UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2006

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: 0-3576

COUSINS PROPERTIES INCORPORATED

(Exact name of registrant as specified in its charter)

GEORGIA		58-0869052
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia		30339
(Address of principal executive offices)		(Zip Code)

(770) 955-2200
(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 Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

Large accelerated filer þ           Accelerated filer o           Non-accelerated filer 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 August 3, 2006
Common Stock, $1 par value per share		50,911,360 shares

 

 

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended June 30, 2006 and 2005

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

Item 6. Exhibits

SIGNATURES

EX-31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

EX-31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

EX-32.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

EX-32.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

FORWARD-LOOKING STATEMENTS

     Certain matters discussed in this report are forward-looking statements within the meaning of the federal securities laws and are subject to uncertainties and risks, including, but not limited to, statements regarding the entry into purchase and sales agreements, the satisfaction of certain conditions to the agreements, the expected closing date of such transactions and the effect of such transactions on the Company. Other risks include general and local economic conditions, local real estate conditions, including downtown Atlanta, Georgia, the activity of others developing competitive projects, the cyclical nature of the real estate industry, the financial condition of existing tenants, interest rates, the Company’s ability to obtain favorable financing or zoning, environmental matters, the effects of terrorism, the failure of assets under contract for purchase and sale to ultimately close and additional risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including the Company’s Report on the Annual Report on Form 10-K for the year ended December 31, 2005. The words “believes,” “expects,” “anticipates,” “estimates,” “would” and similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in any forward-looking statement are reasonable, the Company can give no assurance that these plans, intentions or expectations will be achieved. Such forward-looking statements are based on current expectations and speak as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.

PART I – FINANCIAL INFORMATION

     Item 1. Financial Statements.

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

		June 30,				December 31,
		2006				2005
ASSETS
PROPERTIES:
Operating properties, net of accumulated depreciation of $133,913 in 2006 and $158,700 in 2005		$	424,818			$	572,466
Land held for investment or future development			96,643				62,059
Projects under development			315,775				241,711
Residential lots under development			8,477				11,577
Total properties			845,713				887,813
CASH AND CASH EQUIVALENTS			16,116				9,336
RESTRICTED CASH			2,358				3,806
RECEIVABLE FROM VENTURE PARTNER			133,375				—
NOTES AND OTHER RECEIVABLES, net of allowance for doubtful accounts of $1,244 and $781 in 2006 and 2005, respectively			28,917				40,014
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES			234,644				217,232
OTHER ASSETS, including goodwill of $8,326 in 2006 and $8,324 in 2005			39,866				30,073
TOTAL ASSETS		$	1,300,989			$	1,188,274
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
NOTES PAYABLE		$	404,612			$	467,516
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES			74,300				55,791
DEFERRED GAIN			154,580				5,951
DEPOSITS AND DEFERRED INCOME			2,394				2,551
TOTAL LIABILITIES			635,886				531,809
MINORITY INTERESTS			58,175				24,185
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ INVESTMENT:
Preferred stock, 20,000,000 shares authorized, $1 par value:
7.75% Series A cumulative redeemable preferred stock, $25 liquidation preference; 4,000,000 shares issued and outstanding			100,000				100,000
7.50% Series B cumulative redeemable preferred stock, $25 liquidation preference; 4,000,000 shares issued and outstanding			100,000				100,000
Common stock, $1 par value, 150,000,000 shares authorized, 53,564,472 and 53,357,151 shares issued in 2006 and 2005, respectively			53,564				53,357
Additional paid-in capital			320,329				321,747
Treasury stock at cost, 2,691,582 shares			(64,894	)			(64,894	)
Unearned compensation			—				(8,495	)
Cumulative undistributed net income			97,929				130,565
TOTAL STOCKHOLDERS’ INVESTMENT			606,928				632,280
TOTAL LIABILITIES AND STOCKHOLDERS’ INVESTMENT		$	1,300,989			$	1,188,274

