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Cousins Properties Forms JV, Pre-leases 10000 Avalon to AXIS

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Recently, Cousins Properties (CUZ - Free Report) announced that it has formed a joint venture (JV) with real estate firm — Hines —  for the development of a 251,000-square-foot Class A office building in Atlanta. The project is expected to cost nearly $97 million.

Specifically, Cousins has majority stake in the JV with 90% interest, while Hines has 10% stake. The development duo is expected to repeat the success of their first JV project — 8000 Avalon — which is currently 98% leased to high-quality tenants like Microsoft.

In fact, this alliance has already landed a pre-lease deal with AXIS Reinsurance Co. — a subsidiary of AXIS Capital Holdings Limited (AXS - Free Report) . The anchor tenant will occupy 76,000 square feet of space for a term of 15 years.

While construction on the building will begin this July, initial occupancy is expected to commence in 2020. In addition, the 10-story mid-rise building will be situated adjacent to 8000 Avalon. It will also mark the second and final office building in the mixed-use development of Avalon, GA. Strategic location of the building in a mixed-use development will likely enable the office building to enjoy high demand.

Notably, mixed-use developments have gained popularity for their solid neighborhood character, greater housing variety and density. Such developments diminish the distance between housing, workplaces, retail businesses, as well as other amenities and destinations.

Hence, such developmental work enables the companies to grab attention of target people, who prefer to live, work and play in the same area – a trend that drove development in several other cities in the United States.

Per management, the property is receiving favorable response from potential tenants interested to associate with the mixed-use project. These further cements our view that the property will witness high leasing activity.

Per the company, Cousins has a significant presence in Atlanta, with a portfolio spanning 6.6 million square feet of space, which was 91% leased as of Jun 30, 2018. Nonetheless, intense competition from developers, owners and operators of office affects the company’s ability to attract and retain tenants at relatively higher rents than its competitors.

Also, shares of this Zacks Rank #3 (Hold) company have outperformed its industry in the past six months. During this time frame, shares of the company have climbed 7.5%, while the industry recorded growth of 6.3%.

Stocks Worth a Look

A few better-ranked stocks from the same space are PS Business Parks (PSB - Free Report) and Columbia Property Trust, Inc. (CXP - Free Report) . Both stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PS Business Parks’ Zacks Consensus Estimate for 2018 funds from operations (FFO) per share has been revised 0.3% upward over the past month. Its shares have returned 15.5% in the past three months.

Columbia Property Trust’s FFO per share estimates for 2018 remained unchanged at $1.46 in the past month. The stock has gained 14.8% in three months’ time.

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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