Q3 2025 Cousins Properties Inc Earnings Call
Speaker #1: Good morning, ladies and gentlemen. And welcome to the Cousins Properties Incorporated conference call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.
Speaker #1: If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, October 31, 2025.
Speaker #1: And I would now like to turn the conference over to Ms. Pamela Roper, General Counsel. Thank you. Please go ahead.
Speaker #2: 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.
Speaker #2: The press release and supplemental package were distributed yesterday afternoon, as well as furnished on Form 8-K. And 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.
Speaker #2: If you did not receive a copy of these documents, they are available through the quarterly disclosures and supplemental SEC information links. On the investor relations page of our website, cousins.com.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: And a detailed discussion of the potential risks contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly.
Speaker #3: Thank you, Pam, and good morning, everyone. We had a strong third quarter at Cousins. On the earnings front, the team delivered 69 cents a share in FFO, and raised the midpoint of our guidance by 2 cents a share to $2.84 a share.
1, 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 right sizing. And AI is not yet the existential threat. That some expected 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 non-core assets.
Settling shares already outstanding on our ATM and utilizing the balance sheet are more likely options.
while sometimes characterized as conservative.
We view our low levered balance sheet as a distinctive tool.
At select times in the past, we have modestly flexed up our leverage to take advantage of compelling investment opportunities.
Give an 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 forecast. 5.6% growth over 2024
This would be our second consecutive year of SFO growth.
Cousins would be 1 of 1 in the traditional office sector to accomplish this multi-year growth.
Our team's ability to drive both internal and external growth is key.
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 Reed sector.
Our balance sheet is exceptionally strong. In our G&A, it is highly efficient for our investors.
Before turning the call over to Richard, I want to thank our dedicated cousins and employees for providing outstanding service to our customers and each other every day. Richard?
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 waste and weighted average occupancy, percentages were 90% And 88.3% respectively.
as expected both were down in this quarter almost exclusively due to the known move out of Bank of America at 2011, 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 the 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. Ft
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 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, the sum of free rent and 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 $88.37 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 Sun Belt 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% of 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. Were 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 into the quarter at 94.9% lease.
Similar to Austin. JL reported that 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 ft of leasing in our Atlanta portfolio in this quarter. And on a transaction count basis 2/3, of our activity was new and expansion of Leasing.
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 expanse expansion, lease commencements in Buckhead.
Turning to Charlotte, fundamentals for high-quality office remain 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 2011 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 Maguire Woods at 2011, North Tryon for 127,000 square feet. This was an important win and we view this long-term commitment to 2011. North Tryon is a validation of the building's quality location and of our ongoing property Redevelopment
The 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 1 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 1. That would bring the building to approximately 95% leased in very short order.
during the third quarter, the team also completed 2 important renewals, at both Hayden Ferry 2 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 three-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.
Oh, Ventev is the sole customer in the building?
though they sublease substantially all of the building years ago,
In the third quarter, we proactively entered into an early termination agreement with O Ventev.
And upon the Oves' 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 sub tenancy 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 was with existing sub tenants 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 today or in lease negotiations of which 77% are new and expansion. Leases that represents a total of 551,000 square feet of new and expansive, 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.
Thanks Richard.
We finished the quarter with the apartment component up to 86% leased, and we still expect this part of the project to be stabilized at the end of the year. On the commercial side, we signed two spec suite leases, both of which commenced in 2025, bringing 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. We are 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 in an expedited timeline upon tenant commitment.
As a reminder, new office is located in the German Town 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 multi-billion dollar investment by Oracle, as well as the recent tenant activity in the market, is a testament to both National's talented and growing workforce as well as companies' desire for high-quality, differentiated office environments.
We are excited about the response from the market for new hospitals today 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 Sun, Belt office strategy while expanding our footprint in Dallas.
