Cousins Properties Incorporated (NYSE:CUZ) Q3 2025 Earnings Call Transcript

Cousins Properties Incorporated (NYSE:CUZ) Q3 2025 Earnings Call Transcript October 31, 2025

Operator: Good morning, ladies and gentlemen, and welcome to the Cousins Properties Inc. Conference Call. [Operator Instructions]. This call is being recorded on Friday, October 31, 2025. And I would now like to turn the conference over to Ms. Pamela Roper, General Counsel. Thank you. Please go ahead.

Pamela Roper: Thank you. Good morning, and welcome to Cousins Properties’ Third Quarter Earnings Conference Call. With me today are Colin Connolly, our President and Chief Executive Officer; Richard Hickson, our Executive Vice President of Operations; Kennedy Hicks, our Executive Vice President and Chief Investment Officer; and Gregg Adzema, our Executive Vice President and Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8-K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website, cousins.com.

Please be aware that certain matters discussed today may constitute forward-looking statements within the meaning of federal securities laws, and actual results may differ materially from these statements due to a variety of risks and uncertainties and other factors including the risk factors set forth in our annual report on Form 10-K and our other SEC filings. The company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise. The full declaration regarding forward-looking statements is available in the supplemental package posted yesterday, and a detailed discussion of the potential risks is contained in our filings with the SEC. With that, I’ll turn the call over to Colin Connolly.

Michael Connolly: Thank you, Pam, and good morning, everyone. We had a strong third quarter at Cousins. On the earnings front, the team delivered $0.69 a share in FFO and raised the midpoint of our guidance by $0.02 a share to $2.84 a share. The midpoint of our guidance now represents 5.6% growth compared to 2024. Importantly, leasing remained robust. We completed 551,000 square feet of leases during the quarter, which is our second highest quarterly volume over the last 3 years. And for the 46th consecutive quarter, we delivered a positive cash rent roll-up on second-generation leasing. We also acquired the Link for $218 million, which strategically expands our presence in the fast-growing market of Dallas. These are remarkable results all around.

I will start with a few observations on the market. Most major companies are phasing out remote work. Office fundamentals are improving. Demand is growing. During the third quarter, net absorption reached a post-pandemic high. Vacancy declined for the first time in 7 years. And with new construction starts at de minimis levels, any meaningful increase in new supply is 4 to 5 years away. Importantly, for Cousins, corporate migration to the Sunbelt has firmly reaccelerated. As a result, our leasing pipeline is robust across all markets. We see a notable pickup in leasing interest from West Coast and New York City-based companies. Financial service and select large-cap technology companies are particularly active. While not necessarily full corporate relocations, they are significant hubs in some cases and highlight growth away from high tax in high regulation states once again.

A recent rise in layoff announcements seems to be weighing on investor sentiment around the office sector. However, we have not seen any meaningful impact on demand. I’ll explain why. Office using employment growth was historically high during the pandemic. At some companies, headcounts almost doubled. However, because of the pandemic, many of these new hires were remote and associated office space was never leased. Now as return to office mandates have become widespread, many companies lack the space to accommodate their pandemic era headcount growth even after modest recent layoffs. Simply said, the tailwinds from the accelerating return to office remain greater than the impact of corporate layoffs from our vantage point. One more thing I’d like to note on this topic.

Given the current exuberance around AI, corporate downsizing is often incorrectly tied to automation. Amazon is the most recent example. However, on last night’s earnings call, Andy Jassy confirmed that Amazon’s announcement of 14,000 job cuts was aimed at reversing excessive hiring during the pandemic. To put this in perspective, Amazon grew its headcount by almost 750,000 jobs since year-end 2019. To reiterate my previous comments, the return to office is a more powerful lever for office demand than corporate rightsizing and AI is not yet the existential threat that some expect it to be. This is an excellent setup for Cousins to advance our strategic priorities. Our team remains sharply focused on driving occupancy and earnings growth while maintaining our best-in-class balance sheet and enhancing the quality of our portfolio.

To do so, we are prioritizing both internal and external growth opportunities. At quarter end, the portfolio was 88.3% occupied, and finally reflects the expiration of Bank of America’s lease in Charlotte. Given our robust leasing pipeline and modest lease expirations in 2026, we are confident that we can grow occupancy next year. While the ramp will be heavily weighted towards the back half of the year, we have a goal of achieving occupancy of 90% or higher by year-end 2026. Our creative investment team continues to evaluate several interesting investment opportunities. Our track record highlights our openness to a wide variety of transactions, including property acquisitions, select development, debt, structured transactions and joint ventures.

However, our core strategy remains the same, invest in properties that already are or can be positioned into lifestyle office in our target Sunbelt markets. Earnings accretion is a priority. To fund any new investments, we will always consider all options. To be clear, new equity at today’s stock price certainly does not make financial sense. Dispositions of noncore assets, settling shares already outstanding on our ATM and/or utilizing the balance sheet are more likely options. While sometimes characterized as conservative, we view our low-levered balance sheet as a distinct offensive tool. At select times in the past, we have modestly flexed up our leverage to take advantage of compelling investment opportunities. Given improving property fundamentals and a scarcity of competitive office capital, this could be one of those moments and Cousins is uniquely positioned to seize it.

