CUZ Cousins Properties Inc

Cousins Properties Incorporated (NYSE:CUZ):

Highlights

• Funds From Operations (FFO), before non-cash impairment charges, was $0.16 per share.
• Purchased Promenade, a 775,000-square-foot Class A office building in midtown Atlanta.
• Sold remaining operating industrial properties.
• Implemented an aggressive strategy to monetize the land portfolio.

Cousins Properties Incorporated (NYSE:CUZ) today reported its results of operations for the quarter ended December 31, 2011.

“Cousins had a very strong finish to the year with solid operating results, significant leasing momentum, the sale of our remaining industrial buildings, and an attractive value creation opportunity in Promenade,” said Larry Gellerstedt, CEO of Cousins. “Consistent with our strategy to simplify our platform, we have made the decision to more aggressively monetize our land portfolio. We intend to recycle this capital into our core businesses of office, retail and opportunistic development.”

Portfolio Activity

• Leased or renewed 266,000 square feet of office space and 122,000 square feet of retail space.

Transaction Activity

• Purchased Promenade for $134.7 million.
• Sold King Mill Distribution Park—Building 3 for $28.2 million.
• Sold Lakeside Ranch Business Park—Building 20 and related undeveloped land for $44.0 million.
• Sold 3.8 acres at North Point for $2.8 million.
• Sold 187 residential lots, including all remaining lots at Tillman Hall and 79 of the remaining 109 lots at Creekside Oaks.
• Subsequent to year end, entered into a contract to sell its interests in 18 residential projects held by its CL Realty and Temco joint ventures to affiliates of Forestar Group Inc., its partner in the ventures, for $23.5 million.

Financial Results

FFO was ($110.2) million, or ($1.06) per share, for the fourth quarter of 2011 compared with $10.0 million, or $0.10 per share, for the fourth quarter of 2010. FFO was ($76.9) million, or ($0.74) per share, for the year ended December 31, 2011, compared with $32.8 million, or $0.32 per share, for the same period in 2010.

FFO before non-cash impairment charges (reconciled to FFO below) was $16.1 million, or $0.16 per share, for the fourth quarter of 2011. FFO before non-cash impairment charges (reconciled to FFO below) was $53.2 million, or $0.51 per share, for the year ended December 31, 2011.

Net loss available to common stockholders was ($129.0) million, or ($1.24) per share, for the fourth quarter of 2011 compared with net loss available of ($8.9) million, or ($0.09) per share, for the fourth quarter of 2010. Net loss available was ($141.3) million, or ($1.36) per share, for the year ended December 31, 2011, compared with ($27.5) million, or ($0.27) per share, for the same period in 2010.

Impairment Charges

The Company recently made the decision to more aggressively liquidate most of its commercial and residential land holdings, as well as certain non-core operating assets. The capital generated from these sales will be re-deployed into high-quality income producing assets. The accelerated sales, when completed, will eliminate approximately $5 million in annual carry costs, over $100 million in remaining capital commitments, and leave the Company with a more focused platform. Furthermore, the assets to be monetized are encumbered by only $2.1 million of debt, enabling the Company to recycle the vast majority of the proceeds into new investments.

As a result of this change, the Company recorded non-cash impairment charges of $126.3 million, or $1.22 per share, on certain commercial and residential land holdings and pre-development assets, and $7.6 million, or $0.07 per share, on operating properties in the fourth quarter of 2011. For the year ended December 31, 2011, the Company incurred $130.1 million in impairment charges, or $1.25 per share, on commercial and residential land holdings, pre-development assets and other investments and $7.6 million of such charges, or $0.07 per share, on operating properties.

With respect to the non-cash impairment charges discussed above, the Company recorded $104.3 million and $107.8 million for the quarter and year ended December 31, 2011, respectively, in the caption “Impairment Losses” on its statements of operations. The Company recorded $937,000 in the caption “Other Expenses” on its statements of operations. The Company recorded $28.1 million and $28.4 million, for the quarter and year ended December 31, 2011, respectively, within its unconsolidated joint ventures in the caption “Equity in Net Income from Unconsolidated Joint Ventures” on its statements of operations. The Company recorded $608,000 in the caption “Impairment Loss on Investment in Unconsolidated Joint Ventures” on its statements of operations.

