Cousins Properties Inc Q4 FY2025 Earnings Call

Good morning, everyone, and welcome to the Cousins Properties Fourth Quarter Conference Call. This call is being recorded on Friday, February 6, 2026. I will now hand the conference over to Pamela Roper, General Counsel. Please proceed.

Thank you. Good morning, and welcome to Cousins Properties Fourth 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 link 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 the 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, everyone. We had a strong 2025 at Cousins. On the earnings front, the team delivered $0.71 a share in FFO during the fourth quarter, which is in line with consensus. In addition, we delivered $2.84 a share for the full year in 2025, which represents 5.6% growth over 2024. Importantly, leasing remained robust. We completed 700,000 square feet of leases during the quarter, which is our second highest quarterly volume over the last 4 years. And for the 47th consecutive quarter, we delivered a positive cash rent roll-up on second-generation leasing. Earlier this week, we acquired 300 South Tryon, a trophy lifestyle office property in Charlotte for $317 million, which strategically expands our presence in the Uptown submarket. These are remarkable results all around. Let me start with a few observations on the market. Most major companies are phasing out remote work. Home Depot here in Atlanta is the latest Fortune 500 company to end work from home entirely. Thus, office fundamentals are improving. Demand is growing as leasing hit a post-pandemic high in 2025. Vacancy is declining with new construction starts at de minimis levels; any meaningful increase in new supply is 4 to 5 years away. The net result of these trends will be a shortage of high-quality space that will be particularly acute in 2028, 2029, and 2030. Importantly, for Cousins, corporate migration to the Sub Belt has reaccelerated. As a result, our leasing pipeline is robust across all markets. We see a notable pickup in leasing interest from West Coast and New York City-based companies, particularly among financial service and select large-cap technology companies. While not necessarily full corporate relocations, they are significant regional hubs and in some cases, highlight growth away from high tax and high regulation states. The recent mayoral election in New York and wealth tax proposals in California only reinforce these trends. A slowing labor market is raising some concern about office leasing. However, as I said, demand is actually accelerating. I'll explain why. Office-using employment growth was historically high during the pandemic. At some companies, headcount almost doubled. Because of the pandemic, many of these new hires were remote, and associated office space was never leased. Now, as return to office mandates have become widespread, many companies lack the space to accommodate their pandemic-era headcount growth even after recent layoffs. Simply said, the tailwinds from accelerating return to office remain greater than the impact of a slower job market. This is an excellent setup for Cousins to advance our strategic plan. Our team remains sharply focused on driving earnings growth while maintaining our best-in-class balance sheet and enhancing the quality of our Sub Belt lifestyle portfolio. I will share some 2026 priorities. First, we plan to grow occupancy in 2026. At quarter end, the portfolio was 88.3% occupied and finally reflects the expiration of Bank of America's lease in Charlotte. We have modest lease expirations in 2026 and a late-stage leasing pipeline that now totals over 1.1 million square feet. While the ramp will be weighted towards the back half of the year, we have a goal of achieving occupancy of 90% or higher by year-end 2026. We believe this goal is achievable, but will be highly dependent on the timing of lease commencements, which are outside of our control. Simply said, though, timing, not underlying leasing demand, will be the risk in achieving this goal. Second, we hope to execute additional accretive investment opportunities. Our track record highlights our openness to a wide variety of transactions, including property acquisitions, debt, structured transactions, and joint ventures. However, our core strategy remains the same, invest in properties that already are or can be repositioned into lifestyle office in our target Sub Belt markets. To fund any new investments, we will always evaluate all of our 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/or utilizing the balance sheet are more likely options. While sometimes characterized as conservative, we view our low-levered balance sheet as an offensive tool. At select times in the past, we have modestly flexed up our leverage to take advantage of compelling investment opportunities. Given improving property fundamentals and a scarcity of competitive office capital, this could be one of those moments. We will remain agile and opportunistic with any acquisitions and/or dispositions. And as always, our capital allocation decisions will prioritize earnings accretion while maintaining our financial strength and enhancing our portfolio quality. Lastly, we hope to identify a new development start that could break ground in late 2026 or 2027. As I mentioned earlier, large users with '28, '29 and 2030 expirations are facing a significant shortage of large blocks of premier space and will likely need to consider new construction. We hope to capitalize on this dynamic as select developments with meaningful pre-leasing have been a powerful source of long-term earnings and NAV growth for Cousins. Last night, we introduced 2026 FFO guidance of $2.92 a share at the midpoint. This guidance forecast implies 2.8% growth over 2025. This would be our third consecutive year of FFO growth and would represent a 3.7% compounded annual growth rate over this time period. This performance is simply unmatched among other traditional office REITs. Our team's ability to drive both internal and external growth is the key. We are excited about what is ahead for Cousins. As I said, demand is accelerating, new supply is at historical lows. The office market is rebalancing. We are growing earnings. Bank of America independently ranks our portfolio as the highest quality in the office REIT sector, and the balance sheet is exceptionally strong, and our G&A is highly efficient for our investors. Before turning the call over to Richard, I want to thank our dedicated Cousins employees who provide outstanding service to our customers and each other every day.