As I mentioned earlier, the current midpoint of our guidance forecasts 5.6% growth over 2024. This would be our second consecutive year of FFO growth. Cousins would be 1 of 1 in the traditional office sector to accomplish this multiyear growth. Our team’s ability to drive both internal and external growth is key. We plan to continue the streak in 2026. We are excited about what is ahead for Cousins. Demand is accelerating, new supplies and historical lows, the office market is rebalancing. We are growing earnings, Bank of America independently ranks our portfolio is the highest quality in the office REIT sector. Our balance sheet is exceptionally strong, and our G&A is highly efficient for our investors. Before turning the call over to Richard, I want to thank our dedicated Cousins employees who provide outstanding service to our customers and each other every day.

Richard?

Richard Hickson: Thanks, Colin. Good morning, everyone. Our operations team once again delivered exceptional results in the third quarter. This quarter, our total office portfolio end-of-period lease and weighted average occupancy percentages were 90% and 88.3%, respectively. As expected, both were down this quarter, almost exclusively due to the known move out of Bank of America at 201 North Tryon in Charlotte. Without Bank of America’s expiration, our occupancy would have been steady this quarter. Like last quarter, I want to reiterate that our near-term occupancy expectations remain generally the same. We still see the third quarter as a bottom. And then expect occupancy to be stable or modestly increase for a couple of quarters and then build higher in the back half of 2026.

I would be remiss if I didn’t once again point out that a big driver of our occupancy expectations continues to be our best-in-class near-term expirations profile. As of third quarter end, we only had 6.3% of annual contractual rent expiring through the end of 2026. We continue to be laser-focused on proactively managing our expirations. During the third quarter, our team completed 40 office leases totaling an impressive 551,000 square feet with a weighted average lease term of 9.4 years. Total leasing volume was up 65% sequentially and even exceeded our strong first quarter activity. This quarter’s volume was also well above our 1-, 3- and 5-year volume run rates. We are very pleased with our year-to-date leasing activity, which stands at 1.4 million square feet.

Our leasing pipeline also continues to be very healthy at all stages, has grown nicely throughout the year and as a result, remains at record high levels. As Colin mentioned, our pipeline also reflects a notable increase in large user activity including new-to-market requirements looking to either relocate or build a new talent base in the Sunbelt. With regard to lease economics, second-generation cash rents increased yet again in the third quarter by a healthy 4.2%. Dallas and Tampa posted the largest cash rent roll-ups this quarter, with Austin and Charlotte not far behind. Average net rent this quarter landed at $39.18 which is the third highest quarterly level in our company’s history. Average leasing concessions with some of free rent — tenant improvements were $8.12, which is 13.8% below last quarter and 7.6% below the full year 2024.

The result was average net effective rent of $28.37, slightly higher than last quarter and the second highest quarterly level in the company’s history. Our net effective rents were solid in every market once again, a testament to the broad strength of our Sunbelt markets and assets. Turning to the markets. JLL reported that transaction volume in Austin totaled 1.3 million square feet in the third quarter, a sequential increase and 16% above the 3-year quarterly average. Across our Austin portfolio, we signed 97,000 square feet of leases in the third quarter, also sequentially higher. Of that activity, 52,000 square feet were new leases at the Terrace in Southwest Austin, where demand continues to be impressive. The Austin team also completed an important 40,000 square foot renewal of a law firm at Colorado Tower in the CBD.

Our Austin portfolio ended the quarter at 94.9% leased. Similar to Austin, JLL reported a quarterly leasing activity in Atlanta increase at 15.5% quarter-over-quarter. They also noted that this quarter, new leasing made up a greater share of leasing volume than in recent years, with renewals accounting for just 17% of volume. We signed a strong 125,000 square feet of leasing in our Atlanta portfolio this quarter and on a transaction count basis, 2/3 of our activity was new and expansion leasing. That included a 24,000 square foot headquarters expansion of a customer at North Park in the central perimeter, effectively doubling their footprint. Of particular note is that expansion was driven by a recent decision to bring employees back to the office as soon as possible.

Also in North Park, I’m very excited to report that we are in advanced lease negotiations with a Fortune 50 company to lease 166,000 square feet at the property on a long-term basis, which when complete will represent incremental occupancy of nearly 12% for the 1.4 million square foot project. This will clearly be a huge boost for North Park, but also for our occupancy trajectory at the total portfolio level. This quarter, our overall Atlanta portfolio occupancy increased to 83.4%, driven primarily by a handful of new and expansion lease commencements in Buckhead. Turning to Charlotte. Fundamentals for high-quality office remains strong with Class A space representing 70% of all new leasing during the quarter. Further, new development inventory in South End and Uptown is very close to fully leased.

As such, we continue to be very excited about our redevelopment projects at both 550 South and 201 North Tryon in Uptown, which we view as the highest quality existing office projects with availability in the market. Consistent with the new supply dynamic I just mentioned, we are pleased to say that in the third quarter, we completed an early long-term renewal with McGuire Woods at 201 North Tryon for 127,000 square feet. This was an important win, and we view this long-term commitment to 201 North Tryon as a validation of the building’s quality location and of our ongoing property redevelopment. Same positive market dynamics are in play in Phoenix as well in the past few months have been remarkably active on the leasing front. You may recall that we signed a 39,000 square foot new lease at Hayden Ferry I in the second quarter.

Since then, but subsequent to third quarter end, we signed an additional 52,000 square foot new lease at the building with a commencement date before year-end 2025. On top of that, we are in lease negotiations with another new customer for Hayden Ferry I that would bring the building to approximately 95% leased in very short quarter. During the third quarter, the team also completed 2 important renewals at both Hayden Ferry II and Tippy Gateway, totaling 44,000 square feet. We could not be more pleased with the recent performance of our Phoenix portfolio. Last, I’ll touch on Dallas. With the addition of the Link, we now own a 3-building, 808,000 square foot portfolio in Dallas with the largest asset being the 319,000 square foot Legacy Union 1 building in the legacy submarket of North Dallas.