We acquired the 94% lease property for 218 million or 747 per square foot pricing that reflect represents a discount to replacement costs 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. 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 can continue to seek out acquisition opportunities. That meet our, our criteria
Some belt 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 bitter depth, increasing and buyers becoming more constructive around underwriting. We also intend to selectively Explorer 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 non-core, and we don't need to sell. However, when there are opportunities to creatively 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 Greg.
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 a 2025 earnings guidance.
Overall, as Colin stated upfront, our third quarter results were outstanding.
Second generation. Cash, leasing spreads with positive.
Same property year-over-year. Cash NOI increased, and leasing velocity was very strong.
Focusing on St. property performance for a moment, the Gap and A-Y grew 1.9% and cash NOI grew 0.3%.
During the third quarter compared to last year.
Market departure at our 201 North Tron 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 2024.
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, uh, compared to the prior year. Or 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 new Huff 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 sofa 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 in 19.6 million.
At an interest rate of. So for 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 our most recent million dollar Bond offering in June.
We also use the proceeds from this Bond, partially fund or acquisition of the link property in Dallas that Kennedy just discussed.
We continue to assess alternatives to fund the remainder of the link acquisition. As I discussed in our last earnings call,
Settling. Some of the shares. We have issued on a forward basis. Andor selling, some non-core 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 2025 earnings guidance. We currently anticipate full-year 2025 earnings to be between $2.82 and $2.86 per share, with the midpoint of $2.84. This is up a few pennies from last quarter.
The increase in FFO guidance is driven by higher parking income, higher termination fees, and lower sofa and interest income from the loan to our joint venture partner.
Our guidance assumes no additional softer cuts for the remainder of 2025.
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 6 cents 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 creative investment opportunities.
We look forward to reporting our progress in the coming quarters. With that, I'll turn it 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. 4 to 1 on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request? Please press star. Followed by the 2. If you're using a speaker-phone, please leave the handset before pressing any keys.
1 moment, please, for your first question.
Thank you. And your first question comes from the line of Blaine Hack from Wells Fargo. Please go ahead.
Able to Ai and displacement given the amount of corporate uh back office type jobs housed in those markets. So I'm wondering how you would respond to that and and how you think your portfolio is insulated from that potential trend.
Well, good morning, Blaine. I appreciate the question. There's a, there's a lot in there and I think in particular there's a lot of misconceptions in there in the first that I would highlight is, is kind of a narrative of kind of gate. Gateway markets are pushing that. The Sunbelt is full of back office jobs. And and that is just uh far far from the case. And as we look around uh the Sunbelt the 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, you know, a lot of companies that uh have made those moves and 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, uh, where, where there have been some significant challenges, so think, Oracle moving their corporate headquarters to Nashville, think of the large hubs, uh, with Amazon in Austin and Nashville. Uh, as well as DC think about Goldman Sachs, uh, uh, 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. Uh, so I, I think that that is very much a, a misconception. I think in particular, uh, many of those companies are highly engaged in Ai and so while the, uh, kind of the startup AI universe is, is largely located in San Francisco in time that AI demand will find itself distributed again throughout the country. And and we
We are already seeing that today, you know, Amazon as I touched on, in my prepared remarks, you know, we have a great conversations with, with Amazon all of the time. Uh, again, I think Andy Jassie just waited any fears that those that those riffs were AI, uh, related. It was more about right sizing uh, 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 expander, not contractor. Um and so I want to make sure
To to highlight that uh that certainly has been the trend with them as of late. And I don't see that changing and then just kind of you know stepping back uh with with a few statistics. Um the you know with the enthusiasm around San Francisco and New York over the last 12 months. Uh if you actually drill into the data and look at actual leasing activity in growth markets, which would include all of our markets uh relative to Gateway markets and this is jll research, the growth markets are at 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. Uh, that's at about 65%. So that's just the last 12 months. So again, despite the exuberance over certain markets the the the Sun Belt and growth markets continue to outperform.
Okay, great. That's really helpful, and it all makes sense from my perspective. Um, 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 2026 or 2027.
