Cousins keeps it local

As the son of a well-known powerhouse in the building business, Larry Gellerstedt III doesn't need to prove his pedigree in Atlanta's commercial real estate circles.

Creating skylines is in his blood. When he was a child, he and his late father, a veritable Mapquest of the city and its buildings, would ride around Atlanta looking at the landmarks his dad had built.

Last week, Gellerstedt III continued a family legacy with the announcement that he'll assume the reins of Cousins Properties, the venerable commercial real estate firm founded by his dad's friend and business partner, Tom Cousins. He follows in the footsteps of a larger-than-life senior management team at Cousins. Tom Bell, the man he'll replace, is known in the industry as a master of buying and selling properties. Bell, in turn, followed founder Tom Cousins, who helped shape Atlanta's skylines and is a heavy-hitter in Atlanta's civic circles.

In recent months though, the decks have been cleared for Gellerstedt, a civic leader in his own right, to run the company.

"I'm not coming from the outside," Gellerstedt said during an interview Friday at Cousins Properties' headquarters at 191 Peachtree Towers, the 50-story office building his father built and one Gellerstedt helped Cousins buy a few years ago. "I've been part of the company for four years and have been involved in decision-making, particularly the last year or two."

Gellerstedt was tapped to head Cousins' office, multifamily and development divisions soon after he joined the company. Cousins acquired his real estate advisory firm, Gellerstedt Group, in 2005.

Actually, his ties to the company go back much further. In 1986, when Gellerstedt took over Beers Construction Co. from his father, he asked his dad why he'd never built anything for his friend Cousins. He never asked, his dad replied. The younger Gellerstedt later posed the same question to Cousins, who had a similar reply.

That forged the younger Gellerstedt's own relationship with Cousins the man —- which he maintains today —- and the company.

"Over the years, we got to build so many buildings," Gellerstedt said. The Pinnacle Building in Buckhead, the Bank of America building. And, of course, 191 Peachtree.

"I have a special fondness for downtown and that building," he said.

Shortly after he was named to head the company last week, he and Cousins reminisced about their long-standing relationship and the 1970s commercial real estate market ("which was about as bad as this," he said).

"To get to be CEO of Cousins is a special honor," Gellerstedt said.

Sam Holmes, vice chairman with real estate services firm CB Richard Ellis, said Cousins' board of directors made a "phenomenal choice" selecting Gellerstedt for the top job.

"Larry's extremely bright. He's a consensus-builder. He's a great listener and is extremely steeped in Cousins culture," Holmes said.

While Gellerstedt is well thought of in Atlanta, Wall Street is still getting to know the native Atlantan.

"Based on our limited interaction with him, he's thoughtful and well acquainted with Cousins' Atlanta portfolio, and the 191 Peachtree acquisition suggests to us he's a logical choice for leading the company through the next cycle," said John Stewart, an analyst with Green Street Advisors in Newport Beach, Calif.

Besides, Stewart added, "[current CEO] Tom Bell had all the fun he could stand in real estate." Bell, who retires July 1, leaves the company in relatively good shape. While the company hasn't avoided the real estate downturn, it has managed to stay in the black.

For the year ending Dec. 31, 2008, Cousins had net income of $7.6 million, or 15 cents a share, vs. net income of $17.7 million, or 33 cents a share, for the year-earlier period.

The company's funds from operations —- a measure used by Real Estate Investment Trusts to define operating performance or cash flow —- totaled $61 million or $1.18 a share for the year ended Dec. 31. That's up from $48.4 million, or 92 cents a share, the previous year. Its shares closed Friday at $10.43, down from around $40 in early 2007.

But there are some lingering concerns.

"They did a good job buying and selling real estate between 2004 and 2006, but not as good a job on the development front during that same time," Stewart said.

Also, Cousins built its reputation on Wall Street for being a "local sharpshooter."

"They are well-regarded by Wall Street for their expertise in Atlanta," Stewart said.

But with the bulk of Cousins' operating assets in Atlanta and the overall commercial real estate market struggling, Gellerstedt has his work cut out for him. His tenure will likely prove more challenging than those of his predecessors.

The U.S. commercial real estate market, normally a steadying influence in economic downturns, is in turmoil like most industries these days.

Gellerstedt sees the sagging market as a chance to go shopping.

"Out of all the distress come good opportunities in the real estate business," he said.

"This company has been successful in good times and bad. Our balance sheet is in a good position. It doesn't mean in today's times it is as strong as we'd like it to be."

Gellerstedt's first order of business will be making sure Cousins has plenty of capital to buy distressed assets. He will look for ways to gain capital through joint-venture partnerships. Joint ventures have been a long-standing practice at Cousins, whose partners have included Bank of America and IBM.

On Friday, Gellerstedt reflected on taking over the company at its half-century mark.

"A 51-year-old development company is extraordinarily rare. We survived being conservative," he said. "Dad was a very conservative businessperson. So was Tom Cousins, and Tom Bell.

"It's not about being the biggest. The name is big. But the name is big because it's been around a long time and it's associated with high quality and being actively involved in the community."

Business

The Gellerstedt file

Name: Lawrence Love Gellerstedt III

Age: 53

Residence: Ansley Park .