Ovintiv is the sole customer in the building, so they subleased substantially all of the building years ago. In the third quarter, we proactively entered into an early termination agreement with Ovintiv. And upon Ovintiv’s new expiration in mid-2026, all of the subtenants will automatically become direct tenants. Through this agreement, we essentially multi-tenanted the building and can now more effectively engage with the subtenancy about future renewals. This move also greatly improves our flexibility in executing creative strategies to proactively backfill whatever space we may ultimately get back. Encouragingly, interest in the building has been very robust even in the short period of time since we executed this agreement, both with existing subtenants and potential new tenants.

It is clear that demand for high-quality office in Dallas is very healthy, and we are excited to capitalize on it. I’ll conclude with a brief revisit of our leasing pipeline. Again, our overall pipeline is at record levels for Cousins, and 68% is new and expansion leasing. Further, we have 715,000 square feet of leases either signed fourth quarter year-to-date or in lease negotiations, of which 77% are new and expansion leases. That represents a total of 551,000 square feet of new and expansion leasing in our late-stage pipeline alone. For perspective, that’s roughly 2x our year-to-date quarterly new and expansion leasing run rate. This is a very encouraging trend. As always, I want to thank our operations team for all of your hard work. Your talent and excellent customer service continue to position our company exceptionally well.

Kennedy?

Jane Hicks: Thanks, Richard. Before I discuss the transaction environment, I want to touch on our mixed-use development project, Neuhoff in Nashville. We finished the quarter with the apartment component up to 86% leased and we still expect for this part of the project to be stabilized at the end of the year. On the commercial side, we signed 2 spec suite leases, both of which commenced in 2025 and brought that component up to 53% leased. We’ve been very encouraged by the recent uptick in tenant demand in the Nashville market with several large office prospects currently considering Neuhoff for both near-term requirements and future expansion needs. As you may recall, as part of the overall project, we have the ability to develop a 280,000 square foot office tower adjacent to the current one.

Given the infrastructure that is already in place, we believe we have a competitive advantage in our ability to offer expansion space and an expedited time line upon tenant commitment. As a reminder, Neuhoff is located in the Germantown neighborhood of Nashville, directly across the Cumberland River from Oracle soon-to-be-developed state-of-the-art headquarters campus. Oracle has reportedly hired nearly 1,000 employees in the city to date and is pledged to have at least 8,500 workers in Nashville by the end of 2031. Just this month, the company released rendering showing its extensive plans for the campus. These plans include a pedestrian bridge that the company will build across the river to link its campus to Neuhoff. This multibillion-dollar investment by Oracle as well as the recent tenant activity in the market, is a testament to both Nashville’s talented and growing workforce as well as company’s desire for high-quality differentiated office environments.

We are excited about the response from the market for Neuhoff to date and feel that the momentum is only building for this iconic project. Turning to our acquisition activity. As previously announced, we closed on the Link in Uptown Dallas during the third quarter. The Link is a trophy building that fits squarely into our lifestyle Sunbelt office strategy while expanding our footprint in Dallas. We acquired the 94% leased property for $218 million or $747 per square foot, pricing that represents a discount to replacement cost and has been immediately accretive to earnings. We remain very enthusiastic about the Dallas office market and our ability to continue to expand our presence there. Uptown Dallas is receiving an outsized share of demand, thanks to its appeal as an urban walkable mixed-use district and the ongoing migration of financial and professional service jobs to the region, largely from New York and California.

There are very few large blocks of available space remaining in Uptown and we are already witnessing near-term demand exceeds supply. The increasing tenant demand that we are experiencing across all of our markets has led to continued improvement in investor sentiment towards office, which is creating higher transaction volumes. Debt for office assets is now readily available and equity is following, albeit still selectively and generally more oriented towards smaller assets. We continue to seek out acquisition opportunities that meet our criteria. Sunbelt assets that are consistent with or better than the quality of our current portfolio that we can fund in a manner that is accretive to earnings and cash flow. We are mindful of maintaining geographic diversity and will remain laser-focused on asset quality and location.

With better debt increasing and buyers becoming more constructive around underwriting, we also intend to selectively explore dispositions as a funding source for new acquisitions and eventually development. Given the quality of our portfolio, we don’t have a lot of assets that qualify as noncore and we don’t need to sell. But when there are opportunities to accretively rotate into assets that improve our portfolio composition and mitigate higher CapEx needs, we will execute. With that, I’ll turn the call over to Gregg.

Gregg D. Adzema: Thanks, Kennedy. Good morning, everyone. I’ll begin my remarks by providing a brief overview of our results, spending a few minutes on our same-property performance then moving on to our capital markets transactions before closing my remarks, with an update to our 2025 earnings guidance. Overall, as Colin stated upfront, our third quarter results were outstanding. Second-generation cash leasing spreads were positive, same property year-over-year cash NOI increased and leasing velocity was very strong. Focusing on same-property performance for a moment, GAAP NOI grew 1.9% and cash NOI grew 0.3% during the third quarter compared to last year. These numbers were negatively impacted by the Bank of America departure at our 201 North Tryon property that Richard discussed earlier.

