| Investment in Unconsolidated Ventures |
Note 7 — Investment in Unconsolidated Ventures
At year-end 2011, we had ownership interests ranging from 25 to 50 percent in 10 ventures that we account for
using the equity method. We have no real estate ventures that are accounted for using the cost method. Our three largest ventures at year-end 2011 are CL Realty, Temco and Palisades West. We own a 50 percent interest in both CL Realty and
Temco, and Cousins Real Estate Corporation owns the other 50 percent interest. We own a 25 percent interest in Palisades West, Cousins Properties Incorporated owns a 50 percent interest and Dimensional Fund Advisors LP owns the
remaining 25 percent. Information regarding these ventures follows:
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CL Realty, L.L.C. was formed in 2002 for the purpose of developing residential and mixed-use communities in Texas and across the southeastern United
States. At year-end 2011, the venture had 14 residential and mixed-use communities, of which 10 are in Texas, 3 are in Florida and 1 is in Georgia, representing about 4,640 planned residential lots and 378 commercial acres. Subsequent to year-end
2011, we entered into an agreement to acquire certain of the venture’s real estate assets. Please read Note 23 for additional information.
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Temco Associates, LLC was formed in 1991 for the purpose of acquiring and developing residential real estate sites in Georgia. At year-end 2011, the
venture had 4 residential and mixed-use communities, representing about 1,507 planned residential lots, all of which are located in Paulding County, Georgia. The venture also owns approximately 5,800 acres of undeveloped land in Paulding County,
Georgia. Subsequent to year-end 2011, we entered into an agreement to acquire certain of the venture’s real estate assets. Please read Note 23 for additional information.
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Palisades West LLC was formed in 2006 for the purpose of constructing a commercial office park in Austin, Texas. The project includes two office
buildings totaling approximately 375,000 square feet and an accompanying parking garage. At year-end 2011, the buildings are approximately 99 percent leased. Effective fourth quarter 2008, we entered into a 10-year operating lease for approximately
32,000 square feet that we occupy as our corporate headquarters. Rents paid under this operating lease were $1,172,000 in 2011, $1,190,000 in 2010 and $1,123,000 in 2009 and are included in general and administrative and other operating expenses.
Subsequent to year-end 2011, we sold our interest in this venture. Please read Note 23 for additional information.
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Combined summarized balance sheet information for our ventures accounted for using the equity method follows:
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Year-End 2011 |
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Year-End 2010 |
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CL
Realty |
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Temco |
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Palisades
West |
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Other
Ventures |
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Total |
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CL
Realty |
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Temco |
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Palisades
West |
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Other
Ventures |
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Total |
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(In thousands) |
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Real estate
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|
$ |
50,050 |
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|
$ |
18,741 |
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|
$ |
119,017 |
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|
$ |
71,842 |
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|
$ |
259,650 |
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|
$ |
85,436 |
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$ |
60,454 |
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$ |
124,696 |
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$ |
74,618 |
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$ |
345,204 |
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Total assets
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51,096 |
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18,922 |
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124,588 |
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75,060 |
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269,666 |
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86,657 |
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60,610 |
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129,378 |
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78,059 |
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354,704 |
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Borrowings(a)
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1,056 |
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2,787 |
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— |
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70,975 |
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|
74,818 |
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2,663 |
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2,929 |
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— |
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74,606 |
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|
80,198 |
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Total liabilities
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2,488 |
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|
3,026 |
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42,953 |
(b) |
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85,704 |
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134,171 |
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4,123 |
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3,134 |
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48,612 |
(b) |
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87,145 |
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143,014 |
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Equity
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48,608 |
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15,896 |
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81,635 |
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(10,644 |
) |
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135,495 |
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82,534 |
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57,476 |
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80,766 |
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(9,086 |
) |
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211,690 |
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Our investment in real estate ventures:
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Our share of their equity(c)
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24,304 |
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7,948 |
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20,412 |
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12,495 |
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65,159 |
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41,267 |
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28,738 |
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20,191 |
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14,075 |
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104,271 |
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Unrecognized deferred gain(d)
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— |
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— |
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— |
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|
(936 |
) |
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(936 |
) |
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(2,190 |
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— |
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— |
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(915 |
) |
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(3,105 |
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Investment in real estate ventures
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$ |
24,304 |
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$ |
7,948 |
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$ |
20,412 |
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$ |
11,559 |
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$ |
64,223 |
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$ |
39,077 |
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$ |
28,738 |
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$ |
20,191 |
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$ |
13,160 |
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$ |
101,166 |
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Combined summarized
income statement information for our ventures accounted for using the equity method follows:
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For the Year |
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2011 |
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2010 |
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2009 |
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(In thousands) |
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Revenues:
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CL Realty
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$ |
9,141 |
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$ |
28,663 |
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$ |
2,760 |
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Temco
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653 |
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2,180 |
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1,420 |
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Palisades West
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16,230 |
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13,588 |
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12,496 |
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Other ventures
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14,850 |
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12,074 |
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7,659 |
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Total
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$ |
40,874 |
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$ |
56,505 |
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$ |
24,335 |
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Earnings (loss):
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CL Realty(e)
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$ |
(22,832 |
) |
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$ |
228 |
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$ |
(8,500 |
) |
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Temco(f)
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(42,242 |
) |
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210 |
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(2,728 |
) |
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Palisades West
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5,858 |
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4,668 |
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4,626 |
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Other ventures(g)
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(195 |
) |
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(17,421 |
) |
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(2,629 |
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Total
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$ |
(59,411 |
) |
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$ |
(12,315 |
) |
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$ |
(9,231 |
) |
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Our equity in their earnings (loss):
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CL Realty
|
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$ |
(11,416 |
) |
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$ |
114 |
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$ |
(4,250 |
) |
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Temco
|
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(21,121 |
) |
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105 |
|
|
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(1,364 |
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Palisades West
|
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1,464 |
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1,167 |
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1,156 |
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Other ventures(c)
|
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(360 |
) |
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(1,554 |
) |
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(3,313 |
) |
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Recognition of deferred gain(d)
|
|
|
2,224 |
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|
|
4,869 |
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— |
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Total
|
|
$ |
(29,209 |
) |
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$ |
4,701 |
|
|
$ |
(7,771 |
) |
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| (a) |
Total includes
current maturities of $71,816,000 at year-end 2011, of which $43,144,000 is non-recourse to us and $75,121,000 at year-end 2010, of which $43,166,000 is non-recourse to us.