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
REVENUES:
Rental property revenues		$	29,798			$	24,252			$	58,242			$	48,002
Fee income			4,185				3,969				8,922				7,821
Multi-family residential unit sales			15,136				—				21,715				—
Residential lot and outparcel sales			3,129				4,449				7,634				6,060
Interest and other			861				742				3,544				1,153
			53,109				33,412				100,057				63,036
COSTS AND EXPENSES:
Rental property operating expenses			11,746				9,723				22,774				18,835
General and administrative expenses			9,906				8,217				19,838				16,893
Depreciation and amortization			13,689				9,523				24,512				18,895
Multi-family residential unit cost of sales			12,377				—				17,735				—
Residential lot and outparcel cost of sales			2,298				3,023				5,501				4,142
Interest expense			4,880				2,103				8,493				4,884
Loss on extinguishment of debt			2,764				—				2,764				—
Other			481				386				935				428
			58,141				32,975				102,552				64,077
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES AND INCOME FROM UNCONSOLIDATED JOINT VENTURES			(5,032	)			437				(2,495	)			(1,041	)
PROVISION FOR INCOME TAXES FROM OPERATIONS			(1,926	)			(1,057	)			(4,296	)			(1,926	)
MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES			(1,313	)			(397	)			(2,391	)			(789	)
INCOME FROM UNCONSOLIDATED JOINT VENTURES			8,404				5,608				20,527				10,783
INCOME FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES			133				4,591				11,345				7,027
GAIN ON SALE OF INVESTMENT PROPERTIES, NET OF APPLICABLE INCOME TAX PROVISION			61				5,578				866				12,405
INCOME FROM CONTINUING OPERATIONS			194				10,169				12,211				19,432
DISCONTINUED OPERATIONS, NET OF APPLICABLE INCOME TAX PROVISION:
Income from discontinued operations			—				109				—				147
Gain on sale of investment properties			135				—				326				37
			135				109				326				184
NET INCOME			329				10,278				12,537				19,616
DIVIDENDS TO PREFERRED STOCKHOLDERS			(3,812	)			(3,812	)			(7,625	)			(7,625	)
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS		$	(3,483	)		$	6,466			$	4,912			$	11,991
PER SHARE INFORMATION — BASIC:
Income (loss) from continuing operations		$	(0.07	)		$	0.13			$	0.09			$	0.24
Income from discontinued operations			0.00				0.00				0.01				0.00
Net income (loss) available to common stockholders		$	(0.07	)		$	0.13			$	0.10			$	0.24
PER SHARE INFORMATION — DILUTED:
Income (loss) from continuing operations		$	(0.07	)		$	0.13			$	0.09			$	0.23
Income from discontinued operations			0.00				0.00				0.00				0.00
Net income (loss) available to common stockholders		$	(0.07	)		$	0.13			$	0.09			$	0.23
CASH DIVIDENDS DECLARED PER COMMON SHARE		$	0.37			$	0.37			$	0.74			$	0.74
WEIGHTED AVERAGE SHARES — BASIC			50,385				49,924				50,377				49,856
WEIGHTED AVERAGE SHARES — DILUTED			50,385				51,586				52,019				51,591

See notes to condensed consolidated financial statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands, except per share amounts)

		Six Months Ended June 30,
		2006				2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	12,537			$	19,616
Adjustments to reconcile net income to net cash flows provided by operating activities:
Gain on sale of investment properties, net of income tax provision			(1,192	)			(12,442	)
Loss on extinguishment of debt			2,764				—
Depreciation and amortization			24,512				19,175
Amortization of deferred financing costs			536				671
Amortization of unearned compensation			3,309				1,563
Effect of recognizing rental revenues on a straight-line or market basis			(2,053	)			(1,603	)
Operating distributions from unconsolidated joint ventures in excess of income			1,160				—
Residential lot, outparcel and multi-family cost of sales			22,787				3,895
Residential lot, outparcel and multi-family acquisition and development expenditures			(10,344	)			(2,274	)
Income tax benefit from stock options			—				646
Changes in other operating assets and liabilities:
Change in other receivables			12,980				1,833
Change in accounts payable and accrued liabilities			10,966				623
Net cash provided by operating activities			77,962				31,703
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment property sales			1,522				17,966
Proceeds from venture formation, net of closing and transaction costs			163,339				—
Property acquisition and development expenditures			(152,760	)			(129,685	)
Investment in unconsolidated joint ventures			(5,583	)			(12,040	)
Distributions from unconsolidated joint ventures in excess of income			7,740				9,561
Investment in notes receivable			(1,196	)			(8	)
Change in other assets, net			(9,100	)			1,557
Change in restricted cash			1,448				(808	)
Net cash provided by (used in) investing activities			5,410				(113,457	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of credit and construction facilities			(642,436	)			(94,670	)
Borrowings from credit and construction facilities			628,801				142,478
Payment of loan issuance costs			(1,995	)			(17	)
Proceeds from other notes payable or construction loans			8,726				—
Repayment of other notes payable or construction loans			(21,168	)			(2,588	)
Common stock issued, net of expenses			3,236				5,359
Tax benefit from stock transactions			286				—
Common dividends paid			(37,548	)			(37,232	)
Preferred dividends paid			(7,625	)			(6,979	)
Contributions from minority partners			247				—
Distributions to minority partners			(7,116	)			(926	)
Net cash provided by (used in) financing activities			(76,592	)			5,425
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			6,780				(76,329	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			9,336				89,490
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	16,116			$	13,161

See notes to condensed consolidated financial statements.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2006
(UNAUDITED)

1. BASIS OF PRESENTATION

     The condensed consolidated financial statements included herein include the accounts of Cousins Properties Incorporated (“Cousins” or “the Company”) and its consolidated subsidiaries, including Cousins Real Estate Corporation and its subsidiaries (“CREC”). All of the entities included in the condensed consolidated financial statements are hereinafter referred to collectively as the “Company.”