The impact of the impairment charges on FFO is summarized below:

      Three Months Ended Year Ended December 31, 2011 December 31, 2011 ($000)   Per Share ($000)   Per Share FFO Before Non-Cash Impairment Charges $ 16,111   $ 0.16 $ 53,196   $ 0.51 Commercial and Residential Land Impairment Losses (125,376 ) (1.21 ) (125,626 ) (1.21 ) Predevelopment Asset Write-off (937 ) (0.01 ) (937 ) (0.01 ) Investment in Verde Realty, LLC Impairment Loss   -       -     (3,508 )     (0.03 ) FFO $ (110,202 )   $ (1.06 ) $ (76,875 )   $ (0.74 )  

Investor Conference Call and Webcast

The Company will conduct a conference call at 11:00 a.m. (Eastern Time) on Wednesday, February 22, 2012, to discuss the results of the quarter ended December 31, 2011. The number to call for this interactive teleconference is (212) 271-4651.

A replay of the conference call will be available for 14 days by dialing (402) 977-9140 and entering the passcode 21575231. The replay can be accessed on the Company’s website, www.cousinsproperties.com, through the “Q4 2011 Cousins Properties Incorporated Earnings Conference Call” link on the Investor Relations page.

Cousins Properties Incorporated is a leading diversified real estate company with extensive experience in development, acquisition, financing, management and leasing. Based in Atlanta, the Company actively invests in office and retail projects. Since its founding in 1958, Cousins has developed 20 million square feet of office space, 20 million square feet of retail space, more than 3,500 multi-family units and more than 60 single-family neighborhoods. The Company is a fully integrated equity real estate investment trust (REIT) and trades on the New York Stock Exchange under the symbol CUZ. For more, please visit www.cousinsproperties.com.

The Consolidated Statements of Operations, Consolidated Balance Sheets and a schedule entitled Funds From Operations, which reconciles Net Income (Loss) Available to FFO, are attached to this press release. More detailed information on Net Income (Loss) Available and FFO results is included in the “Net Income and Funds From Operations – Supplemental Detail” schedule, which is included along with other supplemental information in the Company’s Current Report on Form 8-K, which the Company is furnishing to the Securities and Exchange Commission (“SEC”), and, which can be viewed through the “Supplemental Information” and “SEC Filings” links on the “Investor Information & Filings” link of the Investor Relations page of the Company’s website at www.cousinsproperties.com. This information may also be obtained by calling the Company’s Investor Relations Department at (404) 407-1984.

Certain matters discussed in this news release are forward-looking statements within the meaning of the federal securities laws and are subject to uncertainties and risk. These include, but are not limited to, availability and terms of capital and financing; national and local economic conditions; the real estate industry in general and in specific markets; the potential for recognition of additional impairments due to continued adverse market and economic conditions or changes in Company business and financial strategy; leasing risks; potential acquisitions, new investments and/or dispositions; the failure of purchase, sale or other contracts to ultimately close; the financial condition of existing tenants; competition from other developers or investors; the risks associated with real estate development and acquisitions; the availability of buyers and adequate pricing if the Company intends to liquidate certain assets; rising interest and insurance rates; the availability of sufficient development or investment opportunities; environmental matters; the financial condition and liquidity of, or disputes with, joint venture partners; any failure to comply with debt covenants under credit agreements; any failure to continue to qualify for taxation as a real estate investment trust and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including those described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The words “believes,” “expects,” “anticipates,” “estimates,” ”plans,” “may,” “intend,” “will” or similar expressions are intended to identify forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in any forward-looking statement are reasonable, the Company can give no assurance that such plans, intentions or expectations will be achieved. Such forward-looking statements are based on current expectations and speak as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise, except as required under U.S. federal securities laws.

  COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts)           Three Months Ended

December 31,

Years Ended December 31, 2011 2010 2011 2010 REVENUES: Rental property revenues $ 35,136 $ 32,917 $ 135,573 $ 130,522 Fee income 3,092 3,206 13,821 14,444 Third party management and leasing revenues 5,268 4,973 19,359 18,976 Multi-family residential unit sales - 9,716 4,664 34,442 Residential lot and outparcel sales 2,605 1,178 3,015 15,943 Other   515     689     2,032     1,229     46,616     52,679     178,464     215,556     COSTS AND EXPENSES: Rental property operating expenses 14,143 12,649 55,918 53,750 Third party management and leasing expenses 4,171 4,099 16,585 17,393 Multi-family residential unit cost of sales - 7,749 2,487 27,017 Residential lot and outparcel cost of sales 2,588 779 2,891 10,699 General and administrative expenses 6,338 7,565 24,166 28,517 Interest expense 6,281 8,411 27,784 37,180 Reimbursed expenses 1,459 1,648 6,208 6,297 Depreciation and amortization 13,559 16,000 50,174 53,313 Impairment losses 104,255 1,968 107,763 2,554 Separation expenses 4 742 197 1,045 Other   2,112     (357 )   4,436     4,416     154,910     61,253     298,609     242,181     LOSS ON EXTINGUISHMENT OF DEBT AND INTEREST RATE SWAPS   -     -     (74 )   (9,827 )  

LOSS FROM CONTINUING OPERATIONS BEFORE TAXES, UNCONSOLIDATED JOINT VENTURES AND SALE OF INVESTMENT PROPERTIES

(108,294 ) (8,574 ) (120,219 ) (36,452 )   (PROVISION) BENEFIT FOR INCOME TAXES FROM OPERATIONS (31 ) (28 ) 186 1,079   INCOME (LOSS) FROM UNCONSOLIDATED JOINT VENTURES: Equity in net income (loss) from unconsolidated joint ventures (25,159 ) 2,000 (17,691 ) 9,493 Impairment loss on investment in unconsolidated joint ventures   (608 )   -     (608 )   -     (25,767 )   2,000     (18,299 )   9,493    

LOSS FROM CONTINUING OPERATIONS BEFORE GAIN ON SALE OF INVESTMENT PROPERTIES

(134,092 ) (6,602 ) (138,332 ) (25,880 )   GAIN ON SALE OF INVESTMENT PROPERTIES   3,317     63     3,494     1,938     LOSS FROM CONTINUING OPERATIONS (130,775 ) (6,539 ) (134,838 ) (23,942 )   INCOME FROM DISCONTINUED OPERATIONS: Income from discontinued operations 467 916 2,852 4,683 Gain on sale of investment properties   6,082     654     8,519     7,226     6,549     1,570     11,371     11,909     NET LOSS (124,226 ) (4,969 ) (123,467 ) (12,033 ) NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (1,504 )   (734 )   (4,958 )   (2,540 )   NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST (125,730 ) (5,703 ) (128,425 ) (14,573 )   DIVIDENDS TO PREFERRED STOCKHOLDERS   (3,227 )   (3,227 )   (12,907 )   (12,907 )   NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $ (128,957 ) $ (8,930 ) $ (141,332 ) $ (27,480 )   PER COMMON SHARE INFORMATION - BASIC AND DILUTED: Loss from continuing operations attributable to controlling interest $ (1.31 ) $ (0.10 ) $ (1.47 ) $ (0.39 ) Income from discontinued operations   0.06     0.02     0.11     0.12   Net loss available to common stockholders $ (1.24 ) $ (0.09 ) $ (1.36 ) $ (0.27 )     WEIGHTED AVERAGE SHARES - BASIC AND DILUTED   103,712     102,761     103,651     101,440       COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES FUNDS FROM OPERATIONS (Unaudited, in thousands, except per share amounts)       Three Months Ended   Years Ended December 31, December 31, 2011   2010 2011   2010   Net Loss Available to Common Stockholders $ (128,957 ) $ (8,930 ) $ (141,332 ) $ (27,480 ) Depreciation and amortization: Consolidated properties 13,559 16,000 50,174 53,313 Discontinued properties 219 1,501 3,887 6,643 Share of unconsolidated joint ventures 2,566 2,586 10,356 9,683 Depreciation of non-real estate assets: Consolidated properties (365 ) (414 ) (1,688 ) (1,884 ) Discontinued properties - - - (5 ) Share of unconsolidated joint ventures (5 ) (5 ) (20 ) (22 ) Impairment loss on depreciable investment property 7,632 - 7,632 - Gain on sale of investment properties: Consolidated properties (3,317 ) (63 ) (3,494 ) (1,938 ) Discontinued properties, net of noncontrolling interests (4,792 ) (654 ) (5,648 ) (7,226 ) Share of unconsolidated joint ventures

