Good morning, ladies and gentlemen, and welcome to the Cousins Properties First Quarter Conference Call. At this time all lines are in listen-only mode. This call is being recorded on Friday, May 2, 2025. I would now like to turn the conference over to Pamela Roper, General Counsel. Please go ahead.

Thank you. Good morning and welcome to Cousins Properties first quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer; Richard Hickson, our Executive Vice President of Operations; Gregg Adzema, 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 8-K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website, cousins.com. Please be aware that certain matters discussed today may constitute forward-looking statements within the meaning of federal securities laws, and actual results may differ materially from these statements due to a variety of risks and uncertainties and other factors including the risk factors set forth in our Annual Report on Form 10-K and our other SEC filings. The company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise. The full declaration regarding forward-looking statements is available in the supplemental package posted yesterday, and a detailed discussion of potential risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly.

Thank you, Pam, and good morning. We had a terrific first quarter at Cousins. On the earnings front, the team delivered $0.74 a share in FFO. Same-property net operating income increased 2% on a cash basis. Leasing remained very strong. We completed 539,000 square feet of leases during the quarter with a 3.2% cash rent roll up. This was our 44th consecutive quarter or 11 years of a positive rent roll-up. This is an extraordinary achievement. Given the solid first quarter performance, we have increased the midpoint of our guidance to $2.79 a share which represents a 3.7% growth rate over last year. Our encouraging start to 2025 highlights the strength and resiliency of our leading Sun Belt lifestyle office portfolio and best-in-class balance sheet. Before discussing the quarter in more detail, I will start with a few observations on the market. Fundamentals are improving. The existing supply of office buildings is declining as older buildings are converted or torn down and new construction is almost nonexistent. JLL reports that 10 million square feet have been removed from the U.S. office inventory since 2024 and predicts that inventory could decline by an additional 40 million square feet by the end of this decade. At the same time, demand is accelerating. Leasing volume over the past 12 months now reflects 89% of typical pre-pandemic activity and is steadily increasing. We believe vacancy has peaked in the lifestyle office sector and market tightening is not far off and already arrived in some submarkets. The return to normal is well underway. With these tailwinds, our team remains strategically focused on driving earnings growth while maintaining our best-in-class balance sheet. To do so, we are prioritizing both internal and external growth opportunities. Our portfolio was 90% occupied at the end of the first quarter, up from 88.4% at the end of the first quarter in 2024. We are thrilled to be making progress, growing our leasing market share and driving the occupancy back to more stabilized levels. As we've discussed, Bank of America's exploration in Charlotte this year is a small speed bump in that process. However, with the pickup in leasing activity and only very modest expirations through 2026, we believe there is meaningful upside in the cash flow of our existing portfolio in the intermediate term. Recent tariff discussions have created macro uncertainty. The most immediate impact to the REIT sector has been increased volatility in the capital markets. However, tariffs also create concerns over a softening economy, weaker demand, and higher construction costs. Given the strength of our markets, the quality of our lifestyle office assets, and our fortress balance sheet, Cousins is uniquely positioned in the office sector to navigate these uncertain times. First, we have seen no impact in the leasing market to-date. As I mentioned, demand remains robust across our markets and broad-based across industries. Many companies are still playing catch up from not leasing enough space during the pandemic, which has created pent-up demand as the return to office intensifies. While higher construction costs could delay potential new starts for our development team, a further pause in new supply will only accelerate the tightening of market fundamentals for our existing trophy portfolio. Lastly, we still maintain a relative cost of capital advantage over our public and private peers. This advantage, combined with our balance sheet capacity from low leverage and strong liquidity, creates optionality for Cousins. We are positioned to capitalize on compelling opportunities that might arise due to market disruption. Importantly, our 2024 transaction activity highlights the creativity of our investment team and openness to a wide variety of opportunities, including debt, structured transactions, joint ventures, and property acquisitions. However, our core strategy remains the same: invest in properties that already are or can be positioned into lifestyle office in our target Sun Belt markets. Near-term accretion is a priority. In conclusion, the office market remains highly bifurcated. There is little to no leasing demand or capital for commodity and older vintage properties, and values for these properties are resetting so that they can be reimagined or demolished. This process is now clearly underway. At the same time, the lifestyle office market is improving. New construction is at historic lows, while leasing demand is improving. The market is rebalancing, and a shortage of premium space is not far off. We built Cousins to thrive during all parts of the economic cycle. And today, we are in a highly advantageous position. We are in growing Sun Belt markets. Bank of America ranks our portfolio as the highest quality among all office REITs. Our leverage is the lowest across the sector. The pricing on our unsecured bonds trades at the tightest spread to treasuries among all traditional office companies. In short, we have great access to capital, and we see great opportunity. We are excited about the future for Cousins. Before turning the call over to Richard, I want to thank our talented Cousins employees who are the foundation of our success. They're dedicated, hard-working, and provide excellent service to our customers. Thank you. Richard?

