Cousins Boosts Liquidity

Zacks

In order to enhance its financial flexibility, Cousins Properties Incorporated (CUZ) infused approximately $165.1 million of capital through a public offering of its common stock. The company’s plans to finance an acquisition and redeem the preferred stocks with the proceeds generated.

In particular, Cousins Properties priced the public offering of 14,354,000 shares of its common stock at $10.45 per share. Moreover, in conjunction with the completion of the offering, the underwriters exercised in full their option to purchase an additional 2,153,100 common shares as granted by the company to cover any over-allotments. After taking into account the underwriting discount and offering costs, net proceeds came in at around $165.1 million.

The real estate investment trust (:REIT) plans to finance the acquisition of Austin, Texas-based Class-A office building – 816 Congress Avenue – with a major chunk of the net proceeds. The purchase of the property, which is currently under contract, is projected to close by Apr 2013. Moreover, Cousins Properties expects to utilize a part of the proceeds for full redemption of its outstanding 7.75% Series A cumulative redeemable preferred stock.

A cluster of renowned financial institutions such as BofA Merrill Lynch of Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM) and Wells Fargo Securities of Wells Fargo & Company (WFC) served as joint book-running managers for the public offering.

We expect the stock offering to enable Cousins Properties to attain financial flexibility. Also, financing for strategic acquisitions and investments are expected to go a long way in enhancing the company’s top-line growth. Moreover, paying back of debt would reduce its interest expenses. Notably, as of Dec 31, 2012, Cousins Properties had cash and cash equivalents of $176.9 million. However, the consequent share dilution effect of the stock offering cannot be ignored.

Cousins Properties is scheduled to release its first-quarter 2013 results on May 8, after the closing bell. The Zacks Consensus Estimate for the company’s first-quarter FFO (funds from operation) is currently pegged at 12 cents per share.

Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Cousins Properties is 8.33% for the first quarter. This, combined with a Zacks Rank #2 (Buy) indicates that the company will definitely beat the Zacks Consensus Estimate in the first quarter.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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