Cousins Reports Results for the Third Quarter of 2013

Business Wire

ATLANTA--(BUSINESS WIRE)--

Cousins Properties Incorporated (CUZ):

Highlights

  • Funds From Operations for the quarter was $0.11 per share.
  • Acquired 5.3 million square-foot office portfolio in Texas.
  • Issued 69 million shares of common stock.
  • Sold the majority of remaining retail assets.
  • Increased same property net operating income for the third quarter 4.5% over prior year.

Cousins Properties Incorporated (CUZ) today reported its results of operations for the quarter ended September 30, 2013.

“The team has worked extremely hard over the past 24 months to transform the company,” said Larry Gellerstedt, President and Chief Executive Officer of Cousins. “This quarter marked an inflection point in that transformation, with a compelling portfolio acquisition in Texas - the largest in our history - and the disposition of our lifestyle and power center holdings. With significant value creation opportunities in our existing portfolio and in the development pipeline, we are well positioned for a strong 2014.”

Portfolio Activity

  • Leased or renewed 338,000 square feet of space.
  • Weighted average occupancy for the quarter was 90% on a same property basis, up from 88% in the prior year.

Transaction Activity

  • Acquired Greenway Plaza, a 4.3 million square-foot, 10 building office portfolio in Houston, Texas, and 777 Main, a 980,000 square-foot office tower in Fort Worth, Texas. Total purchase price for these assets was $1.1 billion.
  • Completed a public offering of 69 million shares of common stock at $10.00 per share, generating net proceeds of $661.3 million.
  • Sold Tiffany Springs MarketCenter for $53.5 million, generating a gain of $3.7 million.
  • Sold the Company’s interest in CP Venture Two LLC and CP Venture Five LLC in a transaction that valued its interest at $57.4 million prior to allocation of property level debt, generating a gain of $37.0 million.
  • Sold the Company’s interest in CF Murfreesboro Associates in a transaction that valued its interest in The Avenue Murfreesboro at $82.0 million prior to allocation of property level debt, generating a gain of $23.5 million.
  • Closed a non-recourse mortgage loan on Promenade with a principal balance of $114.0 million, a fixed interest rate of 4.27%, and a term of 9 years.
  • Closed a non-recourse mortgage loan on Post Oak Central with a principal balance of $188.8 million, a fixed interest rate of 4.26%, and a term of 7 years.
  • Subsequent to quarter end, the Company formed EP II LLC, an unconsolidated joint venture, for the purpose of developing and operating the second phase of the Emory Point mixed-use property in Atlanta, Georgia. The second phase will consist of 307 apartments and 43,000 square feet of retail space with a total projected cost of $73.3 million.

Financial Results

FFO was $17.2 million, or $0.11 per share, for the third quarter of 2013 compared with $25.7 million, or $0.25 per share, for the third quarter of 2012. FFO was $42.8 million, or $0.33 per share, for the nine months ended September 30, 2013, compared with $52.3 million, or $0.50 per share, for the same period in 2012.

Net income available to common stockholders was $59.4 million, or $0.36 per share, for the third quarter of 2013, compared with net income available of $9.4 million, or $0.09 per share, for the third quarter of 2012. Net income available was $107.0 million, or $0.83 per share, for the nine months ended September 30, 2013, compared with $2.7 million, or $0.03 per share, for the same period in 2012.

During the third quarter of 2013, the Company recorded several special items in FFO. These items included acquisition and related costs in the third quarter of 2013 associated with the purchase of Greenway Plaza and 777 Main of $6.8 million, which included $2.6 million in costs associated with a term loan that was never utilized. In addition, the Company recognized an additional gain of $4.5 million associated with the third quarter 2012 sale of its third party management business. The amount of this additional gain was based on revenues generated by this business in the twelve months following the closing of the transaction. The Company also incurred separation expenses of $520,000 during the third quarter primarily related to the sale of its retail assets. FFO before these special items for the three months ended September 30, 2013 was $0.12 per share. The following table reconciles FFO to FFO before these special items for the three months ended September 30, 2013:

    Actual       Per
($000) Share
FFO $ 17,226 $ 0.11
Texas acquisition and related costs 6,838 0.04
Gain on sale of third party business (4,531 ) (0.03 )
Separation expenses 520    
FFO before special items $ 20,053   $ 0.12  
 

Investor Conference Call and Webcast

The Company will conduct a conference call at 11:00 a.m. (Eastern Time) on Thursday, October 31, 2013, to discuss the results of the quarter ended September 30, 2013. The number to call for this interactive teleconference is (212) 231-2908.