     Cousins has elected to be taxed as a real estate investment trust (“REIT”) and intends to, among other things, distribute 100% of its federal taxable income to stockholders, thereby eliminating any liability for federal income taxes. Therefore, the results included herein do not include a federal income tax provision for Cousins. CREC operates as a taxable REIT subsidiary and is taxed separately from Cousins as a C-Corporation. Accordingly, the condensed consolidated statements of income include a provision for CREC’s income taxes.

     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 (the “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 June 30, 2006 and results of operations for the three and six month periods ended June 30, 2006 and 2005. Results of operations for the six months ended June 30, 2006 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 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, 2005. The accounting policies employed are the same as those shown in Note 1 to the consolidated financial statements included in such Form 10-K. Certain 2005 amounts have been reclassified to conform to the 2006 presentation.

2. CASH FLOWS SUPPLEMENTAL INFORMATION

     The following table summarizes supplemental information related to cash flows ($ in thousands):

		Six Months Ended June 30,
		2006				2005
Interest paid, net of amounts capitalized		$	4,914			$	4,629
Income taxes paid, net of refunds			5,988				2,166
Non-Cash Transactions
Transfer from operating properties to land			7,250				—
Transfer from land to projects under development			4,783				18,538
Transfer from projects under development to land			1,486				1,816
SAB 51 gain, net of tax, recorded in investment in joint ventures and additional paid-in capital			453				—
Transfer from other assets to land			228				—
Transfers related to venture formation (see Note 6 herein):
Projects under development to investment in joint venture			3,980				—
Operating properties to investment in joint venture			16,019				—
Accrued capital expenditures excluded from development and acquisition expenditures			9,420				1,906
Receipt of promissory note for expense reimbursement			—				500
Transfer from land to investment in joint venture			—				14,198
Transfer from projects under development to held-for-sale properties			—				11,387
Transfer from land to held-for-sale properties			—				4,041
Transfer from projects under development to operating properties			—				6,387
Transfer from investment in joint venture upon consolidation of 905 Juniper to:
Projects under construction			—				(8,940	)
Restricted cash			—				(1,098	)
Notes and other receivables			—				(2,077	)
Notes payable			—				2,548
Accounts payable and accrued liabilities			—				1,619
Minority interest			—				875
Investment in unconsolidated joint venture			—				7,073

3. NOTES PAYABLE, INTEREST EXPENSE AND COMMITMENTS AND CONTINGENCIES

     The following table summarizes the terms and amounts of the notes payable outstanding at June 30, 2006 and December 31, 2005 ($ in thousands):

						Term/								Balance				Balance
						Amortization								Outstanding				Outstanding
						Period				Final				at December 31,				at June 30,
Description		Rate				(Years)				Maturity				2005				2006
Credit facility (a maximum of		Floating based
$400,000), unsecured		on LIBOR					4/N/A				3/07/10			$	—			$	99,200
Construction facility (a maximum of		Floating based
$100,000), unsecured		on LIBOR					4/N/A				3/07/10				—				45,200
Credit facility (a maximum of		Floating based
$325,000 at 12/31/05), unsecured		on LIBOR					3/N/A				9/14/07				158,035				—
Note secured by Company’s interest in CSC Associates, L.P.			6.96	%			10/20				3/01/12				141,125				139,732
The Avenue East Cobb mortgage note			8.39	%			10/30				8/1/10				37,058				—
333/555 North Point Center East mortgage note			7.00	%			10/25				11/01/11				30,232				29,907
Meridian Mark Plaza mortgage note			8.27	%			10/28				9/01/10				23,975				23,792
100/200 North Point Center East mortgage note (interest only until 12/31/06)			7.86	%			10/25				8/01/07				22,365				22,365
The Points at Waterview mortgage note			5.66	%			10/25				1/01/16				18,500				18,358
600 University Park Place mortgage note			7.38	%			10/30				8/10/11				13,350				13,261
905 Juniper construction loan (a maximum of $20,500)		LIBOR+2.0%					3/N/A				12/1/07				11,252				—
Lakeshore Park Plaza mortgage note			6.78	%			10/20				11/01/08				9,359				9,223
King Mill Project I member loan (a maximum of $2,839)			9.00	%			3/N/A				8/30/08				1,715				2,420
King Mill Project I second member loan (a maximum of $2,349)			9.00	%			3/N/A				6/26/09				—				697
Other miscellaneous notes		Various				Various				Various					550				457
Notes payable														$	467,516			$	404,612

     The Company had $99.2 million drawn on its unsecured credit facility as of June 30, 2006 and, net of $9.5 million reserved for outstanding letters of credit, the Company had $291.3 million available for future borrowings under this facility. The Company had $45.2 million drawn on its construction facility as of June 30, 2006, with $54.8 million available for future borrowings under this facility. In conjunction with the venture formation on June 29, 2006, as described in Note 6 herein, the Avenue East Cobb mortgage note payable was assumed by CP Venture Five LLC.