Thanks, Colin. Good morning. Our operations team ended 2025 with another great quarter and once again delivered a full year of fantastic operating results for our shareholders. In the fourth quarter, our total office portfolio end-of-period leased and weighted average occupancy percentages were 90.7% and 88.3%, respectively. Our portfolio leased percentage was sequentially higher, driven by gains in Atlanta, Tampa, and Phoenix. Our portfolio occupancy was flat sequentially as we expected, with occupancy either increasing or holding steady in every market except Charlotte. Regarding occupancy in Charlotte, the impact of Bank of America's expiration at 201 North Tryon is now fully reflected in our occupancy. As Colin mentioned, our occupancy outlook remains the same. Our exceptionally low 2026 lease expirations of only 4.8% of contractual rent and continued strong new leasing demand are important tailwinds in our focus on driving occupancy gains. Leasing volume in the fourth quarter was very strong for Cousins. Our team completed an impressive 39 office leases totaling 700,000 square feet with a weighted average lease term of 9.6 years. This is our highest quarterly square footage volume of the year and the second highest in the past 4 years. Our total signed activity for the year exceeded 2.1 million square feet, which was the most since 2019. This quarter, 493,000 square feet of our completed leases were new and expansion leases, representing 70% of total activity. For the full year, new and expansion activity accounted for a healthy 55% of our activity. Our average net rent this quarter came in at 36.52, and leasing concessions, defined as the sum of free rent and tenant improvements were above trend at $10.58. As a result, average net effective rent this quarter came in at a lower $23.18. It is important to note that we completed 211,000 square feet of leasing at Northpark this quarter, including a very important 166,000 square foot new lease with AT&T. While this activity is clearly very positive, Northpark lease economics are generally lower than the balance of our portfolio. So for context, when excluding Northpark activity, our average lease economics were much stronger with net rent of $41.02, concessions of $10.03, and net effective rent of $27.96. The same dynamic holds true with our increase in second-generation cash rents this quarter. In total, this quarter, while still positive, cash rents only increased 0.2%. However, excluding Northpark, cash rents increased by a more substantial 10.4% and every market posted increases this quarter. At the market level, JLL reports that leasing volume in Atlanta registered a 5.8% increase quarter-over-quarter in the fourth quarter, marking the highest quarterly volume of the year. We have seen this demand in our portfolio, where we signed a phenomenal 361,000 square feet of leases in the fourth quarter, our highest quarterly volume in Atlanta since the first quarter of 2019. 70% of our quarterly activity was new and expansion leasing and included the AT&T lease at Northpark that I've already mentioned. Our total activity also included 2 renewals with Raymond James totaling 55,000 square feet in both Buckhead and Northpark. Net of our Northpark activity, the Atlanta team also rolled up rents an impressive 14.5% this quarter. Our Atlanta portfolio occupancy also increased for the second consecutive quarter to 84.2%, driven by commencements at Avalon and in Buckhead. In Austin, JLL noted that the CBD posted positive absorption for both the fourth quarter and the full year. In addition, with 1.3 million square feet of leasing activity market-wide in the fourth quarter, total leasing activity for the full year was the highest for Austin since 2021. Notably, leasing by technology companies played a meaningful role in the year's activity, and nearly 1/3 of tenants currently in the market are technology companies. Across our Austin portfolio, we signed a solid 98,000 square feet of leases in the fourth quarter, and we ended the year at 94.8% leased. In Charlotte, CBRE noted that the fourth quarter rounded out with one of the strongest leasing years as of late, with leasing activity market-wide increasing 72% year-over-year. About 3/4 of that activity was new and expansion leasing, driven by large block and also new-to-market requirements. Along with that, there is no speculative new development currently underway. This supply and demand equation has already translated into solid rent growth in the urban core and the tightening conditions in Charlotte certainly bode well for our major redevelopments of 201 North Tryon and 550 South. Our 550 South redevelopment is reaching completion at a great time as the property will see a couple of move-outs in the second quarter that combined will total 128,000 square feet, all of which have been long expected and are included in our occupancy outlook. With that said, I'm very pleased to report that we are in lease negotiations with a new 87,000 square foot customer at 550 South that would take occupancy in 2026. While we don't yet have any specific activity to report at 201 North Tryon, we continue to see very encouraging demand for multiple large requirements for what we view as the highest quality second-generation large block availability in the market. In Phoenix, full year 2025 net absorption came in at over 700,000 square feet and fourth quarter absorption showed improvement over the prior quarter for JLL. Demand in the market continues to be focused on the most well-located and high-quality projects especially in Tempe and the Camelback Corridor. As such, the highest quality segment of the market has been successfully increasing rents. For example, prior to 2024, Phoenix had not seen a lease completed with a gross rent over $60 per square foot. As of today, 20 leases have been completed market-wide north of that mark. In the fourth quarter, our Phoenix team signed an incredible 177,000 square feet of leases, all of which were at our Hayden Ferry project in Tempe. Over 90% of our quarterly activity was with 3 new customers with all of them relocating their corporate headquarters to Hayden Ferry. I'm thrilled to say the entire project, inclusive of Hayden Ferry I is now 95% leased. The redevelopment of Hayden Ferry and resulting accelerated lease-up of the former SVB space and then some is one of the greatest success stories in Cousins' recent history. I'll conclude with an update on our leasing pipeline. Our overall pipeline remains near peak levels, and 60% of the overall pipeline is new and expansion leasing. In our December late-stage leasing pipeline update, we shared that 1.2 million square feet of activity was either signed quarter-to-date or in lease negotiations. Even after completing 700,000 square feet of volume in the fourth quarter, as of today, we still have over 1.1 million square feet of leases either signed quarter-to-date or in lease negotiations. Further, the amount of activity we have in lease negotiations is at its highest level in 5 years. With continued robust demand and activity progressing nicely through our pipeline, we believe we are positioned for an excellent start to 2026 on the leasing front. As always, I want to thank our operations team for everything they do to help make us successful. Again, 2025 was another fantastic year, and we are looking forward to continuing the momentum into 2026.

