"Accounting for the Impairment and Disposal of Long-Lived Assets," and APB Opinion No. 18 based on changes in the market and changes in management's intent for assets, as well as management's estimates of future cash flows of its projects. Therefore, additional impairment charges may be required in future periods.
Significant events during the three months ended June 30, 2009 included the following:
• Executed a 50,000 square foot lease with Firethorn Holdings, LLC in Terminus 200, a 25-story office building under construction at the Company's Terminus development in Atlanta, Georgia. Executed or renewed an additional 261,000 square feet of office leases.

• Executed a 28,000 square foot lease with Bed, Bath & Beyond at the Avenue Carriage Crossing, a 511,000 square foot retail center in Memphis, Tennessee. Executed or renewed an additional 186,000 square feet of retail leases.

• Executed 104,000 square feet of industrial leases.

• In April 2009, repaid in full the $83.3 million mortgage note payable secured by the San Jose MarketCenter for approximately $70 million and recognized a gain on extinguishment of this debt of approximately $12.5 million.

Results of Operations:
Rental Property Revenues. Rental property revenues increased approximately $395,000 (1%) and $3.6 million (5%) in the three and six month periods, respectively, compared to the same 2008 periods. These increases are discussed in detail below.
Rental property revenues from the office portfolio decreased approximately $1.2 million (4%) and $905,000 (2%) between the three and six month 2009 periods, respectively, as a result of the following:
• Decrease of $1.0 million and $2.4 million in the three and six month 2009 periods, respectively, related to 191 Peachtree Tower, where average economic occupancy decreased, mainly due to the December 2008 expiration of the Wachovia lease;

• Decrease of $655,000 and $398,000 in the three and six month periods, respectively, from the American Cancer Society Center, where average economic occupancy decreased; and

• Increase of $634,000 and $1.9 million in the three and six month 2009 periods, respectively, from One Georgia Center, due to an increase in average economic occupancy.

Rental property revenues from the retail portfolio increased approximately $1.6 million (19%) and $4.5 million (28%) in the three and six month 2009 periods, respectively, as a result of the following:
• Increase of $918,000 and $2.5 million in the three and six month 2009 periods, respectively, related to increased average economic occupancy at The Avenue Forsyth, which opened in April 2008;

• Increase of $1.2 million and $2.4 million in the three and six month 2009 periods, respectively, related to increased average economic occupancy at Tiffany Springs MarketCenter, which opened in July 2008; and

• Decrease of $502,000 and $514,000 in the three and six month 2009 periods, respectively, at The Avenue Carriage Crossing where average economic occupancy decreased.

Rental Property Operating Expenses. Rental property operating expenses increased approximately $576,000 (4%) and $4.5 million (16%) in the three and six month 2009 periods, respectively, compared to the same 2008 periods as a result of the following:

• Increase of $753,000 and $1.8 million in the three and six month 2009 periods, respectively, related to the openings of The Avenue Forsyth and Tiffany Springs MarketCenter;

• Increase of $257,000 and $575,000 in the three and six month 2009 periods, respectively, related to San Jose MarketCenter due to an increase in real estate taxes, insurance and bad debt expense;

• Increase of $124,000 and $226,000 in the three and six month 2009 periods, respectively, due to increased economic occupancy at One Georgia Center;

• Increase of $160,000 and $625,000 in the three and six month 2009 periods, respectively, related to 191 Peachtree Tower, primarily due to increases in non-recoverable tenant amenity expenses, marketing costs and bad debt expense; and

• Decrease of $520,000 in the three month 2009 period primarily due to the reversal of bad debt expense, which was recognized in the first quarter of 2009 at Terminus 100. Rental property operating expenses increased $635,000 for the six month 2009 period due partially to increased average economic occupancy in 2009 and partially to an adjustment of prior year operating expenses recognized in the current year.