Thanks, Colin. Good morning, everyone. Our operations team had a strong start to the year, delivering yet another outstanding quarter. In the first quarter, our total office portfolio end of period lease and weighted average occupancy percentages were 92.1% and 90%, respectively. As a reminder, the long-anticipated move out of one trust in Atlanta occurred at quarter end and Bank of America in Charlotte will expire at the end of July. With that said, the team continues to do great work in managing our expirations with only 9.3% of annual contractual rent expiring through 2026. This is 280 basis points lower than last quarter. Including Bank of America, we only have two expirations greater than 100,000 square feet through the end of 2026. With new leasing demand continuing to be healthy, we still see occupancy declining likely through the third quarter and then building back towards the end of the year and beyond. This was a particularly notable quarter for Cousins from a leasing perspective. During the first quarter, our team completed 47 office leases totaling a very strong 539,000 square feet with a weighted average lease term of 6.3 years. Our square footage volume was the highest in the first quarter since 2019. On a transaction count basis, 53% of our completed leases this quarter were new and expansion leases totaling over 200,000 square feet. Again, the team also made great strides this quarter in managing near-term expirations. Specifically, we completed six separate renewals for a full floor or greater this quarter. I'll provide more details on a few of these when I touch on our markets. Regarding lease economics, our average net rent this quarter came in at $35.87, in line with last quarter. This quarter average leasing concessions, defined as the sum of free rent and tenant improvements were $8, about 9% lower than the full year 2024. Average net effective rent this quarter came in at a solid $25.06. Finally, second-generation cash rents increased yet again in the first quarter at 3.2%. This is lower than our recent run rate, and as we always try to note, was a function of leasing mix. This quarter, we renewed a large customer in North Park in the Central Perimeter of Atlanta, a project where we tend to see rent roll downs. Excluding that renewal, total portfolio second-generation cash rents increased 7.9%, closer to our recent run rate. Beyond our encouraging completed activity, our leasing pipeline remains very healthy at all stages with no signs of slowing related to ongoing trade dynamics or macro uncertainty. In fact, our combined early and late-stage pipeline is currently near the highest level it has been in years. In short, as of right now, demand for lifestyle office appears resilient. At the same time, and as Colin already highlighted, domestic office inventory removals are accelerating. This should be an important long-term tailwind for our business. At the market level, the broader Atlanta office market continued to show positive trends in the first quarter, following record-breaking deal volume in 2024. Per JLL, both average tenant requirement size and average lease term increased this quarter. Across our Atlanta operating portfolio, we signed a very strong 213,000 square feet of leases with approximately 110,000 square feet of that at North Park. As I mentioned earlier, our activity at North Park included a key renewal of Veritiv and 68,000 square feet. Veritiv's expiration was previously one of our largest in 2026. Austin has also seen solid demand for high-quality office space. CBRE reports that as of March, more than 112 tenants were actively seeking space totaling over 3.75 million square feet, which they state as a 33% increase in demand compared to last quarter. We signed 176,000 square feet of leases in Austin in the first quarter, and our portfolio currently stands at 94.7% leased. Like Atlanta, this quarter's activity in Austin included some key renewals. Specifically, we completed a 34,000 square foot renewal and expansion of KPMG at 111 Congress in the CBD and a 71,000 square foot renewal of Time Warner at Domain Point. Recall that Time Warner currently occupies 112,000 square feet and was previously set to expire in September of this year. While Time Warner ultimately elected to contract by 41,000 square feet, the contraction will not take effect until October of 2026. The contraction space extension is not reflected in our reported renewal leasing volume because it is only for 1 year. On that, we view this as a great outcome to retain a long-standing large customer with an opportunity to market a very desirable space with 17 months of lead time. In Charlotte, the market posted positive net absorption in the first quarter and the development pipeline hit its lowest level since 2013 with only 150,000 square feet under construction, all per JLL. Given the growing scarcity in high quality and new office space, we remain excited about our redevelopment projects at 550 South and Fifth Third Center in Uptown. As we mentioned last quarter, these significant redevelopment projects will elevate the properties with new amenities, refresh lobbies and plentiful outdoor space, cementing their status as best-in-class for years to come. In Phoenix, the team is very energized about the finished product after our redevelopment of our Hayden Ferry project in Tempe. There are currently a number of large office requirements searching in the Tempe submarket, and interest in Hayden Ferry in particular continues to be very strong. In fact, I'm very pleased to report that we are in lease negotiations with a 105,000 square foot new customer at Hayden Ferry One. Once complete, this new lease would take Hayden Ferry 1 to 76% leased. Recall that this building was occupied by Silicon Valley Bank prior to its bankruptcy and was 0% leased only 7 months ago. In Tampa, our team leased an impressive 84,000 square feet and rolled up cash rents 5%. Our activity also included yet another key 41,000 square foot renewal of a customer at Corporate Center 3. Our Tampa portfolio stood at a solid 96% leased as of quarter end. Finally, our new mixed-use development in Nashville continues to show momentum. After quarter end, we signed a lease with Fifth Third Bank for 18,300 square feet at the project. This lease takes the commercial portion of the project to 50% leased. Our multifamily leasing velocity continues to accelerate as well with that segment increasing to 70% leased as of today. In light of this velocity, we have moved up our projected stabilization of the multifamily by 1 quarter to the first quarter of 2026. As we look ahead, even amid today's macro uncertainty, we are encouraged by office fundamentals and the continued leasing momentum we see as we move further into 2025. As always, thank you to our entire team for your hard work to make the start of 2025 a positive one. We look forward to continuing the momentum together this year.

