Cousins Reports Results for the Third Quarter of 2012

Cousins Properties Incorporated (NYSE:CUZ):

Highlights

  • Funds From Operations was $0.25 per share, adjusting for special items FFO was $0.15 per share.
  • Completed the sale of Cousins Properties Services for a gain of $7.4 million.
  • Acquired 2100 Ross Avenue in Dallas, Texas.
  • Commenced operations at Emory Point in Atlanta, Georgia and Mahan Village in Tallahassee, Florida.
  • Same property net operating income increased 4.1% for the first nine months of 2012.

Cousins Properties Incorporated (NYSE:CUZ) today reported its results of operations for the quarter ended September 30, 2012.

“It was an active and productive third quarter, with the execution of several encouraging transactions and another solid performance for the core operating portfolio,” said Larry Gellerstedt, CEO of Cousins. “We remain focused on simplifying the platform, leasing vacant space, and sourcing additional investment opportunities.”

Portfolio Activity

  • Leased 175,000 square feet of office space and 119,000 square feet of retail space.
  • The office and retail portfolios finished the quarter 91% and 89% leased, respectively, on a same property basis.
  • Subsequent to quarter end, executed 25,000 square feet of additional leases at Promenade in Atlanta, Georgia, bringing the property to 72% leased.

Transaction Activity

  • Completed the sale of Cousins Properties Services, a business unit providing third-party services to owners of Class A office buildings, to Cushman & Wakefield.
  • Acquired 2100 Ross Avenue, a 67% leased, 844,000-square-foot, Class-A office tower located in the Arts District submarket of Dallas, Texas, for cash of $59.2 million or $70 per square-foot.
  • Commenced operations at Emory Point, a mixed-use development comprised of 443 apartments and 80,000 square feet of retail space, located adjacent to Emory University in Atlanta, Georgia.
  • Commenced operations at Mahan Village, a 147,000-square-foot grocery-anchored retail center development in Tallahassee, Florida.
  • Entered into agreements to sell Avenue Webb Gin and Avenue Forsyth, two retail lifestyle centers in Atlanta, Georgia.
  • Subsequent to quarter end, completed the sale of Cosmopolitan Center, an office complex in Atlanta, Georgia slated for re-development, for $7.0 million.

Financial Results

FFO was $25.7 million, or $0.25 per share, for the third quarter of 2012 compared with $14.3 million, or $0.14 per share, for the third quarter of 2011. FFO was $52.3 million, or $0.50 per share, for the nine months ended September 30, 2012, compared with $33.3 million, or $0.32 per share, for the same period in 2011.

Net income available to common stockholders was $9.4 million, or $0.09 per share, for the third quarter of 2012 compared with net income available of $188,000, or $0.00 per share, for the third quarter of 2011. Net income available was $2.7 million, or $0.03 per share, for the nine months ended September 30, 2012, compared with net loss available of ($12.4) million, or ($0.12) per share, for the same period in 2011.

During the third quarter of 2012, the Company recorded several special items in FFO. These items included a $7.4 million gain on the sale of Cousins Properties Services and income of $3.4 million associated with a participation interest in a previously completed development in Austin, Texas. Additionally, the Company completed a strategic re-organization which generated $574,000 in severance expense in the third quarter of 2012 and is expected to generate additional severance expense in the fourth quarter of 2012. As a result of this re-organization, the Company anticipates a reduction in general and administrative expenses for 2013. The Company also recorded a charge of $488,000 on its investment in Verde Realty as a result of Verde’s recently announced merger. The completion of this merger is currently anticipated to close in the fourth quarter of 2012 and will result in the complete liquidation of the Company’s investment in Verde. The following table reconciles FFO to FFO before these special items for the three months ended September 30, 2012:

Actual Per
($000) Share
FFO $ 25,685 $ 0.25
Gain on sale of Cousins Properties Services (7,384 ) (0.07 )
Participation interest income (3,366 ) (0.03 )
Severance/reorganization expenses 574 0.01
Verde charge 488 0.00
FFO before special items $ 15,997 $ 0.15

Investor Conference Call and Webcast

The Company will conduct a conference call at 10:00 a.m. (Eastern Time) on Wednesday, October 31, 2012, to discuss the results of the quarter ended September 30, 2012. The number to call for this interactive teleconference is (212) 231-2905.

