Cousins Properties Incorporated 2006 Annual Report - SNL Financial

The Company recorded lease expense of approximately $2.1 million, $2.2 million and $1.6 million, net of amounts
capitalized, in 2006, 2005 and 2004, respectively. Amounts due under these lease commitments are as follows:
2007 ................................................................ $ 831
2008 ................................................................ 293
2009 ................................................................ 263
2010 ................................................................ 266
2011 ................................................................ 185
Thereafter ............................................................ 14,909
$16,747
As of December 31, 2006, outstanding commitments for the construction and design of real estate projects,
including an estimate for unfunded tenant improvements at operating properties, totaled approximately $304.7 million.
At December 31, 2006 and 2005, the estimated fair value of the Company’s notes payable was approximately
$313.1 million and $487.2 million, respectively, calculated by discounting future cash flows at estimated rates at
which similar loans would have been obtained at December 31, 2006 and 2005.
5. DEFERRED GAIN
The deferred gain of $154.1 million and $6.0 million at December 31, 2006 and 2005, respectively, arose from
two transactions with The Prudential Insurance Company of America (“Prudential”) discussed as follows.
CP Venture LLC (“CPV”)
As discussed in Note 6 below, in 1998 the Company and Prudential entered into an agreement whereby the
Company contributed interests in certain operating properties it owned to a venture and Prudential contributed an
equal amount of cash. The venture was structured such that the operating properties were owned by CP Venture Two
LLC (“CPV Two”) and the cash was held by CP Venture Three LLC (“CPV Three”). Upon formation, the Company
owned an effective interest in CPV Two of 11.5%, and an effective interest in CPV Three of 88.5%, with Prudential
owning the remaining effective interests of each entity. The Company’s effective interest in CPV Two was reduced
to 10.4% in 2006. The Company accounts for its interest in CPV Two under the equity method (see Note 6), and the
Company consolidates CPV Three.
At the time of the formation of the ventures, the Company determined that the transaction qualified for
accounting purposes as a sale of the properties to the venture pursuant to SFAS No. 66. However, because the legal
consideration the Company received from this transaction was a controlling interest in CPV Three as opposed to
cash, the Company determined that the gain on the transaction should be deferred. The Company reduces the
deferred gain as properties are sold or depreciated by CPV Two and as distributions are made by CPV Three.
The balances in deferred gain related to this venture were approximately $5.4 million and $6.0 million at
December 31, 2006 and 2005, respectively. In 2006, CPV sold Grandview II, which resulted in recognition of
deferred gain of approximately $0.3 million, and in 2004, CPV sold Wachovia Tower, which resulted in recognition
of deferred gain of approximately $2.5 million, both of which were recognized in gain on sale of investment
property in the Consolidated Statements of Income.
CPV IV
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On June 29, 2006, the Company formed CPV IV with Prudential. Upon formation, the Company contributed
its interests in five properties (the “Properties”) to CPV IV valued initially at $340.9 million. Prudential agreed to
contribute cash to CPV IVof $300.1 million (the “Base Contribution Amount”) and to assume mortgage debt valued
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