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| (b) |
Principally
includes deferred income from leasehold improvements funded by tenants in excess of leasehold improvement allowances. These amounts are recognized as rental income over the lease term and are offset by depreciation expense related to these tenant
improvements. There is no effect on venture net income.
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| (c) |
Our share of the
equity in other ventures reflects our ownership interests ranging from 25 to 50 percent, excluding venture losses that exceed our investment where we are not obligated to fund those losses.
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| (d) |
Represents
deferred gains on real estate contributed by us to ventures. We recognize the gains as real estate is sold to third parties. The deferred gains are reflected as a reduction to our investment in unconsolidated ventures. As a result of entering into
an agreement to acquire certain of the venture’s real estate assets, in 2011, we offset the remaining $2,164,000 in deferred gains related to CL Realty against our share of the venture’s 2011 loss. Please read Note 23 for additional
information. In 2010, we recognized about $4,869,000 in gains previously deferred by us as CL Realty sold about 625 acres in 2010 to a third party for $20,250,000.
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| (e) |
In 2011, CL
Realty’s loss includes non-cash impairment charges of $25,750,000, of which, $23,255,000 relates to additional non-cash impairments associated with real estate assets to be sold in 2012. Please read Note 23 for additional information. In 2010,
CL Realty’s earnings include impairment charges of $4,458,000 principally related to a commercial real estate project located near the Texas gulf coast. In 2009, CL Realty’s loss includes impairment charges of $3,300,000 related to two
residential real estate projects located in Tampa, Florida and an impairment charge of $5,238,000 related to an equity investment in an unconsolidated venture.
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| (f) |
In 2011,
Temco’s loss includes non-cash impairment charges of $41,226,000, of which, $21,426,000 principally relates to additional non-cash impairments associated with real estate assets to be sold in 2012. Please read Note 23 for additional
information. In 2009, Temco Associates’ loss includes an impairment charge of $1,263,000 related to a residential real estate project located in Atlanta, Georgia.
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| (g) |
In 2010, other
ventures loss includes a $13,061,000 loss on sale of a golf course and country club property in Denton, Texas. This loss did not impact our equity in the earnings (loss) of this venture as we exclude losses that exceed our investment where we are
not obligated to provide additional equity.
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In 2011, we invested $2,007,000 in these ventures and received
$9,664,000 in distributions; in 2010, we invested $3,291,000 in these ventures and received $16,458,000 in distributions; and in 2009, we invested $2,875,000 in these ventures and received $4,056,000 in distributions. Distributions include both
return of investments and distributions of earnings.
At year-end 2011, we participate in three partnerships that have total
assets of $49,799,000 and total liabilities of $79,623,000, which includes $63,353,000 of borrowings classified as current maturities. These partnerships are managed by third parties who intend to extend or refinance these borrowings; however, there
is no assurance that this can be done. Although these borrowings are guaranteed by third parties, we may under certain circumstances elect or be required to provide additional equity to these partnerships. We do not believe that the ultimate
resolution of these matters will have a significant effect on our earnings or financial position. Our investment in these partnerships is $2,108,000 at year-end 2011. These three partnerships are variable interest entities. Please read Note 18
for additional information.
We provide development services for some of these ventures for which we receive fees. Fees for
these services were $912,000 in 2011, $1,091,000 in 2010 and $45,000 in 2009 and are included in real estate and mineral revenues. In 2010, we received fees of $1,013,000 related to the sale of approximately 625 acres by CL Realty for marketing
the property and closing the transaction on behalf of the venture.
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