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Cousins Properties Raises '19 View on Strategic Transactions

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Shares of Cousins Properties Incorporated (CUZ - Free Report) inched up 1% during yesterday’s trading hours as the company announced an increase in its 2019 earnings guidance on the back of three strategic transactions it signed in Atlanta.

These transactions are expected to be immediately accretive to its 2019 results. Accordingly, the company now expects 2019 funds from operations (FFO) per share to be 70-75 cents, up from 61-65 cents, provided earlier.

Transaction Details

On Feb 26, Cousins completed the sale of its air rights for nearly eight acres in an area at Downtown Atlanta known as The Gulch. The rights were sold to developer CIM Group for a gross price of $13.25 million. It will record $13.1 million as gain on land sale. Additionally, the company has entered into an agreement with CIM, per which Cousins will retain office development rights on the property.

On Mar 1, the office landlord entered into an agreement with Norfolk Southern Corporation (NSC - Free Report) to develop the new headquarters of the latter at 650 West Peachtree in Midtown Atlanta. It is situated near Georgia Tech and is nearby the North Avenue MARTA station. Norfolk Southern had earlier acquired the land from Cousins and will own the development. Construction will commence in the ongoing quarter, with expected delivery targeted for third-quarter 2021.

Cousins will serve as fee developer and will have no funding requirements. Accordingly, it will recognize fee income of $52.3 million through 2022 for this development.

Concurrent with the development agreement, the company also acquired 1200 Peachtree — a Class A office building — from Norfolk Southern for $82 million. The 370,000-square-foot building is located in Midtown Atlanta and was recently revamped with significant upgrades.

Norfolk Southern has signed a triple net lease for the full building and will continue to occupy the building until it relocates to its new headquarters. The lease will expire on Dec 31, 2021.

Buying 1200 Peachtree is a strategic fit for Cousins as it gives the company additional ownership in Midtown Atlanta. It already owns the adjacent Promenade office tower. Additionally, Cousins will recognize the associated GAAP net operating income (NOI), amounting to$8 million, for the 10-month ownership period in 2019.

Per management, the acquisition of 1200 Peachtree and the retention of development rights for The Gulch has opened up additional value accretion opportunities over the long term, while boosting the company’s 2019 results.  

The company currently carries a Zacks Rank #3 (Hold).

Stocks Worth a Look

A few better-ranked stocks from the same industry are Boston Properties, Inc. (BXP - Free Report) and Piedmont Office Realty Trust, Inc. (PDM - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Properties’ Zacks Consensus Estimate for 2019 FFO per share has been revised 0.9% upward to $6.90 over the past month.

Piedmont Office Realty Trust’s FFO per share estimates for the current year inched up 1.1% to $1.78 in a month’s time.

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