As part of the long-term strategy to upgrade its overall portfolio with newer high-quality assets, Cousins Properties Inc. ( CUZ ), a Georgia-based real estate investment trust (REIT), has recently completed the acquisition of Promenade Two - a 774,000 square-foot Class-A office building in the Midtown submarket of Atlanta, Georgia, for $134.7 million in cash.
The purchase price was well below the replacement cost of the property and provided a significant growth opportunity for the company with a first-class tenant base and no considerable lease expirations until 2016. In addition, with Promenade Two in its kitty, Cousins Properties presently has a sought-after asset in all three urban submarkets along the 'Peachtree Corridor' of Atlanta.
Cousins Properties has a diversified portfolio with a broad array of product types - office, retail, urban residential and single-family communities that mitigates operating risks associated with the economic down cycles. In 2008, Cousins Properties reorganized its business according to the functional lines and eliminated its division structure, which was primarily based on product types.
Under its new structure, the company has five reportable segments: Office, Retail, Land, Third-Party Management and Multi-Family. The Office and Retail segments comprise operations of consolidated and joint venture office and retail properties, respectively. The Land segment primarily includes operations for land held for future development. The Third-Party Management segment includes projects where the company manages, leases and develops properties for third parties. The Multi-Family segment includes operations for the development and sale of multi-family real estate.
The spread-out product portfolio has ensured a relatively steady source of revenue generation for Cousins Properties over the years. Furthermore, the portfolio is primarily concentrated in high-growth Sun Belt markets, which due to their long-term demographic trends, should exhibit above-average growth in the coming quarters.
Cousins Properties is currently shoring up its balance sheet and increasing its liquidity by selling non-core assets. At the same time, the company remains focused on leasing activities and intends to maintain steady occupancy levels across its portfolio.
We maintain our 'Neutral' recommendation on Cousins Properties, which currently has a Zacks #3 Rank that translates into a short-term 'Hold' rating. We also have a 'Neutral' rating and a Zacks #3 Rank for Duke Realty Corp. ( DRE ), one of the competitors of Cousins Properties.