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Cousins Properties Incorporated’s CUZ premium portfolio of Class A office assets concentrated in the high-growth Sun Belt markets is likely to bode well for the company. This region has been witnessing a population influx. The demand for office space has been high amid favorable migration trends and pro-business environment. Assets in these markets are expected to command higher rents compared with the broader market.
Moreover, the company has a well-diversified, high-end tenant roster with less dependence on a single industry. This enables the company to enjoy steady revenues over different economic cycles. The company has collected 96% of May rents, including 97% from its office tenants amid the coronavirus mayhem.
Further, Cousins Properties maintains a solid balance sheet, with ample liquidity. The company garnered total proceeds of about $533 million in the first quarter from asset sales that reduced its net debt-to-adjusted EBITDA to 3.66 times at the end of the period. Also, the company’s $1.1-billion liquidity is sufficient to fund the remaining $200 million of development pipeline and limited near-term maturities.
However, higher construction activity is expected to increase supply of new office spaces in the company’s market. This is intensifying competition for Cousins Properties, leading to lesser scope for rent and occupancy growth.
Furthermore, an extensive development pipeline escalates its operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.
In addition, the trend in estimate revision for 2020 FFO per share does not indicate a favorable outlook for the company as it has remained unchanged over the past month. Therefore, given the above-mentioned concerns and the lack of positive estimate revisions, the stock has limited upside potential for the near term.
Shares of this Zacks Rank #3 (Hold) company have underperformed the industry it belongs to in the past year. During this period, its shares have dipped 3.3% compared with the industry’s decline of 0.6%.
Stocks to Consider
Alexander & Baldwin, Inc.’s ALEX FFO per share estimate for 2020 moved up from 22 cents to 83 cents over the past two months. The stock currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
City Office REIT, Inc.’s CIO Zacks Consensus Estimate for the ongoing-year FFO per share moved 11% north to $1.11 over the past month. The stock currently flaunts a Zacks Rank of 1.
One Liberty Properties, Inc.’s OLP Zacks Consensus Estimate for the current year’s FFO per share moved 2.2% north to $1.89 over the past two months. The stock currently sports a Zacks Rank of 1.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Cousins Properties Incorporated (CUZ) : Free Stock Analysis Report
One Liberty Properties, Inc. (OLP) : Free Stock Analysis Report
Alexander Baldwin Holdings, Inc. (ALEX) : Free Stock Analysis Report
City Office REIT, Inc. (CIO) : Free Stock Analysis Report
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