Despite initiating a significant redevelopment plan at this property, we left it in our same property pool. I also want to take a moment to point out the lumpiness that can sometimes run through our quarterly same-property expense numbers, usually driven by property taxes. Property tax true-ups as we get clarity through the tax assessment and appeal process, can push the quarterly numbers around quite a bit. So it’s always best to use longer time frames when looking at these numbers. For example, same-property tax expenses that ran through our P&L were up 21.9% in the fourth quarter of ’24, they were down 12.1% in the first quarter of this year, down 22.4% in the second quarter and up 14.7% this quarter. That’s a lot of movement, compared to the prior year.

However, if you take a step back and look at all of 2025, we currently forecast our net property tax expenses to be essentially flat compared to 2024. Moving on to our capital markets activity. Our Neuhoff joint venture, of which we own 50%, proactively approached our lender and amended its existing construction loan during the quarter. Our goal was to lower the SOFR spread and extend the maturity date, which we accomplished by paying down $39 million of the outstanding principal balance. In connection with this amendment, we also loaned our joint venture partner, $19.6 million at an interest rate of SOFR plus 625 basis points, which they used to fund their portion of the repayment. Although we didn’t sell any common shares during the third quarter, to date, we’ve sold 2.9 million shares through our ATM program on a forward basis at an average gross price of $30.44 per share.

None of these shares have yet been settled. In addition, we paid off a $250 billion note upon maturity in early July, using proceeds from our most recent $500 million bond offering in June. We also used proceeds from this bond to partially fund our acquisition of the Link property in Dallas that Kennedy just discussed. We continue to assess alternatives to fund the remainder of the Link acquisition and as I discussed in our last earnings call, settling some of the shares we have issued on a forward basis and/or selling some noncore assets are 2 of the alternatives available to us. With our sector-leading balance sheet, we’re in a position to be patient on this front. With that, I’ll close our prepared remarks by updating our ’25 earnings guidance.

We currently anticipate full year 2025 FFO between $2.82 and $2.86 per share with the midpoint of $2.84. This is up $0.02 from last quarter. The increase in FFO guidance is driven by higher parking income, higher termination fees, lower SOFR and interest income from the loan to our joint venture partner. Our guidance assumes no additional SOFR cuts for the remainder of ’25. Bottom line, our third quarter results are excellent, and we’re raising the midpoint of our full year earnings guidance yet again. The current midpoint is $0.06 per share above the midpoint we provided when initiating the guidance in February. And although it’s not in our guidance, as Colin said earlier, we anticipate the potential to continue deploying additional capital into compelling and accretive investment opportunities.

We look forward to reporting our progress in the coming quarters. With that, I’ll turn it back over to the operator.

Operator: [Operator Instructions] And your first question comes from the line of Blaine Heck from Wells Fargo.

Q&A Session

Blaine Heck: Colin, I appreciate your commentary on AI and layoffs, very helpful. Just a follow-up, and I know it was a very recent announcement. But given that Amazon is your largest tenant, have you spoken to them about their space within your portfolio and whether the recent announcement might change their utilization at all? And more broadly, I think there’s an idea being brought up in our conversations that the Sunbelt might be a bit more susceptible to AI and displacement given the amount of corporate back-office type jobs housed in those markets. So I’m wondering how you would respond to that and how you think your portfolio is insulated from that potential trend?

Michael Connolly: Blaine, I appreciate the question. There’s a lot in there. And I think in particular, there’s a lot of misconceptions in there. And the first that I would highlight is kind of a narrative of kind of gateway markets are pushing that the Sunbelt is full of back-office jobs. And that is just far from the case. And as we look around the Sunbelt, the migration of technology and financial services companies has been largely driven by moving out of high-tax and high regulation states into markets where there is highly educated workforce and exciting and dynamic markets. So think Austin, think Atlanta, think Charlotte, think Nashville. And again, I could point to a lot of companies that have made those moves and intentionally made this decision to distribute their workforce more broadly around the country so as to not be overly concentrated in markets like San Francisco or Seattle or New York, where there have been some significant challenges.

So I think Oracle moving their corporate headquarters to Nashville. Think of the large hubs with Amazon in Austin and Nashville, as well as D.C. Think about Goldman Sachs establishing a new hub, building an 800,000 square foot campus in Uptown Dallas for 5,000 employees, many of whom will be front-of-house bankers. So I think that is very much a misconception. I think in particular, many of those companies are highly engaged in AI. And so while the kind of the start-up AI universe is largely located in San Francisco in time that AI demand will find itself distributed again throughout the country and we are already seeing that today. Amazon, as I touched on in my prepared remarks, we have great conversations with Amazon all the time. Again, I think Andy Jassy dissuaded any fears that those risks were AI-related, it was more about rightsizing the headcount to become more efficient.

But as I look at Amazon around the country, I think you’re likely to see them be a net expender, not contractor. And so I want to make sure to highlight that, that certainly has been the trend with them as of late, and I don’t see that changing. And then just kind of stepping back with a few statistics, the — with the enthusiasm around San Francisco and New York over the last 12 months, if you actually drill into the data and look at actual leasing activity in growth markets, which would include all of our markets relative to gateway markets, and this is JLL Research, the growth markets are in a 104% of the leasing levels over the last 12 months compared to 2019. The gateway markets, which would include San Francisco, New York, Seattle, Boston, that’s at about 65%.

So that’s just the last 12 months. Despite the exuberance over certain markets, the Sunbelt and growth markets continue to outperform.

Blaine Heck: Okay. Great. That’s really helpful and all makes sense. Sense from my perspective. And then my second question is your expiration schedule, as you guys have mentioned, is relatively light in the next couple of years, which I think, should help with the occupancy build. But I was hoping you could give some color on whether the expirations in the next couple of years are kind of proportional relative to your market exposure? Or if there are any specific markets that have a high concentration of expirations in ’26 or ’27?