Fee Income. Fee income increased $370,000 (5%) and $856,000 (6%) between the three and six month 2009 and 2008 periods, respectively. Fee income is comprised of management fees, development fees and leasing fees, which the Company performs for third party property owners and joint ventures in which it has an ownership interest. These amounts vary between quarters, due to the number of contracts with ventures and third party owners and the development and leasing needs at the underlying properties. Amounts could vary in future periods based on volume and composition of activities at the underlying properties.
Residential Lot, Multi-family and Outparcel Sales and Cost of Sales. Residential lot, multi-family and outparcel sales increased $3.3 million and $4.1 million between the three and six month 2009 and 2008 periods, respectively. Residential lot, multi-family and outparcel cost of sales increased $2.4 million and $3.2 million in the three and six month 2009 periods, respectively.
Residential Lot Sales and Cost of Sales - The Company's residential lot business consists of projects that are consolidated, for which income is recorded in the residential lot and outparcel sales and cost of sales line items, and projects that are owned through joint ventures in which the Company is a 50% partner with Temco Associates LLC ("Temco") and CL Realty, L.L.C. ("CL Realty"), for which income is recorded in income from unconsolidated joint ventures. (See additional disclosure in income from unconsolidated joint ventures, including impairment discussion.) Residential lot sales decreased $702,000 and $98,000 for consolidated projects in the three and six month 2009 periods, respectively. The number of lots sold in the six months periods were as follows:

                                                 2009     2008
                        Consolidated projects      7        10
                        Temco                      -         8
                        CL Realty                 66        97

                        Total                     73       115

Demand for residential lots is down significantly as a result of general market conditions and as a result of limited demand in the Company's and its ventures' principal markets in Texas, Florida and metropolitan Atlanta. Builders, the primary customers for such residential lots, have a general oversupply of inventory in the Company's markets and are working to reduce inventory levels before they consider buying additional lots. Many builders are also in financial distress because of current

market conditions. In addition, the recent changes in credit availability for home buyers and homebuilders have made it more difficult to obtain financing for purchasers. Management is closely monitoring market developments but is currently unable to predict when markets will improve. Management expects these market conditions to continue to negatively impact residential lot sales and have an adverse impact on the Company's results of operations until such time as the residential lot markets improve. Therefore, consistent with current market trends, the Company anticipates residential lot sales for 2009, like those in 2008, will be lower than those the Company experienced in recent years, both at consolidated projects and at Temco and CL Realty. The Company cannot currently quantify the effect of the current slowdown on its results of operations for 2009 and forward.
Residential lot cost of sales decreased $485,000 and $74,000 in the three and six month 2009 periods, respectively. The change in residential lot cost of sales was also partially due to the number of lots sold during the periods and partially to fluctuations in gross profit percentages used to calculate the cost of sales for residential lot sales in certain of the residential developments.
Multi-Family Sales and Cost of Sales - Multi-family sales and cost of sales increased approximately $1.2 million in the three and six month 2009 periods due to closings of condominiums at the Company's 10 Terminus Place project. No profit was recognized on the 2009 multi-family sales.
Outparcel Sales and Cost of Sales - Outparcel sales increased $2.8 million and $3.0 million in the three and six month 2009 periods, respectively. There were two outparcel sales in the six month 2009 period, compared to only one outparcel sale in the comparable 2008 period. Outparcel cost of sales increased $1.7 million and $2.0 million in the three and six month 2009 periods, respectively, due to the aforementioned increase in number of outparcel sales.
General and Administrative Expense, Separation Expense and Reimbursements ("Total G&A").
Total G&A expense increased $2.9 million (22%) and $2.5 million (9%) between the three and six month 2009 and 2008 periods, respectively, primarily as a result of the following:
• Separation expense increased by $2.0 million and $2.1 million in the three and six month 2009 periods, respectively, due to expense recognized for the lump sum payment and for the modification of stock compensation awards related to the retirement of the Company's former chief executive officer in the second quarter of 2009;

• Reimbursements of salaries and benefits for reimbursed employees increased approximately $418,000 in the six month 2009 period due to higher average projects under management in 2009 compared to the same 2008 period.

• General and administrative expense increased $983,000 and $70,000 in the three and six month 2009 periods, respectively, compared to the same 2008 periods, due to a decrease of approximately $2.7 million and $5.4 million in the three and six month periods, respectively, of capitalized salaries and related benefits for personnel involved in the development and leasing of certain projects, which increased general and administrative expense. The increase was partially offset by a decrease in salaries and benefits for employees of approximately $2.1 million and $5.1 million in the three and six month periods, respectively. This decrease is based in part on a decrease in the number of employees at the Company between the periods. The decrease is also due to a decrease in stock-based compensation expense, a portion of which fluctuates with the Company's stock price.

Depreciation and Amortization. Depreciation and amortization increased approximately $2.8 million (22%) between the three month 2009 and 2008 periods and $4.6 million (19%) between the six month 2009 and 2008 periods, primarily as a result of the following:
• Increase of $1.7 million and $2.5 million between the three and six month periods, respectively, related to higher depreciation of tenant assets associated with increases in occupancy at Terminus 100 and One Georgia Center; and

• Increase of $1.1 million and $2.3 million between the three and six months periods, respectively, from the openings of The Avenue Forsyth and Tiffany Springs MarketCenter.

