Cousins Properties' 2025 Q3 Earnings Call: Contradictions in Acquisition Strategy, Leasing Trends, Sunbelt Market Growth, and Occupancy Expectations

Date of Call: October 31, 2025

Financials Results

• EPS: FFO $0.69 per share in Q3; full-year 2025 FFO guidance $2.82–$2.86, midpoint $2.84 (raised $0.02 from prior quarter), midpoint implies 5.6% growth vs 2024

Guidance:

• Full-year 2025 FFO guidance $2.82–$2.86 per share; midpoint $2.84, up $0.02 from last quarter and +5.6% vs 2024
• Guidance drivers: higher parking income, higher termination fees, lower SOFR and interest income from JV loan
• Assumes no additional SOFR cuts for remainder of 2025
• Occupancy target: 90%+ by year-end 2026 (back‑end loaded)
• May deploy capital into accretive opportunities using balance sheet, ATM settlements or selective dispositions; new equity not favored at current stock price

Business Commentary:

• Office Market Improvement and Demand:
• Cousins Properties reported second-highest quarterly leasing volume of 551,000 square feet in Q3, marking the second highest in the last three years.
• The company achieved a positive cash rent roll-up on second-generation leasing for the 46th consecutive quarter.

• The improvement in office market fundamentals, with net absorption reaching a post-pandemic high, and vacancy declining for the first time in seven years, were key drivers.

• Leasing and Investment Activity:

• The company completed 40 office leases totaling 551,000 square feet, with a weighted average lease term of 9.4 years.
• The pipeline includes 715,000 square feet of leases either signed or in negotiation, with over 551,000 square feet in late-stage pipeline, which is nearly double the year-to-date quarterly new and expansion leasing run rate.

• This was driven by strong demand from financial services and select large-cap technology companies, notably from New York City and West Coast-based companies.

• Financial Performance and Guidance:

• FFO was raised to $2.84 per share, marking a 5.6% growth over 2024.
• The company's same-property performance showed GAAP NOI growth of 1.9% and cash NOI growth of 0.3%, despite a significant departure from Bank of America.

• This growth reflects strong leasing velocity and favorable lease economics, indicating potential for continued improvement in 2026 with occupancy projections expected to reach 90%.

• Asset Acquisition and Capital Markets:

• Cousins Properties acquired the Link in Dallas for $218 million, expanding its Sunbelt presence, and expects the acquisition to be immediately accretive.
• The company also refinanced its Neuhoff construction loan by repaying $39 million, lowering the interest rate spread and extending maturity.
• This strategic acquisition and capital market activity are part of the company's plan to seize opportunities in a favorable market environment for office assets.

Sentiment Analysis:

Overall Tone: Positive

• Management described Q3 as "strong"/"outstanding," reported FFO $0.69 and raised 2025 FFO midpoint to $2.84, highlighted robust leasing (551k sqft), acquisition of the Link ($218M, accretive), declining vacancy and an explicit goal of 90%+ occupancy by YE2026 — all signaling constructive execution and outlook.

Q&A:

• Question from Blaine Heck (Wells Fargo): Given Amazon is your largest tenant, have you spoken to them about whether the recent announcement might change their utilization in your portfolio? More broadly, is the Sunbelt more susceptible to AI-related displacement given back-office concentration?
  Response: Sunbelt markets host high‑quality tech/finance hubs, not just back‑office; Amazon conversations indicate cuts were pandemic-era rightsizing (not AI), and management expects Amazon to be a net expander — no meaningful demand impact seen.

• Question from Blaine Heck (Wells Fargo): Are your expirations over the next couple years proportional across markets or are any markets highly concentrated in '26/'27?
  Response: Expirations are broadly evenly distributed; the only large near-term expiration is Samsung in Houston (~123k sqft, much sublet) and Austin has modest expirations; management is comfortable managing expirations and redevelopment plans.

• Question from Andrew Berger (BofA): What's the upper bound of leverage you'd be willing to take?
  Response: Historically net debt/EBITDA has ranged ~4.5–5.5x; current ~5.38x; rating agencies indicate up to 6x is consistent with current ratings — 6x is an absolute upper bound but would be used selectively for offensive opportunities.

• Question from Andrew Berger (BofA): How much upside remains in parking income — physical utilization, pricing vs pre‑COVID, and forecasts?
  Response: Parking revenue is just under 7% of total (vs ~8% pre‑COVID, bottomed at ~5%); upside remains driven ~75% by utilization and ~25% by price; parking is ~75% contractual/25% transient.