     For the three and six months ended June 30, 2006 and 2005, interest expense was recorded as follows ($ in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Incurred		$	9,774			$	6,449			$	18,428			$	12,590
Capitalized			(4,894	)			(4,346	)			(9,935	)			(7,706	)
Expensed		$	4,880			$	2,103			$	8,493			$	4,884

     At June 30, 2006, the Company had outstanding letters of credit and performance bonds of $28.5 million. The Company has several projects under development for which it estimates development commitments of $191.0 million at June 30, 2006. Additionally, the Company has obligations as a lessor of office, retail and industrial space to fund approximately $14.1 million in tenant improvements

as of June 30, 2006. As a lessee, the Company has obligations under ground and office leases of approximately $47.5 million at June 30, 2006.

4. 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. 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 is calculated to reflect the potential dilution under the treasury stock method that would occur if stock options, restricted stock or other contracts to issue common stock were exercised and resulted in additional common shares outstanding. The numerators used in the Company’s per share calculations are the same for both basic and diluted net income per share.

     Weighted average shares-basic and weighted average shares-diluted were as follows (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Weighted average shares-basic			50,385				49,924				50,377				49,856
Dilutive potential common shares			—				1,662				1,642				1,735
Weighted average shares-diluted			50,385				51,586				52,019				51,591
Anti-dilutive options not included			2,540				892				895				892

     Because the Company reported a net loss available to common stockholders for the three months ended June 30, 2006, the effect of all outstanding options on per share earnings was anti-dilutive, and these options were excluded from the calculation of weighted average shares-diluted.

5. STOCK-BASED COMPENSATION

     The Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 123(R), “Share-Based Payment,” in the quarter beginning January 1, 2006. SFAS 123(R) requires that compensation expense be recognized in the statement of income for the grant-date fair value of share-based awards which vested during the period.

     The Company has several stock-based compensation plans — stock options, restricted stock and restricted stock units — that are described in Note 6 of “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. The Company previously accounted for its plans under Accounting Principles Board (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related interpretations as permitted by SFAS No. 123, “Accounting for Stock-Based Compensation,” which required the recording of compensation expense for some, but not all, stock-based compensation. The Company did not record stock-based compensation expense for stock options in the consolidated statements of income prior to January 1, 2006, as all stock options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.

     SFAS 123(R) applies to new awards and to awards modified, repurchased or cancelled after the required effective date, as well as to the unvested portion of awards outstanding as of the required effective date. The Company uses the Black-Scholes model to value its new stock option grants under SFAS 123(R), applying the “modified prospective method” for existing grants which requires the Company to value stock options prior to its adoption of SFAS 123(R) under the fair value method and

expense the unvested portion over the remaining vesting period. Results of prior periods have not been restated. SFAS 123(R) also requires the Company to estimate forfeitures in calculating the expense related to stock-based compensation. In addition, SFAS 123(R) requires the Company to reflect the benefits of tax deductions in excess of recognized compensation cost to be reported as both a financing cash inflow and an operating cash outflow upon adoption.

     Compensation expense arising from share-based payment arrangements granted to employees is being recognized in general and administrative expense in the 2006 condensed consolidated statement of income over the related awards’ vesting period. A portion of share-based payment expense is capitalized to projects under development as it is a part of the total compensation of certain leasing and development personnel. Compensation expense for the Company’s share-based payment arrangements is as follows ($ in thousands, except per share amounts):

		Three Months Ended				Six Months Ended
		June 30, 2006				June 30, 2006
Expense for share-based payment arrangements		$	(1,905	)		$	(4,018	)
Amounts capitalized for share-based payment arrangements			601				1,213
Effect on provision for income taxes from share-based payment arrangements			75				159
Effect on income from continuing operations and net income		$	(1,229	)		$	(2,646	)
Effect on basic earnings per share		$	(0.01	)		$	(0.01	)
Effect on diluted earnings per share		$	(0.02	)		$	(0.02	)
Effect on cash flows from operating activities		$	—			$	—
Effect on cash flows from financing activities		$	182			$	286

     Upon adoption of SFAS 123(R), $8.5 million of unearned compensation related to the Company’s restricted stock, which was previously accounted for under APB No. 25, was reclassified to additional paid-in capital. As of June 30, 2006, there was $10.1 million of total unrecognized compensation cost related to restricted stock and stock options, which will be recognized over a weighted average period of 1.4 years.