Thanks, Richard. Overall, as Colin stated upfront, our first quarter results were outstanding. Second-generation cash leasing spreads were positive for the 44th straight quarter. Same property year-over-year cash NOI increased and leasing velocity was particularly strong. There were three items during the first quarter that pushed FFO above the current run rate. First, as previously disclosed, we sold our bankruptcy claim with SVB Financial Group for $4.6 million. Second, we realized an unusually large amount of termination fees during the first quarter, approximately $2.9 million. The front loading of these term fees in the first quarter was included in our original earnings guidance and was based on known move-outs. Three-quarters of these move-outs were proactively initiated by us. Third, although the mezzanine loan on the Radius property in Nashville was paid off early in March, our recent loan modification guaranteed us interest income on this loan through September '25. We recognized this extra interest of $858,000 during the first quarter. This is a timing issue only and does not change the total amount of interest that we received during 2025. All three of these items, the SVB bankruptcy claim sale, the large amount of termination fees, and the Radius interest guarantee were in our internal numbers and do not impact our full year earnings guidance. Focusing on same-property performance for a moment. GAAP NOI grew 4% and cash NOI grew 2% during the first quarter compared to last year. This continues a string of positive same-property numbers that began in early 2022, and with the most recent quarterly cash increases, largely driven by our Atlanta portfolio with increased occupancy and cash rent commencement at Prominent Central, Bucket Plaza and 3350 Peachtree. There is one unusual item that impacted our cash same-property performance this quarter. Our lease with Parsley Energy, now Exxon at 300 Colorado for 298,000 square feet, included a Middle East rent abatement for January, February and half of March 2025. Without this one-time abatement, year-over-year same-property cash NOI would have increased 4% this quarter instead of the reported 2%. It's a better indication of underlying portfolio performance. I also wanted to take a moment to point out the lumpiness that can sometimes run through our quarterly same-property expense numbers. It's usually driven by property taxes. Property tax true-ups as we receive actual assessments from the taxing authorities can push the quarterly numbers around quite a bit. So it's always best to use longer-term time frames when looking at expense numbers. For example, last quarter, our same-property cash expenses were up 11.7% compared to the previous year. This quarter, they declined by 0.3%. However, for the full year '24 same-property cash expenses were up 3.6% over the previous year, and they have increased only 2.3% each year on average over the past four years. Moving on to our transaction activity. We completed three significant deals during the first quarter. In January, we received the payoff of a $138 million mortgage loan secured by the Saint Ann Court building in Uptown Dallas. In March, we received the payoff of a $12.8 million mezzanine loan secured by the Radius building that I discussed earlier. And finally, over the course of the first quarter, we sold 2.1 million shares of common stock on a forward basis under our ATM program at an average gross price of $30.43 per share. These shares were issued in anticipation of potential new investments and will likely be settled when we identify and close on a potential new investment. Looking at our balance sheet, net debt to EBITDA remains an industry-leading 4.9 times. Our liquidity position is strong with only $39 million outstanding on our $1 billion credit facility, and our debt maturity schedule is well-laddered to accommodate efficiently accessing the unsecured bond market. Turning to our development efforts. The current pipeline is now only comprised of a 50% interest in Neuhoff and Nashville. We've moved Domain 9 in Austin, which is 98.5% occupied, to our operating portfolio. Our share of the remaining development costs at Neuhoff will be funded by a combination of our Neuhoff construction loan and our operating cash flow. I'll close by updating our 2025 earnings guidance. We currently anticipate full year '25 FFO between $2.75 and $2.83 per share with a midpoint of $2.79. This is up $0.01 from the last quarter and is up $0.10 or 3.7% over our '24 results. The increase in FFO guidance is driven by higher parking income and lower real estate taxes, primarily in Atlanta and Austin. Our guidance continues to assume the refinancing of a $250 million senior note that matures on July 6. It also continues to assume no sulfur cuts in 2025. Our guidance does not include any speculative property acquisitions, property dispositions, or development starts. If any of those do take place, we'll update you on future earnings calls accordingly. Bottom line, our first 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 macro uncertainty, Sun Belt office fundamentals are solid. And although it's not in our guidance, we anticipate the potential to deploy capital into compelling and accretive investment opportunities. We look forward to reporting our progress in the coming quarters. With that, I'll turn it back over to the operator. Operator, are you there?

