted Stock Unit Plan (the “RSU Plan”). Under the 2009 Plan, the Company made restricted stock grants in 2017 of 308,289 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 in 2017 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 (“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, 2017 to December 31, 2019, and the targeted units awarded of TSR RSUs and FFO RSUs was 267,013 and 132,266, 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. These RSU awards cliff vest on December 31, 2019 and are to be settled in cash with payment dependent on upon attainment of required service, market, and performance criteria. The number of RSUs vesting will be determined by the Compensation Committee, 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, 2019. The Company expenses an estimate of the fair value of the TSR RSUs over the performance period using a quarterly Monte Carlo 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, the Company granted 166,132 time-vested RSUs to key employees in 2017. The value of each unit is equal to the fair value of one share of common stock. The vesting period for this award is three years. These RSUs are to be settled in cash with payment dependent upon the attainment of the required service criteria. Dividend equivalents will be paid upon vesting based on the number of RSUs granted with such payments made concurrently with payment of common dividends.
During the nine months ended September 30, 2017, the Company issued 120,878 shares of common stock at fair value to members of its board of directors in lieu of fees, and recorded $1.0 million in general and administrative expense in the nine months ended September 30, 2017 related to the issuances.


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11. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2017 and 2016 (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
Earnings per Common Share - basic:
 
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
 
     Income from continuing operations
$
12,285

 
$
2,920

 
$
188,088

 
$
17,857

 
Net income attributable to noncontrolling interests in CPLP
from continuing operations
(213
)
 

 
(3,170
)
 

 
Net income attributable to other noncontrolling interests
(5
)
 

 
(11
)
 

 
Income from continuing operations available for common stockholders
12,067

 
2,920

 
184,907


17,857

 
Income from discontinued operations

 
8,737

 

 
24,361

 
         Net income available for common stockholders
$
12,067

 
$
11,657

 
$
184,907

 
$
42,218

 
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Weighted average common shares - basic
419,998

 
210,170

 
414,123

 
210,400

 
Earnings per common share - basic:
 
 
 
 
 
 
 
 
Income from continuing operations available for common
    stockholders
$
0.03

 
$
0.01

 
$
0.45

 
$
0.08

 
Income from discontinued operations available for common
    stockholders

 
0.05

 

 
0.12

 
Earnings per common share - basic
$
0.03

 
$
0.06

 
$
0.45

 
$
0.20

 
 
 
 
 
 
 
 
 
 
Earnings per common share - diluted:
 
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
 
     Income from continuing operations
$
12,285

 
$
2,920

 
$
188,088


$
17,857

 
Net income attributable to other noncontrolling interests
    from continuing operations
(5
)
 

 
(11
)
 

 
Income from continuing operations available for common stockholders before net income attributable to noncontrolling interests in CPLP
12,280

 
2,920

 
188,077


17,857

 
Income from discontinued operations available for common stockholders

 
8,737

 

 
24,361

 
Net income available for common stockholders before
     net income attributable to noncontrolling interests in
     CPLP
$
12,280

 
$
11,657

 
$
188,077

 
$
42,218

 
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Weighted average common shares - basic
419,998

 
210,170

 
414,123

 
210,400

 
     Add:
 
 
 
 
 
 
 
 
Potential dilutive common shares - stock options
328

 
156

 
320

 
128

 
Weighted average units of CPLP convertible into
    common shares
6,974

 

 
7,511

 

 
Weighted average common shares - diluted
427,300

 
210,326

 
421,954

 
210,528

 
Earnings per common share - diluted:
 
 
 
 
 
 
 
 
Income from continuing operations available for common stockholders before net income attributable to noncontrolling interests in CPLP
$
0.03

 
$
0.01

 
$
0.45

 
$
0.08

 
Income from discontinued operations available for common
    stockholders

 
0.05

 

 
0.12

 
Earnings per common share - diluted
$
0.03

 
$
0.06

 
$
0.45


$
0.20

 
 
 
 
 
 
 
 
 
 
Weighted average anti-dilutive stock options outstanding
731

 
1,103

 
740

 
1,110

 