Richard Hickson: Yes. Blaine, this is Richard. So we’ve talked about in the past, really the only large expiration that we have through end of 2026 is Samsung in Houston at Briar Lake. There are 123,000 square feet. Nothing much has changed in terms of the status of that. A lot of that space has already been sublet. We’re engaged with some of the subtenants on going direct or extensions when the subleases expire. We’re actually talking with Samsung as well directly for some sort of a renewal. We’ll see how that plays out, but it’s going well so far, and we feel good about our ability to take care of the vast majority of that space. And so really, there’s just not a lot of lumpy big activity right ahead of us. Obviously, we all know that BofA is now in the numbers and behind us.

So proportionately, we feel good. I mean we obviously have a lot of wood to chop in Charlotte and feel very good about what we’re doing with deploying capital to redevelop both 550 South and 201 North Tryon and we know that this play works in that when we’ve done these projects in the past, the most recent being Hayden Ferry, once we get these projects done and the redevelopment can be touched and felt by potential customers and existing customers that we’ve seen has been robust and very encouraging. So we also feel good about our position there.

Michael Connolly: Blaine, it’s Colin. I’d just add back to your question, I’d say the expirations are pretty evenly distributed throughout the portfolio. There’s not kind of any one market that has significantly more than the others. I’d point out Austin probably has some of the, I’d say, the more modest expirations over the next couple of years, and that would be kind of the one market that would stick out for its modest expirations.

Operator: And your next question comes from the line of Andrew Berger from Bank of America.

Andrew Berger: Great. And thank you for the thorough opening remarks. Just wanted to circle back on the comments around the balance sheet and leverage. I appreciate the current leverage levels are a bit lower than maybe some of your peers. What’s sort of the upper bound of how high you would potentially be willing to take leverage at this point?

Gregg D. Adzema: Andrew, it’s Gregg. So if you go back and look over the last 12 years, our leverages remain, give or take, right around 5x net debt to EBITDA. It’s kind of varied between 4.5 and 5.5 generally over that period of time. When it’s been at the top of that range, it’s been associated with — as Colin stated earlier, when we’ve gone into kind of offensive mode. So the 2 biggest pieces, the 2 biggest instances would be the mergers with both TIER and Parkway over the last decade. In both instances, we used the low levered balance sheet. I know it was an offensive weapon to pick those transactions without having to raise any incremental equity and then subsequently brought leverage back down to 5x. We think we’re in another period like that right now, we’ll be able to use it on an offensive basis.

In terms of kind of what the cap is, we’ll always maintain an industry-leading balance sheet. But we think we have a little bit of room here. Really, the only hard number that you have out there, is we do have an investment-grade rating for both Moody’s and S&P. And if you look at their write-ups, they tell you that 6 and below is consistent with what our current rating would be. So from a rating agencies perspective, there’s no problem going up to 6. We haven’t gone up to 6 as a company in well over a decade. So that — I’m not taking that off the table. But that would certainly be the absolute upper bound of the range of what we would do. We’ve got some capacity here, though. I mean we’re at [ 5.38 ] right now. That’s a little higher than it’s been recently because as I discussed in my opening remarks, we bought the Link, we haven’t fully funded it yet.

We’ve got lots of options to do that, whether it’s asset sales or settling some of the shares that we’ve issued on a forward basis under the ATM. We’ve got some capacity to flex the balance sheet here and drive earnings and drive growth at what we think is a really opportune time to do it.

Andrew Berger: Great. And as my follow-up, the parking income has been an area where you’ve frequently been able to beat over the last several quarters. Can you just talk about how much more upside there is from here, — what are at a high level, I guess the physical utilization of your buildings and of the parking lots and then also the pricing relative to pre-COVID and also how you forecast this?

Gregg D. Adzema: Sure. So — if you go back at kind of pre-COVID times 2018, 2019, total parking revenues generally represented about 8% of our total revenues. Now the portfolio has changed quite a bit since 2019. But using that as a kind of as a starting point, our current parking revenues as a percentage of total revenues are at just under 7%. So below where they were pre-COVID as a percentage of total revenues, by the way, they bottomed at around 5%. So they’ve come up significantly since kind of ’21, which represented the bottom. But using that prior baseline of 8%, we still think we probably have a little bit of room to push. In terms of kind of what we’ve seen in that increases and we keep surprising ourselves every quarter, it’s about 75% utilization and 25% price, right?

You can drive revenues either by using it more or by increasing the price. It’s been a 75% to 25% balance as we move forward through this. So yes, we think there’s still a little bit of room there. We do a ground-up analysis of this every quarter as we reforecast, and we continue to surprise ourselves every quarter. It’s a good surprise though because it really is an indication of better utilization of our decks which is exactly what we want to see. It plays into what Colin had talked about at the top of the call, which is the return to office continues and if anything, is accelerating. And then finally, in terms of a breakdown of parking revenues, our parking revenues are about 75% contractual and about 25% transient or noncontractual. And that relationship, that 75-25 relationship, is that incredibly consistent over the years, it doesn’t move much.

Operator: And your next question comes from the line of Brendan Lynch from Barclays.

Brendan Lynch: It sounds like you’re still on track for your previous expectations for occupancy to trough in the third quarter and improve from here kind of be steady and then improve. How should we expect that to kind of flow through to the trajectory for same-store cash NOI growth going forward?