Yeah, well, it's hey bling, this is Richard. Um, so we talked about in the past, really the only large expiration that we have through the end of 2026 is Samsung in Houston at Brier Lake. They're 123,000 square feet. Um,
See how that plays out. But it's, um, 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 B of A is now in the numbers and and behind us. So um proportionately, um 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 with deploying Capital to redevelop. Both 550 South, and 2011, North Tryon. And, you know, we we know that this play works and that 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, uh, that we've seen has been robust and very encouraging. So, uh, we also feel good about our position there playing and it's Colin. I, I just add back back to your question. I'd say the, you know, the expirations are are pretty evenly distributed throughout the portfolio. There's not kind of anyone 1 market, uh, that that has, you know, significantly more than the others. I, I'd point out, Austin probably has some of the I'd say, the more modest expirations, uh, over the next couple years. Um, and and that would be kind of the 1, the 1 market that would stick out for for its modest expirations.
Okay, great. Terry helpful. Thanks everyone.
Thanks Blaine.
Thank you. And your next question, cancel, the line of Andrew Berger from Bank of America. Please go ahead.
Great. Good morning and thank you for the thorough opening remarks. Um just wanted to Circle back on the comments around the balance sheet and leverage you know, appreciate the current leverage levels are a bit lower than maybe some of your peers what sort of the upper bound of how high you would potentially be willing to take leverage at this point?
Andrew good morning, it's Greg. Um so if you go back and look over the last 12 years, our leverage has remained give or take right around 5 times net debt to ibida, its kind of varied between 4 and a half, and 5 and a half 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 lever balance sheet and it was offensive weapon.
um, to
Complete those transactions without having to raise any incremental equity and then subsequently bring leverage back down to 5 times. 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. Um, but we think we have a little bit of room here. Um, really the only hard number that you have out there is, you know, we do have an investment grade rating for both Moody's and S&P. And if you look at the write-ups, you know, they tell you that 6 and below is consistent with what our current rating would be. So from a rating agency's perspective, there's no problem going up to 6. We haven't gone up to 6 as a company in well over a decade.
Um, so that I'm not taking that off the table. But um, but that would certainly be the absolute upper bound of the range, um, of what we would do. We've got some capacity here though. I mean, we're at 538 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 its asset sales or settling. Some of these shares that we've issued on a Ford basis under the ATM. Um, we've got some capacity to flex, the balance sheet, here and drive earnings and drive growth. That what we think is a really opportune time to do it.
Great, thank you. And as my follow-up, you know, 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. Thank you.
Sure. So
Represented the bottom. Um, but using that prior Baseline of 8%, we still think we probably have a little bit of room, um, to push in terms of kind of what we've seen in that increases and we keep surprising ourselves every quarter. Um, it's about 75% utilization and 25% price. Right. You can drive revenues either by using it more or, by increasing the price. And 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. Um, we do a ground up analysis of this, every quarter, as we reforest and we continue to surprise ourselves every quarter. It's a good surprise though because it's really is in indication of better utilization.
Of our decks.
Which is exactly what we want to see; it plays into what Colin has talked about at the top of the call, which is the return to office continues, and if anything, is accelerating. Finally, in terms of a breakdown of parking revenues, our parking revenues are about 75% contractual and about 25% transient or non-contractual. That relationship, the 75-25 relationship, is actually incredibly consistent over the years. It doesn't move much.
Thank you. And your next question comes from the line of Brendan Lynch from Barkley's. Please go ahead.
Great, thanks for taking my questions. Um, it sounds like you're still on uh track for your previous expectations for occupancy to trough in the third quarter um and improve from here, it kind of Be steady and then improve. How should we expect that to kind of flow through to the trajectory for same store cach? Noi growth. Uh, going forward
Well, yeah. I
Trajectory and then counting probably analytical granularity. But the increase in occupancy that we referred to in this call getting to 90% or better by year. In 2016, is highly likely to be back in loaded. Um not completely back-end loaded but more back-end loaded in the front end loaded. Um, in terms of how that plays through to to our same property performance, the 1 thing that we've got to deal with is, you know, 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, many reports these numbers. You know, 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 priority of your comps, you're going to see some significant acceleration in our same property performance in the second half of 202.
