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ATLANTA-Cousins Properties Inc. president and CEO Tom Bell sees no silver lining yet in the office market even though his company’s second-quarter performance showed a 91% occupancy level and record net income.

Bell attributes the $143.5 million, or $2.92 per diluted share, in net income directly to the California sales of Mira Mesa MarketCenter and the two-building Cerritos Corporate Center which generated a combined gain of $43 million. The company plans to close on the sale of Presidential MarketCenter and Perimeter Expo later this year, he says. Both properties are under contract.

The California sales “are a great example of our strategy of creating and harvesting value, where we take advantage of opportunities in the marketplace to realize the value created through development,” Bell says.

Worrying Bell at the moment is the status of Mirant Corp., the locally based utility now in Chapter 11 protection from its creditors. Mirant occupies all of the 362,000-sf 1155 Perimeter Center West building in which Cousins holds a 50% equity interest.

“We do not know whether they will terminate our lease, a right that they have in bankruptcy,” Bell says. “Obviously, any such termination would have a negative impact on (our) net income and FFO.”

Still, Bell adds, “Notwithstanding the office market weakness to date, we have been able to maintain a 90% leased level in our office portfolio–well above average for our core markets.”

Funds from operations per share in the second quarter decreased 4% to 55 cents from 57 cents. FFO decreased 7% to $27 million from $29 million in second quarter 2002.

For the six-month period ended June 30, FFO per share increased 44% to $1.51 from $1.05 for the same period last year. FFO increased 40% to $74.1 million from $53.1 million a year ago.

Increases in residential lot sales, including the company’s share of lot sales in unconsolidated joint ventures, positively affected net income and FFO by $1 million.

Net income and FFO “were also positively affected in the second quarter and six-month period by Emory Crawford Long Medical Office Tower, which became partially operational during the first quarter of 2002 and has experienced increasing revenue since then,” Bell says. Ten Peachtree Place also became fully occupied and rent paying in the second quarter of this year with the start of a lease from AGL Resources, he adds.

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