A replay of the conference call will be available for 14 days by dialing (402) 977-9140 and entering the passcode 21675999. The replay can be accessed on the Company's website, www.cousinsproperties.com, through the “Q3 2013 Cousins Properties Incorporated Earnings Conference Call” link on the Investor Relations page.

Cousins Properties Incorporated is a fully integrated, self-administered and self-managed real estate investment trust (REIT). The Company, based in Atlanta, GA, primarily invests in Class-A office towers located in high growth Sunbelt markets, with a focus on Georgia, Texas and North Carolina.

The Consolidated Statements of Operations, Consolidated Balance Sheets, a schedule entitled Funds From Operations, which reconciles Net Income (Loss) Available to FFO, and a schedule entitled Same Property Information, which reconciles same property net operating income to rental property revenues and rental property expenses, are attached to this press release. More detailed information on Net Income (Loss) Available and FFO results is included in the “Net Income and Funds From Operations - Supplemental Detail” schedule, which is included along with other supplemental information in the Company’s Current Report on Form 8-K, which the Company is furnishing to the Securities and Exchange Commission (“SEC”), and which can be viewed through the “Supplemental Information” and “SEC Filings” links on the “Investor Information & Filings” link of the Investor Relations page of the Company’s website at www.cousinsproperties.com. This information may also be obtained by calling the Company’s Investor Relations Department at (404) 407-1984.

Certain matters discussed in this news release are “forward-looking statements” within the meaning of the federal securities laws and are subject to uncertainties and risk. These include, but are not limited to, the availability and terms of capital and financing; the ability to refinance indebtedness as it matures; failure of purchase, sale or other contracts to ultimately close; the availability of buyers and adequate pricing with respect to the disposition of assets; risks and uncertainties related to national and local economic conditions, the real estate industry in general and in specific markets, and the commercial markets in particular; market conditions and changes to the Company's strategy with regard to land and other non-core holdings that require impairment losses to be recognized; the effects of the sale of the Company's third party management business; leasing risks, including the ability to obtain new tenants or renew expiring tenants on favorable terms, and the ability to lease newly developed, recently acquired or current vacant space; financial condition of existing tenants; volatility in interest rates and insurance rates; the availability of sufficient investment opportunities; competition from other developers or investors; the risks associated with real estate developments and acquisitions (such as construction delays, cost overruns and leasing risk); loss of key personnel; potential liability for uninsured losses, condemnation or environmental issues; potential liability for a failure to meet regulatory requirements; the financial condition and liquidity of, or disputes with, joint venture partners; any failure to comply with debt covenants under credit agreements; and any failure to continue to qualify for taxation as a real estate investment trust and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including those described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and the Current Report on Form 8-K filed on July 29, 2013. The words “believes,” “expects,” “anticipates,” “estimates,” ”plans,” “may,” “intend,” “will” or 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 such 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, except as required under U.S. federal securities laws.

               
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share amounts)
 

Three Months Ended September 30,

  Nine Months Ended September 30,
2013 2012 2013 2012
REVENUES:
Rental property revenues $ 49,208 $ 31,125 $ 122,686 $ 88,347
Fee income 2,420 7,343 8,932 12,985
Land sales 155 732 1,551 2,216
Other   292     86     2,960     1,612  
  52,075     39,286     136,129     105,160  
 
COSTS AND EXPENSES:
Rental property operating expenses 22,730 13,946 57,135 38,317
Reimbursed expenses 1,097 1,235 4,365 3,968
General and administrative expenses 6,635 6,399 17,257 18,668
Land cost of sales 147 354 1,543 1,333
Interest expense 5,149 5,793 14,325 17,936
Depreciation and amortization 19,003 10,542 46,243 30,338
Separation expenses 520 574 520 866
Acquisition costs 6,859 350 7,427 495
Other   925     1,252     1,715     2,351  
  63,065     40,445     150,530     114,272  
 
LOSS ON EXTINGUISHMENT OF DEBT   -     -     -     (94 )
 

LOSS FROM CONTINUING OPERATIONS BEFORE TAXES, UNCONSOLIDATED JOINT VENTURES AND SALE OF INVESTMENT PROPERTIES

(10,990 ) (1,159 ) (14,401 ) (9,206 )
 
PROVISION FOR INCOME TAXES FROM OPERATIONS (1 ) (60 ) (3 ) (120 )
 
