Q2 2025 Cousins Properties Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Cousins Properties second quarter conference call.

At this time, all lines are in listen-only mode.

Following the presentation, we will conduct a question and answer session.

If at any time during this, call you require immediate assistance, please press 4 zero for the operator.

This call is being recorded and Friday. August 1st 2025, I would now like to turn the conference over to Pamela Roper Gerald Council. Please go ahead.

Thank you. Good morning and welcome to Cousins Properties' Q2 2025 earnings conference call. With me today are Michael Connolly, our President and Chief Executive Officer, and Richard Hickson, our Executive Vice President of Operations.

Greg Zimma, our Executive Vice President and Chief Financial Officer, and Kennedy Hicks, our Executive Vice President and Chief Investment Officer.

The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8K. And the supplemental package. The company has reconciled all non-gaap Financial measures to the most directly comparable, gaap measures in accordance with Reggie requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links and the investor relations page of our website cousins.com

forward-looking statements within the meaning of Federal Security 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 annual report on form, 10K, 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 call and call us.

Thank you, Pam, and good morning.

Before I begin my remarks, I want to take a moment to remember the extraordinary life of Tom cousins, who passed away this week at 93 years old.

When Tom founded cousins properties in 1958.

He had a bold vision for Real Estate development rooted in in integrity and purpose.

His leadership helped shape, not only the Atlanta Skyline but also the broader residential and Commercial Real Estate landscape across the Sunbelt.

Tom's impact extended far beyond the buildings he developed.

He believed deeply in giving back.

And in the power of business to serve communities.

His transformation of Atlanta's Eastlake neighborhood is a powerful example of this belief.

With Tom, it was not just what he did. That was special.

It was also how he did it.

His legacy lives on in the culture of our company.

It is an honor that Cousins Properties is part of his remarkable legacy, and we will miss him dearly.

On behalf of all of us, I extend our heartfelt, condolences to the cousin's, family.

Now, turning to the quarter.

We had a strong second quarter at cousins on the earnings front. The team delivered 700 cents a share in ffo which was 1 cent above consensus.

Same property, net operating income increased 1.2% on a cash basis and 1.6% year to date.

Leasing remained very strong. We completed 334,000 square feet of leases during the car quarter and remarkably. 80% of that was new or expansion leases.

Cash rents on a second-generation space increased 10.9% in the quarter and 5.4% year-to-date. These are remarkable results.

Post quarter-end, we purchased The Link, a trophy lifestyle office property, in Uptown Dallas, which grows our presence in a strategically important market.

We plan to fund the acquisition with excess proceeds from our unsecured note offering in June, proceeds from the settlement of common shares previously issued on a forward basis under our ATM program, and/or potential future asset dispositions.

Given the solid second-quarter performance, we have increased the midpoint of our guidance to $2.82 a share, which represents a 4.8% growth rate over last year.

I believe there's a perception that an office company cannot grow earnings.

We are proving that wrong and for the second consecutive year and we are excited to do it.

The forward discussing our strategy in more detail, I will start with a few observations on the market.

While uncertainties over terrorists and interest rates remain.

We continue to see encouraging signs in the Sunbelt lifestyle office Market.

Leasing demand is healthy.

New to Market activity in Atlanta, Austin Dallas, Charlotte Tampa. And Phoenix is accelerating.

New development, activity remains constrained.

Inventory, removals from conversions and demolitions are also accelerating.

The net result is a declining supply of office space at the exact same time that demand is growing.

The market is resetting, and tightening is underway.

Net absorption has now turned positive and vacancy levels are on the decline.

Not surprising, the investment sales market is opening up, and more private investors are actively pursuing office acquisitions.

This is an excellent setup for cousins to advance our strategic priorities.

We remain highly focused on the following goals.

Growing earnings, cash flow and nav.

By increasing occupancy reducing capex and opportunistically investing in compelling new opportunities.

Second continuously upgrading the quality of our lifestyle portfolio and enhancing our Geographic and Industry diversification.

And finally, maintaining our Fortress balance sheet.

Find compelling investment opportunities are the key drivers to advance these strategic priorities.

To fund new acquisitions, and select developments in addition to other potential Alternatives. We will likely prioritize recycling capital from our few remaining older vintage properties that have a lower occupancy, Andor higher capex profile,

We will also consider selling non-office non-core land.

Given our past recycling activity, we are fortunate to have few properties today that do not meet our lifestyle office definition.

But as discipline owners, we always have a bottom 10% and we will remain active. As we upgrade the quality and diversification of the portfolio, while growing earnings

At cousins, we've been running this play for years.

Since 2019, we have acquired $2.3 billion of lifestyle office properties.

Started approximately $600 million of new developments and sold $1.3 billion of non-core assets.

Important to note, we executed these transactions and significantly upgraded. Our portfolio with the headwinds of a global pandemic.

In a rising interest rate environment.

Yet, we still grew core ffo by 6.1% and core fad by 7.3% over this time frame.

And did so, approximately leverage neutral. This is a tremendous accomplishment and highlights the capability of our platform.