Our first question comes from Dylan Burzinski from Green Street. Please go ahead.

Talked about how the demand pipeline remains fairly robust. Obviously, occupancy within the portfolio is high. Even though it's expected to dip throughout the rest of the year, it should continue to grow over the near-term. I guess just given that backdrop in your comments around the supply expectations moving forward, I mean you guys get the sense that you are going to start to see rent spikes eventually across the portfolio? And can you guys talk about sort of the ability to push net effective rents in today's environment?

Dylan, it's Colin. Yes, in the backdrop for the lifestyle office sector, I think it's a positive one because again, anytime you've got demand improving, at the same time, supply is declining. I think that will ultimately rebalance the market and I think in time, show itself in really positive improvements in the leasing market, both from a volume perspective as well as the underlying lease economics. And so we are starting to see some signs of that tightness or tightening. I'd say that's showing up in some of the concessions and tenant improvement allowances starting to level off. And as those do, I think, in time, we'll begin to see rental rates improve. I think if we see spikes, I think that is going to be determined by how long a period we have with kind of very little to no new supply. And as I've mentioned, earlier today, many times in the past, we do see some shortages of high-quality lifestyle office in certain submarkets. And I think over time, if this delay in any construction starts takes quite a while, I think you could see some meaningful upside in rents, particularly when you compare that to what new construction rents are, in some cases, it's 50% higher. So I do think there's a long runway for the highest quality lifestyle office rents kind of the existing where they are today and where they need to go to get to new construction levels.

Thank you for that insight, Colin. Gregg, you mentioned the acquisition pipeline and the continued search for opportunities. Since you completed the forward equity raise at the beginning of the year, can we assume there are near-term opportunities in the pipeline? Additionally, could you elaborate on the current pipeline compared to the beginning of the year? Are you noticing any shifts in sellers' willingness to sell their properties given the volatility in the capital markets?

Yes, sure, Dylan. It's Colin again. I definitely think we are seeing more owners explore the opportunities to sell and perhaps some of these owners have kind of delayed decisions to sell for several years, and they are now looking to monetize. And so I think there is a greater volume of opportunity. That being said, I think the recent, I'd say, disruption in the capital markets with impacts to equity prices, debt spreads, that has a tendency to create a bid-ask spread. So we've seen that creep back into the market. But I could also see that being fairly short-lived. For us, in particular, we are always looking at a wide variety of opportunities. We are always hanging around the hoop. We've got great relationships with owners out there. I think we are somewhat of a preferred buyer given our track record. And so we are always evaluating. We think we've got interesting opportunities out there. I wouldn't say any of them are immediately actionable as we balance the impact of those investments on our FFO accretion, our FAD accretion, what does it do to leverage and some other strategic considerations. But as the forward equity raise highlighted, we are optimistic over the course of this year that we are going to find creative ways to deploy capital, and it could come in a lot of different forms as it did last year.

Awesome. Appreciate the details, Colin. Have a good one.

Your next question comes from Steve Sakwa with Evercore ISI. Please go ahead.

Yeah, thanks, good morning. Richard, I didn't know if you could maybe provide a little bit more color on the pipeline, maybe either by market where you are seeing kind of the most activity? And then maybe by kind of industry? Is it legal, financial services? Is it tech? I'm kind of interested in where if in fact, you're seeing any big tech kind of picking up. Thanks.

Sure. Good morning, Steve. I'll begin with the breakdown of our pipeline by industry. It is quite diversified, but currently, there is a notable concentration in the legal sector, which we find encouraging. We are noticing some pent-up demand that is now coming through. Overall, the pipeline remains diversified, with strong representation from our core sectors of technology, financial services, and professional services. I am pleased with the diversification. In terms of markets, every area has started strong, which gives us confidence in overall demand, but there is a tilt toward Atlanta and Charlotte, which corresponds with our availability there. Phoenix is also experiencing robust demand, and we have ample availability in that market as well. Additionally, it's worth mentioning that over 70% of our opportunities are new and expansion leases as opposed to renewals, which we view as a positive indicator.

