Cousins Properties Incorporated (CUZ) reported second quarter 2014 FFO (funds from operations) of 18 cents per share, beating the Zacks Consensus Estimate by a penny and also came in better than the year-ago figure of 12 cents. Robust revenue growth aided the 50% year-over-year rise in FFO per share.
However, shares of this real estate investment trust (REIT) fell 0.48% during the regular trading session on Jul 31, on broader market concerns.
Inside the Headlines
Total revenue for the quarter surged a massive 98.7% year over year to $84.5 million. It also exceeded the Zacks Consensus Estimate of $78.0 million.
Also, total same property revenue edged up 1.4% year over year to $25.7 million while total same property operating expense declined 7.0% year over year to $10.0 million. As a result, total same property net operating income (NOI) rose 7.7% year over year to $15.8 million.
In the reported quarter, Cousins Properties inked new leases or renewed prior ones for 416,000 square feet of office and retail space.
Cousins Properties divested remaining land at the Round Rock, TX site at a price of $10.0 million, which generated a gain of $1.3 million, in the second quarter. Moreover, subsequent to end of the second quarter, the company penned a deal to buy a Class A office tower – Fifth Third Center – in Uptown Charlotte, NC for $215.0 million.
The company exited second-quarter 2014 with cash and cash equivalents of $6.3 million, compared to $29.1 million at Mar 2014 end.
Common Shares Offering
Concurrent with this earnings release, Cousins Properties declared an underwritten public offering of 18.0 million common shares. On Jul 30, the company priced this equity offering and expects to reap $224.1 million, before underwriting discounts and commissions and other offering expenses, from it.
The proceeds are expected to be used for financing the buyout of the abovementioned Fifth Third Center and other corporate needs. The offering is anticipated to close on Aug 4, 2014.
Our Viewpoint
We are encouraged by Cousins Properties’ strong second-quarter results on the back of its improving operating portfolio performance. Notably, apart from second-quarter 2014, the company has an average FFO surprise of 10.8% in the trailing four quarters.
The company’s portfolio is primarily focused on the high-growth Sun Belt markets, which due to their long-term demographic trends, is expected to exhibit above-average job growth. Moreover, the company aims to shape its business on a simpler platform by specifically targeting trophy assets and opportunistic investments. This ensures a steady revenue stream.
Cousins Properties currently holds a Zacks Rank #3 (Hold). We now look forward to the other REITs that are scheduled to report next week. These include HCP, Inc. (HCP), Federal Realty Investment Trust (FRT) and Regency Centers Corp. (REG).
Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.
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