We are excited about what is ahead for cousins. The office Market is rebalancing. We are growing earnings, both organically and externally while also improving and already terrific portfolio.

The investment sales market is accelerating, and we believe private market pricing will soon provide a boost to public market valuations.

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.

Thanks Colin. Good morning, everyone.

Our operations team closed. The first half of the year with another solid quarter.

In the second quarter, our total office portfolio end of period waste and weighted average occupancy percentages were 91.6 and 89.1% respectively.

As expected both were down compared to last quarter primarily due to the known. Move out of 1 trust at North Park in Atlanta.

Without the 1 trust move out. Occupancy would have been down only about 20 basis points.

While not reflected in second quarter results, Bank of America and Charlotte has now also expired.

Both of these large expirations have been anticipated for a very long time, so our expected occupancy trends remain unchanged.

Specifically, we still see occupancy declining through the third quarter of this year and then beginning to build back toward the end of the year and beyond.

A major driver of our occupancy, projections continues to be our best-in-class near-term, expirations profile.

Our team continues to do great work in this area. And as of second quarter end, we only had 8.1% of annual contractual rent expiring for the end of 2026.

As of today, we only have 1 customer larger than 100,000 square feet expiring through 2026, which is Samsung for 123,000. Square feet at Briar Lake Plaza in Houston at the end of November.

26.

During the second quarter, our team completed 41 office, leases totaling 334,000 square feet with a weighted average lease term of 7.9 years importantly, 268,000 square feet of our completed leases. This quarter were new and expansion, leases representing a very impressive, 80% of our activity and directly in line with our 3-year quarterly run rate.

While second quarter total volume was down sequentially. I would note that our total leasing volume for the first half of this year is nearly 10% higher than the first half of 2024. We are very pleased with our year-to-date leasing activity.

Beyond our completed activity, our leasing pipeline remains very healthy at all stages with no signs of slowing. In fact, our combined early and late stage pipeline is currently at its highest level since we began consistently tracking this metric,

With regard to lease economics. This quarter was 1 of the best and cousins history.

So, I'll roll ups and rent, with Atlanta being the largest positive contributor on a weighted average basis.

Our average net rent this quarter came in at $40.95, a 14% increase over last quarter and the second highest quarterly level in our company's history.

This quarter average leasing concessions. The sum of free rent and tenant improvements were $942 resulting in an average net effective. Rent of 28.35. Also, the second highest quarterly level and our company's history.

I want to make an important point about this quarter's economics.

The few times in the past when we had delivered net effective rents around this level it was typically driven by 1 market or 1 s sizeable transaction. That is not the case this quarter. The fact is that our net effective rents were solid in every Market this quarter, which is a testament to the broad strength of our markets and lifestyle office assets.

Touching on our markets Joel noted that Austin saw healthy demand for office space in the second quarter with Market, leasing volume, reaching 1.2 million square feet which is 11.4% above the 3 year quarterly average and up to 32% year-over-year.

They also noted that sublease availability was stable sequentially and down over 14% relative to Mid 2024.

We signed 79,000 Square ft of leases in Austin in the second quarter of which 71% were new leases and our very stable operating portfolio currently stands at 95.3%. Least

But particular note, is that with recent strong demand in the southwest submarket, the Austin team was able to take our 619,000 square foot Terrace project to 90% waste for the first time since 2021.

In Atlanta, the office market continues to show strength at the top end of the market while low incoming supply persists.

JL has also stated that Office Inventory, decreased by 2.9 Million square feet, this quarter, which is the largest ever quarterly reduction recorded in the Atlanta Market.

This quarter also represented the first quarterly positive net absorption in 10 quarters.

We signed a strong 115,000 Square ft of leases in our Atlanta portfolio. This quarter including over 36,000 square feet of expansion of cross. 3 of our Buckhead projects,

And as I already alluded to the Atlanta team also rolled up rents an impressive 17% this quarter.

Turning the Charlotte, according to the Bureau of Labor Statistics, Charlotte has been the leader among the largest domestic markets in office, using job growth for the better part of this year.

Major brokerage firms are citing growing completed leasing activity, which is decidedly positive year to date, along with net absorption and the trophy segment. There is a robust level of tenants in the market, and the new construction pipeline now sits at zero.

The fundamental backdrop in Charlotte could not be much better. And the prevailing opinion is that the market is likely to see a shortage of high-quality large blocks of available space in the near future. This is 1 reason why we continue to be very excited about our Redevelopment projects. At both, 550, South and 5th, Third Center in uptown.

We also have an important announcement about Fifth Third Center, which is that? We have completed an agreement with Fifth, Third Bank, a valued and long-term customer at the project allowing cousins to among other things, Rebrand the property.

Going forward.

The property will be branded as 201 North Tryon, and we are confident. This new name will appeal to a much broader range of potential new customers in the financial services sector.

In Phoenix, Class A net absorption remained positive across the MSA, with vacancies moving down across nearly all submarkets. I'm pleased to report that our team completed 67,000 square feet of leasing this quarter, including a 39,000-square-foot new lease with a financial services company that Hayden Ferry won.

the market reaction to our Hayden Ferry Redevelopment continues to be very encouraging.