Gregg D. Adzema: I’ll talk about just the trajectory and Colin can probably add a little granularity. But the increase in occupancy that we’ve referred to in this call, getting to 90% or better by year-end ’26s highly likely to be back-end loaded not completely back-end loaded, but more back-end loaded than front-end loaded. In terms of how that plays through to our same property performance. The one thing that we’ve got to deal with is this big Bank of America move-out that we just had in July. I mean as you do year-over-year comps, which is how we report these numbers, however we reports these numbers, that’s going to sit in the numbers as a prior year comp until we get to July of 2026. So you’re going to see kind of lower numbers this next quarter, still positive, we think, but lower this next quarter and probably lower in the first half of next year.

But once you get that out of the machine out of the system and you don’t get the bad prior year comps, you’re going to see some significant acceleration in our same-property performance in the second half of ’26.

Brendan Lynch: Great. That’s helpful. And maybe sticking with Bank of America and the 201 North Tryon asset, it sounds like you’re already making progress backfilling some of that space, I understand there’s some redevelopment still going on. Maybe talk about the prospect of leasing up the rest of the space that has become available.

Richard Hickson: This is Richard. Again, we feel really good. Again, we just started in the past quarter, the redevelopment of 201 North Tryon, but we’re well underway. The market can see it. 550 South, I would notice it’s further along, but the activity that we’re seeing, I’d say, broadly in Charlotte is very encouraging. There are plenty of large users that are looking in Uptown and South End whether kind of figuring out that there’s really no space left in South End to lease. And so they’re all starting to concentrate almost exclusively on Uptown and big blocks that are available. There’s new-to-market activity, as Colin alluded to, that we’re seeing that’s extremely encouraging. So we feel good about our position relative to supply and demand in the market and think we’re going to have success here in the next 12 months or so.

Michael Connolly: Yes. And Brendan, it’s Colin. I’d just add on. Consistent with my earlier comments about the reacceleration of Sunbelt migration, I think Charlotte, in particular, you’re seeing quite a bit of activity at large New York City-based financial services firms looking to do growth and establish large hubs in Charlotte. I can’t speak to the specifics of what’s driving that, but it’s been a noticeable acceleration over the last 3 to 6 months.

Operator: And your next question comes from the line of Nick Thillman from Baird.

Nicholas Thillman: Maybe, Colin, you mentioned sort of the New York West Coast sort of migration into Sunbelt markets. As you look at the vacancy within the portfolio and these larger requirements, do you think you have the vacancy in the right spots and sell markets to kind of attract these tenants? I guess how are you feeling about the pockets where you do have some vacancy on leasing that space up? Obviously, the new North Park AT&T stuff kind of pending here, but just some other stuff.

Michael Connolly: Yes. No, we do feel like — we said differently, where we do have large blocks of space. Again, you mentioned North Park, Kennedy mentioned Neuhoff, the 201 North Tryon, Hayden Ferry. I mean we — in each of those instances, we are seeing some interest and larger users taking a look at that space. So that’s very much encouraging. The other thing I’d mention in certain areas of our footprint where we don’t have space, we’re actually starting to have some very preliminary conversations with large users coming out of New York and the West Coast who have potential interest in building — in new buildings. And so that’s been a very encouraging sign and we hope to address some of those needs.

Nicholas Thillman: That’s helpful. And then, Kennedy, you mentioned some potential dispositions with the capital markets improving. I know you’re in the market with 1 asset in Tampa, but are those the type of assets we should be thinking about as disposition targets here near term?

Jane Hicks: Yes. I mean, as we’ve said, we will only look to dispositions when we have exciting acquisition opportunities. So we are — we’re monitoring the market, monitoring our portfolio and assets where we think that match up well with the depth of the buyer pool today, we’ll look to transact. So yes, I would say, generally smaller and maybe less tied in to the rest of our portfolio in specific markets.

Operator: And your next question comes from the line of Steve Sakwa from Evercore ISI.

Steve Sakwa: Richard, I was just wondering if you could provide maybe a little more granularity on that pipeline. It sounds obviously impressive. Can you give us maybe a sense of number and kind of size? I guess I’m just thinking if tenants are somewhat larger getting them into occupancy by end of the year becomes a little bit more of a challenge, if they’re smaller in that 25,000, 50,000, 75,000 foot range, they can get in quickly. So I’m just trying to get a sense of number and ultimate size of that pipeline.

Richard Hickson: Sure. The pipeline overall is definitely partly being driven by larger activity. And again, new-to-market activity that we’re seeing. But to your point, the larger users tend to be slower moving just by the sheer nature of the size and the lift of getting that much space built out and occupied. I think right now, we have roughly 100 total prospects within the pipeline overall. But we’ve actually had some interesting cases just in the last couple of months. I alluded to one in Phoenix where we had a 50,000 square foot new customer that we signed a lease with a very fast-moving lease negotiation, and they’re going to occupy the space that they leased literally within 60 days. So that’s unusual, but there are little pockets of activity where we’re seeing actually a little faster occupancy.

And for a 50,000 square foot customer to do that, that’s pretty impressive. So again, it takes time for the bigger users to filter through the system. End of the day, we welcome large user activity. I think it’s wonderful to have that engine beginning to fire again on all cylinders and are happy to waive those into our portfolio if we have the opportunity.

Michael Connolly: And Steve, it’s Colin. And you’re right, again, larger users take larger or longer periods of time to lease up and timing of commencements and build-outs are always — that’s a big variable and ultimately being able to meet our goals. But I would, I guess, characterize that 90% plus goal at year-end 2026 is largely being driven by the leases that we have already signed and not yet commenced or perhaps leases that we think we’re going to do over the fourth quarter. But again, those won’t have that large of an impact. And so the timing of the commencement in that pipeline, all of those dates are factored into our projections, and we’re optimistic about achieving our goal.