     The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The risk free interest rate utilized in the Black-Scholes calculation is the interest rate on U.S. Treasury Strips having the same life as the estimated life of the Company’s option awards. Expected life of the options granted was computed using historical data reflecting actual hold periods plus an estimated hold period for unexercised options outstanding using the mid-point between 2006 and the expiring date. Expected volatility is based on the historical volatility of the Company’s stock over a period relevant to the related stock option grant. No options were granted in the second quarter of 2005. The second quarter 2006 grant had the following weighted average assumptions and fair value:

		Three Months Ended
		June 30, 2006
Risk free interest rate			5.08	%
Expected life		6.74 years
Expected volatility			20.70	%
Expected dividend yield			4.92	%
Weighted average fair value of options granted		$	4.53

     If the Company had applied the fair value recognition provisions of SFAS No. 123 to options granted under the Company’s stock option plans prior to January 1, 2006, pro forma results would have been as follows ($ in thousands, except per share amounts):

		Three Months Ended				Six Months Ended
		June 30, 2005				June 30, 2005
Net income available to common stockholders, as reported		$	6,466			$	11,991
Add: Stock-based employee compensation expense included in reported net income, net of related tax effect			733				1,468
Deduct: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effect			(1,544	)			(3,014	)
Pro forma net income available to common stockholders		$	5,655			$	10,445
Net income per common share:
Basic — as reported		$	0.13			$	0.24
Basic — pro forma		$	0.11			$	0.21
Diluted — as reported		$	0.13			$	0.23
Diluted — pro forma		$	0.11			$	0.20

     The following table summarizes stock option activity for the first half of 2006 ($ in thousands, except per share amounts):

						Weighted— Average				Aggregate
		Number of Shares				Exercise Price				Intrinsic Value
Outstanding at December 31, 2005			6,177			$	22.01
Granted			48				33.05
Exercised			(234	)			16.35
Forfeited			(67	)			26.76
Outstanding at June 30, 2006			5,924			$	22.27			$	51,677
Exercisable at June 30, 2006			3,948			$	19.92			$	43,641

     At June 30, 2006, the weighted-average remaining contractual life of options outstanding and exercisable was 6.4 and 5.4 years, respectively. The total intrinsic value of options exercised was $2.3 million and $3.5 million for the three and six months ended June 30, 2006, respectively.

     The following table summarizes restricted stock activity for the first half of 2006 ($ in thousands, except per share amounts):

						Weighted-
						Average
		Number of				Grant Date
		Shares				Fair Value
Non-vested stock at December 31, 2005			413			$	29.44
Granted			—				—
Exercised			—				—
Forfeited			(9	)			31.05
Non-vested stock at June 30, 2006			404			$	29.41

     The Company also has a restricted stock unit (“RSU”) plan whereby employees are paid cash based on the value of the Company’s common stock on vesting dates in the future. Certain of the Company’s RSUs provide for the payment of dividends equal to the Company’s quarterly dividend.

All RSUs are accounted for as liability awards under SFAS No. 123(R). The value of the liability related to the RSUs is remeasured each reporting period based upon the fair value calculated using the Black-Scholes option pricing model at period end. The Company recognized expense related to RSUs in the three and six month periods ending June 30, 2006 of approximately $0.3 million and $0.5 million, respectively, after capitalization to projects under development and income taxes. As of June 30, 2006, there was approximately $6.8 million of unrecognized compensation cost related to RSUs, which will be recognized over a weighted average period of 3.8 years. A rollforward of RSUs at June 30, 2006 is as follows (in thousands):

Outstanding at December 31, 2005			87
Granted			200
Exercised			—
Forfeited			(4	)
Outstanding at June 30, 2006			283

6. FORMATION OF JOINT VENTURE

     Effective May 2, 2006, the Company entered into an agreement (the “Agreement”) to form a venture arrangement (the “Venture”) with The Prudential Insurance Company of America on behalf of a separate account managed for institutional investors by Prudential Real Estate Investors (“PREI”). The Venture closed on June 29, 2006 (the “Closing Date”).

     In accordance with the Agreement, at the Closing Date, the Company contributed its interests in five properties (the “Properties”) to the Venture. The Properties were valued by the Company and PREI based on arms length negotiations at an initial gross fair value, before contingent value as described below, of $340,890,074. The Properties and the values allocated to each property under the Venture agreements are as follows:

		Rentable								Contingent								Total
		SF				Allocated Value				Value				Mortgage*				Net Value
The Avenue East Cobb, Cobb County, GA			231,373			$	98,250,000				—			$	40,827,327			$	57,422,673
The Avenue West Cobb, Cobb County, GA			251,186			$	81,253,639			$	6,978,811				—			$	88,232,450
The Avenue Peachtree City, Peachtree City, GA			182,215			$	57,250,000				—				—			$	57,250,000
The Avenue Viera, Viera, FL			331,989			$	87,061,279				—				—			$	87,061,279
Viera MarketCenter, Viera, FL			178,339			$	17,075,156			$	13,571,115				—			$	30,646,271
TOTALS			1,175,102			$	340,890,074			$	20,549,926			$	40,827,327			$	320,612,673

*     Based on balance of mortgage as of June 29, 2006 plus a $4,000,000 defeasance amount to reflect current market interest rates.