In Tampa, CBR reports that total vacancy fell 50 basis points, this quarter and JL notes. The new developments

And Rising rents and proven Class A Properties highlight continued interest and high-quality office space, while Class B properties experienced. Negative, net, absorption, and further rent declines,

Tampa. We see. Velocity is 12.5% ahead of last year with 2 and a half million square feet completed in the first half of the year.

Our Tampa team signed seven leases totaling 46,000 square feet, all of which were new leases, and six of them have expected commencements in 2025.

Folio was 95.1%, least, as of quarter end.

Finally, we continue to be pleased with the progress in our new Hof mixed-use development in Nashville.

The apartment component of the project was 78% least. As the as of the end of the quarter and based on our current velocity, we expected to be stabilized by the end of the year. The commercial component is 51% lease and I'm pleased to report that we have seen a recent pickup in tour activity, we are now anticipating stabilization of the commercial space in the third quarter of 2026, which is more reflective of the commencement requirements. We are seeing in our leasing pipeline

As always, I want to thank our operations team for your great work, which is positioning us well as we look to the second half of this year.

Kennedy.

Thanks Richard.

In addition to our strong operating quarter, we are excited to announce another acquisition.

earlier this week we closed on the link in Uptown Dallas a trophy asset that fits squarely into our lifestyle Sun, Belt office strategy

We acquired the property for 218 million or 747 per square foot. Pricing that represents the discount to replacement costs and is immediately accretive to earnings.

The building's appeal is evident from its quick lease-up and the types of customers it is attracting.

After it delivered in 2021, the 25th building leased up within 12 months, featuring a stellar rent roll of professional service firms, including Hulaan, Loki PMG Newark, and Maguire Woods.

Today, the asset is 94% leased with a weighted average remaining lease term of 9.3 years.

Furthermore.

All of the customers are fully utilizing their workspaces spaces that they have made significant investments in with a focus on employee experience.

The building offers a full complement of first class amenities and enjoy the walk score of 94.

Clearly from a quality and profile perspective, the link is an excellent fit for our portfolio.

From a market perspective, we have now planted a flag in Uptown Dallas 1 of the strongest and most dynamic segment submarkets in the country.

for co-star Dallas, as a whole has experienced 1.3 million square feet of positive, net absorption in the past 12 months,

Uptown is receiving an outsized share of demand, thanks to the quality of its inventory and its status as the most dense than amenitiz submarket.

The link sits in the heart of Uptown offering great vehicular access and numerous walkable dining and hotel options.

It is also just 2 blocks from Goldman Sachs, state-of-the-art Urban campus.

Which, upon completion, is set to house 5,000 workers?

Finally, as mentioned the financial profile of the link is compelling and immediately accretive to earnings.

We acquired the Link at a basis below. Today's replacement cost.

The initial cash yield over the next 12 months is anticipated to be 6.7%.

With a gap yield of 8.3%, a spread driven by over 9 years. Of remaining lease terms and in place rents that are nearly $20 per square foot below. What could be achieved today?

In the past 9 months, we've invested over $1 billion in trophy lifestyle office buildings. Going forward, we intend to continue to execute on that course strategy as we identify some belt investments that are consistent with the quality of our portfolio and will allow us to grow in an accretive manner.

As the capital markets continue to open up. We will also explore Capital recycling opportunities with an eye towards continuously. Upgrading our portfolio composition and increasing cash flow.

I will now turn the call over to Greg.

Thanks, Kennedy. I'll be getting my remarks by providing a brief overview of our results.

And I'll spend a few minutes on our same-property performance before moving on to our capital markets transactions.

And our balance sheet and finally closing my remarks by updating your 2025 earnings guidance.

Overall, as Colin stated up front,

Our second quarter results were outstanding.

Second generation cash leasing spreads were positive for the 45th straight quarter.

Same property year-over-year cash in the line increased and leasing velocity was strong.

Focusing on same property performance for a moment Gap. Noi grew 3.2% and cash. Noi grew 1.2% during the second quarter compared to last year. This continues a string of positive same property numbers that began in early 2022.

Buy property taxes.

Property tax true-ups. As we receive actual assessments from the taxing authorities,

And push the quarterly numbers around quite a bit.

So it's always best to use longer time frames. When looking at property, tax numbers, for example, the same property, tax expenses, that ran through. Our p&l were up 21.9% in the fourth quarter of 24, over the previous year, they were down 12.1% in the first quarter and they were down 202.4%, this quarter, it's a lot of movement as prior, recruitments are made. However, for all of 2025, we currently forecast, gross property taxes and our same property portfolio to be up 2.8% over the prior year. However, net of approval adjustments that I just discussed. We forecast a 4% decline actually running through our p&l for the year.

Moving on to our Capital markets activity. We completed our third investment grade Bond offering during the second quarter, issuing 500 million of notes at an initial yield of 5.25%.

Proceeds were used to pay off an unsecured note that matured on July 6 and to partially fund our acquisition of the link that Colin and Kennedy discussed earlier.