Steve Sakwa: Great. That’s good color. And then I don’t know if Kennedy or Richard, maybe just on the Neuhoff project. Obviously, that’s been a little bit slower to lease. But I guess I’m just curious with Oracle making a bigger push. One, have they kind of looked at the project as maybe temporary space for the employees that are coming into the market? And if not, are there maybe companies that are feeding off of Oracle’s move into the market and trying to be adjacent to their new campus. Is that a source of demand that’s looking at the project?

Jane Hicks: Yes. I think certainly, the Oracle being across the river and just their plans in a variety of industries and for the campus and growth is all great for the follow-on demand. So we are starting to see some of that and are excited about the larger users that are showing up again just recently here.

Michael Connolly: And Steve, to kind of directly answer your question, all of those are possibilities. And again, I think Oracle, a company of that size is obviously heavily involved. Again, in AI not just in San Francisco but here in Nashville, in the derivatives off of that and companies that work with Oracle, it’s going to be fantastic for Neuhoff. And we’ve certainly seen an acceleration of interest in our space since Oracle has made in their grand reveal recently of their project in a specific time line. But it’s all very positive.

Operator: And your next question comes from the line of Upal Rana from KeyBanc Capital Markets.

Upal Rana: Richard, I appreciate the details on the leasing pipeline. Given the stronger pipeline, are you seeing any shift in lease economics as it related to rents or concessions or TIs in there?

Richard Hickson: No, not at this point. I think it’s actually been relatively stable. I mean our concessions came down a little bit this quarter. I’m really pleased with the fact that our net effective rents, though are hanging in there and been very steady. I think we’re right on top of the second quarter for net effective rents. So if anything, I’d say, we’re feeling while TIs continue to be large, we’re feeling like we’re able to hold the line on rate and get net effective rents and produce stability there, yes.

Michael Connolly: It’s Colin. I would just add. We do think we’re relatively close to an inflection point where it is likely to become a landlord’s market. With no new construction having started really over the last couple of years and not expected to have any meaningful uptick there and now demand accelerating a shortage of what I would characterize as lifestyle office in some of our markets is absolutely coming and in some cases, almost here. And if you talk to the major tenant reps across our markets, whether it’s in Atlanta or Austin or Charlotte, those large tenant reps are looking out to their ’27, ’28, ’29 expirations and starting to have some real concern that they won’t have the options to accommodate growth for their customers. And so hopefully, that ultimately translate into us driving net effective rents, whether it’s face rents or ultimately bringing concessions down.

Upal Rana: Okay. Great. That was helpful. And then with the Ovintiv termination, could you provide any lease economics or rent changes that you may have had with the new subtenants relative to what Ovintiv was paying? If there were none, where is market rent today relative to what Ovintiv was historically paying?

Richard Hickson: Sure. So there are some changes that will happen as Ovintiv rolls out of the stack in mid-’26. It’s not material, it won’t move the needle from an NOI perspective. And we’re definitely going to be able to push and roll up rents to the extent we backfill or renew any of that space. We’re in the market, if you will, with kind of mid-40s net right now for the building, which is meaningfully higher than where employee rents are.

Operator: And your next question comes from the line of Ray Zhong from JPMorgan.

Zhuorui Zhong: Thanks for the color on looking out in — on the occupancy guidance. Just curious, it sounds like 201 North Tryon is part of that 90% occupancy comment as well. Just want to confirm that. That’s number one. And number 2 is, can you remind us the redevelopment timing? And how much you’re going to spend there — and when can we expect the backfilling to take place in terms of commencing.

Michael Connolly: Ray, just to clarify your question, you — as it relates to 201 North Tryon, your question is, will it be 90%? Or is it in the 90% guidance. Is that your question?

Zhuorui Zhong: Yes, the second one. Yes, you mentioned the 90% comment towards year-end ’26. Curious if that includes 201 North Tryon in the occupancy pool? And I’m guessing is yes, but I just want to confirm.

Michael Connolly: It absolutely does. And again, as we’ve just gotten that space back and we’re that are under construction on our redevelopment, that forecast does not include a significant amount of commencements new leasing at 201 North Tryon by year-end 2026. We certainly hope to outperform that, but I’d say largely the re-leasing and the commencement of those leases at 201 North Tryon are more geared towards 2027.

Zhuorui Zhong: Got it. Yes, that’s what I was trying to get to. And the second part of that question would be, can you remind us the spending amount on there. And I think you guys also mentioned it’s not going to be capitalized like on the Golden dark space, right?

Gregg D. Adzema: I’ll tackle the gap of it and then Colin to put the total number in there. Yes, since we’re not taking this out of the portfolio, we were not capitalizing interest against the basis of the existing building. We’ll just capital interest on the new spend. So not a big movement there in terms of capitalized interest. And then in terms of total spending.

Michael Connolly: It’s approximately $40 million with an anticipated completion in the first quarter of 2027. It’s very much consistent with the spending and the type of redevelopment we did at the Promenade tower, Promenade central building here in Atlanta or the Hayden Ferry project out in Phoenix that have all been really well received. And so I’d say it’s a very similar project, slightly higher nominal dollars because it’s just a larger tower.

Operator: And your next question comes from the line of John Kim from BMO Capital Markets.

