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CEO Larry Gellerstedt: Cousins Properties back to playing offense

By Doug Sams and Maria Saporta
Published in the Atlanta Business Chronicle on Friday, April 19, 2013

Almost four years after he took over running Cousins Properties Inc., CEO Larry Gellerstedt believes the Atlanta real estate company is once again playing offense.

Gellerstedt cites the company’s recent public offering of more than 14 million shares as proof. It raised about $165 million in net proceeds, a large portion of which is set aside to help finance the acquisition of 816 Congress Avenue, an Austin, Texas, office tower.

It underscores how much has changed for Atlanta’s second-largest owner of office buildings and one of the South’s most familiar real estate companies.

In 2009, it carried out another giant stock offering — in fact, the largest in the more than 50-year history of the company founded by Atlanta real estate icon and civic leader Tom Cousins. It used much of the proceeds from that 2009 offering not to acquire or develop properties — but to pay off debt.

This time it’s a different story.

“We are back to executing the Tom Cousins kind of strategy,” Gellerstedt said.

That means less debt and more strategic acquisitions of high-quality office towers. It also means Cousins is positioned to develop mixed-use urban projects, one of the reasons Gellerstedt joined the company in the first place.

In Atlanta, Cousins has long-term projects in its pipeline including the “Gulch” area between the CNN Center and the Five Points MARTA station. Cousins is part of a team of developers that would turn the Gulch into a bus and rail terminal with office and retail.

Recently, it’s been making news with high-profile value-add acquisitions.

At the end of 2011, it bought the 38-story Promenade tower in Midtown for almost $135 million, well off its peak price, though it was just 58 percent leased at that time.

The building is now closer to 80 percent leased, and rents are recovering.

That turnaround reflects how deep the company’s connections run in Atlanta corporate circles.

It has relationships with some of the city’s biggest companies, including Cox Enterprises Inc. and The Coca-Cola Co.

Cousins still generates about 60 percent of its income from its Atlanta portfolio of office buildings, mixed-use projects and fee-development work such as downtown’s new $67 million College Football Hall of Fame and its National Center for Civil and Human Rights.

About 90 percent of Cousins’ employees also work in Atlanta.

“We’ve got a passion for the city,” Gellerstedt said. “It is where we are going to have the majority of our projects, and it’s where we call home.”

Cousins has adjusted, though, in the wake of the steepest slowdown to affect Atlanta commercial real estate in at least two decades.

While its Atlanta holdings still generate most of its income, they once produced more than 70 percent. Cousins has been diversifying its portfolio by adding properties in Texas cities, including Austin, Dallas and Houston.

“You don’t put all your eggs in one basket,” Gellerstedt said.

Like other publicly traded real estate companies that operate in the Sun Belt such as Parkway Properties Inc. (NYSE: PKY) and Highwoods Properties Inc. (NYSE: HIW), Cousins is investing in urban mixed-use environments where a young and creative U.S. workforce wants to live.

The market seems confident in the company’s overall strategy.

Its stock price is hovering at $10.40, up38 percent from this time last year. It has reduced its overall debt on its balance sheet from 70 percent a few years ago to about35 percent.

It updated its portfolio, selling off retail and residential land holdings. It also streamlined its service lines.

The most recent example of that strategy was the agreement last year to sell its third-party office leasing and management business to real estate services company Cushman & Wakefield.

“While there has been a general resurgence in the Atlanta [commercial real estate] industry and both business expansion and investor interest have increased in the Sun Belt, what Cousins has done is incredible,” said John Shlesinger, a vice chairman with commercial real estate services giant CBRE Inc.

“They have completely changed their investment focus and philosophy, sold off non-core assets, their third-party leasing/management company, and they’ve acquired value-add properties in multiple cities.

Analysts like the moves.

“They have resonated with investors,” said Brendan Maiorana, an analyst with Wells Fargo & Co. “The big hurdles have been cleared, and the balance sheet is in pretty good shape.”

Cousins’ development pipeline has also picked up. It’s eyeing a mixed-use project in downtown Decatur, the latest sign of renewed residential and retail activity in that city.

It’s also got even bigger projects on the drawing board.

Later this year, Cousins is expected to break ground on Colorado & Third, a 30-story office building in Austin.

It’s partnering on the tower with San Antonio-based Hixon and Silver Ventures.

Maria Saporta, Editor, is a longtime Atlanta business, civic and urban affairs journalist with a deep knowledge of our city, our region and state.  Since 2008, she has written a weekly column and news stories for the Atlanta Business Chronicle. Prior to that, she spent 27 years with The Atlanta Journal-Constitution, becoming its business columnist in 1991. Maria received her Master’s degree in urban studies from Georgia State and her Bachelor’s degree in journalism from Boston University. Maria was born in Atlanta to European parents and has two young adult children.

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