Higher Revs Drive Cousins Properties' Q1 FFO - Analyst Blog

Cousins Properties Incorporated CUZ reported positive funds from operations (FFO) surprise of 11.8% in first-quarter 2014, driven by a significant rise in revenues. To be particular, this equity real estate investment trust (REIT) reported the first quarter 2014 FFO of 19 cents per share, beating the Zacks Consensus Estimate by 2 cents. FFO also came in better than the year-ago figure of 11 cents.

Total revenue for the quarter grew more than twofold year over year to $81.7 million. It also exceeded the Zacks Consensus Estimate of $78.0 million.

Quarter in Detail

Total same property revenue edged up 0.8% year over year to $25.4 million while total same property operating expense declined 1.3% year over year to $10.1 million. As a result, total same property net operating income (NOI) rose 2.2% year over year to $15.2 million.

In the reported quarter, Cousins Properties inked new leases or renewed prior ones for 454,000 square feet of office and retail space.

Portfolio Restructuring Activity

Cousins Properties divested 600 University Park office building at a price of $19.7 million, which generated a gain of $6.4 million.

Liquidity

Cousins Properties had cash and cash equivalents of $29.1 million at Mar 2014 end, substantially higher than $6.0 million at the end of Mar 2013.

In the quarter, Cousins Properties issued 8.7 million common stocks for net proceeds of $98.6 million.

Dividend

The company raised the common stock dividend to 7.5 cents per share from 4.5 cents per share. This 66.7% hike in dividend is sure to boost the investors' confidence in the stock.

Our Take

We are encouraged by Cousins Properties' decent first-quarter results on the back of its strong operating portfolio performance. Notably, excluding first-quarter 2014, the company has an average FFO surprise of 5.82% 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 #2 (Buy). Investors interested in equity REITs may also consider stocks like BioMed Realty Trust Inc. BMR, Chesapeake Lodging Trust CHSP and CorEnergy Infrastructure Trust, Inc. CORR. All these stocks carry the same Zacks Rank as Cousins Properties.

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.