We know 3 tancho.

We also sold 803,000 shares of common stock on a forward basis under our ATM program. During the second quarter at an average gross price of $30.47 per share.

Year to date. We have sold 2.9 Million. Shares at an average price of $30.44 per share.

None of these shares have yet settled.

Looking at our balance sheet, net debt, to EBA remains an industry-leading 5.1 times.

Our liquidity position is strong and our debt maturity schedule is well-lettered to accommodate continuing to assess the unsecured bond market.

I'll close by updating our 25 guests. Currently we we anticipate full year 2025 ffo between $2.79 and $2.85 per share with a midpoint of $2.82 per share. This is Up 3. Pennies from last quarter and is up 13 cents, of course, call and discussed earlier 4.8% over our 24 results.

The increase in FFL. Guidance is driven by accretion from our acquisition of the link.

Higher parking income and better than forecast execution on the unsecured note that we issued in June.

Our guidance continues to assume. No. So for cuts in 2025,

Stated upfront, where funding the link acquisition with excess proceeds that we raised in our recent unsecured note offering as well as proceeds from the settlement of a portion of the shares. We have previously issued on a forward basis on our ATM program or property. I'm sorry, proceeds from potential assets sales

Our guidance assumes the future settlements of approximately 2.3 million of these previously issued shares. However, we may ultimately use some potential asset sales instead of

Or in combination with the settlement of shares, we'll know more on this topic on our next earnings call.

Bottom line, our second quarter results are excellent and we are raising the midpoint of our full year earnings guidance.

Our best-in-class leverage and liquidity position remains intact.

And despite recent macro uncertainties Sunbelt Office. Fundamentals remain solid.

And although it's not in our guidance, 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 the call back over to the operator.

Thank you.

Ladies and gentlemen, we will now begin the question-and-answer session.

Should you have a question please? Press star. Followed by the number 1 on your touchtone phone. You will hear a prompt that your hand is new raised.

Should you wish to decline from the polling process? Please press star followed by the number 2?

If you are using a speaker phone, please make sure to list our handset before pressing any keys.

Your first question is from the line of asking me pain from JP Morgan. Please go ahead.

Uh, thank you and good morning. Um, first question relates to to the link and was wondering if you can give us a little bit more context around the underwriting, you know, going in at the 67 cache like how do you think about the growth at the asset uh replacement cost and just you know, how you kind of thought about getting to the value. You got to

A flag in in Uptown Dallas which I think is going to be 1 of the fastest growing submarkets, um, in the country. And I think for us, um, you know, looking at that particular situation, um, with rents, you know, significantly below market and a terrific rent, roll with you know, good weighted average lease term and I should also add very little capex needs um you know, we were excited and and I think anytime we can identify a compelling investment opportunity with that type of profile that continues to upgrade the quality.

Of our portfolio and do that in an accretive manner on a leverage neutral basis. And actually do it below replacement cost is uh checks all the boxes for us.

Okay and then just more broadly uh you know can you talk about just how much you are actually looking at right now in terms of potential Acquisitions and just how attractive uh the market is with with that deal flow? Like are you are you seeing a lot of things that you have interest in buying?

We're always evaluating opportunities that are on market and off-market, and we do feel like there's going to be more that fits our criteria coming in the second half of the year. So, we're encouraged and think that the capital markets are continuing to.

Open up and just continue to provide acquisition opportunities for us.

Okay, thank you.

Your next question is from the line of Jana gone from Bank of America. Please go ahead.

You good morning and uh, congrats on the strong releasing spreads. Um, and thanks for calling out Atlanta. For the 17% increase. Can, can you tell us which is the 1 mark? It that saw a decline and was that just kind of the prior rents deal specific.

Sure, this is Richard. Um,

So yeah, broad-based strength really, really excited about our ability to, to post a number like that, that had broad support the 1 market, that did not post rollups was Phoenix, and we, we really only had 1 lease in that market, this quarter that qualified in our definition of second generation. Um, and it was just a tough comp

Thank you and then sorry to jump around then on the non-core dispositions. Um, can you maybe talk about, you know, a range of of how much is being marketed and kind of what you're seeing in terms of interest and what type of bidders are out there.

Yeah, it it is. Um,

The any dispositions that we do are are going to be driven by new investment opportunities that we identify. And so I wouldn't characterize it as a as a broad-based disposition program. I'd say, um, we see an opportunity with an improving market and improving, uh, investment sales Market to hopefully Source, more compelling opportunities. And as we do, so we we increasingly see, uh, dispositions as a potential source of capital. And as we do so we will uh, prioritize the handful of properties that we have that that are perhaps an older vintage and have a higher capex profile. And as I said, we, we might also include, uh, some kind of non-core land. And I I would characterize non-core land for us is land that perhaps has a higher better use uh most likely uh in the multi family Arena.

Thank you.

Your next question is from the lead line of Steve Saka from Evercore ISI. Please go ahead.