Great. Thanks that's helpful and and maybe sticking with um Bank of America and the the 2011 North Tryon asset it sounds like you're already making progress back filling some of that space. I I understand there's some Redevelopment still going on. Maybe you talk about the prospect of uh, at leasing up the rest of the space that has become available.
Again, this is Richard again, we we feel really good again, we just started in the past quarter of the Redevelopment of 2011, North Tryon. Um, but we're well underway, the market can see it. Um, 550 South, I would, I would notice it's further along, but, but the the activity that we're seeing, let's say, broadly in Charlotte is very encouraging. Their there are plenty of large users, uh, that are looking and Uptown and South in, but are kind of figuring out that there's really no, no space left in South End to lease. And so they're, they're all starting to concentrate almost exclusively on Uptown and and Big Blocks that are available. Um, there's new to Market activity, is calling alluded to that, um, that we're seeing that's extremely uh, encouraging. So we we feel good about our position, um, relative to supply and demand in the market. Um and and think we're going to, we're going to have success. Um,
here and and and the next, you know, 12 months or so, yeah, and Brendan it's Colin, I just add on, um,
You know, consistent with with my earlier comments about the re acceleration of Sun Belt, migration, I'd say Charlotte in particular, you're seeing quite a bit of activity, out of large, New York City Base Financial Services firms. Looking to growth and establish large hubs, uh, in in Charlotte, I can't speak to the specifics of what's driving that, uh, but it's been a noticeable acceleration over the last 3 to 6 months.
Great. Thank you.
Thank you. And your next question comes from the line of Nick Telmon from Beard. Please go ahead.
In South markets to kind of track, uh, these tenants. I, I guess, how are you feeling about the pockets, where you do have some vacancy on leasing that space up? Obviously, the new, uh, North Park AT&T stuff, kind of pending here, but, uh, just some other stuff.
Yeah, no, we we, we do feel like, uh, well set set differently, where we do have large blocks of, of space. Again, you mentioned North Park, uh, Kennedy mentioned neuhoff, um, 2011, North Tryon out out of Hayden Ferry. I mean, we in each of those instances we are seeing, um, we we are seeing some, some interest, uh, and and larger users, uh, taking a look at that space. So, so that's very much encouraging. You know, the other thing I'd mentioned is certain areas uh, of of our footprint where we don't have space, we're we're actually starting to have some very preliminary conversations with large users coming out of New York and the west coast to have potential interest in in building in a new building buildings. And so, so that's been a very encouraging sign, um, and uh, and and and we hope to address some of those needs.
That's helpful. And then Kennedy you kind, you mentioned some potential dispositions with a capital markets improving. I know you're in the market with 1 asset in Tampa, but are those the type of assets we should we should be thinking about as, as disposition targets, here in your term.
Yeah. I mean as we've said, we will only look to dispositions when we have exciting acquisition opportunities. Um, so we are, but we're, we're monitoring the market monitoring our portfolio and assets where we think that match up well, with the, the depth of the buyer pool today. We'll, we'll look to to transact. So, yes, I would say generally smaller, um, and maybe less tied in to the rest of our portfolio and specific markets.
That's it for me. Thank you.
Thanks there.
Thank you. And your next question comes from the line of Steve Cequa from Evercore ISI. Please go ahead.
Uh, great thanks. Good morning. Um, Richard, I was just wondering if you could provide maybe a little more, uh, granularity on that pipeline. It, it sounds obviously impressive. Um, can you give us maybe a sense of number and, and kind of size. I guess, I'm just thinking. If tenants are somewhat larger, getting them into occupancy by the end of the year, becomes a little bit more of a challenge, if they're smaller in that, you know 2550, 75,000 foot range, they can get in quickly. So I'm just trying to get a sense of number and, and ultimate size.
