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Cousins Properties Incorporated CUZ is poised to capitalize on the favorable long-term growth fundamentals of the Sun Belt markets, including inbound business migration, steady office absorption and positive rent growth. However, a competitive landscape and huge capital outlays might act as deterrents.
The company has an unmatched portfolio of Class A office assets concentrated in the high-growth Sun Belt markets. With population influx in the region, it is well poised to witness high demand for its office spaces.
The company is seeing a recovery in demand for its high-quality, well-placed office properties as highlighted by the rebound in new leasing volume. Cousins Properties executed leases for 484,000 square feet of office space in the June-end quarter, including 361,000 square feet of new and expansion leases.
The REIT makes efforts to enhance its portfolio quality with the acquisitions of trophy assets and opportunistic developments in the high-growth Sun Belt submarkets. In July 2021, it acquired 725 Ponce in Atlanta and entered into a 50/50 joint venture with a large, institutional investor to develop a mixed-use project in Nashville. The transactions have boosted the company’s presence in the thriving Sun Belt region.
Moreover, Cousins Properties has a robust balance-sheet position. The company exited the second quarter with cash and cash equivalents of $9.8 million, and $968 million of availability under its $1-billion credit facility. A low-leveraged balance sheet provides it ample flexibility to pursue stellar growth opportunities.
However, as the coronavirus pandemic has given rise to an uncertain economic environment, the REIT is likely to keep facing pressure from higher tenant lease concessions, including free rent and tenant improvement allowances for its leasing negotiations. Stiff competition might also dent occupancy growth.
In addition, while the company’s development pipeline is accretive for value creation, it requires huge capital outlays. Also, an extensive development pipeline increases its risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.
Shares of this Zacks Rank #3 (Hold) company have appreciated 11.5%, underperforming the industry’s growth of 22.7% over the past six months. However, the estimate revisions trend for the company's 2021 FFO per share indicates a favorable outlook as estimates have moved north in past two months.
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The Zacks Consensus Estimate for Duke Realty Corporation’s DRE ongoing year’s FFO per share has been revised marginally upward over the past month. The company carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CubeSmart’s CUBE 2021 FFO per share has moved 5.7% upward over the past month. The company currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Extra Space Storage Inc.’s EXR current-year FFO per share has moved 3.6% north in the past 30 days. The company carries a Zacks Rank of 2, at present.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs
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Duke Realty Corporation (DRE) : Free Stock Analysis Report
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