Cousins Properties Cuts Dividend

Cousins Properties Inc. (CUZ - Analyst Report), a leading real estate investment trust (REIT), has drastically reduced its third quarter dividend in order to conserve cash in the current credit-constrained market. The company has declared a third quarter dividend of $0.15 per share, down from $0.25 in the previous quarter.

The reduction in the quarterly dividend payout was based on the current estimate of taxable income. In order to maintain the REIT standard, companies are required to pay annually at least 90% of the taxable income as shareholder dividends.

Cousins Properties will pay the third quarter dividend in a combination of cash and stock. The cash component would not exceed one-third of the total dividend. Shareholders would have the right to decide on the composition of the dividends.

With the reduction in dividend, the company expects to retain a significant portion of its resources to capitalize on potential investment opportunities surfacing during the current recession. Furthermore, in order to increase liquidity, Cousins Properties have also scaled back its retail and office development pipeline.

As of March 31, 2009, the owned portfolio (including development/redevelopment properties) of the company consisted of interest in 7.5 million square feet of office space, 4.7 million square feet of retail space, 2.0 million square feet of industrial space, and 9,529 acres of land for future sale or commercial development.

In addition, Cousins Properties (including JVs) had four retail and office projects in various stages of development, totaling 1.8 million square feet. The properties are spread throughout the US, including Atlanta, Charlotte, Austin, San Francisco, Los Angeles and Washington DC.

Market fundamentals are deteriorating for office and retail landlords throughout the country due to the continued economic downturn. With high market vacancies and no job growth, rental rate growth on new leases will also be non-existent for some time.

Consequently, with no short-term growth indicators, the company represents a bleak outlook. We reiterate our Sell rating of the company.

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