Premier Urban Sun Belt Office REIT: 2016 – Today
Heading into 2016, Cousins was well-positioned with a portfolio of trophy office assets and an industry-leading balance sheet, but its share price suffered, specifically due to a significant decline in energy prices. The Houston portfolio was stable at 91% leased with a strong tenant credit profile, but it represented 42% of the Company’s NOI, and the market reacted to Cousins’ exposure.
Parkway Properties, another Sun Belt office REIT with Houston exposure, was experiencing similar challenges. In April of 2016, after thoughtful consideration, Cousins and Parkway announced a stock-for-stock merger and simultaneous spin-off of the Houston assets of both companies, creating a new publicly traded REIT: Parkway, Inc. The end result was a larger Cousins, led by its current management team, with an enviable urban office portfolio in Atlanta, Austin, Charlotte, Orlando, Phoenix and Tampa. The Houston assets of both companies would belong to Parkway, Inc., led by the previous Parkway Properties management team. The deal was overwhelmingly approved by the shareholders of both companies. The transactions closed in October 2016, and total shareholder return in 2016 for Cousins was 28.39%. Meanwhile, total returns in 2016 for the SNL US Office REIT Index and the S&P 500 were 11.59% and 11.96%, respectively.
With the Parkway merger complete, the company moved to sell $607 million in non-core assets and land in 2017, opportunistically exiting the Orlando and Miami office markets; the development pipeline continued to provide significant value with the opening of projects in Atlanta, Charlotte and Chapel Hill and the start of other exciting projects in Atlanta; and Cousins significantly reduced leverage, remaining positioned with one of the best balance sheets in the REIT universe.
As of 2018, Cousins owned approximately 15 million square feet of high-quality assets in the best urban submarkets of Atlanta, Austin, Charlotte, Phoenix and Tampa. The team executed 1.6 million square feet of office leases, acquired premium land sites in Midtown Atlanta and Phoenix’s Tempe, and closed a new $1 billion unsecured revolving credit facility.
Cousins commenced operations of Spring & 8th, NCR's world headquarters in Midtown Atlanta. Construction of two office developments began in 2018 including 300 Colorado in Austin, at 87% pre-leased, and 10000 Avalon in Atlanta, at 40% pre-leased.
At the start of 2019, Colin Connolly moved into the role of President and Chief Executive Officer of the Company, exhibiting sharp focus and strategic vision much like Larry Gellerstedt, who simultaneously transitioned to Executive Chairman. Despite the CEO transition, Cousins continued to remain intensely focused on its simple, straightforward strategy: assemble a portfolio of trophy assets in high-growth Sun Belt markets, capture embedded value in the operating portfolio and execute attractive investment opportunities, all while maintaining a conservative balance sheet.
During the second quarter of 2019, Connolly wasted no time in advancing the company’s strategy through a highly complimentary merger with Dallas-based TIER REIT. The combined company would continue to be headquartered in Atlanta, with the senior management team and Cousins brand remaining in place. The merger closed in June 2019, significantly growing the company, including bolstering its existing presence in Austin, Charlotte and Dallas, which also helped balance out the company’s already large Atlanta portfolio. As a result of this transformative merger, Cousins now has a best-in-class portfolio balanced across the most desirable Sun Belt markets, and added a number of well-located strategic land holdings for future development.
Cousins is officially the largest Class A office owner by square footage in leading Sun Belt markets including: Austin CBD, The Domain in Austin, Midtown Atlanta and Buckhead in Atlanta. The Company is truly positioned as the preeminent Sun Belt office REIT, maintains a best-in-class balance sheet, owns an unmatched portfolio of trophy office properties in the premier submarkets within its strategic footprint, and controls well-located strategic land holdings for future development.
We are optimistic about how the Company is positioned and look forward to the future.