Cousins Properties’ (CUZ - Free Report) unmatched portfolio of Class A office assets, located in Sun Belt markets, enables it to enjoy high demand. Moreover, the company is focusing on trophy assets and opportunistic developments in targeted submarkets to strengthen its platform. These efforts to fortify its position in markets, with robust rent growth, augur well for long-term growth.
However, stiff competition from other market players remains a concern before the company as this impacts its ability to retain and attract tenants at higher rents. Further, rate hike adds to its woes.
Notably, Cousins Properties owns a portfolio of Class A office assets which is concentrated over the high-growth Sun Belt markets, which, due to their long-term demographic trends, exhibit above-average job growth. Also, assets in these markets command higher rents compared with the broader market. In fact, the majority of the company’s office portfolio is situated in the best urban submarkets in each city, offering the company ample room for growth. Further, Cousins Properties has a well-diversified high-end tenant roster with less dependence on a single industry.
Additionally, the company has been making concerted efforts to build a stronger platform with trophy assets and opportunistic developments in high-barrier-to-entry submarkets in Atlanta, Austin, Charlotte, Phoenix and Tampa. In fact, the Class A office real estate environment in these markets has experienced robust net growth and positive net absorption in recent years.
Moreover, Cousins Properties focuses on maintaining a disciplined balance sheet, with ample liquidity to leverage on improving market fundamentals and raise operational efficiency, which aids in long-term growth. The company has also made significant efforts to increase its unencumbered asset pool.
Over the past three months, shares of this Zacks Rank #3 (Hold) stock have outperformed the industry it belongs to. During this period, shares of the company have gained 12.1% against the industry’s growth of 5%. Moreover, the trend in estimate revisions of current-year funds from operations (FFO) per share indicates a steady earnings outlook for the company.
Nevertheless, Cousins Properties faces intense competition from developers, owners and operators of office properties and other commercial real estates, including sublease space available from its tenants. Moreover, supply is increasing in the market therefore any robust growth is likely to remain elusive in the near term.
Further, rise in interest rates poses a challenge for Cousins Properties. This is because the company’s ability to refinance existing debt would be restricted while interest cost on new debt would increase. This could adversely affect the company’s financial results and consequently dent its dividend payout.
Stocks to Consider
A few better-ranked stocks from the same space include LaSalle Hotel Properties , Park Hotels & Resorts Inc. (PK - Free Report) and Arbor Realty Trust (ABR - Free Report) . While LaSalle Hotel and Park Hotels & Resorts sport a Zacks Rank of 1 (Strong Buy), Arbor Realty carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
LaSalle Hotel’s FFO per share estimates for 2018 have been revised upward marginally to $2.21 over the past month. The stock has gained 25.7% during the past six months.
Park Hotels & Resorts’ Zacks Consensus Estimate for 2018 FFO per share has been revised upward marginally to $2.73 over the past month. The stock has rallied 5.2% in six months’ time.
Arbor Realty’s Zacks Consensus Estimate for 2018 FFO per share has remained unchanged at $1.03 over the past month. Its shares have returned 15.3% in the past six months.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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