Thank you. I'd like to follow up on Colin's remarks about development. You have some appealing land parcels in the Austin market, and I'm interested in your perspective on new development. It seems that large tech activity in Austin may not be as strong right now. How do you approach the activation of new development? Additionally, how do you assess yield requirements for new development compared to some of the recent acquisitions you've made?

Yes, good morning, Steve. We evaluate development just like any other investment opportunity, comparing it to acquisition prospects and other capital allocation options. Ultimately, it’s essential that the risk-adjusted returns are justifiable. Currently, construction costs have significantly increased compared to previous years, which means that rents must also rise substantially to achieve an attractive going-in yield relative to our acquisition investments. However, as we assess the company, we have a valuable land bank with several attractive sites not only in Austin but also in cities like Atlanta and Charlotte, and we constantly explore these opportunities. Regarding Austin, I believe there is a unique situation where new development could materialize sooner than expected, largely due to the 2.5 million square feet we own at The Domain being nearly fully leased with minimal sublease space available. There are also major tech companies and other large corporate users that might independently decide to commit to rental rates to secure desired spaces in their preferred submarkets. Therefore, I see potential in Austin, and I am optimistic that in the near future, cities such as Atlanta, Charlotte, Nashville, and others will present opportunities, leading to an increase in rents that will ultimately support development. The only question remains, timing.

Great. That’s it from me.

Your next question comes from John Kim with BMO Capital Markets. Please go ahead.

I think this is the first time you mentioned office removals in your markets accelerating. So I was wondering what markets in particular you are seeing that at? And what's driving some of the removals? And is this going into multifamily redevelopment or some other use?

Good morning, John. It's now widespread across all of our markets throughout the country. This situation stems from obsolete space; the office market is not significantly oversupplied, but rather under-demolished, with insufficient demolition occurring over the past 10 to 20 years. There is a necessary catch-up process happening, as these outdated properties can no longer attract tenant demand, and consequently, investor interest, leading to their repricing for potential repurposing or demolition. Currently, I am at our corporate headquarters in Atlanta in the Buckhead submarket, and from my window, I can see several properties, including one that is set to demolish portions while repositioning others, and another nearby where they intend to tear down about half of the project across multiple buildings to consolidate office space and likely construct multifamily units. Therefore, we are witnessing a mix of teardowns and repositioning, with various strategies emerging. Ultimately, the driving factor is the product that is no longer relevant today.

Okay. That's interesting. In recent weeks, Blackstone has made office investments in Manhattan and San Francisco. And I was wondering if your comments on either Blackstone or the large private equity firms, their interest in office in your markets?

Yes. Look, I think it's a positive. I think ultimately, there is more capital into the space. First, I think it shows their conviction that perhaps they have taken a view that the secular concerns and the overhang around the office business is perhaps faded. And I think that should ultimately translate into a rerating in the public sector and higher multiples. And they see the opportunity. And really, I don't want to speak for Blackstone. But I think more investors are seeing an interesting and compelling opportunity that's driven by a market where demand is improving and supply is declining, and that ultimately should translate into higher occupancies and higher rental rates and an interesting investment opportunity to be on the front end of.

Are you seeing them in your markets in particular?

We are seeing an increase in private equity, in particular, some of the large private equity firms in markets all over the country. Again, I think they are not just Blackstone, but others are interested in this higher end of the market or assets that can be repositioned into the lifestyle and quality assets where they think there's going to be, again, this interesting opportunity and perhaps in the not too distant future, an imbalance where there's perhaps more demand and less supply. So I think it's across all major markets of the country, investment firms, both public and private, are looking for those opportunities.

Your next question comes from Blaine Heck with Wells Fargo. Please go ahead.

Great. Thanks, good morning. Just following up on the investment side, are you seeing any more or better opportunities on the debt side, given the uncertainty that's come about and some disruption in the credit market? Just wondering if we could see debt opportunities come back to the forefront for you guys.

Yes, I think it is a possibility, Blaine. Last year, we executed on three different debt investments. And then once the bid-ask spread and the uncertainty faded, you saw us begin to invest directly into the equity of properties with a bit of dislocation that's happened more recently. I think it's definitely a possibility that we would look at the debt side as an interesting way and the appropriate part of the capital stack to invest in. As we've said in the past, we're not looking to build a large-scale debt book here at Cousins, but we're in a unique part of the cycle, and we think we need to be flexible as to where we invest. And Gregg highlighted, we've been paid off on two of the three investments that we've made. And so if situations arise and the debt part of the capital stack is the right place to invest and the right basis to invest. And it is ultimately an asset that we would be comfortable owning if need be, we'll make the select few investments if those arise.