Thanks, Richard. Good morning. As Colin discussed, one of our key objectives remains to identify and execute acquisitions that meet our criteria, lifestyle Sun Belt assets consistent with or better than the quality of our current portfolio that we can acquire and fund in a manner that is accretive to earnings and cash flow. While office transaction volume is increasing across our markets, we believe that we still have a competitive advantage as a well-capitalized buyer and operator, particularly when it comes to larger offerings. To that end, I'm excited to provide more detail on the acquisition of 300 South Tryon in Uptown Charlotte that we closed earlier this week. The 638,000 square foot trophy asset is an excellent strategic fit for our portfolio. The highly amenitized building sits in the heart of the urban core, boasting a walk score of 95 as well as very convenient vehicular access and direct connectivity to the Kimpton Tryon Park Hotel. Since its completion in 2017, the 100% leased building has served as Barings' global headquarters, while also attracting a who's who of Amwell 100 and other professional service firms such as Mayor Brown, Ameriprise Financial, K&L Gates, and RSM. Barings leases approximately 30% of the building. We acquired the building off market for $317.5 million or $497 per square foot, a basis that represents a significant discount to replacement cost. This equates to a 7.3% cash cap rate and an 8.8% GAAP cap rate. There's currently over 6 years of weighted average remaining lease term and strong upside potential given that the in-place rents are approximately 20% below today's market rate. This transaction and the seller's desire to work with us directly validates our competitive advantage within our markets. The asset is a great complement to our existing Charlotte portfolio, bringing it to 2.7 million square feet. The Charlotte market has recently been a top performer, leading the country in job growth in 2025 among major MSAs. As Richard mentioned, this dynamic, along with the dwindling supply of high-quality urban space, has led to demonstrable recent rent growth in the top-tier buildings. We expect this trend to continue and perhaps even accelerate. Turning to dispositions. The private market continues to improve with equity and debt sources becoming more constructive around office opportunities, especially those of a smaller size. As we have discussed in the past, we view dispositions as one of several funding options for new acquisitions and eventually developments. Given the quality of our portfolio and balance sheet, we don't need to sell. But when there are opportunities to accretively rotate into assets that improve our portfolio composition and mitigate higher CapEx needs, we plan to execute. We are currently under contract to sell Harbourview Plaza in Westshore Tampa, scheduled to close in the first quarter for $39.5 million. This is a 2002 vintage building that is approximately 81% leased and due for a renovation. We were encouraged by the depth of investor demand for the building and decided that our resources are better invested in other assets going forward. We also have a land parcel, 303 Tremont in Southend Charlotte, now under contract to be sold to a residential developer. The contract price for the 2.4 acres is $23.7 million, and we expect it to close in the second half of the year. As you know, we maintain a very modest land bank, but similar to the rest of our portfolio, we are always evaluating the highest and best use of our capital. As this area of South End has evolved, our view is that this particular site is now better suited for a residential development as opposed to the office towers that we originally contemplated. Given the aforementioned office supply shortage in Charlotte, we continue to advance predevelopment efforts on our other South End site, 1435 South Tryon, and remain enthused about the prospects for that eventual office development as well as others across our markets. Looking forward, we are optimistic that 2026 will be another busy investment year for Cousins. We continue to be opportunistic when it comes to acquisitions and dispositions as well as other investment opportunities. We have the flexibility to invest in a variety of ways throughout a capital stack, yet we'll maintain discipline as to quality with a constant eye towards ultimately increasing earnings. Finally, I want to provide an update on Neuhoff, our mixed-use development project in Nashville. We finished the quarter with the apartment component up to 89% leased. And today, it sits at over 90%. We did move the stabilization date to the first quarter of 2026 as we expect to achieve over 90% occupancy in this quarter. On the commercial side, we remain very encouraged by the recent activity, both in the market and at the project. We now have a late-stage lease pipeline that is nearly 120,000 square feet. We look forward to providing further updates. I will now turn the call over to Greg.

