Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cousins Properties Inc (CUZ, Financial) reported a strong third quarter with $0.67 per share in FFO and a 4.4% increase in same-property net operating income on a cash basis.
- The company achieved its highest quarterly leasing volume since 2019, leasing 763,000 square feet with a 7.2% cash rent roll-up.
- Cousins Properties Inc (CUZ) successfully completed its inaugural unsecured bond issuance, highlighting its strong access to capital.
- The company closed on strategic investments, including a joint venture acquisition in Midtown Atlanta and a whole loan purchase in Uptown Dallas, aligning with its Sun Belt lifestyle office strategy.
- Cousins Properties Inc (CUZ) maintains a best-in-class balance sheet with industry-leading leverage and liquidity, positioning it well for future growth opportunities.
Negative Points
- The upcoming expiration of Bank of America's lease in Charlotte is expected to temporarily impact occupancy levels.
- The private capital markets remain challenging for office assets, with limited and expensive asset-level debt and equity.
- Occupancy is projected to experience a downdraft in 2025 due to anticipated move-outs, including One Trust in Atlanta and Bank of America in Charlotte.
- The company faces potential risks with its recent loan acquisitions, including the uncertainty of being paid off at maturity.
- Cousins Properties Inc (CUZ) is navigating a bifurcated office market, with little demand for older, commodity properties, which may require significant repositioning or demolition.
Q & A Highlights
Q: Are you planning to continue leveraging your current footprint and teams, or do you see yourself looking into other Sun Belt markets?
A: Michael Connolly, CEO: We remain focused on the Sun Belt footprint we operate in today. We are evaluating new markets within the Sun Belt, such as Raleigh-Durham and South Florida, but we don't feel opportunity-constrained in our current markets.
Q: Can you provide more color on occupancy levels and how 2025 may play out?
A: Michael Connolly, CEO: We believe we can return our portfolio to normalized levels of occupancy, north of 90%. This might take a year or two, but the quality of our portfolio supports this goal. The office market is stabilizing, with lower-quality properties disappearing and high-quality buildings filling up.
Q: Can you discuss the Saint Ann Court mortgage acquisition and potential scenarios if it doesn't get paid off at maturity?
A: Michael Connolly, CEO: It's too early to speculate, but our expectation is to be paid off at maturity. If not, we'll assess our rights and remedies. We're comfortable with the quality of the collateral and our loan basis.
Q: Are there any prospects for build-to-suits or activating development land in the near term?
A: Michael Connolly, CEO: We are having more discussions about future real estate needs, including build-to-suits. While existing buildings will fill up first, development is not far behind, especially in select submarkets like the Domain.
Q: Can you provide details on the IBM lease and Meta's plans in the Austin market?
A: Michael Connolly, CEO: The IBM lease highlights challenges in private capital markets. IBM had a signed lease for a new development but couldn't secure financing. We provided a creative solution using Meta's underutilized space, benefiting all parties involved.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