     Under the Agreement, PREI is obligated to contribute cash to the Venture equal to the initial agreed upon net value of the Properties, approximately $300,062,747 (the “Base Contribution Amount”). The Base Contribution Amount will be contributed in three installments in the amounts and on or about the dates shown below. Also shown below are the percentages the Company and PREI will have, respectively, in the cash flow and capital proceeds from the Properties following the cash contributions on the indicated dates:

						Total Expected
		Current				Cumulative				Cousins				PREI
Date		Contribution Amount				Contribution Amount				Percentage				Percentage
Closing Date		$	166,687,582			$	166,687,582				51	%			49	%
9/29/06		$	66,687,582			$	233,375,164				31	%			69	%
12/29/06		$	66,687,582			$	300,062,747				11.5	%			88.5	%

     In addition, PREI will contribute to the Venture up to an additional $20,549,926 (the “Contingent Contribution Amounts”) if certain conditions are satisfied with respect to the expansions of the The Avenue West Cobb and Viera MarketCenter, both of which are still under construction. The Contingent Contribution Amounts would be made on or about December 29, 2006, June 30, 2007 and December 31, 2007.

     The Company also agreed to master lease a portion of the unleased space at The Avenue Viera during 2007. The maximum amount of rent payable to the Venture under the master lease would be $1,633,299 for rent, plus tenant improvement costs and commissions of up to $2,552,512. To the extent that any space subject to the master lease is actually leased to third parties pursuant to a qualifying lease, the Company would no longer be obligated under the master lease with respect to such space.

     Pursuant to the Agreement, the structure of the Venture is as follows: CP Venture IV Holdings LLC (“Parent”) is the parent entity. Parent owns a 100% interest in each of CP Venture Five LLC (“Property Activity LLC”) and CP Venture Six LLC (“Development Activity LLC”). Property Activity LLC holds the Properties and Development Activity LLC holds rights to the contributed cash.

     Following the final contribution of the Base Contribution Amount by PREI, the Company, through its interest in Parent and Parent’s interest in Property Activity LLC, will have an 11.5% interest in the cash flow and capital proceeds of the Properties, and PREI will have an 88.5% interest therein. Unless both parties agree otherwise, the Venture is not permitted to sell the Properties until the end of a four-year lock-out period.

     The parties expect that the cash contributed by PREI will be used by Development Activity LLC primarily to develop commercial real estate projects or to make acquisitions, in all cases as directed by the Company (“Developments”). In addition, Development Activity LLC has the right to make loans to the Company with any excess cash that it may hold from time to time. The parties anticipate that some of the projects currently under consideration by the Company will be undertaken by the Venture, although the Company has no obligation to make any particular opportunity available to the Venture. Prior to any other distributions with respect to the Developments from Development Activity LLC, PREI will receive a priority current return of 6.5% per annum on an amount equal to 11.5% of its capital contributions to the Venture. PREI may also receive a liquidation preference whereby it would be entitled to receive a distribution sufficient to allow it to achieve an overall 8.5% internal rate of return on an amount equal to 11.5% of its capital contributions to the Venture, subject to capital account limitations. After these preferences to PREI, the Company will be entitled to certain priority distributions related to the Developments. After such priority distributions, the Company and PREI will share residual distributions, if any, with respect to the Developments, 88.5% to the Company and 11.5% to PREI.

     The Company manages the Developments and the Properties on a day-to-day basis. In particular, the Venture engaged the Company to provide property management and leasing services with respect to each of the Properties. The management and leasing agreements for each Property have an initial term of four years. The Company and PREI have certain discretionary decision rights and approval rights with respect to the Developments and the Properties. The Company serves as Administrative Manager of the Venture.

     The Company is accounting for its interest in Property Activity LLC under the equity method of accounting in accordance with APB No. 18 and consolidating the assets and results of operations of Development Activity LLC, with PREI’s share in this entity recorded as minority interest. Development Activity LLC loaned the first contribution of $167 million from PREI to the Company, which utilized the contribution to reduce amounts outstanding under its credit facility and recorded the remaining two contributions of $133 million as a receivable from venture partner at June 30, 2006. The net book value of the Properties was removed from operating properties and projects under development as of the Closing Date, and an investment in unconsolidated joint ventures was recorded using 11.5% of the Company’s original basis in the Properties. The Company is entitled to 51% of the operations of the Properties until the second contribution is received in September 2006, at which point it will recognize 31% of the operations until December 2006, at which time it will reach its ultimate ownership percentage of 11.5%.

     The contribution of the Properties was treated as a sale for accounting purposes using guidance as outlined in SFAS No. 66, “Accounting for Sales of Real Estate.” However, the Company did not recognize any gain in the income statement related to the Venture formation as the consideration received did not meet the rules in SFAS No. 66 for income statement gain recognition. The gain was included in the Deferred Gain line item on the Company’s Condensed Consolidated Balance Sheet and was calculated as 88.5% of the difference between the book value of the Properties and the fair value as detailed above. The Avenue East Cobb was contributed to the Venture encumbered by a mortgage note payable. As discussed above, the Base Contribution amount was adjusted for an estimate of the difference between the stated interest rate per the mortgage note payable and current interest rates. The Company calculated a mark-to-market debt adjustment upon closing and recorded 88.5% of this adjustment as a loss on extinguishment of debt in the Condensed Consolidated Statement of Income.