Of that pipeline.
Sure. Um,
The the pipeline overall is definitely partly being driven by larger activity and again new to Market activity that we're seeing. But but to your point, the larger users tend to be slower moving. Um just by the sheer nature of the size and and the the lift of getting that much space built out and occupied. Um I think right now we have roughly a 100 total uh prospects within the pipeline overall. Um but but um, you know, we've actually had some interesting cases just in the last couple of months. Um, I alluded to 1 in Phoenix where um we had a 50,000 square foot uh new customer that we signed a lease with a very fast, moving lease negotiation and they're going to occupy the space um that they leased literally within 60 days. Um, so that's that's unusual but they're a little pockets um, of activity
Where we're seeing actually a little faster occupancy and for a 50,000 square foot customer to do that is pretty impressive. Um so it it again it takes time for for the bigger users to to filter through the system. Um,
Yeah, at the end of the day, you know, we welcome large user activity. I think it's wonderful to have that engine beginning to fire again on all cylinders, and we are happy to waive those into our portfolio if we have the opportunity. And, and Steve, it's Colin. Um, and you're right again, larger users take larger or longer periods of time to...
Uh but again those won't have that large of of an impact. Um and and so the timing of of the commencement in that pipeline all all of those dates are factored into our our projections and and we're optimistic about you know, achieving our goal.
Great, that's good. Call our thanks. Um, and then I don't know if Kennedy or, or Richard maybe just on the on the nov project. Um, obviously, that that's been a little bit slower to lease, but I guess I'm just curious with Oracle making a bigger push you know, 1 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, you know, adjacent to their new campus. Is that a source of demand that's looking at the project
I yes, I think certainly, the Oracle being AC the river and just their plans, um, in a variety of Industries and uh, for the campus and growth is, is all great for for the follow on demand. So we are starting to see some of that, um, and are and excited about the larger users that are showing up again. Um, just just recently here. Yeah, and Steve that kind of directly answer your question. All of those are possibilities. And again, I think Oracle a company of that size obviously heavily involved again in AI that, not just in San Francisco. But, but but here in Nashville, uh, in the direct,
Derivatives off of that and companies that work uh, with Oracle, uh it it's going to be fantastic for for neuhoff. And we've certainly seen um an acceleration of interest in our space. Since Oracle has made kind of their grand reveal. Uh, recently above their project in a specific timeline, it's all very positive.
Great. Thanks. That's it for me.
Thank you. And your next question comes from the line of Opal Rena from KeyBanc Capital Markets. Please go ahead.
Okay, thanks for taking my question. Uh, Richard, you know, appreciate the details on the leasing pipeline. Uh, you know, given the stronger pipeline? Are you seeing any shift in lease, economics, as it relates to rents or concessions or TI's in there?
at this point, I think it's
Order. Um, you know, I'm really pleased with the fact that our net effective rent so or or, or hanging in there, um, and been very steady. I think we're right on top of the second quarter, uh, for net effective rent. So, um, if anything I'd say we're feeling, um, while TI's continue to be large, we're feeling like we're able to hold the line on rate and get that effective rents, and, and produce stability there. Yeah, hopefully it's time. I'm just adding, we, we do think we're relatively close to an inflection point where it it is likely.
To become a landlord's Market, um, with, with no new construction, uh, having started really over the last couple years and not not expected to have any meaningful uptick there and now demand, uh, accelerating a shortage of, you know, what I would characterize as lifestyle office in. In some of our markets, is, is absolutely coming. And, in some cases almost here. And if you talk to the major tenant reps, um, you know, across our markets, whether it's in Atlanta, or Austin, or Charlotte, uh, you know, those large tenant reps are looking out to their 272829, expirations, and, and starting to have some real concern that they won't have the options to accommodate growth, uh, for for their customers. And, and so, hopefully that could ultimately translate, uh, into US driving that effective rents whether its face rents, um, or or ultimately bringing concessions down,
Okay, D, that was helpful. And then with the OV termination, could you provide any lease economics or rent changes that you may have had with the new sub tenants relative to what event was paying. And if there were none, you know. Uh, whereas Market rents today, relative to what event it was historically paying
Anyway, that's it for me. Thank you.
