Cousins Properties(CUZ) - 2024 Q2 - Quarterly Results

Earnings Release Financial Results Net income decreased in Q2 2024 due to higher depreciation, while FFO remained stable for the quarter and slightly increased year-to-date | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income (millions) | $7.8 | $22.6 | $21.1 | $44.8 | | Net Income per Share | $0.05 | $0.15 | $0.14 | $0.29 | | FFO (millions) | $103.3 | $103.0 | $202.8 | $201.0 | | FFO per Share | $0.68 | $0.68 | $1.33 | $1.32 | Operations and Leasing Activity The company achieved strong operational performance in Q2 2024, marked by increased NOI and robust leasing activity | Metric | Q2 2024 Change | YTD 2024 Change | | :--- | :--- | :--- | | Same Property NOI (Cash-Basis) | +5.1% | +5.8% | | Second Gen. Net Rent (Cash-Basis) | +18.2% | +11.7% | - Executed 391,000 square feet of office leases in Q2 2024, with new and expansion leases accounting for 61% of the total activity[65] - Year-to-date leasing activity reached 794,000 square feet, with new and expansion leases representing 66% of the total[67] Financing, Investing, and Guidance The company secured investment-grade credit ratings, invested in mezzanine loans, and raised its full-year FFO guidance - Received corporate investment grade credit ratings of BBB from S&P and Baa2 from Moody's[53] - Acquired two mezzanine loans for $27.2 million with a weighted average spread of 8.66% over SOFR[53] | Guidance Per Share | Updated 2024 Range | Previous 2024 Range | | :--- | :--- | :--- | | Net Income | $0.31 - $0.36 | $0.32 - $0.39 | | FFO | $2.63 - $2.68 | $2.60 - $2.67 | Company Information Company Overview Cousins Properties is an Atlanta-based REIT specializing in Class A office buildings in high-growth Sun Belt markets - Cousins Properties is a REIT specializing in Class A office buildings located in high-growth Sun Belt markets[50] - The company's strategy is based on a simple platform, trophy assets, and opportunistic investments[50] | Rating Agency | Corporate Credit Rating | | :--- | :--- | | S&P Global Ratings | BBB | | Moody's Investors Service | Baa2 | Financial Statements Consolidated Balance Sheets Total assets slightly increased to $7.70 billion by Q2 2024, while liabilities rose and equity slightly decreased | Balance Sheet Item (in thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Real Estate Assets | $7,072,297 | $7,062,705 | | Total Assets | $7,700,528 | $7,634,474 | | Notes Payable | $2,586,732 | $2,457,627 | | Total Liabilities | $3,223,024 | $3,086,161 | | Total Equity | $4,477,504 | $4,548,313 | Consolidated Statements of Operations Q2 2024 revenues increased, but net income declined due to higher depreciation, a trend also seen year-to-date | Income Statement (in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Rental property revenues | $211,474 | $203,954 | | Total revenues | $212,978 | $204,320 | | Depreciation and amortization | $95,415 | $80,269 | | Net income available to common stockholders | $7,840 | $22,621 | | Income Statement (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Rental property revenues | $420,292 | $404,030 | | Total revenues | $422,219 | $407,048 | | Depreciation and amortization | $181,645 | $156,039 | | Net income available to common stockholders | $21,128 | $44,817 | Key Metrics & Funds From Operations (FFO) Key Performance Metrics The company reported strong occupancy and NOI growth in Q2 2024, with a slight improvement in its Net Debt to EBITDAre ratio | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Office Weighted Average Occupancy | 88.5% | 88.4% | 87.7% | | Change in Cash-Basis Same Property NOI (YoY) | 5.1% | 6.6% | 3.7% | | Change in Cash-Basis Second Gen. Net Rent | 18.2% | 5.3% | 7.9% | | Net Debt/Annualized EBITDAre | 5.12x | 5.25x | 4.89x | Funds From Operations - Summary FFO remained stable in Q2 2024 at $0.68 per diluted share, with a slight year-to-date increase despite higher interest expenses | FFO Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | FFO (in thousands) | $103,346 | $102,951 | $202,842 | $398,289 (YTD 2023) | | FFO per Share | $0.68 | $0.68 | $1.33 | $2.62 (YTD 2023) | Portfolio Analysis Portfolio Statistics The portfolio is concentrated in Sun Belt markets, with 91.2% leased and 88.5% occupied across 18.8 million square feet | Market | % of Portfolio NOI (Q2 2024) | | :--- | :--- | | Atlanta | 36.0% | | Austin | 32.8% | | Tampa | 8.9% | | Phoenix | 7.9% | | Charlotte | 7.8% | | Houston | 4.1% | | Dallas | 2.5% | | Portfolio Metric | Q2 2024 | | :--- | :--- | | Total Office Rentable SF | 18,835,000 | | % Leased (End of Period) | 91.2% | | Weighted Average Occupancy | 88.5% | Same Property Performance Same property NOI grew 4.2% (GAAP) and 5.1% (cash-basis) in Q2 2024, driven by revenue growth outpacing expenses | Same Property Performance (Q2 2024 vs Q2 2023) | 2024 ($ in thousands) | 2023 ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Rental Property Revenues | $203,906 | $195,895 | 4.1% | | Rental Property Operating Expenses | $68,524 | $66,015 | 3.8% | | Same Property NOI | $135,382 | $129,880 | 4.2% | | Cash-Basis Same Property NOI | $123,967 | $118,007 | 5.1% | - For the six months ended June 30, 2024, cash-basis same property NOI increased by 5.8% year-over-year[5] Office Leasing Activity Q2 2024 saw 390,586 square feet leased with strong second-generation rent increases of 18.2% cash-basis and 37.6% straight-line | Leasing Metric (Q2 2024) | Value | | :--- | :--- | | Net Leased Square Feet | 390,586 | | Number of Transactions | 40 | | Average Lease Term (Years) | 8.6 | | Net Effective Rent (per sq. ft.) | $24.85 | | Second Generation Rent Increase | Q2 2024 | YTD 2024 | | :--- | :--- | :--- | | Straight-Line Basis | 37.6% | 28.8% | | Cash-Basis | 18.2% | 11.7% | Office Lease Expirations The company maintains a staggered lease expiration schedule, with 9.7% of leased space expiring in 2025 | Year of Expiration | Square Feet Expiring | % of Leased Space | | :--- | :--- | :--- | | 2024 | 383,044 | 2.3% | | 2025 | 1,610,398 | 9.7% | | 2026 | 1,304,333 | 7.8% | | 2027 | 1,589,964 | 9.6% | | 2028 | 1,604,869 | 9.6% | - Leases expiring in 2033 and thereafter represent the largest block, accounting for 21.3% of the total leased space[10] Top 20 Office Tenants The top 20 tenants contribute 38.2% of annualized rent, led by Amazon, with a weighted average remaining lease term of 6.3 years - The top 20 tenants account for 38.2% of the company's share of annualized rent[12] | Rank | Tenant | % of Annualized Rent | Weighted Avg. Remaining Lease Term (Years) | | :--- | :--- | :--- | :--- | | 1 | Amazon | 9.1% | 5.7 | | 2 | NCR Voyix | 5.4% | 8.9 | | 3 | ExxonMobil | 3.3% | 7.2 | | 4 | Meta Platforms | 2.5% | 7.1 | | 5 | Expedia | 2.3% | 6.8 | Investment & Development Activity Investment Activity The company completed significant property acquisitions and developments between 2019-2022, alongside strategic dispositions - Completed property developments from 2019-2022 totaled 2,162,000 square feet with a total project cost of $858 million[16] - Completed operating property acquisitions from 2019-2022 totaled 8,870,000 square feet with a total price of over $1 billion[16] - Completed property dispositions between 2020 and 2022 included major assets like Hearst Tower and Burnett Plaza[18] Development Pipeline The active development pipeline includes two major projects with a company share of $441.6 million, notably the 98% leased Domain 9 | Project | Type | Market | Company's Share of Cost (thousands) | % Leased | Estimated Stabilization | | :--- | :--- | :--- | :--- | :--- | :--- | | Neuhoff (Office/Retail) | Mixed-Use | Nashville | $294,550 | 37% | 4Q25 | | Domain 9 | Office | Austin | $147,000 | 98% | 1Q25 | Land Inventory The company holds 36.0 acres of developable land with a cost basis of $156.0 million, positioning it for future growth | Metric | Value | | :--- | :--- | | Total Developable Land (Acres) | 37.0 | | Company's Share (Acres) | 36.0 | | Company's Share of Land Basis | $156,007 thousand | Capital Structure Debt Schedule Total debt (company share) is approximately $2.76 billion with a weighted average interest rate of 4.96% and 84% fixed-rate | Debt Analysis (Company Share) | Value | | :--- | :--- | | Total Principal | $2,758,594 (thousands) | | Weighted Average Interest Rate | 4.96% | | Weighted Average Maturity (Years) | 3.1 | | % Fixed Rate Debt | 84% | | % Floating Rate Debt | 16% | - Total consolidated debt stands at approximately $2.59 billion, with an additional $168.8 million in unconsolidated debt[22] - The company has $682.9 million of remaining borrowing capacity under its unsecured credit facility as of June 30, 2024[28] Joint Venture Information The company engages in joint ventures for operating assets and development projects, including Neuhoff Holdings and Crawford Long-CPI - The Neuhoff Holdings LLC joint venture is a 50/50 partnership for a mixed-use development in Nashville[32] - The Crawford Long-CPI, LLC joint venture for the Medical Offices at Emory Hospital includes a provision where Cousins can put its interest to its partner, or the partner can call Cousins' interest[32] Non-GAAP Measures & Reconciliations Calculations and Reconciliations This section details reconciliations for key non-GAAP metrics, including FFO and NOI, and provides full-year 2024 guidance projections | FFO Reconciliation (Q2 2024, in thousands) | Amount | | :--- | :--- | | Net Income Available to Common Stockholders | $7,840 | | Add: Depreciation and amortization of real estate assets | $95,299 | | Funds From Operations (FFO) | $103,346 | | NOI Reconciliation (Q2 2024, in thousands) | Amount | | :--- | :--- | | Net Income | $7,961 | | Adjustments (Interest, G&A, D&A, etc.) | $133,354 | | Net Operating Income (NOI) | $141,315 | | Full Year 2024 Guidance Reconciliation (in thousands) | Low End | High End | | :--- | :--- | :--- | | Projected Net Income Available to Common Stockholders | $47,531 | $55,162 | | Add: Projected Depreciation and amortization | $353,935 | $353,935 | | Projected Funds From Operations (FFO) | $401,375 | $409,006 | Definitions This section provides definitions for key non-GAAP financial measures such as FFO, NOI, and Same Property Net Operating Income - Funds From Operations (FFO): Defined by Nareit as net income excluding gains/losses from property sales and real estate depreciation, used as a supplemental measure of a REIT's operating performance[47] - Net Operating Income (NOI): Calculated as rental property revenues (excluding termination fees) less rental property operating expenses, used to measure property-level operating performance[47] - Same Property Net Operating Income: Represents NOI for properties that were stabilized and owned for the entirety of all comparable reporting periods, allowing for analysis of the continuing portfolio's growth trend[47]