Cousins Properties (CUZ - Free Report) is witnessing robust rent collections for its office assets with August office rent collections being 99% and total rent collection of 98%. The company’s top 20 customers paid 100% in the month. Moreover, flexible office customers paid 97% of August rents, while medical office customers paid 96%.
During its second-quarter earnings call, the company noted that in July it collected 98% of its rents, including 98% from office tenants, while rent collection for the second quarter was 97%, including 98% from office tenants.
The company has an unmatched portfolio of class A office assets concentrated in the high-growth Sun Belt markets. This region is seeing a population influx. The demand for office space has been high amid favorable migration trends and pro-business environment. Moreover, assets in these markets are poised to benefit from the resilient market fundamentals, with solid rent growth and absorption compared with the broader market.
Thus, with 77% of assets in close proximity to mass transit and a parking ratio of 2.9:1000, this pure-play Sun Belt office REIT with dominant market share in highly-amenitized submarkets is well positioned to capitalize on the favorable fundamentals. Its well-diversified, high-end tenant roster enables it to enjoy steady revenues despite the pandemic-led market mayhem.
The company also has compelling growth opportunities with $9 million of development NOI in 2019 growing to $71 million in 2022. Moreover, its 1.9 million-square-foot development pipeline is 82% leased, indicating the solid demand for the company’s properties. Also, a low-leveraged balance sheet and ample liquidity allows it to pursue compelling investments and leverage on strategic opportunities.
However, a competitive landscape and high supply in the office real estate market are expected to adversely impact Cousins Properties’ pricing power. Further, the coronavirus pandemic and the related setbacks continue to hinder its leasing activities and affect rent collections from retail tenants. The company’s August retail rent collections stood at 57%. As such, deferral activity is expected to continue until the pandemic subsides.
Shares of this Zacks Rank #3 (Hold) company have gained 16.7% over the past six months compared with the 22.3% rally of its industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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