Thank you. And your next question comes from the line of Razor from JP Morgan. Please go ahead.
Hey, good morning. Uh, thanks for the caller on looking out on guiding, uh, on the occupancy guidance. Um, just curious, um, sounds like 201 North Tryon is part of that uh 90% occupancy comment as well. Um, just want to confirm that, number one, and number two, can you remind us the redevelopment timing and how much you're going to spend there? And when can uh, we expect the back filing to take place in terms of commencing?
Right. Just to clarify your question, you were asking as it relates to Q3, and we’re trying to determine whether it will be 90% or ...
Or is it in the 90%? Uh, guidance. Is that your question?
Yeah, the second 1. Yeah you mentioned the 90% comment towards a year and 26 curious if that includes 2011, North Tryon in the occupancy pool and I'm guessing it's a yes but just want to confirm it it it it it absolutely does. And you know again as we've just gotten that space back and we're got to under construction on our Redevelopment. You know that that forecast um does not include a a a significant amount of
Commencements of new leasing at 20201 North Tryon by year end 2026. We certainly hope to, um,
To to outperform that. But but I'd say largely the the the the releasing and the commencement of of those leases at 2 and 2011, North try or more geared towards 2027.
Got it, that, yeah, 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, you know, going dark space, and...
Yeah, I'll I'll tackle the gap of it and the account to put the total number in there. Yeah, we're since we're not taking this out of out of the portfolio. We're not capitalizing interest against the basis of the existing building, we'll just capitalize interest on the new spend. So not not a big movement there in terms of capitalized interest and then in terms of total spending it, it's it's approximately, uh, $40 million, um, with an anticipated completion in the first quarter of, of 2027 and it's very, very much consistent with the spending and the type of Redevelopment that we did at the prominent uh Tower from an Central Building uh here in Atlanta or the Hayden Ferry project out in uh, in Phoenix, that that have all been really well received. And so I'd say it's a very similar project.
Uh, slightly higher nominal dollars because it's just a larger Tower.
So I said that's very helpful. Thank you. Um that's that's it for me. Thank you.
Thank you. And your next question comes from the line of John Kim from BMO Capital Markets. Please go ahead.
Thank you.
Um this quarter other than the new house loan, you've been making any Investments either on the assets or debt Med side. I was wondering if you could talk about cap rate or yield compression, you've seen the increase competition and if we could focus on Dallas, uh there was recently a hardware portfolio sale uh which included Stan Court um you know that recently traded and I was wondering if you could discuss how close you were to acquiring that portfolio and any any commentary you have on pricing.
You know, John, on Harvard, we were kind of 67 on it. Uh,
Uh, we appreciated your name. Um, the you know, well I I'll go back to the to the the beginning in terms of cap rates. I mean is, is Kennedy alluded to your certainly seeing kind of more investors uh you know, focused and and and become interested in office and debt, certainly readily available. Um, so I would say, you know, cap rates we think are are likely to compress, um, you know, we haven't seen a lot of that compression just yet, but
And announcements as to how that uh, is playing out. Uh, certainly something that that we looked at. And and obviously strategically, very focused on growing our presence, uh, in in Dallas. But I think ultimately, uh, We've made a decision to to focus our efforts elsewhere.
Okay. And then on the leasing uh success you've had in Hayden fairy 1, can you just provide some uh, commentary on either the tenant or industry, uh, that sign there? Um,
He can give on redevelopment yields or return investment capital on the redevelopments.
And maybe for Greg, can you remind us when you plan to place that asset back into the same store, poll?