• Question from Brendan Lynch (Barclays): How should we expect the occupancy trough and recovery to flow through to same‑store cash NOI trajectory?
  Response: Occupancy recovery to 90%+ by YE2026 is likely back‑end loaded; near‑term comps pressured by the Bank of America move‑out, so same‑property growth will be muted near term but should accelerate materially in H2 2026 once comps normalize.

• Question from Brendan Lynch (Barclays): Progress on backfilling the Bank of America space at 201 North Tryon given redevelopment?
  Response: Redevelopment is underway, market interest is strong (including an early McGuire Woods renewal); management is optimistic about backfilling and expects meaningful leasing success within ~12 months, with most re‑leasing activity likely in 2027.

• Question from Nicholas Thillman (Baird): Do you have vacancy in the right spots and markets to attract New York/West Coast migrants?
  Response: Yes — they have available large blocks and pipelines in North Park, Neuhoff, 201 North Tryon and Hayden Ferry and are also engaging with users interested in new development where existing supply is limited.

• Question from Nicholas Thillman (Baird): On potential dispositions (e.g., the Tampa asset), are those the types of assets you'll target near term?
  Response: Dispositions will be opportunistic and used to fund accretive acquisitions; likely targets are smaller, less-integrated or noncore assets — only pursue sales when they enable better portfolio rotations.

• Question from Steve Sakwa (Evercore ISI): Can you give more granularity on the pipeline — number of prospects and typical sizes (large vs 25–75k sqft)?
  Response: Pipeline contains roughly ~100 prospects, includes both larger and smaller users; larger deals move slower but there are examples of fast 50k sqft new leases with ~60‑day occupancy, so a mix of sizes with meaningful late‑stage new/expansion activity.

• Question from Steve Sakwa (Evercore ISI): Is Neuhoff benefiting from Oracle's planned campus — are tenants using it as temporary or aiming to be adjacent?
  Response: Oracle's campus is increasing follow‑on demand and tenant interest; Neuhoff is seeing acceleration in prospect activity, with potential for tenants seeking adjacency or long‑term space — momentum is building.

• Question from Upal Rana (KeyBanc): With a stronger pipeline, are lease economics shifting on rents, concessions, or TIs?
  Response: Concessions declined this quarter and net effective rents remain steady at elevated levels; TIs remain sizable but overall economics are stable and management is holding rates.

• Question from Upal Rana (KeyBanc): With the Ovintiv early termination, how do rent economics compare to what Ovintiv paid and where is market rent today?
  Response: Changes from Ovintiv's departure are not material to NOI; management expects to push rents when backfilling — currently marketing mid‑$40s net rents for the building, meaningfully above historical Ovintiv levels.

• Question from Zhuorui Zhong (JPMorgan): Does the 90% YE2026 occupancy target include 201 North Tryon, and will it materially contribute by year‑end?
  Response: Yes, 201 North Tryon is included in the occupancy pool, but management does not expect significant lease commencements there by YE2026 — most re‑leasing is anticipated in 2027.

• Question from Zhuorui Zhong (JPMorgan): How much will you spend on 201 North Tryon redevelopment and how is interest capitalization being handled?
  Response: Planned redevelopment spend is approximately $40 million with anticipated completion in Q1 2027; interest will be capitalized only on new spend (not the existing basis).

• Question from John Kim (BMO): Thoughts on cap‑rate/yield compression given increased competition, and any commentary on the Saint Ann Court/Harwood pricing and your involvement?
  Response: Management expects cap rates to compress as more equity returns to the sector but hasn't seen broad compression yet; they were involved on Harwood at ~6.7% but ultimately focused efforts elsewhere.

• Question from John Kim (BMO): Who signed at Hayden Ferry I, redevelopment yield/ROIC details, and when will the asset rejoin the same‑store pool?
  Response: New tenants are diverse (regional engineering firm with data center work, regional bank HQ, corporate HQs) — strong tenant profile; no redevelopment ROI cited; asset expected back in same‑property pool on Jan 1, 2028.

• Question from Dylan Burzinski (Green Street): With cap rates likely compressing, will your acquisitions skew toward stabilized/mispriced core or more value‑add/lease‑up risk?
  Response: Primary focus remains on stabilized, accretive, high‑quality Sunbelt assets but they remain open to selective lease‑up risk and new development opportunities with attractive pre‑leasing/returns.

• Question from Dylan Burzinski (Green Street): How much runway remains from the RTO tailwind before job growth again becomes the dominant driver of office demand?
  Response: Management believes meaningful runway remains (many firms expanded headcount without leased space during the pandemic — e.g., Amazon); over time RTO tailwinds will wane but constrained new supply supports tightening for multiple years.