Uh, yeah. Thanks. Good morning. Um, could you maybe just spend a little time talking about neihoff? Um, you know, I guess that seems to be 1 project that hasn't had as much traction as as some of the other, uh, markets and assets. So, is it something about that asset specifically? Is it something about Nashville or is it just something about tenants needing to pick up and move? And that's kind of the more challenging issue right now.

If Dave Kennedy, um, we we remain really excited about new off. Um, it's Richard mentioned the apartments, continue to lease out but a really nice pace.

The project just continues to to get more, um, exciting and, and kind of more interest from the market. On the office side, we did see a little bit of a lull, um, earlier in the spring, but we, we've seen the pickup, uh, in tours and, and requests for proposals, in the past, 30, or 45 days. So, so, we're encouraged by that. I think it's just a little bit of function of timing and then who's out in the market and, and wanting to pay pay new construction rents as well. Um, but I think in general, we're, we remain really excited and encouraged by by the progress and the momentum.

Okay, thanks. And for my second question, I mean, it may be a little bit far off, but as you think about new construction opportunities, which markets are you most excited about, given kind of the land that you have? And, I mean, maybe where is there the strongest demand for potentially a new build?

Yes, uh, Steve, it's calling me again. Broad-based, we're seeing really attractive demand across all of our markets. But as it relates to new development, I think a key metric is kind of where our...

Top end of the market rents today, relative to replacement cost rents. And, you know, if I had to kind of rank where I think some of those opportunities could emerge, um, you know, certainly out at the Domain in Austin, where we've got quite a bit of of, of, really attractive land and the, in the heart of the domain, you know, our 2 and a half million square feet.

Out. There is essentially 100% lease with no space available for sub lease and, you know, demand. So that's a market where I think you could justify, uh, a rents could be achieved. Um, and then the, you know, the market where we just entered in, in Uptown Dallas, I think is another Market where uh you are seeing some uh leases executed north of 70 dollars, a square foot on the net basis and and as you get into that into that range, Dallas is not far off. And then and I tell you, we're we're starting to see some opportunities and and even in markets like Atlanta where perhaps there's a greater spread between top and Market rents today and new development rents. But in certain instances, you've got large customers that want what they want and they might want new, and they might be comfortable paying whatever it costs. And so, you know, that that's encouraging to us to see some of that activity, um, you know, start to, uh, start to show up in in places like Atlanta.

Great. Thank you.

Thanks Steve.

The next question is from the line of John Kim from BMO Capital markets. Please go ahead.

Thank you. Um I think uh Colin you mentioned at link. There's a a good uh Mark to Market and I was wondering if you could uh just quantify that. And also what are the opportunities as far as uh increasing occupancy at that at the market runs?

And if there's any, um, upside to the parking, that's.

There. Am I prepared remarks? There's about a twenty dollar spread between in place rents and where we think rents can be achieved today. Um, there's basically 2 office spaces that are available 1 is fully built out of the spec Suite. So we expect to be able to lease that 1 uh, quickly. And there's, there's good interest in that currently. Uh, we'll probably look to to explore building, a spec Suite out in the other 1, as well. Um, so I feel like that's that's a little bit of an upside right there. Um, and then have been encouraged by the parking growth as well. So as that neighborhood continues to

Evolve and grow, and just with the, the Goldman Sachs campus coming in that. Do you think there's some opportunity to keep keep pushing parking, um, in the near term? But then again, over the long term, we just really like the the basis of the, the caliber of the Tenney and the the below Market rent story.

And and John, I I just I want to make sure to highlight um you know, with with you know, as Kenny just mentioned the the rents in place rents being, you know, twenty dollars, a square foot below market and that's a building that just delivered a handful of years ago. And so I think it's important for all of our, our investors to kind of step back and and think more broadly as we look across our footprint. And, and we continue to um, you know, share that there's a shortage of high-end lifestyle office space coming to most markets and, you know, a $20 increase in rental rates in a short period of time. Um you know can happen and I think you're going to uh we're getting closer to that happening in in more of our footprint.

For this asset. And if you see cap rate compression, uh, in some of the markets that you're looking to acquire in,

Marketed over the really over the past couple of years. I think ultimately the the developers goal was to sell up on stabilization, but they wanted to wait till a better time in the capital markets environment. So we had developed a relationship with them. Um and as they had their timing needs evolved. I think they they viewed us as um a a very

Good, good buyer. That could move quickly and that they would get they could get comfortable with the the execution. So, um, this 1 was a little bit different, there are a lot of investors that are looking at Dallas opportunities right now and that's, um, you know, a lot of private Equity firms, family, offices, Etc. So, um, certainly, it's a market. That's that's getting a lot of attention.

Um, in terms of cap rates, I mean, I think just the dynamic of having more Equity looking at office more debt options available. Um, debt, has gotten less more or less expensive rather base rate to stay generally the same but spreads have come in so that combination inevitably leads to a little bit of of cap rate compression. Uh, we still feel like we've got a competitive advantage in terms of the certainty that we offer as a buyer and then our cost of capital. Um, but it is becoming a little bit more competitive.

Great, thanks.

Next question is from the line of Blaine, hack from Los Fargo. Please go ahead.

