Product Diversification: 1998–2008
Change came in early 2002, when founder Tom Cousins stepped back from his day-to-day role with the Company and the Board named Tom Bell as President and CEO. By 2004, the market for stable, high-quality real estate had become heated and Cousins, whose portfolio was filled with these assets, decided to capitalize on the market dynamics by capturing the value of mature projects (where value creation has been maximized) and recycling that capital into new projects. Beginning with two smaller sales in 2003 through a flurry of activity in 2004 and the final large-scale sales in 2006, the Company and its partners sold or contributed to joint-ventures 35 projects totaling $2.7 billion. Common shareholders received $12.62 in special dividends during that period.
The recycling efforts of the early- to mid-2000’s were followed by expansion within the Office Division and Retail Division but also a new focus into other product types. In 2004, Cousins formed its Industrial Division, led by industry veteran Forrest Robinson. The next year, Cousins moved back into multi-family development with the acquisition of The Gellerstedt Group, an Atlanta based development company led by Larry Gellerstedt. While the Industrial Division focused its efforts in Atlanta and Texas, the Multi-Family Division embarked on condominium development projects in Miami and Atlanta.
By 2005, 29% of the Company’s portfolio was comprised of projects within the development pipeline, with 10 projects underway in multiple product types with a total cost of over $670 million. This development pipeline included retail projects in Tennessee, Georgia, California and Florida, Terminus 100, a class A office building in a prime location in the Buckhead submarket of Atlanta, Georgia, a new industrial project and six new residential projects in Georgia and Texas. The Company also announced that its strategy included investing between $200 million and $400 million annually in new development projects.
TERMINUS Comprised of Terminus 100, Terminus 200 and 10 Terminus, the project includes 1.2 million square feet of office space with a retail component and 137 condo units.
In 2006, the Company announced its return to Downtown Atlanta, with the acquisition of 191 Peachtree for $153 million (or $127 per square foot), an extraordinary price for an asset of its quality. This building was experiencing record vacancy, due to the move from Downtown of many businesses, including King & Spalding and Wachovia. Underscoring its commitment to Atlanta and to quality urban office buildings, Cousins also moved its corporate headquarters to this iconic building.
As the mid-2000’s progressed, the real estate markets began to soften, especially in residential markets, but the leasing and financing opportunities, particularly in the office markets, continued to remain favorable. Terminus 100 reached 93% leased and major leasing success was seen in the remainder of the Company’s Atlanta office projects. Cousins wisely recast its bank credit facility in 2007, expanding it to $500 million and adding a $100 million term loan, thereby avoiding the devastating short-term maturity issues faced by many real estate companies in the following years.
Nonetheless 2008 looked to be a very challenging year with the country seeing broad swings in the stock market and the continued slide in consumer confidence. The Company stopped lot production at nearly all residential projects, awaiting a return in demand. Unfortunately, as 2008 and 2009 progressed, it became clear that Cousins was facing the Great Recession, an economic period recognized by most as the worst real estate recession since World War II.