Alright. Great. That's helpful. And then can you talk a little bit more about the strong increase in leasing you guys saw at the multifamily portion at Neuhoff this quarter, maybe touch on whether you've adjusted rents or concessions to kind of increase that velocity of lease signings?

Sure, Blaine, it's Kennedy. As Richard mentioned, we are very encouraged by the continued momentum. We have leased a significant number of apartments there and are now looking at raising base rates. We will start to see some renewals later this summer, but we are indeed increasing base rates. We have maintained concessions for the time being but are reviewing that regularly.

Can you discuss the activity you have in the commercial space at Neuhoff? Do you have any large contiguous blocks of space, and are there significant tenant requirements in the Nashville market that could provide a quick boost to leasing? Or are you primarily focused on smaller tenants and gradually moving towards stabilization?

So we do have a large contiguous block that's left. We've also got some spec suites that we'll deliver here any day now. And it is a bit of a mix. I would say at the moment, we feel that a one or two floor lease-up per customer is the right cadence, but there are some bigger requirements that are out there. They just may be a little bit further out in their decision-making. So we're still seeing a steady flow of tour activity and think we'll continue to make progress on the lease up there.

Your next question comes from Upal Rana with KeyBanc. Please go ahead.

Great. Richard, you went through some of the implications of some of the renewal leasing in the quarter, but lease term did come down a bit to 5.5 years. Was there anything that was particularly driving that?

Okay. Well, I think it was 6.3% this quarter. And I really think Time Warner weighed on that a little bit. They tend just historically to do renewals at more of the kind of 5-year or less time frame. But just to give some context, if you look at our pipeline today, late stage, the lease term is pushing nine years. So I think it's just the quarter dynamic that will obviously bounce around over time like it typically does.

Okay. Great. And then you guys noted that you're seeing parking revenues increase, which is driving the guidance. How much of that is a function of higher office utilization versus increased pricing? And are there any markets that stick out to you the most?

It's Gregg. The parking revenue increases we're observing show that about 75% come from higher utilization, while around 25% result from increased pricing. This trend has proven to be a solid indicator for the utilization of our buildings over the years, and it’s an encouraging sign for us. Regarding the source of these revenues, Atlanta stands out as our largest market for parking revenues.

Your next question comes from with Bank of America. Please go ahead.

Thank you. Good morning. Going back to the potential acquisition and investments pipeline, with your balance sheet so well-positioned today, how large could this opportunity be this year while still kind of balancing your leverage targets?

Jana, it's Gregg. Good morning. What we've done in the past is as we've executed these transactions, we raised the incremental capital at the same time on a leverage-neutral basis. And so we've locked in the spread upfront with zero risk, and it's been terrific. So how we fund potential acquisitions going forward will depend on what's available to us at that point in time. We'll see what happens to credit spreads, as Colin talked about earlier, and we'll see what happens to our share price. But as the cycle matures, we will also have an opportunity to maybe sell assets. And so again, I don't want to commit to how we are going to fund these acquisitions, although we do have the $64 million of forward equity sitting on our balance sheet, which by the way, I know it's not large, but I see it as a very powerful asset that we have as we move forward with transactions. But outside of that, we're going to look at what's available to us at the time and make a decision as to how we fund it.

In terms of the leasing discussions, are you seeing any tenants in your markets recognizing that the markets are strengthening in terms of space? Are you being approached in any of your markets for early renewals?

Yes. I think it's a short answer. We are definitely seeing situations where customers are looking at the landscape, especially paying attention to the fact that there really is a shutdown of new supply and doing the math and realizing that they need to get ahead of the game. So it's absolutely something we are experiencing right now.

Thank you.

Next question comes from Nick Thillman with Baird. Please go ahead.

Hi, good morning. Maybe I just wanted to follow up on something and broaden the discussion. But what are you guys seeing on the new-to-market requirements? Obviously, understanding corporate relocations aren't like a huge driver of this business, but we've been hearing in Atlanta that there is a big pickup or not a big pickup, but a slight pickup here on requirements. Just curious if you could broaden that scope to the entire portfolio on markets kind of we didn't touch.