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- Gain (loss) on sale of undepreciated investment properties   3,258     (1 )   3,258     1,697     Funds From Operations Available to Common Stockholders $ (110,202 ) $ 10,020   $ (76,875 ) $ 32,781       Per Common Share - Basic and Diluted:   Net Loss Available $ (1.24 ) $ (.09 ) $ (1.36 ) $ (.27 )   Funds From Operations $ (1.06 ) $ .10   $ (.74 ) $ .32     Weighted Average Shares - Basic   103,712     102,761     103,651     101,440   Weighted Average Shares - Diluted   103,712     102,761     103,655     101,440    

The table above shows Funds From Operations Available to Common Stockholders (“FFO”) and the related reconciliation to Net Income (Loss) Available to Common Stockholders for Cousins Properties Incorporated and Subsidiaries. The Company calculated FFO in accordance with the National Association of Real Estate Investment Trusts' ("NAREIT") definition, which is net income (loss) available to common stockholders (computed in accordance with accounting principles generally accepted in the United States ("GAAP")), excluding extraordinary items, cumulative effect of change in accounting principle and gains or losses from sales of depreciable property, plus depreciation and amortization of real estate assets, impairment losses on depreciable investment property and after adjustments for unconsolidated partnerships and joint ventures to reflect FFO on the same basis.

 

FFO is used by industry analysts and investors as a supplemental measure of an equity REIT’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income. Management believes that the use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Company management evaluates operating performance in part based on FFO. Additionally, the Company uses FFO along with other measures, to assess performance in connection with evaluating and granting incentive compensation to its officers and other key employees.

 

    COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)       December 31, 2011 2010

ASSETS

(Unaudited) PROPERTIES:

Operating properties, net of accumulated depreciation of $289,473 and $274,925 in 2011 and 2010, respectively

$ 884,652 $ 898,119 Projects under development 11,325 - Land held for investment 54,132 123,879 Residential lots 13,195 63,403 Other   637     2,994   Total properties 963,941 1,088,395   CASH AND CASH EQUIVALENTS 4,858 7,599 RESTRICTED CASH 4,929 15,521

NOTES AND OTHER RECEIVABLES, net of allowance for doubtful accounts of $5,100 and $6,287 in 2011 and 2010, respectively

48,500 48,395 INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 160,587 167,108 OTHER ASSETS   52,720     44,264     TOTAL ASSETS $ 1,235,535   $ 1,371,282    

LIABILITIES AND EQUITY

NOTES PAYABLE $ 539,442 $ 509,509 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 36,075 32,388 DEFERRED GAIN 3,980 4,216 DEPOSITS AND DEFERRED INCOME   15,880     18,029   TOTAL LIABILITIES 595,377 564,142   COMMITMENTS AND CONTINGENT LIABILITIES   REDEEMABLE NONCONTROLLING INTERESTS 2,763 14,289   STOCKHOLDERS’ INVESTMENT: Preferred stock, 20,000,000 shares authorized, $1 par value:

7.75% Series A cumulative redeemable preferred stock, $25 liquidation preference; 2,993,090 shares issued and outstanding in 2011 and 2010

74,827 74,827

7.50% Series B cumulative redeemable preferred stock, $25 liquidation preference; 3,791,000 shares issued and outstanding in 2011 and 2010

94,775 94,775

Common stock, $1 par value, 250,000,000 shares authorized, 107,272,078 and 106,961,959 shares issued in 2011 and 2010, respectively

107,272 106,962 Additional paid-in capital 687,835 684,551 Treasury stock at cost, 3,570,082 shares in 2011 and 2010 (86,840 ) (86,840 ) Distributions in excess of cumulative net income   (274,177 )   (114,196 )   TOTAL STOCKHOLDERS’ INVESTMENT 603,692 760,079   Nonredeemable noncontrolling interests   33,703     32,772   TOTAL EQUITY   637,395     792,851     TOTAL LIABILITIES AND EQUITY $ 1,235,535   $ 1,371,282