Cousins Properties(US:CUZ)2021-10-29 17:48Financial Data and Key Metrics Changes - The company reported $0.69 per share in FFO for Q3 2021, with same-property NOI on a cash basis increasing by 3.6% [7] - Net effective rent reached $24.06 per square foot, higher than the 2019 average, with second-generation cash rents increasing by 23.1% [7][16] - The net debt to EBITDA ratio stood at 4.54 times, maintaining a stable leverage profile [7][28] Business Line Data and Key Metrics Changes - The total office portfolio lease percentage increased to 91.3%, while the weighted average occupancy decreased to 89.8% due to a significant move-out [15] - The company executed 43 leases totaling 597,000 square feet, with new and expansion leases accounting for 84% of total activity [16] - Parking revenues increased by 27% quarter-over-quarter, indicating a recovery in property utilization [14] Market Data and Key Metrics Changes - In Atlanta, positive net absorption was recorded for the first time since the pandemic, with 299,000 square feet of leases signed [18] - Austin's portfolio is currently 95% leased, with a significant decline in Class A total sublease space available [20] - Charlotte's operating portfolio is well-positioned at 96.1% leased, with a notable decline in available sublease space [21] Company Strategy and Development Direction - The company is focusing on high-quality office spaces in fast-growing Sun Belt markets, with a $663 million development pipeline [13][27] - Recent acquisitions include Heights Union in Tampa for $144.8 million, reflecting a strategy to invest in dynamic urban areas [9] - The company has sold approximately $1 billion of non-core properties to enhance its trophy portfolio and reduce CapEx [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the return to office plans from customers, with many companies firming up their strategies [6] - The company anticipates continued demand for high-quality office space, driven by the migration to Sun Belt cities and a flight to quality [8][9] - Future leasing activity is expected to remain strong, with a positive outlook for the Sun Belt markets compared to the broader U.S. economy [17] Other Important Information - The company has a well-located land bank that can support an additional $2.6 billion in development, including over 3 million square feet of trophy office space [13] - The construction loan for the Neuhoff development joint venture was closed at $312 million, maturing in September 2025 [29] Q&A Session Summary Question: What factors drove the portfolio changes and acquisitions? - Management indicated that customer feedback and the need for high-quality, amenitized spaces drove their investment strategy [33] Question: How is subleasing impacting pricing in major markets? - Sublease activity has declined in many markets, with new companies migrating to the Sun Belt, which has positively influenced pricing [36] Question: Is the company more focused on development or acquisitions currently? - The company is pursuing both strategies, adapting to supply chain issues while maintaining a disciplined approach to development [37] Question: Are the impressive leasing spreads sustainable? - Management believes that while this quarter was exceptional, the pipeline remains strong, indicating potential for continued positive leasing spreads [39][40] Question: What is the current mark-to-market estimate for the portfolio? - The mark-to-market is estimated to be between 8% and 10%, with expectations for continued positive movement [41] Question: How does the company view conditions in Midtown Atlanta? - Management is optimistic about Midtown Atlanta's demand profile, citing strong talent attraction and limited supply [44]