Cousins Properties Marginally Beats

Zacks

Cousins Properties Inc. (CUZ), a real estate investment trust (:REIT), reported first quarter 2012 FFO (fund from operations) of $13.5 million or 13 cents per share, compared with $8.1 million or 8 cents in the year-earlier quarter. Funds from operations, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.

The reported FFO for first quarter 2012 marginally beat the Zacks Consensus Estimate by a penny. Total revenues were $47.2 million during the reported quarter versus $45.5 million in the year-ago period. Total revenues during first quarter 2012 well exceeded the Zacks Consensus Estimate of $37 million.

During the reported quarter, Cousins Properties executed strong leasing activities and leased/renewed 179,000 square feet of office space and 136,000 square feet of retail space. At quarter-end, the company’s office portfolio was 88% leased, while its retail properties were 88% leased.

Total net operating income (:NOI) of the company was $29.3 million during first quarter 2012 compared to $28.1 million in the prior-year quarter. NOI from the office properties accounted for about 70% of the total NOI during the reported quarter, while retail accounted for the balance 30%.

Total same-store revenue increased 2.6% in first quarter 2012 compared to the year-earlier quarter (office up 2.7%, and retail up 2.4%), while operating expenses decreased 2.1% (office down 2.6%, and retail down 0.2%). Total same-store NOI in the reported quarter increased 5.4% on a year-over-year basis (office up 6.3%, and retail up 3.4%).

During first quarter 2012, Cousins Properties sold 18 residential projects held by the CL Realty and Temco joint ventures to affiliates of Forestar Group Inc. (FOR), the other partner in the ventures, for $23.5 million. The asset sale was part of the long-term strategy of the company to upgrade its overall portfolio by acquiring newer high-quality properties and divesting non-core assets.

Subsequent to the quarter-end, Cousins Properties sold ‘The Avenue Collierville’ mall in Tennessee for $55 million. The company also entered into a contract to sell ‘Galleria 75’ – a two-story 113,000 square foot office building in suburban Atlanta, and ‘Ten Peachtree Place’ – a mid-rise office building in midtown Atlanta. Both the asset sale transactions are expected to close in second quarter 2012.

During the reported quarter, Cousins Properties extended the maturity of its $350 million unsecured credit facility to February 2016. At the same time, the company obtained a $100.0 million fixed-rated mortgage loan secured by its ‘191 Peachtree Tower’ property, which is scheduled to mature in October 2018.

Cousins Properties is currently shoring up its balance sheet and increasing liquidity by selling non-core assets. At the same time, the company remains focused on leasing activities and intends to maintain steady occupancy levels across its portfolio. At quarter-end, Cousins Properties had cash and cash equivalents of $4.0 million. Total debt outstanding at quarter-end was $693.4 million.

We maintain our 'Neutral' rating on Cousins Properties, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ recommendation.

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