Cousins Properties Inc. (CUZ), a real estate investment trust (REIT) with a diversified portfolio of office, retail, urban residential and single-family communities, has recently announced the sale of a non-core asset in San Jose, California. The company sold San Jose MarketCenter, a shopping center spanning approximately 360,000 square feet of space, for about $85 million for a net gain of $6.5 million.
 
In addition, Cousins extended a $113 million mortgage loan collateralized by Avenue Murfreesboro, a 750,000 square feet open-air regional lifestyle shopping center near Nashville, to July 2013 with no additional recourse requirements. At the same time, the company refinanced a mortgage loan collateralized by Meridian Mark, a 160,000 square feet medical office building in Atlanta.
 
While increasing the loan amount from $22.2 million to $27 million, the refinancing has also helped the company reduce its interest rate from 8.3% to 6% Cousins utilized the net proceeds from the transactions and available cash under its line of credit to repay a $100 million term loan scheduled to mature in August 2012. 
 
Cousins had earlier scaled back its retail and office development pipeline to conserve cash and remain afloat in the challenging macroeconomic environment. The company is currently shoring up its balance sheet and increasing its liquidity by selling non-core assets.
 
Cousins has a diversified portfolio with a broad array of product types that mitigates operating risks associated with the economic down cycles. Since its inception in 1958, Cousins has developed a portfolio of 40 million square feet of office and retail space, with over 3,500 multi-family units and more than 60 single-family neighborhoods.
 
The portfolio of the company is primarily concentrated in high-growth Sun Belt markets, including Atlanta, Charlotte, Austin, San Francisco, Los Angeles and Washington DC, which due to its long-term demographic trends, should exhibit above-average job growth. However, with high market vacancies rental rate growth on new leases will be non-existent for some time. Consequently, we maintain our Neutral rating on Cousins with a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation.
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