Thanks, Kennedy. I'll begin my remarks today by providing a brief overview of our results, spending a moment on our same-property performance and then moving on to our property transactions and capital markets activity before closing my remarks by discussing our inaugural 2026 earnings guidance. Overall, as Colin stated upfront, our fourth quarter results were outstanding. Second-generation cash leasing spreads were positive, same-property year-over-year cash NOI increased and leasing velocity was exceptionally strong. Focusing on same-property performance for a moment, GAAP NOI increased 0.4% and cash NOI increased 0.03% during the fourth quarter compared to last year. These numbers were negatively impacted by the large Bank of America departure that Richard discussed earlier. But despite that, we've kept this property in the same property pool. Excluding 201 North Tryon, same-property cash NOI increased 2% during the fourth quarter. As Kennedy just discussed, we're in the process of selling 2 non-core assets. These assets were reported as held for sale on our year-end balance sheet, and we recognized impairments on both during the fourth quarter. At Harbourview Plaza, we recognized a $13.3 million impairment, which as a depreciable asset does not impact NAREIT-defined FFO. At 303 Tremont, we recognized a $1 million impairment on our land parcel, which does run through FFO. Before moving on, I want to provide a little bit more detail on the Tremont impairment. We originally purchased this parcel in 2021 for $18.9 million. It's currently under contract to sell for $23.7 million, so there's been significant depreciation. However, while we held it, we spent $5.4 million in predevelopment costs. It's these predevelopment costs that led to the impairment. And just last night, we received repayment at par of our $18.2 million mezzanine loan secured by an equity interest in the 110 East property in the South End submarket of Charlotte. We assumed this repayment in our '26 guidance. Finally, although we didn't sell any common shares during the fourth quarter, to date, we have 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. With that, I'll close out our prepared remarks by discussing our 2026 earnings guidance. We currently anticipate full year '26 FFO between $2.87 and $2.97 per share with a midpoint of $2.92 per share. This is approximately up just a little under 3% from the prior year. Our guidance includes a refinancing of approximately $465 million in debt that matures between August and October of '26. Our unsecured bonds currently trade at the tightest spread to treasuries among all traditional office REITs and are much tighter than any secured debt options. This will provide us a significant cost of capital advantage as we pursue this refinancing. Our guidance also assumes the 300 South Tryon acquisition is funded with proceeds from the Harbourview and Tremont sales as well as approximately $200 million in additional non-core asset sales. We provided this additional sales assumption for modeling purposes. In reality, as Colin stated earlier, our strong balance sheet puts us in a position to be very patient and opportunistic on the ultimate funding for this acquisition. Our guidance does not include any additional property acquisitions or development starts in 2026. If any of these do take place, we'll update our earnings guidance accordingly. Bottom line, our fourth quarter results are excellent, and our initial 2026 guidance indicates the third straight year of earnings growth. Our best-in-class leverage and liquidity position remain intact. Office fundamentals continue to improve with accelerating leasing activity and declining new supply, and we continue 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.