John Kim: This quarter other than the Neuhoff loan, you didn’t make any investments either on the assets or debt mezz side. I was wondering if you could talk about cap rate or yield compression you’ve seen just given the increased competition. And if I could focus on Dallas, there was recently a hardware portfolio sale, which included Saint Ann Court that recently traded. I was wondering if you could discuss how close you were to acquiring that portfolio? And any commentary you have on pricing?

Michael Connolly: John, on Harwood we were kind of [ 6.7% ] on it. We appreciate it — I’ll go back to the beginning in terms of cap rates. As Kennedy alluded to, you’re certainly seeing more investors focus and become interested in office and debt certainly readily available. So I would say cap rates, we think, are likely to compress. We haven’t seen a lot of that compression just yet, but as more equity investors got to make the decision to pull the trigger in office, we think that, that will — that is likely to come specifically to Harwood. Obviously, we had some involvement in the Saint Ann’s asset, and they now have subsequently brought the entirety of the portfolio out to the market. I think you’ve seen some recent announcements as to how that is playing out. Certainly something that we looked at, and we’re obviously strategically very focused on growing our presence in Dallas. But I think ultimately, we’ve made a decision to focus our efforts elsewhere.

John Kim: Okay. And then on the leasing success that you had at Hayden Ferry 1, can you just provide some commentary on either the tenant or industry that signed there? You can give on redevelopment yields or return on invested capital on the redevelopments? And maybe for Gregg, can you remind us when you plan to place that asset back into the same-store pool?

Richard Hickson: Sure. I’ll start. The leasing has been pretty broad-based, the 50,000-ish square foot customer that we signed subsequent to quarter end was a regional engineering firm that actually has a very nice high-growth data center component to their business. We have previously signed a regional headquarters lease with a financial — regional bank financial services company. The company that is in lease negotiations right now is a corporate headquarters. It’s not new to market. And I’d characterize it as a health care/consumer goods-focused company. So it’s very diverse. Actually, the new tenants that we’re bringing into the project. And again, we’ve been very pleased with the profile of all of these customers, their headquarters, their high-end uses, not back office. So very excited about the new tenancy at Hayden Ferry 1 and elsewhere in the project.

Gregg D. Adzema: And then in terms of when we bring it back in our same-property pool, likely Jan 1, ’28. We only changed our same-property pool one time a year, January 1 of each year. And so in Jan 1, ’27, which would be the next logical time to do it, we won’t have a good year-over-year comp because it’s not going to stabilize to later in ’26. So to be Jan 1, ’28.

Operator: And your last question comes from the line of Dylan Burzinski from Green Street.

Dylan Burzinski: I guess maybe following up on one of John’s questions. Given that bidding tenant are growing, and I think in the past, you guys have focused most of your acquisition efforts towards what you could describe as sort of mispriced core assets. given it seems like cap rates are compressing in the subset of investment opportunities, is it your expectation that most of what you guys are going to be looking at going forward will sort of be more closer to the risk profile, say, Proscenium versus Sail Tower Vantage in the Link?

Michael Connolly: No, it’s Colin. I think, as I said, we expect them to likely compress, but we still have not seen that compression yet. And so I do think that there is more opportunity consistent with what we have been doing. And certainly, those type of assets fit our quality profile. We’re not opposed to looking at high-quality assets that have vacancy and taking lease-up risk. But I would just kind of point out that in our Sunbelt and urban markets where Cousins operates, just given how robust the leasing has been, there are not that many high-quality buildings that have significant vacancy. And so those like Prosenium can arise from time to time, and we would absolutely look to capitalize on those opportunities. But I do think there’s more of the recently developed, stabilized, immediately accretive to earnings type opportunities that we’re pursuing.

And then lastly, as I mentioned before, we are starting to see some large users who are migrating from the West Coast to New York City, very much open to got a new development with deliveries out, call it in 2029. And so we are also spending time on those type of situations as well that I think would come with a significant amount of pre-leasing and very, very attractive return on cost.

Dylan Burzinski: That’s helpful. I appreciate that color. And then I guess just 1 more. You mentioned RTO was outweighing sort of the weak job growth prospects. But at a certain point in time, this tailwind should naturally wear off and the important driver of office demand will once again be job growth. So just curious to give any thoughts on sort of how long or how much use is left related specifically to some of this RTO demand that we’re seeing?

Michael Connolly: Yes, I think there’s still some runway there, again, highlighting Amazon who grew their headcount over the last 5 years by 750,000 people and had not signed a significant amount of leasing along the way. And that’s representative of what we’re seeing from a lot of different companies. So I do think that there’s some runway there. At some point, as you indicated, that will run off. But nothing else is static either, and we would anticipate over time while, we’re in a bit of a softer patch now at some point, hopefully, the economy begins to grow and job reductions become job growth once again. And so again, that has us very bullish on what’s in front of us. I think it’s important to continue to highlight the lack of new supply that gives us really positive runway over the next 4 to 5 years.

And the economy will cycle, but without new supply, the market will tighten, and I think it’s a good time to be an owner of existing lifestyle office buildings in the Sunbelt.

Operator: And that ends our question-and-answer session. I will now hand the call back to Mr. Colin Connolly for any closing remarks.

Michael Connolly: We appreciate your time and interest in Cousins Properties. I want to wish everybody a happy Halloween. If you have any follow-up questions, please feel free to reach out to Gregg Adzema or Roni Imbeaux and we hope to see many of you at the NAREIT Conference in Dallas in December. Have a good weekend.

Operator: And this concludes today’s call. Thank you for participating. You may all disconnect.