INCOME FROM UNCONSOLIDATED JOINT VENTURES   63,078     2,269     65,862     14,217  
 

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES

52,087 1,050 51,458 4,891
 
GAIN ON SALE OF INVESTMENT PROPERTIES   3,801     60     61,384     146  
 
INCOME FROM CONTINUING OPERATIONS 55,888 1,110 112,842 5,037
 
INCOME (LOSS) FROM DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations 803 4,724 1,394 (1,087 )
Gain on sale of discontinued operations   8,346     7,444     8,527     8,204  
  9,149     12,168     9,921     7,117  
 
NET INCOME (LOSS) 65,037 13,278 122,763 12,154
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (3,879 )   (608 )   (4,901 )   259  
 
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST 61,158 12,670 117,862 12,413
 
PREFERRED SHARE ORIGINAL ISSUANCE COSTS - - (2,656 ) -
 
DIVIDENDS TO PREFERRED STOCKHOLDERS   (1,777 )   (3,226 )   (8,231 )   (9,680 )
 
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ 59,381   $ 9,444   $ 106,975   $ 2,733  
 
PER COMMON SHARE INFORMATION - BASIC AND DILUTED:
Income (loss) from continuing operations attributable to controlling interest $ 0.31 $ (0.03 ) $ 0.75 $ (0.04 )
Income (loss) from discontinued operations $ 0.05   $ 0.12   $ 0.08   $ 0.07  
Net income (loss) available to common stockholders $ 0.36   $ 0.09   $ 0.83   $ 0.03  
 
WEIGHTED AVERAGE SHARES - BASIC   163,426     104,193     128,953     104,120  
WEIGHTED AVERAGE SHARES - DILUTED   163,603     104,203     129,121     104,125  
DIVIDENDS PER COMMON SHARE $ 0.045   $ 0.045   $ 0.135   $ 0.135  
               
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
FUNDS FROM OPERATIONS
(unaudited; in thousands, except per share amounts)
 
Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Net Income Available to Common Stockholders $ 59,381 $ 9,444 $ 106,975 $ 2,733
Depreciation and amortization of real estate assets:
Consolidated properties 18,811 10,286 45,679 29,495
Discontinued properties 3,600 1,033 10,810
Share of unconsolidated joint ventures 3,079 2,475 10,450 7,631
 

Impairment loss on depreciable investment property, net of amounts attributable to noncontrolling interests

10,190
Gain on sale of depreciated properties:
Consolidated properties (3,643 ) (60 ) (60,709 ) (146 )
Discontinued properties (3,371 ) (60 ) (3,552 ) (820 )
Share of unconsolidated joint ventures (60,421 ) (60,421 ) (7,509 )
Non-controlling interest related to the sale of depreciated properties 3,390 3,390
Other               (59 )
Funds From Operations Available to Common Stockholders $ 17,226   $ 25,685   $ 42,845   $ 52,325  
Per Common Share — Basic and Diluted:        
Net Income Available $ 0.36   $ 0.09   $ 0.83   $ 0.03  
Funds From Operations $ 0.11   $ 0.25   $ 0.33   $ 0.50  
Weighted Average Shares — Basic   163,426     104,193     128,953     104,120  
Weighted Average Shares — Diluted   163,603     104,203     129,121     104,125  
 
The table above shows Funds From Operations Available to Common Stockholders (“FFO”) and the related reconciliation to Net Income Loss Available to Common Stockholders for Cousins Properties Incorporated and Subsidiaries. The Company calculated FFO in accordance with the National Association of Real Estate Investment Trusts' ("NAREIT") definition, which is net income (loss) available to common stockholders (computed in accordance with accounting principles generally accepted in the United States ("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, impairment losses on depreciable investment property and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

 

FFO is used by industry analysts and investors 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 REIT 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. Company management evaluates operating performance in part based on FFO. Additionally, the Company uses FFO along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and other key employees.

 

Management believes that FFO before special items provides analysts and investors with appropriate information related to its core operations and for the comparability of the results of its operations with other real estate companies.

       
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
   
September 30, 2013 December 31, 2012

ASSETS

(unaudited)
PROPERTIES:

Operating properties, net of accumulated depreciation of $235,349 and $255,128 in 2013 and 2012, respectively

$ 1,846,953 $ 669,652

Projects under development, net of accumulated depreciation of $0 and $183 in 2013 and 2012, respectively

14,576 25,209
Land 35,305 42,187
Other   -     151  
Total properties 1,896,834 737,199
 

OPERATING PROPERTIES AND RELATED ASSETS HELD FOR SALE, net of accumulated depreciation of $2,947 in 2013 and 2012