7. DISCONTINUED OPERATIONS

     The Company sold Hanover Square South, a 193,000 square foot retail center, of which the Company owned 69,000 square feet, in the third quarter of 2005. For the three and six month 2006 periods, gain on sale of investment properties includes an adjustment to cost on sale of this property of $120,000 and $185,000, respectively. In addition, the Company had adjustments to cost on sale of properties sold in 2004 of $15,000 and $141,000 in the three and six month 2006 periods, respectively.

     The following details the components of income from discontinued operations for Hanover Square South ($ in thousands):

		Three Months Ended				Six Months Ended
		June 30, 2005				June 30, 2005
Rental property revenues		$	209			$	286
Rental property operating expenses			(28	)			(47	)
Depreciation and amortization			(31	)			(68	)
Provision for income taxes			(41	)			(24	)
		$	109			$	147

8. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

     The Company describes its investments in unconsolidated joint ventures in Note 4 to its Annual Report on Form 10-K for the year ended December 31, 2005 and discusses CP Venture IV and related entities in Note 6 of this Form 10-Q. The following table summarizes balance sheet financial data of unconsolidated joint ventures in which the Company had ownership interests at June 30, 2006 and at December 31, 2005 and income statement financial data for the six months ended June 30, 2006 and June 30, 2005 ($ in thousands):

																										Company's
		Total Assets								Total Debt								Total Equity								Investment
		2006				2005				2006				2005				2006				2005				2006				2005
SUMMARY OF FINANCIAL POSITION:
Charlotte Gateway Village, LLC		$	183,700			$	184,469			$	149,795			$	154,775			$	30,911			$	29,072			$	10,519			$	10,536
CSC Associates, L.P.			152,805				151,931				—				—				145,252				145,883				74,404				74,701
285 Venture, LLC			79				137				—				—				57				52				28				26
Crawford Long — CPI, LLC			44,305				45,630				52,808				53,201				(10,286	)			(8,838	)			(3,824	)			(3,077	)
Ten Peachtree Place Associates			28,729				29,213				29,078				29,300				(985	)			360				(2,004	)			(1,734	)
Wildwood Associates			21,989				22,242				—				—				21,818				21,917				(1,340	)			(1,291	)
CPI/FSP I, L.P.			3,307				3,236				—				—				3,236				3,236				1,644				1,644
Cousins LORET Venture, L.L.C.			—				—				—				—				—				101				—				(3	)
CC-JM II Associates			—				4				—				—				—				4				—				(7	)
CP Venture LLC entities			135,162				138,832				23,758				24,187				111,789				112,792				7,100				7,271
CP Venture IV LLC entities			341,317				—				39,854				—				300,130				—				20,028				—
Brad Cous Golf Venture, Ltd.			140				9,916				—				—				(115	)			9,880				57				5,264
CL Realty, L.L.C.			124,621				108,611				10,952				45,174				109,335				105,828				64,675				59,444
Temco Associates			62,585				68,178				4,024				4,631				56,463				61,163				28,961				35,150
Pine Mountain Builders, LLC			6,635				8,386				739				1,628				1,848				1,126				1,045				767
Handy Road Associates, LLC			5,554				5,335				3,204				3,017				2,303				2,282				2,223				2,371
TRG Columbus Development Venture, Ltd.			138,625				60,921				41,186				29,086				40,986				28,207				21,340				16,628
Other			—				—				—				—				—				—				9,788				9,542
		$	1,249,553			$	837,041			$	355,398			$	344,999			$	812,742			$	513,065			$	234,644			$	217,232

																		Company's Share of
		Total Revenues								Net Income (Loss)								Net Income (Loss)
		2006				2005				2006				2005				2006				2005
SUMMARY OF OPERATIONS:
Charlotte Gateway Village, LLC		$	15,282			$	15,017			$	2,445			$	2,153			$	588			$	570
CSC Associates, L.P.			26,404				25,663				10,929				10,865				5,483				5,395
285 Venture, LLC			5				2,745				4				(310	)			2				(234	)
Crawford Long — CPI, LLC			5,277				4,928				553				457				253				204
Ten Peachtree Place Associates			3,544				3,412				427				303				255				157
Wildwood Associates			—				36				(97	)			(192	)			(49	)			(96	)
CPI/FSP I, L.P.			—				3				—				4				—				1
Cousins LORET Venture, L.L.C.			—				(1	)			—				(74	)			—				(36	)
CC-JM II Associates			—				—				(1	)			696				6				348
CP Venture LLC entities			11,460				5,706				4,190				4,660				509				561
CP Venture IV LLC entities			158				—				12				—				28				—
Brad Cous Golf Venture, Ltd.			178				696				3,131				170				1,108				85
CL Realty, L.L.C.			16,014				18,513				7,219				4,136				3,421				2,237
Temco Associates			31,066				11,370				9,839				2,739				4,645				1,200
Pine Mountain Builders, LLC			10,008				7,485				1,123				823				436				343
Handy Road Associates, LLC			133				—				(79	)			—				(198	)			—
905 Juniper Venture, LLC			—				2,856				—				714				—				514
TRG Columbus Development Venture, Ltd.			40,278				—				11,604				—				4,426				—
Other			—				—				90				—				(386	)			(466	)
		$	159,807			$	98,429			$	51,389			$	27,144			$	20,527			$	10,783

