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2 Unbeloved REITs That Offer Long-Term Upside Potential

Core Viewpoint - The article emphasizes the potential of high-quality office REITs, particularly Cousins Properties (CUZ) and American Assets Trust (AAT), as interest rates are expected to decline, which may lead to increased leasing activity and growth in the sector [2][3]. Group 1: Office REITs Performance - Cousins Properties and American Assets Trust have seen stock price increases of approximately 16% and 15% respectively since July 11th, outperforming peers Douglas Emmett, Inc. and SL Green Realty Corp. [5] - The performance of CUZ and AAT is attributed to their strategic property locations in the growing Sun Belt region and affluent areas in San Diego, California [5][8]. Group 2: Market Trends and Leasing Activity - The office sector has experienced a pickup in leasing activity over the last three quarters, which is expected to continue as interest rates decline [3]. - The article notes that the population decline in states like New York, where SL Green Realty Corp. operates, contrasts with the growth in areas where CUZ and AAT have properties [5][7]. Group 3: Financial Metrics and Outlook - Cousins Properties has a forward price-to-FFO ratio of 10.53x, which is below the sector median of 13.88x, indicating potential for upside [9]. - The occupancy rate for CUZ increased from 87.6% to 88.5% from the beginning of the year to the end of Q2, reflecting positive demand trends [9]. - American Assets Trust has a forward price-to-FFO ratio of 10.61x and a solid occupancy rate of 86.6%, which has improved from 86.4% at the beginning of the year [11][13]. Group 4: Growth Potential - Cousins Properties is projected to have a 21.4% upside over the next two years if it returns to its normal multiple, supported by strong fundamentals and property locations [17]. - American Assets Trust offers a more significant upside of 41.44% if it returns to its historical multiple, with potential growth driven by its property locations and the anticipated return of employees to offices [18].