Q3 2025: Contradictions Emerge on Lease Economics, Disposition Strategy, and Office Demand

Date of Call: October 31, 2025

Financials Results

• EPS: $0.69 FFO in Q3; 2025 FFO guidance $2.82–$2.86 per share (midpoint $2.84), midpoint up $0.02 from prior quarter and represents 5.6% growth vs 2024

Guidance:

• Full-year 2025 FFO guidance $2.82–$2.86 per share (midpoint $2.84), midpoint up $0.02 from prior quarter and +5.6% vs 2024.
• Guidance assumes no additional SOFR cuts for remainder of 2025.
• Target occupancy ≥90% by year-end 2026, with the ramp largely back‑loaded to H2 2026.
• Will pursue selective accretive deployments; prefer dispositions, ATM share settlements or balance‑sheet funding to issuing new equity at current prices.
• Intend to maintain investment‑grade posture but could flex leverage toward ~6x net debt/EBITDA as an absolute upper bound.

Business Commentary:

• Office Fundamentals Improvement and Leasing Activity:
• Cousins Properties reported a strong Q3 with FFO of $0.69 per share, a 5.6% growth in FFO guidance compared to the previous year.
• Leasing activity saw 551,000 square feet of leases completed, the second-highest quarterly volume in the last 3 years.

• This improvement was driven by widespread corporate migration to the Sunbelt, increased demand from financial services and select large-cap technology companies, and a scarcity of new construction supply.

• Occupancy and Expiration Profile:

• The portfolio occupancy was 88.3%, with only 6.3% of annual contractual rent expiring through the end of 2026.
• The company anticipates occupancy to grow to 90% or higher by year-end 2026, driven by moderate lease expirations and active lease negotiations.

• The low expiration profile is primarily due to proactive management of expirations and robust leasing activity.

• Acquisition and Expansion:

• Cousins Properties acquired the Link building in Uptown Dallas for $218 million, expanding its presence in Dallas.
• The acquisition was immediately accretive to earnings and aligns with the company's strategy to invest in Sunbelt markets with high-quality assets.

• This expansion is part of the company's strategic focus on acquiring assets that align with its investment criteria and enhance the portfolio's quality.

• Capital Markets and Balance Sheet Strategy:

• The company maintained a low-leveraged balance sheet, with a net debt to EBITDA ratio of 5.38, allowing flexibility for future growth opportunities.
• Cousins Properties is considering options to fund new investments, including asset sales and settling outstanding ATM shares.
• This balance sheet strategy is an offensive tool to pursue opportunities and capitalize on improving market conditions.

Sentiment Analysis:

Overall Tone: Positive

• Management: "We had a strong third quarter... delivered $0.69 a share in FFO and raised the midpoint of our guidance by $0.02..."; CFO: "Our third quarter results are excellent, and we're raising the midpoint of our full year earnings guidance yet again." Management repeatedly cited robust leasing, pipeline at record levels, and immediate accretion from the Link acquisition.

Q&A:

• Question from Blaine Heck (Wells Fargo Securities, LLC): Given Amazon is a large tenant and recent layoffs, have you spoken with Amazon and how insulated is the Sunbelt portfolio from AI-related displacement?
  Response: Sunbelt demand remains strong and not meaningfully threatened by AI—Amazon discussions indicate rightsizing, not AI-driven cuts, and Cousins expects Amazon to be a net expander; migration of tech/financial firms into Sunbelt supports durable demand.

• Question from Blaine Heck (Wells Fargo Securities, LLC): Are expirations in '26/'27 proportional across your markets or concentrated in any specific market?
  Response: Expirations are broadly distributed and manageable; the only large near-term exposure is Samsung in Houston (~123k sqft) which is largely sublet and being negotiated, so no concentrated portfolio risk through 2026.

• Question from Andrew Berger (BofA Securities): What is the upper bound of leverage you'd consider?
  Response: Historically 4.5–5.5x net debt/EBITDA; investment‑grade rating implies an absolute upper bound near 6x, and current net leverage (~5.38x) gives room to flex opportunistically.