I'll I'll start, uh, you know, the leasing has been pretty broad-based the the the 50,000 is uh, square foot customer that we signed subsequent quarter end was a regional um,
Engineering firm that had actually has a, a very nice, um, uh, high growth, uh, data center component to their business. Um,
We had previously signed a regional headquarters lease with a financial regional bank, a financial services company. Um, the
The company that is in lease, negotiations, right now is a, is a corporate headquarters. It's not new to Market, and I'd characterize it as a healthcare slash consumer goods, focused company. Um, so the it's very diverse actually the, uh, the, the new tenants that were that were bringing into the project. And again, that we've been very pleased with the profile of all these customers, um, their headquarters, their high-end uses, uh, not back office. So, very excited about the new tenancy at Hayden. Fairy 1 and elsewhere in the project.
And then, in terms of when we bring it back in our same property, pool likely, Jan 128.
We only we only change our same property pool, 1 time a year January 1st of each year. And so in January 1277, 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 till later in 26. So it'll be Jan 1288.
Appreciate it. Thank you.
Thank you. And your last question comes from the line. If Dylan breathing ski from Green Street, please proceed,
I guess maybe following up on, on 1 of John's questions, given that bidding tents 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. Uh given what seems like cap rates are compressing in this subset of investment opportunities. Is it your expectation that most of what you guys are going to be looking at moving forward will sort of be more closer to the risk profile of Saiyan versus sales Tower advantage and and uh and the link
Dylan, it's uh, it's Colin. I think, as I said we, we expect them to
Likely compress, but but we, but we still have not seen that compression yet. Um, and, and so I do think that there is more opportunity, uh, consistent with what we have been doing. Um, and, and certainly, those type of assets, uh, fit our quality profile. We're, we're not opposed to looking at, um, high quality assets that have vacancy, and taking lease up risk. Um, but I would, but I would just got to point out that in our uh, in our Sunbelt kind of urban markets, where cousins operate. Just given how robust the leasing has been there. There are not that many high-quality buildings that have significant vacancy. Um and so
Those like, precision can arise from time to time, and we would absolutely look to capitalize on those opportunities. Uh, but I do think there's more of the, um,
Uh, we recently developed stabilized, immediately accretive to earnings-type opportunities that we're pursuing. Lastly, I mentioned before that we are starting to see some large users who are migrating from the West Coast and New York City. They are very much open to getting new development with deliveries out, call it in 2029.
Uh, and so we are, we are also spending time on on those type of situ situations as well. That I think would come with, you know, a significant amount of pre-leasing and very very attractive return on costs.
That call. 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 and the important driver of office demand will once again be be job growth. So just curious if you have any thoughts and sort of how long or how much fuse is left related specifically to to some of this RTO demand that we're seeing.
Yeah, I I think there's, you know, still some some Runway there, you know, again highlighting, you know, Amazon who grew their headcount uh, Over The Last 5 Years by 750,000 people, um, and and had not signed, it's a significant amount of leasing along the way and that's that's representative of what we're seeing from a lot of different companies. So I do think that there's some Runway there, um, at some point as you indicated that will that will run off but but, you know, nothing 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, you know, hopefully the economy begins to grow and, you know, job reductions become job growth once again. Uh, and so again, that that has this very bullish on what's in front of us. I think, uh, it's important to continue to highlight the lack of new Supply that gives us, you know, really positive, Runway over the next 4 to 5 years and um you know, the economy will cycle.
Uh but but without new Supply, you know, the market will tighten and uh and I think it's a good time to be an owner of existing lifestyle Office Buildings in the Sunbelt.
Perfect, thanks. Colin. Appreciate it.
Thank you, Dylan.
Thank you. And with that, we will conclude the question and answer session. I will now hand the call back to Mr. Colin Connelly for any closing remarks.
We appreciate your time and interest uh in cousins properties. Want to wish everybody a happy Halloween. If you have any follow-up questions, please feel free to reach out to Greg at Zima or Ronnie embo and we hope to see many of you at the na Reed conference. In Dallas in December, have a good weekend.
And this concludes today's call, thank you for participating. You may all disconnect