Great. Thanks. Good morning. Um, can you talk a little bit more about your leasing Pipeline and any Trends you're seeing with respect to tenants size or industry? Uh, are you seeing any specific segment of the market strengthening or weakening as we progress through 2025?

Going. Hey this is Richard so um I think the first thing I'd note is that that we continue to see really constructive

Dynamics in every 1 of our markets. And and if you kind of look to the the building blocks of the fundamental backdrop that I outlined with regard to Charlotte, I mean, we're seeing those building blocks to some degree in every market. So we're just broadly encouraged. I would say about the strength of the pipeline. It's very, very Broad, in terms of markets um industry mix, really, there's there's not much of note there. I'd say that Financial Services is the heaviest um contributor to our pipeline today. Um and not far behind that is illegal. And as you'll recall legal was was pretty heavy um kind of earlier in the year for us. Um and then and then Tech still was playing a a more modest but still meaningful role. Um,

In our Pipeline and and interestingly healthcare companies not Healthcare Providers but but certainly healthcare industry. Participants um are are a larger segment than we normally see. Um,

Great. That's how full thanks to Richard. And maybe sticking with you. Can you talk about what you're seeing with respect to net? Migration to your markets, have you seen any interest to uh, increase in interest from from tenants that current currently have exposure to other markets to expand or relocate to the Sun Belt? Uh, if so, are there any specific markets that stand out?

Um, kind of a similar story really. Um, what we're seeing.

New to market requirements. And this is not just new this quarter. I think we've been seeing it really for the balance of this entire first half of 2025. New to market requirements have really come to.

We've come into view, I'd say mostly Atlanta and Charlotte again. This kind of lines up with our leasing pipeline in general, but Phoenix has been an interesting story in terms of some new-to-market requirements. I think we've pointed out in the past too that these new requirements...

2, various markets, aren't always big, you know, singular headquarters leases. A lot of times these can be companies that are headquartered elsewhere. Certainly outside the Sun Belt that are deciding to to increase their presence or build hubs, um, within some belt markets or transition over time to to a larger presence, um, outside of where they currently are headquartered. So so you're seeing a combination of both headquarter, true traditional headquarters and these smaller hubs.

I'm new to market or large growth, and further growth of existing hubs of kind of West Coast-type companies. And at 95% leased effectively, we just don't have the space today unless we were to consider something new.

Okay, great. Uh, lastly for me, Colin, you talked about targeting maybe lower occupancy and higher capex office assets for disposition if you ultimately decide to sell, I guess. Given that profile, would it be fair to assume that the cash cap rates after capex could be close to where you acquired recently, or are they likely to be higher than that?

Yeah, I mean, a big, a a driver there will be, you know, what is the, you know, the occupancy level of those particular assets. And so, I I think, um, you know, certainly if it is a lower occupancy building, I think just on a standalone basis, there's potential to recycle Capital, you know, into newer, uh, better lease buildings, um, perhaps at a lower stabilized yield but, but relative to that lower in place occupancy, that could still be kind of neutral, uh, to accretive. But but we're going to look as I said, all any disposition is, is, is going to the Catalyst for that will be the new investment opportunity and we're confident that as we identify those opportunities, we can look to, you know, our small pool of what I characterize is kind of not

Encore assets and perhaps even match that with some land to make sure that we are reinvesting and doing so um, creatively. Um and you know, Kennedy touched on the the investment sales Market picking up and more activity. And and I'd say we're a lot of that. Capital is focused is is probably on the exact type of buildings that we'll consider selling. And so we think it is a better environment. We've been very patient over the last several years, in a kind of less appealing um, sales market and we think that's changing. And so, as, as discipline owners, we think that should be a source of capital that we uh, give priority to to, to make sure that we continue to upgrade the quality of the portfolio, increase the occupancy and lower the capex profile.

Great color. Thanks everyone.

Thanks Blaine.

The next question is from the line of Nick sillman from beard. Please go ahead.

Hey, good morning, maybe Colin. Uh just overall you guys tend to be a first movers and I kind of adapters to kind of Trends. You're seeing in today's environment. So, maybe as you're looking at Acquisitions, now since you've been a little bit more aggressive here in the last 18 months or so, are there any sort of changes or or type of characteristics, you've noticed in the assets, you're looking at whether it be the size or submarket, um, that that you've just seen shift or you got

Guys are thinking about a little bit differently.

Yeah. Well, I think if you kind of look back more broadly over the span of...

You know, the, the last 5 years and we've been particularly active, let's say, there's certainly, uh, you know, a bit of a bias on our part to to, you know, sell what we would call old and tall and heavily invest in new and small, um, and, and particularly the assets that have what we would characterize a lifestyle orientation, which, you know, is important, not only to be a, a new vintage asset with, you know, a great ceiling Heights, and great amenities and all the things that you would expect within the 4 Walls of a trophy building. But it's really important to us that they're located in really vibrant neighborhoods that have energy. And as we talk to our customers and as they evaluate space, I think that's 1 of the, the key priorities is is to um, to to to find spaces that are in environments that are exciting and appealing for their employees to show up uh spend time together.