Interest Expense. Interest expense increased approximately $3.2 million (43%) in the three month 2009 period compared to the same 2008 period and $7.3 million (54%) in the six month period compared to the same 2008 period due to higher average debt borrowings and decreased capitalized interest as a result of lower weighted average expenditures on development projects.
Impairment Loss. The Company recognized a $34.9 million impairment loss in the second quarter 2009 on 10 Terminus Place, a condominium project that the Company developed in 2008, which has 122 units remaining for sale. The Company considers these units to be held-for-sale pursuant to SFAS No. 144, which requires companies to record long-lived assets held-for-sale at the lower of cost or fair value, less costs to sell. As a result of the declining market for condominiums, the Company's strategy for the sell-out of this project was revised. Therefore, expected cash flows from this project decreased, and the risk associated with the timing of unit sales increased, which caused the fair value under a discounted cash flow analysis to decrease in the second quarter.
The Company also recognized an impairment loss of $1.6 million on a note receivable related to a mezzanine loan made to a developer of a condominium project in Asheville, North Carolina. The developer defaulted on the loan in June 2009 and the Company acquired the project in July in satisfaction of the note and concurrently paid the remaining outstanding balance of the construction loan. The Company recorded the difference between the fair value of the project and the book value of the note receivable, plus the amount paid to the construction lender, as an impairment charge as of June 30, 2009.
Other Expense. Other expense increased approximately $3.9 million and $3.7 million between the three and six month 2009 and 2008 periods, respectively. The expenses incurred by the Company when pursuing a potential development project are recorded in this category. In the 2008 period, approximately $1.1 million was expensed for a retail project no longer probable of development, and in the 2009 period, approximately $4.0 million was expensed for a multi-family project and retail project no longer probable of being developed. Additionally, other expense increased at 10 Terminus Place by $894,000 between the six month periods due to an increase in real estate taxes, insurance and HOA funding by the Company which is no longer being capitalized.
Gain on Extinguishment of Debt. In April 2009, the Company satisfied the San Jose MarketCenter note in full for approximately $70.3 million, which represented a discount from the face amount. The Company recorded a gain on extinguishment of debt, net of unamortized loan closing costs and fees, of approximately $12.5 million in the second quarter of 2009 related to this repayment.
(Provision for)/Benefit from Income Taxes from Operations. Benefit from income taxes from operations decreased approximately $13.5 million and $12.7 million between the three and six month 2009 and 2008 periods, respectively, to a provision for 2009. During the quarter ended June 30, 2009, the Company established a valuation allowance against the deferred tax assets of its taxable REIT subsidiary, Cousins Real Estate Corporation ("CREC"), totaling $42.7 million, including $11.0 million in deferred tax assets that were generated in periods prior to the three months ended June 30, 2009. The Company's conclusion that a valuation allowance against its deferred tax assets should be recorded as of June 30, 2009 was based on losses at CREC in recent years, including consideration of losses incurred in the six months ended June 30, 2009, and the inability of the Company to predict, with any degree of certainty, when CREC would generate income in the future in amounts sufficient to utilize the deferred tax asset. This uncertainty is the result of the continued decline in the housing market which directly impacts CREC's residential land business and multi-family business. Based on current projections of income or loss at CREC, the Company does not anticipate recognizing a provision for or a benefit from income taxes in the near term. Not recognizing income tax benefit or

provision in the Company's financial statements will negatively affect the Company's net income and funds from operations, which in turn affects calculations of compliance under the Company's debt covenants.
Income from Unconsolidated Joint Ventures, including Impairment. Income from unconsolidated joint ventures decreased approximately $31.6 million and $32.6 million in the three and six month 2009 periods, respectively, compared to the same 2008 periods (amounts disclosed are the Company's share).
• Decrease of $24.2 million and $25.1 million in the three and six month 2009 periods, respectively, at CL Realty. CL Realty is a 50-50 joint venture which develops residential lots in Texas, Georgia and Florida and holds tracts of undeveloped land to either develop residential communities in the future and/or sell as tracts. The market for residential lots and land tracts has declined in recent periods in these geographic regions. Due to the state of the market for residential lots and the duration of the market decline, adjustments were made to the sell-out period for certain projects. As a result, the Company analyzed its investment in CL Realty in accordance with APB Opinion No. 18 and determined that the fair value of its investment was less than its carrying amount. The Company determined the impairment was other-than-temporary and recognized an impairment loss of $20.3 million on its investment in CL Realty in the second quarter 2009. An analysis of impairment was also made at the CL Realty venture level. In conjunction with that process, an impairment loss on one residential project was recorded at the venture level, the Company's share of which was $2.6 million. Also contributing to the change in income from CL Realty was income recognized in 2008 from potential lot buyers forfeiting their deposits ($570,000), a gain from a land tract sale at one of the venture's residential developments ($1.0 million) and revenue from two mineral rights lease bonus payments ($1.0 million) in 2008 with no corresponding revenues in 2009.