Contradiction Point 1

Acquisition Strategy and Market Opportunities

It involves the company's approach to acquisitions and the perceived opportunities in the market, which are crucial for strategic planning and investment decisions.

Following Amazon's recent announcement, have you discussed their role in your portfolio? Are Sunbelt markets more vulnerable to AI-driven displacement in back-office roles? - Blaine Heck (Wells Fargo Securities)

2025Q3: The market is continuing to open up, with strong capital markets providing acquisition opportunities. The company is actively evaluating both on-market and off-market opportunities, encouraging investment in compelling new opportunities. - Jane Hicks(CIO)

What details can you provide on The Link acquisition's underwriting related to the 6.7% cash yield? How attractive is the current acquisition market? - Anthony Paolone (JPMorgan Chase & Co)

2025Q2: We think the market is continuing to open up. We've had a good opportunity to see the kinds of acquisitions we would like to do and how we're going to do it. And so we're actively evaluating both on-market and off-market opportunities to allow us to take advantage of the deal-making that's out there. - Jane Hicks(CIO)

Contradiction Point 2

Leasing Trends and Market Demand

It pertains to the company's leasing trends and market demand expectations, which are vital for forecasting revenue and occupancy levels.

Can you provide details on the leasing pipeline and potential tenant sizes? - Steve Sakwa (Evercore ISI Institutional Equities)

2025Q3: The pipeline is driven by larger users, though it takes time for large users to occupy space. We have roughly 100 total prospects, with some faster occupancy for smaller tenants. - Richard Hickson(CFO)

What are the current leasing trends, and which segments are showing strength or weakness? - Blaine Heck (Wells Fargo Securities)

2025Q2: The leasing trends are constructive across all markets, with financial services and legal segments driving demand. Tech is also playing a lesser but meaningful role, and healthcare industry participants are more prominent. - Richard Hickson(CFO)

Contradiction Point 3

Sunbelt Market Growth and Migration Trends

It highlights differing perspectives on the growth and migration trends in the Sunbelt markets, which are critical for strategic positioning and resource allocation.

Have you discussed Amazon's role in your portfolio following their recent announcement? Are Sunbelt markets at higher risk of AI-driven job displacement because of corporate back-office roles? - Blaine Heck (Wells Fargo Securities)

2025Q3: Misconceptions about gateway markets pushing Sunbelt as full of back-office jobs are incorrect. Migration was driven by companies seeking diverse workforces in Sunbelt markets. - Michael Connolly(CEO)

Have you seen net migration to the Sun Belt, and which markets are showing interest? - Blaine Heck (Wells Fargo Securities)

2025Q2: New-to-market and growth requirements are increasing in Atlanta, Charlotte, and Phoenix. Austin is also seeing interest. Demand is diverse, ranging from new headquarters to smaller hubs. - Richard Hickson(COO)

Contradiction Point 4

AI Impact on Sunbelt Markets

It involves differing perspectives on the impact of AI and automation on the Sunbelt markets, which is crucial for understanding the company's growth strategy and market positioning.

Have you discussed Amazon's role in your portfolio following their recent announcement? Are Sunbelt markets more vulnerable to AI-driven displacement in corporate back-office roles? - Blaine Heck(Wells Fargo Securities, LLC, Research Division)

2025Q3: Misconceptions about gateway markets pushing Sunbelt as full of back-office jobs are incorrect. Migration was driven by companies seeking diverse workforces in Sunbelt markets. - Michael Connolly(CEO)

Is the demand pipeline remaining robust? Are there opportunities for rent increases due to declining supply? Can you discuss the ability to push net effective rents in today's environment? - Dylan Burzinski(Green Street Advisors, LLC, Research Division)

2025Q1: The environment for lifestyle office is positive, with declining supply and improving demand leading to potential rental rate improvements. - Colin Connolly(CEO)

Contradiction Point 5

Occupancy and Leasing Pipeline

It involves expectations regarding occupancy levels and the composition of the leasing pipeline, which are critical for assessing Cousins' operational performance and strategic positioning.

How will occupancy improvements impact same-store cash NOI growth? - Brendan Lynch(Barclays Bank PLC, Research Division)

2025Q3: Occupancy improvements will be back-end loaded, affecting cash NOI growth more significantly in the latter half of 2026. Prior year comps from the Bank of America move-out will affect numbers until July 2026. - Gregg Adzema(CFO)

Can you discuss trends in the leasing pipeline and occupancy drivers? How will occupancy compare to last year? - Blaine Heck(Wells Fargo)

2024Q4: Occupancy will be stable initially and will dip with BofA's expiration, but we're confident in building back occupancy by the end of the year and into '26. - Richard Hickson(COO)