Yahoo Finance Cousins Properties Inc (CUZ) Q1 2024 Earnings Call Transcript Highlights: Strong Start with ...
FFO per Share: $0.65, exceeded Street consensus.
Full Year Guidance: Raised, now projecting FFO between $2.60 and $2.67 per share.
Same Property Net Operating Income Growth: 6.6% increase.
Leased Square Footage: 404,000 square feet with a positive cash rent roll-up of 5.3%.
Net Debt-to-EBITDA Ratio: 5.25x, among the lowest in the office sector.
Debt Ratings: BBB by S&P and BAA2 by Moody's.
Parking Revenue: Increased by 10% compared to the first quarter of last year.
Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: So you guys had a strong start to the year from a same-store NOI perspective, with 6.6% in the first quarter. And I know you guys aren't going to give guidance, but I guess just directionally, how should we be thinking about the rest of the year? And any color you can give on the drivers of same-store as we progress through 2024 would be really helpful. A: The biggest driver of NOI on a same-property basis during the first quarter was increased occupancy in Austin, at [$300 million] Colorado, Colorado Tower and San Jacinto. And we had some free rent burn off at $100 million in Tempe. On top of that, we had some timing of lower real estate taxes. And so you rolled all that together, it added up to a really strong first quarter that won't replicate itself for the balance of the year, but the numbers will remain positive for the balance of the year.
Q: Last quarter, you talked about a goal of getting above 90% occupancy in the intermediate term. I think you said stabilized this quarter. you hesitated to put a more specific time line on that, which is understandable. But just a couple of questions there. Has anything changed with respect to your view of the timing on that goal? Especially with the upcoming termination at North Park? A: No, nothing has really changed at all with our goal to drive occupancy back up to stabilized levels. And you mentioned a 90% metric. I mean, really, our goal here at Cousins is to drive that back up to more normalized levels of past cycles, and we've reached occupancy as high as 92% to 93%. And given the quality of the portfolio that we own, the repositioning that we have done and the strength of the markets that we're in, we're confident that we can do that. It will likely be a multiyear process.
Q: Just given the strength of parking on your results, can you just provide more color on what percentage of rental revenue comes from parking and maybe the components of the 10% increase this quarter, how much of that was occupancy versus rate driven? A: The improvement that we've seen in parking is a combination of both rates and volume. And the mix is probably, give or take, 75%, 25 %, 75% volume, 25% rate.
Q: If maybe I just -- if I could ask one just related to that last question, John talked about. As it relates to the BofA space next year, given the redevelopment plans, will that come out of service, the space or the building? Just like should we even think about those being in the occupancy stats? A: We're still finalizing our redevelopment plans there. So give us a little bit more time to finalize it what you know. But we're going to be -- as we've been all along, we're going to be transparent. We're not going to try to hide anything. If we pull it out of service and we do a significant redevelopment, we will. We haven't gotten to that point in the redevelopment plans yet to make a decision.
Q: Nice job on the investment-grade ratings. Gregg, I believe each quarter, you reset your budgets against the sulfur curve, just given how much the curve has shifted and uncertainty around the timing for the next rate cut. What are you factoring into guidance today? And how much of an impact did that have with your update? A: Thanks, Camille. It's a great question considering the volatility that's happening in the short end of the curve right now. So we, at the beginning of the year, as I explained in the last quarterly conference call, we were using the Fed dot plots in our forecast. And so -- at the beginning of the year, the Fed had 3 rate cuts in 2024. As you know, the Fed meets next week and [ads] are probably change that. But we've gone ahead and kind of proactively changed our internal assumption to rate cuts with calendar year '24. That being said, we only have -- we're low levered to begin with and then 15% of our leverage is floating rate. So the impact on that in calendar year '24 is minimal. For example, if they had no rate cuts for the balance of the year, that would only impact our earnings by about $0.05.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