2,694 1,866
 
CASH AND CASH EQUIVALENTS 5,408 176,892
RESTRICTED CASH 2,953 2,852

NOTES AND ACCOUNTS RECEIVABLE, net of allowance for doubtful accounts of $1,883 and $1,743 in 2013 and 2012, respectively

11,669 9,972
DEFERRED RENTS RECEIVABLE 37,140 39,378
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 98,183 97,868
OTHER ASSETS   208,885     58,215  
 
TOTAL ASSETS $ 2,263,766   $ 1,124,242  
 

LIABILITIES AND EQUITY

NOTES PAYABLE $ 642,834 $ 425,410
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 53,095 34,751
DEFERRED INCOME 21,781 11,888
OTHER LIABILITIES   80,826     9,240  
TOTAL LIABILITIES 798,536 481,289
 
COMMITMENTS AND CONTINGENT LIABILITIES
 
REDEEMABLE NONCONTROLLING INTERESTS -

 

-
 
STOCKHOLDERS’ INVESTMENT:
Preferred stock, 20,000,000 shares authorized, $1 par value:

7.75% Series A cumulative redeemable preferred stock, $25 liquidation preference; 0 and 2,993,090 shares issued and outstanding in 2013 and 2012, respectively

- 74,827

7.50% Series B cumulative redeemable preferred stock, $25 liquidation preference; 3,791,000 shares issued and outstanding in 2013 and 2012

94,775 94,775

Common stock, $1 par value, 250,000,000 shares authorized, 193,230,213 and 107,660,080 shares issued in 2013 and 2012, respectively

193,230 107,660
Additional paid-in capital 1,420,810 690,024
Treasury stock at cost, 3,570,082 shares in 2013 and 2012 (86,840 ) (86,840 )
Distributions in excess of cumulative net income   (158,308 )   (260,104 )
 
TOTAL STOCKHOLDERS’ INVESTMENT 1,463,667 620,342
 
Nonredeemable noncontrolling interests   1,563     22,611  
TOTAL EQUITY   1,465,230     642,953  
 
TOTAL LIABILITIES AND EQUITY $ 2,263,766   $ 1,124,242  
           
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
SAME PROPERTY INFORMATION
(unaudited, in thousands)
   
Three Months Ended September 30,   Nine Months Ended September 30,
2013 2012 2013 2012
Net Operating Income - Consolidated Properties
Rental property revenues $ 49,208 $ 31,125 $ 122,686 $ 88,347
Rental property expenses   (22,730 )   (13,946 )   (57,135 )   (38,317 )
Net Operating Income - Consolidated Properties 26,478 17,179 65,551 50,030
Net Operating Income - Discontinued Operations
Rental property revenues 1,237 6,522 3,924 23,468
Rental property expenses   (423 )   (1,962 )   (1,470 )   (7,280 )
Net Operating Income - Discontinued Operations   814     4,560     2,454     16,188  
Net Operating Income - Unconsolidated Joint Ventures   7,538     5,881     21,567     18,083  
Total Net Operating Income $ 34,830   $ 27,620   $ 89,572   $ 84,301  
 
Net Operating Income:
Same Property $ 15,173 $ 14,513 $ 45,540 $ 43,329
Non-Same Property   19,657     13,107     44,032     40,972  
Net Operating Income $ 34,830   $ 27,620   $ 89,572   $ 84,301  
 

This schedule shows same property net operating income and the related reconciliation to rental property revenues and rental property expenses. Net Operating Income is used by industry analysts, investors and Company management to measure operating performance of the Company's properties. Net Operating Income, which is rental property revenues less rental property operating expenses, excludes certain components from net income in order to provide results that are more closely related to a property's results of operations. Certain items, such as interest expense, while included in FFO and net income, do not affect the operating performance of a real estate asset and are often incurred at the corporate level as opposed to the property level. As a result, management uses only those income and expense items that are incurred at the property level to evaluate a property's performance. Depreciation and amortization are also excluded from Net Operating Income. Same Property Net Operating Income includes those office properties that have been fully operational in each of the comparable reporting periods. A fully operational property is one that has achieved 90% economic occupancy for each of the two periods presented or has been substantially complete and owned by the Company for each of the two periods presented and the preceding year. Same Property Net Operating Income allows analysts, investors and management to analyze continuing operations and evaluate the growth trend of the Company's portfolio.

Contact:
Cousins Properties Incorporated
Gregg D. Adzema, 404-407-1116
Executive Vice President and
Chief Financial Officer
greggadzema@cousinsproperties.com
or
Cameron Golden, 404-407-1984
Vice President, Investor Relations and
Corporate Communications
camerongolden@cousinsproperties.com

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