In the office and also outside of the office. So that, that clearly, as you look at our activity over the last five years, I think it all fits squarely with that.

That's helpful. And then maybe just a quick follow-up on, uh, I'm just Samsung at Brier Lake. Um, I believe there were potentially some subtenants there that you guys could go direct with. But updates there? And then also just kind of Houston overall, do you kind of put that in that bucket? I know it's still probably fits kind of Lifestyle office but not a core market for you guys. But would you put that in the likes of a North Park for kind of that non-core sales?

um,

1 1 of the property shows really well at this point, obviously, we, we put Apache in there. They're, they're in their space, a lot of energy. Now, um, did a fantastic Redevelopment really upgraded the amenities across the board. Um, so any any tours, any any time we have an opportunity to show that asset, I think folks come away, very impressed and and um love the project Samsung, you're you're right, um, there are sub tenants in the bulk of that space.

Samsung is going to be relocating, they're leaving the Westchase submarket. So, um, it really is not a commentary on the building. Um, and we do, we do feel that we have an opportunity to, to likely, um, have a shot to go direct with with some number of those sub. Tenants could be 10% of the space could be 30 time will tell. Um, but but we have very good activity already. Um, since that expiration is

It is obviously a little over a year away, but getting closer. There's starting to be more interest in it from the market. So, I feel very good about our competitive position and our ability to backfill that efficiently.

This is Kenny, as it relates to our thoughts around barley, as a potential disposition candidate. I would say you, you characterize it well. Like, it's it's a lifestyle office property. We've been really pleased with the reception that we've gotten from our customers post renovation. Richard said we we feel good about the back fill of the Samsung space and the ability to go direct. So um it's it's not on the top of the list over time as you said Houston is not a core market so I think we'll um continue to evaluate that as as we find Acquisitions. Um but at this point it's not on the the top of the list to sell.

Great. That's it for me. Thank you.

Your next question is from the line of Peter. Abramo is from Jeff. Please go ahead.

Yes, thank you for taking the question. Uh, I I know you covered uh, North Park and and the 1R move out there in terms of why the occupancy dipped, um, just noticed occupancy, also went down a little bit in Tampa. Could you talk about um, anything specifically that drove that

Sure. It was an expiration of a customer on the second floor of Harborview, very standard at 25,000 square feet. You know, we have those kinds of ins and outs.

In the portfolio, routinely.

Okay, that's helpful. Thank you. And then maybe to go back to Colin's comments on Capital Recycling and the prepared remarks, I guess does your kind of evaluation and underwriting also include potentially new markets? And could you talk about how you're sort of thinking about potential entry into new markets?

Yeah, we're we're always evaluating kind of all markets, I mean that that we think is core to our job is as we certainly continue to always pressure test, our Sun Belt lifestyle strategy. Uh, but we do think that those prevailing long-term secular trends of the, you know, the migration to the Sunbelt.

And the flight to Quality uh, will continue to endure. So I think our Focus will absolutely remain uh for now focused on, you know, Top Flite Sunbelt markets and you know there's a handful of markets that we're not invested in today that have got scale like a rally like a South Florida. Um, we continue to look at those and evaluate those. But I'd say, our current priority at the moment is to expand our presence in some markets that we're already in. And I'd certainly include markets like Dallas and Charlotte, and Nashville, and Tampa, and Phoenix as, um, probably the best opportunities for us in the near term. Uh, to, as I said, continue to upgrade the quality of the portfolio and hand.

Geographic diversification, and hopefully continue to do that on an accretive basis.

Okay, that's helpful. And just one more. Richard, you talked about the leasing pipeline and kind of the role.

Big Tech is playing in that, uh, could you talk about Big Tech specifically in Austin? Kind of, uh, you know,

How, how demand is trending? Whether they're kind of getting close to getting back to Growing their footprint and any sort of Trends you're seeing specifically in Austin among that cohort of tenants

Sure. Um,

The demand equation is improving from Big Tech. It's not broad, but I mean, we all see the headlines of who's announcing, um,

Bringing people back, whether it be for, more importantly, five days a week. I think Amazon obviously is a, is a,

Very, um, notable participant in that trend. Um, but we're seeing.

Absolutely tangible signs that there is some growth needs starting to re-emerge again. I'm not characterizing it as the

The, you know, the heyday of 2122 where tech was just growing hand over fist in Austin, but it is improving.

All right. That's all for me. Thank you.

Your next question is from the line of Yu Poranna from KeyBank Capital Markets. Please go ahead.

All right, thank you, yep. Uh, Greg you mentioned the uh, Bond deal, you did earlier was better than anticipated, you know, I was wondering how you would describe the capital markets today. And if, if you were to do a similar deal today, you know, what kind of rate would would you be able to get thanks?

Good morning go. Yeah. The on the credit side the capital markets continue to improve whether it's CBS or corporate spreads is we typically borrow acts and you know we issued that 5-year Bond at 117 over the 5-year treasury. Today that bond is trading in the mid 90s.