Yes. We are experiencing an increase in various types of demand. This includes people deciding to move from one building to another within our markets, as well as a rise in new-to-market activities and a rebound in relocation activities. A significant factor for us, historically, is that new-to-market activity often involves a company that already has a presence in a location, such as California, but is choosing to grow its operations in places like Austin. Companies like Amazon, Workday, and Microsoft have established large hubs and continue to recruit talent from our Sun Belt markets to expand their reach. This shift is primarily driven by these companies’ decisions to distribute their workforce more evenly across the country. This trend is evident among both tech firms from the West Coast and financial service companies from the Northeast. Consequently, we anticipate the development of large-scale hubs in all our markets within these industries, which will benefit cities like Charlotte, Atlanta, Austin, and Tempe, with ongoing activity in each of these locations.

No, that's helpful. And then maybe just following up on acquisitions and I don't know if I actually get an answer on this one, but are there any markets in particular where there is a little bit more of a priority to kind of enter, I think of the likes of like Dallas, you have the Saint Ann Court loan. Is that a market that you view as one that definitely needs more exposure on this next round of kind of deployment?

It is. As we assess all our markets and their fundamentals, we are committed to investing in any market where we currently operate, although we may be hesitant about Houston. Overall, I believe the other markets are performing well, and we are ready to deploy capital. Strategically, the company has a significant presence in Atlanta and Austin, which is expected given the size of those markets compared to others. However, enhancing the geographic diversification of the company is a long-term objective. In the future, we hope to expand our presence in markets such as Dallas, Charlotte, Nashville, Tampa, and Phoenix. We will pursue these investments only when they align with our investment criteria regarding their impact on funds from operations, financial capacity, and our leverage and liquidity. Additionally, enhancing geographic diversification remains one of our long-term goals.

Great. That’s it for me. Thanks all.

Your next question comes from Michael Lewis with Truist Securities. Please go ahead.

Hi, thank you. Some other office REITs are seeing strong leasing activity, but they are experiencing cash flow challenges. You had a smaller occupancy decline to bounce back from. Could you discuss whether the timing of free rent or leasing concessions could affect cash flow? Additionally, how are leasing concessions trending in your markets? I know there are questions about potential rent increases, but is it possible we'll see changes in concessions first? Are you observing any of that?

Well, Michael, I think there are a lot of different things at play. But I do think that for us, as it relates to cash flow, you are seeing some of the benefits of the work that we've done at Cousins really over the last 10 years, but I think as it relates to our portfolio and some of the recycling that we've done. And most recently, if you go back to 2020 and 2021, we made a very intentional decision at Cousins to sell, when the market was open, $1.3 billion of our lower quality, older vintage assets that were also the most capital-intensive and rotated into newer higher quality assets. And since today, we've got, I think, the youngest portfolio across the office sector. And ultimately, that comes with a lower profile. I think also some of the most attractive properties to lease enable us to drive better lease terms, kind of lower TIs and lower free rent. And that was always part of our goal in building the portfolio that we have today. Trophy assets that benefit from the greatest demand and at the same time, are able to be operated and run with the lowest CapEx profile.

Okay. Great. And then Gregg mentioned when he talked about lease termination fee income, that you initiated three tenant move-outs. Is there a theme among those? Or maybe explain what's going on there?

This is Richard. The main idea behind a few of the moves we made is straightforward. We had customers looking to expand or find new space, but the timing didn't align with our lease expirations. For example, with Hayden Ferry, one customer was set to leave a full floor later in 2025, and we had a prospect for that floor and needed to take control of it sooner. So, we approached the existing customer, asked if they could move out earlier, and successfully negotiated a fee to gain control of the space ahead of schedule, allowing us to backfill it immediately. Our strategy is to seize opportunities that improve our position, whether that’s related to timing, rent increases, or stronger credit. We aren't hesitant to talk to our current customers to facilitate a change in control of the space, similar to what we did last year with IBM and Meta.

Okay. Got it. And then my last question, and maybe it's too early to ask this one. You guys have really low financial leverage, but the maturities you do have are going to be at low interest rates. So I know the unsecured notes this year are in your guidance you are a year out from Fifth Third Center and Colorado Tower, those both have fixed interest rates below 3.5%. Is there anything at this early stage to talk about in the strategy or the pricing for refinancing those low-interest rate maturities?

Good morning, Michael. It's Gregg. I'm not going to give specific guidance on our plans for the upcoming maturities, but I can discuss their overall impact on our profit and loss. We'll evaluate the interest rates at the time when the two mortgage notes you mentioned mature next year. The entire REIT industry has been dealing with challenges over the past year or two as many have had to refinance their debt at higher rates, and we are in that position as well. Fortunately, having lower leverage means we have less debt to refinance, which is a positive for us. Additionally, we have experienced significant organic growth, as evidenced by rising rents, positive same-property growth, and strong leasing activity. This ultimately leads to solid organic growth. Despite the challenges posed by higher interest rates, our lower leverage and robust organic growth have enabled us to increase our funds from operations during this period. I believe we are among the few office REITs that have successfully grown FFO in 2024 and project growth for 2025 as well. While we do face some refinancing this year, we have managed to grow FFO regardless, which reflects the strong organic growth within our portfolio.