• Decrease of $7.2 million and $7.3 million in the three and six month 2009 periods, respectively, at Temco. Temco is a 50-50 joint venture which develops residential lots in Georgia and holds tracts of undeveloped land to either develop residential communities in the future and/or sell as tracts. As described above, the markets for residential lots and land tracts have declined. The Company also analyzed its investment in Temco in accordance with APB No. 18 and determined the fair value of its investment was less than its carrying amount, and that the impairment was other-than-temporary. As a result, the Company recorded an impairment loss of $6.7 million on its investment in Temco in the second quarter 2009.

• In June 2009, the Company also recorded an impairment of approximately $1.1 million in its investment in Glenmore Garden Villas, LLC ("Glenmore"). Glenmore is a 50-50 joint venture which was formed in order to develop a townhome project in Charlotte, North Carolina. Development has been suspended on this project, and the future plans for the project are uncertain. Based on current estimates, under APB No. 18, the Company determined that its investment in Glenmore had an other-than-temporary decline and the investment was written down to zero.

• Increase in income of approximately $665,000 and $1.3 million in the three and six month 2009 periods, respectively, from Palisades West LLC, which developed and owns two office buildings in Austin, Texas. Buildings 1 and 2 became partially operational in the fourth quarter of 2008.

Gain on Sale of Investment Properties. Gain on sale of investment properties increased $159.2 million between the six month 2009 and 2008 periods and decreased $4.4 million between the 2009 and 2008 three month periods.

The 2009 gain is primarily attributable to the following:
• Sale of undeveloped land at the Company's North Point Project ($745,000); and

• The recognition of $167.2 million in deferred gain related to the 2006 venture formation with Prudential. When the Company and Prudential formed the venture, the Company contributed properties and Prudential contributed cash. The Company accounted for the transaction as a sale in accordance with accounting rules, but deferred the related gain because the consideration received was a partnership interest as opposed to cash. In the 2009 period, the Company and Prudential made a pro rata distribution of cash from the venture that caused the Company to recognize all of the gain that was deferred in 2006.

The 2008 gain consisted of the following:
• Recognition of $7.8 million in gains on sales of undeveloped land at the Company's North Point, Jefferson Mill and The Avenue Forsyth projects;

• Gain on sale from the condemnation of land at the Cosmopolitan Center ($619,000); and

• Gain on sale of the Company's airplane ($415,000).

Discussion of New Accounting Pronouncements.
Derivative Instruments and Hedging Activities The Company adopted Statement of Financial Accounting Standard ("SFAS") No. 161, "Disclosures about Derivative Instruments and Hedging Activities," on January 1, 2009. Entities that use derivative instruments are required to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. Entities are also required to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of derivative accounting rules have been applied, and the impact that hedges have on an entity's financial position, financial performance, and cash flows.
Fair Value of Financial Instruments
The Company provides information regarding the fair value of financial instruments in interim financial statements beginning in interim periods ending after June 15, 2009. At June 30, 2009 and December 31, 2008, the estimated fair values of the Company's notes payable was approximately $914.3 million and $904.1 million, respectively, calculated by discounting future cash flows at estimated rates at which similar loans would have been obtained at those dates. The fair value calculations for the notes payable are deemed to be Level 2 calculations under the guidelines as set forth in SFAS No. 157. The Company obtains current interest rates that could be obtained on similar loans in active markets in order to calculate the fair value.
Accounting for Noncontrolling Interests The Company consolidates various ventures that are involved in the ownership and/or development of real estate and has historically recorded the other partner's interest as a minority interest, which was presented between liabilities and equity on the Company's balance sheets. Effective January 1, 2009, amounts formerly reflected as minority interests were renamed noncontrolling interests and reflected in stockholders' equity, if appropriate, in the Company's balance sheets. Income or loss associated with noncontrolling interests is required to be presented separately, net of

tax, below net income on the Company's income statements. These amounts were . . .