9. REPORTABLE SEGMENTS

     The Company has four reportable segments: Office/Multi-Family, Retail, Land, and Industrial. The Office/Multi-family division develops, leases and manages owned and third-party owned office buildings and invests in and/or develops for-sale multi-family real estate products. The Retail and Industrial divisions develop, lease and manage retail and industrial centers, respectively. The Land Division owns various tracts of land that are held for investment or future development. The Land Division also develops single-family residential communities that are parceled into lots and sold to various homebuilders or sold as undeveloped tracts of land. The Company’s reportable segments are categorized based on the type of product the division provides. The divisions are managed separately

because each product they provide has separate and distinct development issues, leasing and/or sales strategies and management issues. The divisions also match the manner in which the chief operating decision maker reviews results and information and allocates resources. The unallocated and other category in the following table includes general corporate overhead costs not specific to any segment, interest expense, as financing decisions are not generally made at the reportable segment level, income taxes and preferred dividends.

     Company management evaluates the performance of its reportable segments based on funds from operations available to common stockholders (“FFO”). FFO is a supplemental operating performance measure used in the real estate industry. The Company calculated FFO using the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition of FFO, 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 or losses from sales of 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. The Company has presented the NAREIT-defined calculation and an adjusted NAREIT-defined calculation of FFO in 2006 to add back the loss on extinguishment of debt recognized in the second quarter of 2006 related to the Venture formation described in Note 6 herein. The Company presented this additional measure of FFO because the loss on extinguishment of debt related to the sale or exchange of real estate, and all other amounts related to sales or exchanges of real estate are excluded from FFO.

     FFO is used by industry analysts, investors and the Company as a supplemental measure of an equity 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 that 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. In addition to Company management evaluating the operating performance of its reportable segments based on FFO results, management uses FFO and FFO per share, along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and employees.

     The following tables summarize the operations of the Company’s reportable segments for the three and six months ended June 30, 2006 and 2005. The notations (100%) and (JV) used in the following tables indicate wholly-owned and unconsolidated joint ventures, respectively, and all amounts are in thousands.

		Office/Multi-												Industrial				Unallocated and
Three Months Ended June 30, 2006		Family Division				Retail Division				Land Division				Division				Other				Total
Rental property revenues — continuing (100%)		$	17,331			$	12,467			$	—			$	—			$	—			$	29,798
Fee income (100%)			3,592				324				269				—				—				4,185
Other income (100%)			15,027				988				2,782				272				57				19,126
Total revenues from consolidated entities			35,950				13,779				3,051				272				57				53,109
Rental property operating expenses — continuing (100%)			(7,898	)			(3,848	)			—				—				—				(11,746	)
Other expenses — continuing (100%)			(14,809	)			(1,179	)			(2,598	)			(290	)			(11,934	)			(30,810	)
Provision for income taxes from operations — continuing (100%)			—				—				—				—				(1,926	)			(1,926	)
Total expenses from consolidated entities			(22,707	)			(5,027	)			(2,598	)			(290	)			(13,860	)			(44,482	)
Rental property revenues less operating expenses (JV)			5,638				498				—				—				—				6,136
Other, net (JV)			2,625				—				2,336				—				(682	)			4,279
Funds from operations from unconsolidated joint ventures			8,263				498				2,336				—				(682	)			10,415
Minority interest (100%)			(955	)			(358	)			—				—				—				(1,313	)
Gain (loss) on sale of undepreciated investment properties (100%)			—				—				(5	)			—				—				(5	)
Preferred stock dividends (100%)			—				—				—				—				(3,812	)			(3,812	)
Funds from operations available to common stockholders, excluding loss on extinguishment of debt			20,551				8,892				2,784				(18	)			(18,297	)			13,912
Loss on extinguishment of debt (100%)			—				(2,764	)			—				—				—				(2,764	)
Funds from operations available to common stockholders			20,551				6,128				2,784				(18	)			(18,297	)			11,148
Depreciation and amortization — continuing (100%)			(4,979	)			(7,842	)			—				—				—				(12,821	)
Depreciation and amortization (JV)			(1,654	)			(151	)			(207	)			—				—				(2,012	)
Gain on sale of investment properties, net of applicable income tax provision — continuing (100%)			10				56				—				—				—				66
Gain on sale of investment properties, net of applicable income tax provision — discontinued (100%)			15				120				—				—				—				135
Gain on sale of investment properties, net of applicable income tax provision (JV)			1				—				—				—				—				1
Net income (loss) available to common stockholders		$	13,944			$	(1,689	)		$	2,577			$	(18	)		$	(18,297	)		$	(3,483	)