• Question from Andrew Berger (BofA Securities): How much upside remains in parking income—utilization and pricing versus pre‑COVID?
  Response: Parking revenue is just under 7% of total (pre‑COVID ~8%), with upside driven ~75% by utilization and ~25% by price; about 75% of parking revenues are contractual, so some room to grow remains.

• Question from Brendan Lynch (Barclays): How will the occupancy trough and recovery flow through same-store cash NOI trajectory?
  Response: NOI improvement will be back‑end loaded: near‑term comps depressed by the Bank of America move‑out through July 2026, with meaningful acceleration in same‑property performance expected in H2 2026.

• Question from Brendan Lynch (Barclays): Progress on leasing and redevelopment at 201 North Tryon and prospects to backfill that space?
  Response: Redevelopment is well underway, market interest is strong, and management expects successful lease‑up primarily in 2027 with encouraging near‑term activity in Charlotte.

• Question from Nicholas Thillman (Robert W. Baird): Do you have vacancy in the right locations to attract larger New York/West Coast tenants?
  Response: Yes—we have large blocks and pipeline at assets like North Park, Neuhoff, 201 North Tryon and Hayden Ferry and are also discussing potential new‑build solutions for large users.

• Question from Nicholas Thillman (Robert W. Baird): On potential dispositions (e.g., Tampa), are those the assets you’d target near term?
  Response: Dispositions will be selective and used to fund accretive acquisitions; targets are generally smaller or less aligned with core portfolio composition.

• Question from Steve Sakwa (Evercore ISI): Can you provide granularity on the leasing pipeline—number of prospects and sizes?
  Response: Pipeline comprises roughly 100 prospects with a mix of large and smaller requirements; larger deals move slower but there are also fast‑moving mid‑size opportunities (e.g., a 50k sqft deal moving to occupancy within ~60 days).

• Question from Steve Sakwa (Evercore ISI): Is Oracle's Nashville headquarters driving demand for Neuhoff and are tenants seeking adjacency?
  Response: Yes—Oracle's campus is accelerating demand and follow‑on interest for Neuhoff, creating both direct and spillover tenant demand and improving leasing momentum.

• Question from Upal Rana (KeyBanc): Any shift in lease economics in the stronger pipeline—rents, concessions, TIs?
  Response: Lease economics are stable; concessions declined this quarter and net effective rents held steady, with the team holding rates despite TI levels.

• Question from Upal Rana (KeyBanc): With the Ovintiv termination, how do economics compare to historical rent and market rent today?
  Response: Ovintiv's exit is not material to NOI; current market net rents in the building are in the mid‑$40s per sqft—meaningfully higher than what had been paid historically.

• Question from Zhuorui Zhong (JPMorgan): Does the 90% year‑end 2026 occupancy target include 201 North Tryon and what is redevelopment timing/cost?
  Response: Yes, 201 North Tryon is included in the 90% target but significant re‑leasing is expected in 2027; redevelopment capex is about $40 million with anticipated completion in Q1 2027 (interest capitalized only on new spend).

• Question from John Kim (BMO Capital Markets): Have you seen cap‑rate or yield compression given increased competition, and commentary on the Harwood/Saint Ann opportunity?
  Response: Management expects cap‑rate compression as investor interest returns but has not seen material compression yet; they considered Harwood (~6.7%) but chose to focus efforts elsewhere.

• Question from John Kim (BMO Capital Markets): Who leased at Hayden Ferry 1 and when will it rejoin the same‑property pool?
  Response: New tenants are high‑quality regional HQs (engineering/data‑center, regional bank, healthcare/consumer) and Hayden Ferry will be returned to the same‑property pool on Jan 1, 2028.

• Question from Dylan Burzinski (Green Street): Given compression and competition, will acquisitions be mispriced core or more stabilized accretive assets?
  Response: Primary focus remains on high‑quality, accretive Sunbelt assets (stabilized or recently developed) while remaining open to lease‑up or pre‑leased new‑development opportunities where returns are attractive.