Great. Thank you.

Your next question comes from Peter Abramowitz with Jefferies. Please go ahead.

Yes. Thank you very much. Just wondering if you could touch on specifically leasing requirements in your Charlotte portfolio and specifically progress on Fifth Third Center.

Sure. This is Richard. As I mentioned earlier, we are very confident in the supply and demand dynamics currently underway in Charlotte, particularly due to the lack of new development activity in South End in the near future. The current deliveries are nearing completion, and we have two assets in redevelopment, specifically 550 South and Fifth Third Center. We believe we are entering a favorable phase where we can fill the gap left by limited new development. Consequently, we are experiencing strong interest in uptown. Although there is nothing new to report at this moment, we are positioned well and remain very optimistic.

Thanks, Richard. And then maybe one for Gregg. So you did a fair amount of capital raising to fund the acquisitions in the fourth quarter of last year. I think on a weighted average cost of capital basis, it was somewhere in sort of the mid 6s, maybe high 6s. So just curious, where do you kind of see your cost of debt and cost of equity today and if you did find opportunities, would you be comfortable issuing more equity where the stock is today?

I will address your first question. It is highly unlikely that we will issue stock at the current trading price. The numbers do not support such a move regarding acquisitions. Our business relies on creating a spread between our cost of capital and our capital usage. Given the current cap rates, raising equity at this price seems almost impossible. However, the two equity raises we executed in the fourth quarter last year were approximately around $30 a share. At that price and in relation to cap rates at that time, we were able to proceed in an accretive manner. While the acquisition market has slowed down and we’ve observed fewer transactions for our assets, I anticipate that we will gain clarity as the year unfolds. If the market stabilizes similar to the fourth quarter, we will have an opportunity to deploy new capital in a leveraged-neutral manner. We believe that opportunities will reappear as the year progresses, and our balance sheet is positioned to facilitate this. We find ourselves in a unique situation within the office sector. As Colin mentioned, we are becoming the preferred buyer for many sellers due to our cost of capital advantage and our consistent track record of closing deals.

Got it. That’s all for me. Thanks.

Your next question comes from Brendan Lynch with Barclays. Please go ahead.

Great. Thank you for taking my questions. You've been redeveloping assets for the past couple of years and improving the quality of the portfolio. At a high level, where do you see where you kind of stand in that process when looking at the portfolio as a whole?

Good morning, Brendan. It's Colin. We're largely, I'd say, through that. Again, that decision was made in the early part of the pandemic along with, as I said, recycling really the bottom 20% of the portfolio into ultimately acquisitions and development of kind of that top-tier assets. We also made an intentional decision to pull forward a lot of the redevelopment and repositioning work within the portfolio to do that at a time to minimize disruption when our customers were largely not there. So if I had to look at it today, I'd say we're probably 75% of the way through that work. There is still a handful of properties that in time should be addressed, but for the majority, we're in a really strong position. I put about a 75% number on it today.

Great. That's helpful. And maybe one for Gregg. The lease with the Parsley Energy included a one-time mid-lease abatement. Can you just walk through the details of that?

Yes. I mean it is as simple as I've said. I mean back when the original lease was negotiated and then a follow-up amendment was done years ago. I think it was 2018, it was one that was executed. So almost a decade ago. This 2.5-month rent abatement was placed inside the lease for the first 2.5 months of '25. So on a GAAP basis, everything gets smoothed out. You don't notice it. But on a cash basis, obviously, it ran through the numbers this past quarter. So that's what I wanted to point out. I mean some of the comments we've gotten on our same-property performance of 2% is, hey, that's positive, terrific, but a little lower than it's been. Is there anything unique going on, and there was something unique going on and we wanted to point it out.

And Brendan, let me just clarify my previous comment. When I say 75%, the vast majority of our portfolio is now in great shape and needs kind of no repositioning or redevelopment. I mentioned in that group of assets that we had identified several years ago to reinvest. And so again, it is just down to a handful of properties across the whole portfolio. It's really portfolio of assets and the quality of it has never been better at Cousins than it is today.

Great. Very clear. Thank you.

There are no further questions at this time. Please proceed with any closing remarks.

Thank you all for joining us this morning. We appreciate your time and interest in Cousins Properties. And we will look forward to hopefully seeing many of you at the upcoming investor conferences and ultimately at NAREIT in June. Have a great day and a great weekend.

Ladies and gentlemen, this concludes your conference call for today. We do thank you for participating and ask that you please disconnect your lines. Have a great day.