Cousins Properties Inc.CUZ reported first-quarter 2016 funds from operations ("FFO") of 21 cents per share, missing the Zacks Consensus Estimate by a penny and flat year over year. Results reflected a decline in rental property revenues.
Quarter in Detail
During the quarter, rental property revenues came in at $88.5 million, down 1.7% year over year. Moreover, the figure lagged the Zacks Consensus Estimate of $93 million.
Cousins Properties leased or renewed 220,232 square feet of office space in the quarter. Same property net operating income ("NOI"), on cash basis, rose 8.6% year over year. Moreover, second generation net rent per square foot (cash basis) moved 6.3% north.
During the quarter, the company sold 100 North Point Center East, which is a 129,000-square foot office building in Atlanta, GA, for $22.0 million. On the other hand, the company started the development of 8000 Avalon, a 224,000-square foot office building in Atlanta, GA.
During the quarter, the company repurchased 1.6 million shares of common stock for a total of $13.7 million. This brought the total share buyback to 6.8 million shares for $61.5 million under its Sep 2015 share repurchase program which authorizes up to $100 million in share repurchases over the next two years.
Finally, Cousins Properties exited the quarter with cash and cash equivalents of $5.5 million, up from $2.0 million at the end of the prior year.
Cousins Properties has withdrawn its 2016 FFO guidance taking into consideration the recent announcement regarding the signed definitive merger and spin-off agreement. The company expects to issue the 2017 FFO outlook after the completion of the deal.
Notably, on Apr 29, Cousins Properties and Parkway Properties, Inc. PKY disclosed a definitive agreement for a stock-for-stock merger and the simultaneous spin-off of the Houston-based assets of both companies into a new publicly traded REIT. As a result, Cousins Properties is set to emerge as a premier Sun Belt urban office REIT with a class A office portfolio.
While we are encouraged with the definitive deal with Parkway Properties, we are disappointed with a lower-than-expected performance of Cousins Properties in the first quarter. In fact, the lag in revenues clearly remains a concern. Moreover, a moderate pace of growth amid new supply in the office market is exerting pressure on rent and occupancies.
Cousins Properties currently carries a Zacks Rank #4 (Sell). Investors interested in the REIT industry may consider stocks like CoreSite Realty Corporation COR and Public Storage PSA . Both these stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.