ATLANTA, GA - The big Atlanta-based developer Cousins Properties is looking for bargains in the troubled housing market. Tom Bell, chairman and chief executive officer, told analysts Tuesday his company is seeking opportunities to buy distressed residential projects that have gone back to the banks. Bell said Cousins is interested in finding 40 percent to 50 percent discounts on incomplete projects where infrastructure already is in place. The company is looking not only in Georgia, but in Tennessee, North Carolina, Texas and maybe even Florida.
"Over the last 45 days, we've had discussions with more than 25 banks, mostly regional and local, about their residential development loans," Bell said. "Although many banks are not yet prepared to acknowledge their loan problems, some are now starting to, and we're in discussions with a number of them." In answer to an analyst's follow-up question, Bell said, "We would be willing to move in and take those lots and wait for the market to turn around."
The real estate downturn presents a chance to acquire a variety of properties on the cheap, Bell said. "As today's markets continue to deteriorate, we continue to look for opportunities to make investment in distressed assets," he said. "We're starting to see some opportunities now, but we expect they will become more attractive over the next six to nine months.
"To expand our scope in this area, we've been working recently to set up joint venture structures with financial partners on various types of acquisitions. We're also spending quite a lot of time talking with lenders, investors, brokers and other potential deal sources." Steve Bridges, president and chief executive officer of the Community Bankers Association of Georgia, said banks' willingness to sell home sites at a loss will vary. A bank with enough capital to weather the downturn might rather wait to sell the properties when the economy's improved, he said.
Cousins is a diversified company focused more on office and retail development than residential. Residential accounts for only about 7 percent of its investment. In its newly released second-quarter results, Cousins reported an increase in funds from operations, an earnings yardstick used by real estate investment trusts.
FFO was $16.1 million, or 31 cents a share, compared with $9.4 million, or 18 cents a share, for the second quarter of 2007. Over six months, FFO was $29.9 million, or 58 cents a share, compared with $33.9 million, or 63 cents a share, last year.
Cousins is talking with four possible tenants about leasing space in the new 25-story Terminus 200 office tower in Buckhead, Bell told analysts. Although "Buckhead is difficult" because of a glut of new office product, "our leasing guys feel pretty good about these four prospects," he said.
Terminus is a mixed-use project at Piedmont Avenue and Peachtree Street. The condominium tower 10 Terminus Place is close to completion. About a quarter of the 137 units are under contract and five more contracts are being negotiated, Bell said.
The only new development Cousins plans to start this year is Emory Point, a mixed-use project near Emory University. The first phase will have 93,000 square feet of retail, 172 condominiums and 275 apartments developed by Atlanta-based Gables Residential, a private REIT.
Bell said property sales helped Cousins' earnings. A 28-acre tract adjacent to the Cousins retail center The Avenue Forsyth sold for $17.6 million to Children's Healthcare of Atlanta. And 70 acres at an industrial site in Jefferson brought $8.5 million. Cousins and its joint partners are developing or redeveloping seven office and retail projects and two multifamily projects containing 208 units.
The estimated cost of these projects, which are expected to be completed in the next three years, is $957 million. Additionally, Cousins and its partners are developing 24 residential communities in which about 2,000 lots are completed and another 7,900 lots are available for development or sale.
Source: Atlanta Journal-Constitution