A replay of the conference call will be available for 14 days by dialing (402) 977-9140 and entering the passcode 21607107. The replay can be accessed on the Company’s website, www.cousinsproperties.com, through the “Q3 2012 Cousins Properties Incorporated Earnings Conference Call” link on the Investor Relations page.

Cousins Properties Incorporated is a leading diversified real estate company with extensive experience in development, acquisition, financing, management and leasing. Based in Atlanta, the Company actively invests in office and retail projects. Since its founding in 1958, Cousins has developed 20 million square feet of office space and 20 million square feet of retail space. Cousins has built and maintained an industry-wide reputation for innovative and sustainable developments, premium management services and top quality leadership. The Company creates and maintains value in real estate assets for the benefit of shareholders, and partners. Cousins Properties is a fully integrated equity real estate investment trust (REIT) and trades on the New York Stock Exchange under the symbol CUZ.

The Consolidated Statements of Operations, Consolidated Balance Sheets and a schedule entitled Funds From Operations, which reconciles Net Income (Loss) Available to FFO, and a schedule entitled Same Property Information, which reconciles same property net operating income to rental property revenues and rental property expenses, are attached to this press release. More detailed information on Net Income (Loss) Available and FFO results is included in the “Net Income and Funds From Operations – Supplemental Detail” schedule, which is included along with other supplemental information in the Company’s Current Report on Form 8-K, which the Company is furnishing to the Securities and Exchange Commission (“SEC”), and, which can be viewed through the “Supplemental Information” and “SEC Filings” links on the “Investor Information & Filings” link of the Investor Relations page of the Company’s website at www.cousinsproperties.com. This information may also be obtained by calling the Company’s Investor Relations Department at (404) 407-1984.

Certain matters discussed in this news release are forward-looking statements within the meaning of the federal securities laws and are subject to uncertainties and risk. These include, but are not limited to, availability and terms of capital and financing; national and local economic conditions; the real estate industry in general and in specific markets; the potential for recognition of additional impairments due to continued adverse market and economic conditions or changes in Company business and financial strategy; leasing risks; loss of key personnel; potential acquisitions, new investments and/or dispositions; the failure of purchase, sale or other contracts to ultimately close; the financial condition of existing tenants; competition from other developers or investors; the risks associated with real estate development and acquisitions; the availability of buyers and adequate pricing if the Company intends to liquidate certain assets; rising interest and insurance rates; the availability of sufficient development or investment opportunities; environmental matters; the financial condition and liquidity of, or disputes with, joint venture partners; any failure to comply with debt covenants under credit agreements; any failure to continue to qualify for taxation as a real estate investment trust and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including those described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The words “believes,” “expects,” “anticipates,” “estimates,” ”plans,” “may,” “intend,” “will” or similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in any forward-looking statement are reasonable, the Company can give no assurance that such plans, intentions or expectations will be achieved. Such forward-looking statements are based on current expectations and speak as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise, except as required under U.S. federal securities laws.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)

Three Months Ended
September 30,

Nine Months Ended

September 30,

2012201120122011
REVENUES:
Rental property revenues $32,592 $ 27,022 $92,846 $ 78,802
Fee income 7,343 3,909 12,985 10,729
Residential lot and outparcel sales 732 165 2,216 410
Other 3,061 447 4,587 6,154
43,728 31,543 112,634 96,095
COSTS AND EXPENSES:
Rental property operating expenses 14,400 11,775 39,595 33,658
Residential lot and outparcel cost of sales 354 158 1,334 303
General and administrative expenses 5,255 4,295 17,523 17,828
Interest expense 5,793 6,601 17,936 21,503
Reimbursed expenses 1,235 1,866 3,968 4,749
Depreciation and amortization 11,567 8,719 32,526 25,562
Impairment loss 488 - 488 3,508
Separation expenses 574 15 866 193
Other 2,257 773 3,504 4,760
41,923 34,202 117,740 112,064
LOSS ON EXTINGUISHMENT OF DEBT- (74 ) (94) (74 )

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES, UNCONSOLIDATED JOINT VENTURES AND SALE OF INVESTMENT PROPERTIES

1,805 (2,733 ) (5,200) (16,043 )
BENEFIT (PROVISION) FOR INCOME TAXES FROM OPERATIONS(60) 180 (120) 217
INCOME FROM UNCONSOLIDATED JOINT VENTURES2,269 2,660 14,217 7,468