16

Table of Contents


12. REPORTABLE SEGMENTS
The 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 and Mixed-Use. The segments by geographical region are: Atlanta, Austin, Charlotte, Orlando, Phoenix, Tampa, and Other. In conjunction with the Merger and Spin-Off completed in the fourth quarter of 2016, the Company added the Orlando, Phoenix, and Tampa segments, and removed the Houston segment. These reportable segments represent an aggregation of operating segments reported to the Chief Operating Decision Maker based on similar economic characteristics that include the type of property and the geographical location. Each segment includes both consolidated operations and the Company's share of unconsolidated joint venture operations.
Company management evaluates the performance of its reportable segments in part based on 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 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 as it helps both management and investors understand the core operations of the Company's operating assets. NOI excludes corporate general and administrative expenses, interest expense, depreciation and amortization, impairments, gains/loss on sales of real estate, and other non-operating items.
Segment net income, amount of capital expenditures, and total assets are not presented in the following tables because management does not utilize these measures when analyzing its segments or when making resource allocation decisions. Information on the Company's segments along with a reconciliation of NOI to net income for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):
Three Months Ended September 30, 2017
 
Office
 
Mixed-Use
 
Total
Net Operating Income:
 
 
 
 
 
 
Atlanta
 
$
25,247

 
$

 
$
25,247

Austin
 
15,074

 

 
15,074

Charlotte
 
15,489

 

 
15,489

Orlando
 
3,356

 

 
3,356

Tampa
 
7,412

 

 
7,412

Phoenix
 
8,667

 

 
8,667

Other
 
525

 
45

 
570

Total Net Operating Income
 
$
75,770

 
$
45

 
$
75,815

Three Months Ended September 30, 2016
 
Office
 
Mixed-Use
 
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
 
(61
)
 

 
(61
)
Total Net Operating Income
 
$
59,868

 
$
1,753

 
$
61,621


17

Table of Contents


Nine Months Ended September 30, 2017
 
Office
 
Mixed-Use
 
Total
Net Operating Income:
 
 
 
 
 
 
Atlanta
 
$
84,437

 
$
3,125

 
$
87,562

Austin
 
44,113

 

 
44,113

Charlotte
 
46,117

 

 
46,117

Orlando
 
10,464

 

 
10,464

Tampa
 
21,700

 

 
21,700

Phoenix
 
24,722

 

 
24,722

Other
 
1,374

 
45

 
1,419

Total Net Operating Income
 
$
232,927

 
$
3,170

 
$
236,097

Nine Months Ended September 30, 2016
 
Office
 
Mixed-Use
 
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
 
(36
)
 

 
(36
)
Total Net Operating Income
 
$
175,041

 
$
5,101

 
$
180,142

The following reconciles Net Operating Income to Net Income for each of the periods presented (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net Operating Income
$
75,815

 
$
61,621

 
$
236,097

 
$
180,142

Net operating income from unconsolidated joint
ventures
(6,934
)
 
(6,760
)
 
(23,719
)
 
(20,359
)
Net operating income from discontinued operations

 
(26,408
)
 

 
(76,852
)
Fee income
2,597

 
1,945

 
6,387

 
5,968

Other income
993

 
153

 
9,593

 
570

Reimbursed expenses
(895
)
 
(795
)
 
(2,667
)
 
(2,463
)
General and administrative expenses
(7,193
)
 
(4,368
)
 
(21,993
)
 
(17,301
)
Interest expense
(7,587
)
 
(5,754
)
 
(25,851
)
 
(16,562
)
Depreciation and amortization
(47,622
)
 
(16,622
)
 
(152,546
)
 
(49,804
)
Acquisition and transaction costs
677

 
(1,446
)
 
(1,499
)
 
(3,889
)
Gain on extinguishment of debt
429

 

 
2,258

 

Other expenses
(423
)
 
(173
)
 
(1,063
)
 
(681
)
Income from unconsolidated joint ventures
2,461

 
1,527

 
43,362

 
5,144

Gain (loss) on sale of investment properties
(33
)
 

 
119,729

 
13,944

Income from discontinued operations

 
8,737

 

 
24,361

Net Income
$
12,285


$
11,657

 
$
188,088

 
$
42,218

Revenues by reportable segment, including a reconciliation to total rental property revenues on the condensed consolidated statements of operations, for three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):

18

Table of Contents


Three Months Ended September 30, 2017
 
Office
 
Mixed-Use
 
Total
Revenues:
 
 
 
 
 
 
Atlanta
 
$
41,507

 
$

 
$
41,507

Austin
 
25,385

 

 
25,385

Charlotte
 
23,153

 
143

 
23,296

Orlando
 
6,408

 

 
6,408

Tampa
 
11,815

 

 
11,815

Phoenix
 
11,692

 

 
11,692

Other
 
915

 

 
915

Total segment revenues
 
120,875

 
143

 
121,018

Less Company's share of rental property revenues from unconsolidated joint ventures
 
(11,306
)
 
(143
)
 
(11,449
)
Total rental property revenues
 
$
109,569

 
$

 
$
109,569

Three Months Ended September 30, 2016
 
Office
 
Mixed-Use
 
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
)
 

 
(57
)
Total segment revenues