• Question from Dylan Burzinski (Green Street): How much runway remains from the RTO tailwind before job growth becomes the primary driver?
  Response: Management believes there is still meaningful runway—citing large pandemic hiring that wasn't leased (e.g., Amazon)—and with minimal new supply the market should tighten over the next 4–5 years supporting demand.

Contradiction Point 1

Lease Economics and Market Demand

It reflects differing views on lease economics and market demand, which are crucial for investors to gauge the company's financial performance and growth potential.

Are there any shifts in lease economics with the stronger pipeline? - Upal Rana (KeyBanc Capital Markets Inc., Research Division)

2025Q3: Lease economics are stable, and we are close to an inflection point where it could become a landlord's market. - Richard Hickson(COO)

Does the CapEx include additional spending on retenanting to bring the space back to a Class A standard? - Peter Abramowitz (Jefferies)

2025Q2: We're not seeing meaningful rent concessions, but we're seeing a broader range of lease economics. - Richard Hickson(COO)

Contradiction Point 2

Disposition Strategy and Focus Markets

It highlights inconsistencies in the company's strategy regarding dispositions and focus markets, which are important for understanding the direction of their growth and investment decisions.

Are you well-positioned to attract larger tenants with major needs in your markets? - Nicholas Thillman (Robert W. Baird & Co. Incorporated, Research Division)

2025Q3: Only when exciting acquisition opportunities arise will we look at dispositions. Assets that fit our criteria will be considered for strategic swaps. - Jane Hicks(CIO)

Can you discuss noncore asset sales and potential buyer interest? - Jana Galan (Bank of America)

2025Q2: Dispositions driven by new investment opportunities, focusing on older vintage properties with higher CapEx. Noncore land may be included, with interest from private equity, family offices. - Michael Connolly(CEO)

Contradiction Point 3

Office Demand and Rental Rates

It relates to the company's outlook on office demand and rental rates, which are crucial for financial projections and investor expectations.

Will demand recovery lead to rent increases across the portfolio? Can you increase net effective rents now? - Dylan Burzinski (Green Street)

2025Q3: Demand and supply dynamics are positive, with potential for rental rate improvements as concessions and tenant improvement allowances level off. Rents may increase as supply remains low, especially in high-quality lifestyle office submarkets. This could lead to significant upside in rents compared to new construction levels. - Colin Connolly(CEO)

Are there any shifts in lease economics with the stronger pipeline? - Upal Rana (KeyBanc Capital Markets Inc., Research Division)

2025Q1: Lease economics are stable, and we are close to an inflection point where it could become a landlord's market. There's an expectation of increasing net effective rents as demand outpaces supply. - Richard Hickson(COO)

Contradiction Point 4

Acquisition and Disposition Strategy

It involves the company's strategy regarding acquisitions and dispositions, which can impact its portfolio and future growth prospects.

How close were you to acquiring the Saint Ann Court portfolio, and what are your cap rate or yield compression expectations? - John Kim (BMO Capital Markets Equity Research)

2025Q3: We are looking at starting most of that space at some significant rents. We are very bullish about this space. The two biggest leases we have done in the last 5 years are on this campus. We think this is a very good space. - Jane Hicks(CIO)

Are there specific assets you're considering for disposition? - Nicholas Thillman (Robert W. Baird & Co. Incorporated, Research Division)

2025Q1: We've had some activity in Dallas but not at the level that's been disclosed in the press. And I think the best thing for us to do is just keep our powder dry. We were involved with Saint Ann Court but strategically focused on Dallas. So we're still very interested in the Dallas area. - Michael Connolly(CEO)

Contradiction Point 5

Occupancy and Leasing Momentum

It involves differing perspectives on occupancy and leasing momentum, which are critical for understanding the company's financial performance and market strategy.

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

2025Q3: Occupancy increase will be back-end loaded. This year's numbers will be impacted by Bank of America's departure, but we expect acceleration in same-property performance by the second half of 2026. - Gregg D. Adzema(CFO)

Could you clarify leasing with tech firms in your markets? - Jeffrey Spector (Bank of America)

2024Q4: Leasing momentum is strong, and technology companies are part of the conversation. We're optimistic about continuing the momentum. - Richard Hickson(COO)