And so, you know, it's coming at least 20 basis points from where we, from where we issued it, so we could, we could get even a lower coupon today which feeds into the marks that I made earlier about improving Capital Market and the Kennedy kind of, um, latched on to as well. When we talk about kind of the liquidity and pricing and cap rates in the office space, I mean,

Credit is, you know, the oil in the machine, and when credit is flowing, that's a good thing for transactions. We're seeing that, and the credit markets have absolutely improved over the last six months.

Okay, great. That was helpful. I just want to know, is there any update on the Bank of America move-out that's occurring now, and any updates on your plans there? Thanks.

Um, no, nothing concrete. I mean, again, I mentioned that we are, um, rebranding the property, which we think is actually really exciting and important for increasing the funnel, uh, for potential customers to backfill V of a, um, that they literally expired yesterday. So, um, you know, we finally have control of the space, um, which is going to allow us to start to execute, and, and move though it's been planned for a long time, move on our.

Redevelopment. Um, those plans have come together very nicely, and I can't wait to get started with that.

And I, I'll just add on to that opal that, you know, in many respects. I'm I'm glad that that expiration finally occurred yesterday. Its kind of been much anticipated, uh, over the last several years and I think specific to that property. As Richard mentioned, that the rebranding is a big deal. And our development team has a fantastic plan to reposition that asset in in such in a similar manner as we did to prominade here in midtown Atlanta but I think importantly for the company to stepping back. Um, you know, there are no other large known move outs to talk about and, you know, as Richard indicated, we believed the portfolio occupancy will trough with that, move out during this, third quarter and we think then directionally uh things are up and we'll be talking about growing occupancy and growth. Um, with, you know, very few uh, or a a very

Very modest expiration schedule in 2026, and no other large customers. We think it's going to be a really, really good setup for us to drive that occupancy in an improving market.

Okay, great. That was awful. Thank you.

Your next question is from the line of Brazinski from Green Street. Please go ahead.

Just a quick 1 for me. Richard, I think you mentioned that we can 500 remain strong and the late stage pipeline is actually at the highest level since you guys started tracking it, I guess. Can you sort of give us details on on what you think is, is causing this, this this continuation of strong demand, is it just a rise in in aggregate office demand in general? Or do you guys think that that cousins given the call to the portfolio is is just continuing to Garner a significantly larger share of the leasing activity that's going on across your markets.

You know, certainly there's angst and and we feel the Yanks does, you know, you get, what is a relatively weak employment report this morning? An angst about the macroeconomy, but I just think it's really important for us all to recognize. What's playing out in the office space. Today is the reversal of an extraordinarily anemic Market. Over the last 4 years, you had companies significantly shrinking their space, in some cases, losing their space altogether. Um, and certainly not growing and and now companies are scrambling and there continues to be pent-up demand because of the, the length of that, you know, anemic Market. Um, and so notwithstanding what what looks like at te tepid employment environment and perhaps is companies are still playing catch-up to get their workers back into their office. And I'd say importantly, for cousins, and while we're seeing a disproportionate amount of the demand is, is it is focused on a smaller.

Percentage of the inventory, and our portfolio fits squarely into that. And I think that's kind of a key driver for us of why we're seeing that pipeline continue to remain strong.

Great. Thanks for calling. I really appreciate that.

The last question is from the line of Brandon Link from Barclays. Please go ahead.

Great, thanks for taking my question. Um, just one from me.

As you're looking at capital allocation at this point in the cycle, it seems like you're picking up the pace of acquisitions fairly significantly. Where does the mezzanine financing opportunity sit in your list of priorities?

Business and, and not our priority. Uh, you know, we are Equity investors and long-term Equity investors at that, uh, but we have a really creative team, um, entrepreneurial team that identifies, you know, opportunities that, um, whether it be in the mezzanine, or preferred or structured Investments. And we think, uh, in certain instances when collateralized by lifestyle office that, you know, it's, uh, you know, they can be compelling opportunities for us, uh, in the short term in their structured form, but perhaps can lead to longer term, uh, acquisition and investment opportunities. And so we'll continue to explore those. Um, I think from a sizing perspective, right? We recently did 3 of those 2 have been

Paid off. Uh, I don't think it'll be a material material part of our balance sheet, but, you know, anything under a hundred million dollars in in in the aggregate. I think we're comfortable with. Um, again, we we don't want to do anything in that. Um,

In that form, from a size perspective, it could create, well, a near-term earnings boost, but it could create a longer-term earnings headwind, you know, if those are ultimately paid off. So we'll size the overall scale of that opportunity appropriately. But I do think it's a unique and compelling way to source some longer-term acquisition opportunities.

Great, thanks. Colin, thanks for calling.

Thank you. There are no further questions at this time. I'd like to turn the call over to Michael Connolly for closing comments. Sir, please go ahead.

Thank you all for your time this morning and interest in cousins properties. If you have any follow-up questions, please feel free to reach out to Greg adzema or Ronnie embo. And we hope to see many of you at some of the upcoming conferences in September, have a great weekend.

Ladies and gentlemen, this includes the today's conference call. Thank you very much for your participation. You may now disconnect