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES

4,014 107 8,897 (8,358 )
GAIN ON SALE OF INVESTMENT PROPERTIES60 59 146 177
INCOME (LOSS) FROM CONTINUING OPERATIONS4,074 166 9,043 (8,181 )
INCOME (LOSS) FROM DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations 1,760 2,619 (5,093) 6,503
Gain on sale of discontinued operations 7,444 2,821 8,204 2,437
9,204 5,440 3,111 8,940
NET INCOME13,278 5,606 12,154 759
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS(608) (2,192 ) 259 (3,454 )
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST12,670 3,414 12,413 (2,695 )
DIVIDENDS TO PREFERRED STOCKHOLDERS(3,226) (3,226 ) (9,680) (9,680 )
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS$9,444 $ 188 $2,733 $ (12,375 )
PER COMMON SHARE INFORMATION - BASIC AND DILUTED:
Income (loss) from continuing operations attributable to controlling interest $- $ (0.05 ) $- $ (0.21 )
Income from discontinued operations 0.09 0.05 0.03 0.09
Net income (loss) available to common stockholders $0.09 $ 0.00 $0.03 $ (0.12 )
WEIGHTED AVERAGE SHARES - BASIC104,193 103,715 104,120 103,631
WEIGHTED AVERAGE SHARES - DILUTED104,203 103,715 104,125 103,631
DIVIDENDS PER COMMON SHARE$0.045 $ 0.045 $0.135 $ 0.135
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
FUNDS FROM OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Unaudited, in thousands, except per share amounts)
Three Months EndedNine Months Ended
September 30,September 30,
2012201120122011
Net Income (Loss) Available to Common Stockholders$9,444$188$2,733$(12,375)
Depreciation and amortization:
Consolidated properties 11,567 8,719 32,526 25,562
Discontinued properties 2,575 4,650 8,622 14,721
Share of unconsolidated joint ventures 2,480 2,444 7,646 7,790
Depreciation of furniture, fixtures and equipment:
Consolidated properties (256 ) (388 ) (843 ) (1,323 )
Discontinued properties - - - -
Share of unconsolidated joint ventures (5 ) (5 ) (15 ) (15 )

Impairment loss on depreciable investment property net of amounts attributable to noncontrolling interests

- - 10,190 -
(Gain) loss on sale of investment properties:
Consolidated properties including amounts attributable to noncontrolling interests (60 ) (59 ) (146 ) (177 )
Discontinued properties (7,444 ) (1,240 ) (8,204 ) (856 )
Share of unconsolidated joint ventures - - (7,509 ) -
Gain on sale of third party management and leasing business 7,384 - 7,384 -
Other - - (59 ) -
Funds From Operations Available to Common Stockholders$25,685$14,309$52,325$33,327
Per Common Share - Basic and Diluted:
Net Income (Loss) Available$0.09$0.00$0.03$(0.12)
Funds From Operations$0.25$0.14$0.50$0.32
Weighted Average Shares - Basic104,193103,715104,120103,631
Weighted Average Shares - Diluted104,203103,718104,125103,642

The table above shows Funds From Operations Available to Common Stockholders (“FFO”) and the related reconciliation to Net Income (Loss) Available to Common Stockholders for Cousins Properties Incorporated and Subsidiaries.  The Company calculated FFO in accordance with the National Association of Real Estate Investment Trusts' ("NAREIT") definition, which is net income (loss) available to common stockholders (computed in accordance with accounting principles generally accepted in the United States ("GAAP")), excluding extraordinary items, cumulative effect of change in accounting principle and gains or losses from sales of depreciable property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

FFO is used by industry analysts and investors as a supplemental measure of an equity REIT’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.  Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income.  Management believes that the use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful.  Company management evaluates operating performance in part based on FFO.  Additionally, the Company uses FFO along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and other key employees.

Management believes that FFO before special items provides analysts and investors with appropriate information related to its core operations and for the comparability of the results of its operations with other real estate companies.

