With Big Deal, Cousins Bullish On Atlanta Leasing Activity
The CEO of the Southeast's largest trophy office tower owners remains bullish on Atlanta demand just hours after inking a big office lease.
Cousins Properties told investment analysts Thursday afternoon that it inked a 205k SF lease with WestRock Co., a paper packaging maker, to move its headquarters from Norcross to Northpark Town Center in Sandy Springs. Cousins purchased the 1.5M SF office complex for $348M in 2014.
The deal with WestRock — formerly RockTenn — pushes the complex's occupancy to 91%, Cousins chief operating officer Colin Connolly told analysts during Thursday's call. Company officials noted that rent growth in Atlanta was around 5% this past year.
“Atlanta continues to have strong demand,” Cousins CEO Larry Gellerstedt said. "We haven't seen any dip in terms of lease volume."
Part of that deal volume could be Cousins corporate headquarters itself. Gellerstedt said the firm plans to move its offices from 191 Peachtree Tower to 3344 Peachtree, the 50-story mixed-use tower in the heart of Buckhead. Cousins office transfer is coming months after it sold 191 to a JV between Banyan Street Capital and Oaktree Capital Management for $267.5M.
Connolly also addressed American International Group (AIG), which has a significant office presence at Northpark. The insurance giant's lease expires in 2019. As we previously reported, AIG is eyeing Atlanta and Dallas for a massive corporate office consolidation that could encompass some 600k SF. That subject never arose during the call, and Connolly declined to speculate on whether Cousins could recapture AIG's business.
“It's a bit too early to project, but we have had a great relationship with those folks,” he said. "I just think it's a bit premature for them."
Cousins also inked a 9k SF deal this month at 8000 Avalon, its 224k SF office building in the Avalon mixed-use project in Alpharetta being developed in a JV with Hines Interests. Cousins officials also said it came to terms to lease another 30k SF there with an unnamed tenant. The JV secured a 43k SF lease with Microsoft as the anchor tenant in the $72M project last year.
Gellerstedt said that once 8000 Avalon opens later this year, he expects to have up to half the project leased.
“Particularly in a mixed-use environment like Avalon, a lot of it is letting people see it so they could understand the true value offering we have there,” he said. "I'm confident we'll be in that range by the time we open it."
Cousins plans to put both the 1M SF American Cancer Society Building at 250 Williams St. in Downtown Atlanta (here) and its Emory Point mixed-use project off Clifton Road on the market to help retire $200M of some $550M in debt that is maturing this year. The remainder will be refinanced, officials said.
Another big Atlanta trophy building landlord also expressed optimism about Atlanta's office environment to investment analysts recently. Highwoods Properties' Ed Fritsch told analysts Atlanta is among its top office markets, along with Raleigh and Nashville. That's even when it expects to lose some office tenants at two of its prime Buckhead office towers.
“We expect to see occupancy in our Buckhead portfolio dip in the third quarter as there are some larger customer move-outs, but fortunately rents are about 10% below market, and we're encouraged that there are limited large blocks of high-quality space,” said Highwoods Propertiess Ted Klinck, adding that the firm saw portfolio rent growth of 16% in the fourth quarter on signed deals.