Cousins Properties(US:CUZ)2023-07-28 18:51Financial Data and Key Metrics Changes - The company reported a strong second quarter with FFO of $0.68 per share and a 3.7% increase in same property net operating income on a cash basis [17][49] - Average net effective rents reached $28.20, marking the second highest quarterly level in the company's history [127] - The weighted average occupancy increased by 0.5% to 87.7% [126] Business Line Data and Key Metrics Changes - The company executed 40 office leases totaling 435,000 square feet, with new and expansion leasing volume accounting for 79% of total activity [137] - In Atlanta, 21 leases totaling 147,000 square feet were signed, with significant activity in Midtown and Buckhead [13] - The Neuhoff mixed-use development in Nashville completed its first two office leases totaling just under 50,000 square feet [46] Market Data and Key Metrics Changes - The flight to quality in the office market is evident, with 75% of vacancy in Atlanta concentrated in just 20% of the inventory [7] - The U.S. office space inventory is projected to shrink in 2023 for the first time on record, indicating a rebalancing of supply and demand [8] - Austin ranks first nationally for projected job growth through 2027, supporting the company's optimistic outlook for its portfolio in that market [23] Company Strategy and Development Direction - The company is focusing on high-quality lifestyle office properties in the Sun Belt markets, which are expected to outperform the broader market [134][124] - The company plans to redevelop Hayden Ferry One following the lease rejection by SVB Financial, aiming to enhance the overall project [44][141] - The company maintains a strong balance sheet with minimal near-term debt maturities, positioning itself to capitalize on future investment opportunities [135][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the potential impact of higher interest rates but believes the company is well-positioned to thrive in various economic cycles [19] - There is a noted increase in office utilization as companies bring employees back to work, which is reflected in the positive leasing momentum [20][129] - The company remains patient and disciplined in pursuing new investments, monitoring the market for attractive opportunities [43][113] Other Important Information - The company recognized $6.6 million in termination fees during the quarter, primarily from two customers, which have been backfilled at equal or higher rents [25] - Parking revenues increased over 6% compared to the prior quarter, indicating a recovery in physical utilization [26] - The company raised its FFO guidance for the full year 2023 to between $2.57 and $2.65 per share [156] Q&A Session Summary Question: What is the current state of AI and office leasing in Austin? - Management noted that while there is speculation about AI-related leasing in San Francisco, they expect similar activity to emerge in Austin over time [30][107] Question: Can you provide details on parking fees and potential increases? - Management confirmed that parking revenues have been a source of upside and there are opportunities to increase fees as more people return to work [31][108] Question: What is the breakdown of new leases versus renewals? - Management indicated that there is more activity on the renewal side, but new expansion activity remains encouraging [55][146] Question: How is the company addressing the NCR Corp sublease situation? - Management confirmed they are working with NCR as they restructure and sublease their space [79][80] Question: What gives the company confidence in increasing occupancy in 2024? - Management highlighted the positive leasing momentum and low upcoming lease expirations as key factors for confidence [178][165]