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
September 30, 2012 December 31, 2011

ASSETS

(unaudited)
PROPERTIES:

Operating properties, net of accumulated depreciation of $247,774 and $289,473 in 2012 and 2011, respectively

$674,615 $ 884,652
Projects under development 24,668 11,325
Land held 51,217 54,132
Residential lots 11,965 13,195
Other 431 637
Total properties 762,896 963,941

OPERATING PROPERTIES AND RELATED ASSETS HELD FOR SALE, net of accumulated depreciation of $46,936 in 2012

174,054 -
CASH AND CASH EQUIVALENTS5,469 4,858
RESTRICTED CASH2,749 4,929

NOTES AND ACCOUNTS RECEIVABLE, net of allowance for doubtful accounts of $1,207 and $5,100 in 2012 and 2011, respectively

11,163 11,359
DEFERRED RENTS RECEIVABLE37,840 37,141
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES139,782 160,587
OTHER ASSETS65,148 52,720
TOTAL ASSETS$1,199,101 $ 1,235,535

LIABILITIES AND EQUITY

NOTES PAYABLE$518,630 $ 539,442
ACCOUNTS PAYABLE AND OTHER LIABILITIES40,073 38,592
DEFERRED INCOME12,498 17,343
TOTAL LIABILITIES571,201 595,377
COMMITMENTS AND CONTINGENT LIABILITIES
REDEEMABLE NONCONTROLLING INTERESTS- 2,763
STOCKHOLDERS’ INVESTMENT:
Preferred stock, 20,000,000 shares authorized, $1 par value:

7.75% Series A cumulative redeemable preferred stock, $25 liquidation preference; 2,993,090 shares issued and outstanding in 2012 and 2011

74,827 74,827

7.50% Series B cumulative redeemable preferred stock, $25 liquidation preference; 3,791,000 shares issued and outstanding in 2012 and 2011

94,775 94,775

Common stock, $1 par value, 250,000,000 shares authorized, 107,705,782 and 107,272,078 shares issued in 2012 and 2011, respectively

107,706 107,272
Additional paid-in capital 689,194 687,835
Treasury stock at cost, 3,570,082 shares in 2012 and 2011 (86,840) (86,840 )
Distributions in excess of cumulative net income (285,508) (274,177 )
TOTAL STOCKHOLDERS’ INVESTMENT594,154 603,692
Nonredeemable noncontrolling interests 33,746 33,703
TOTAL EQUITY627,900 637,395
TOTAL LIABILITIES AND EQUITY$1,199,101 $ 1,235,535
COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
SAME PROPERTY INFORMATION
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Unaudited, in thousands)
Three Months EndedNine Months Ended
September 30,September 30,
2012201120122011
Net Operating Income - Consolidated Properties
Rental property revenues $ 32,592 $ 27,022 $ 92,846 $ 78,802
Rental property expenses 14,400 11,775 39,595 33,658
Net Operating Income - Consolidated Properties18,19215,24753,25145,144
Net Operating Income - Discontinued Operations
Rental property revenues 5,055 10,519 18,968 31,720
Rental property expenses 1,508 4,391 6,001 12,237
Net Operating Income - Discontinued Operations3,5476,12812,96719,483
Net Operating Income - Unconsolidated Joint Ventures2,6702,6477,9447,938
Total Net Operating Income$24,409$24,022$74,162$72,565
Net Operating Income:
Same property 24,446 23,752 73,385 70,512
Non-same property 3,174 3,675 10,920 12,138
Net Operating Income$27,620$27,426$84,305$82,650

This schedule shows same property net operating income and the related reconciliation to rental property revenues and rental property expenses.  Net Operating Income is used by industry analysts, investors and Company management to measure operating performance of the Company’s properties.  Net Operating Income, which is rental property revenues less rental property operating expenses, excludes certain components from net income in order to provide results that are more closely related to a property’s results of operations.  Certain items, such as interest expense, while included in FFO and net income, do not affect the operating performance of a real estate asset and are often incurred at the corporate level as opposed to the property level.  As a result, management uses only those income and expense items that are incurred at the property level to evaluate a property’s performance.  Depreciation and amortization are also excluded from Net Operating Income.  Additionally, appraisals of real estate are based on the value of an income stream before interest and depreciation.  Same Property Net Operating Income includes those office and retail properties that have been fully operational in each of the comparable reporting periods.  Same Property Net Operating Income allows analysts, investors and management to analyze continuing operations and evaluate the growth trend of the Company’s portfolio.

Contacts:

Cousins Properties Incorporated
Gregg D. Adzema, 404-407-1116
Executive Vice President and Chief Financial Officer
greggadzema@cousinsproperties.com
or
Cameron Golden, 404-407-1984
Vice President, Investor Relations and
Corporate Communications
camerongolden@cousinsproperties.com
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