Your first question comes from Blaine Heck from Wells Fargo.

Colin, I thought your commentary on starting a new development project was interesting. Can you talk about which markets are most supportive of development from a yield perspective and whether you're likely to develop on land you own, maybe redevelop something in your portfolio like your opportunity in the domain or whether you'll be looking to purchase land associated with that new development?

There's not a specific development I'm referencing at the moment. However, considering the various opportunities we are exploring across our footprint, I am optimistic that by year-end, we will have identified one. This could happen in several markets. For instance, Uptown Dallas is extremely tight, and rents are approaching replacement cost levels. You mentioned The Domain, which is virtually fully leased, and we have excellent land there. We have also noted a tightening market in the south end of Charlotte, where we own valuable land and are experiencing a shortage of large blocks of space. Even in Buckhead, where I currently am, there isn't a single available block over 100,000 square feet in a Class A building. Therefore, I believe we will soon see increases in rental rates that will support new construction for large users with no other options, and we aim to be prepared to take advantage of this. This could involve land we already own or discussions we're having about various ventures with current landowners. We will remain adaptable, but we are focused on identifying and converting one of these opportunities, hopefully by the end of the year.

Okay. Great. That's helpful. You've got a robust late-stage pipeline, as you guys have alluded to at 1.1 million square feet. So I'm sure you guys have a good idea of where rent spreads might be on that activity. Is there any color you can provide there and just general thoughts on '26 rent spreads on a cash basis?

Sure. This is Richard. Yes, I mean we definitely have visibility into that in the late-stage pipeline. And what I'll say is that it's looking certainly more in line with our activity this past quarter net of Northpark. So we feel good about the near term on continuing to be able to roll up cash rents.

And Blaine, I want to emphasize that if we successfully achieve another positive cash rent roll-up in the first quarter, it will mark our 48th consecutive quarter with a positive second-generation rent roll-up, which equates to 12 years.

Very impressive. Yes. Last one for me. Can you just talk a little bit more, I guess, about the optionality you guys have for funding the 300 South Tryon acquisition and how you're thinking about sales versus debt or equity issuance from a strategic and also economic perspective? I guess, are there certain target cost of capital or yields on each option that would make you kind of lean one way or the other?

Yes, great question, Blaine. We have a lot of flexibility due to our low-levered balance sheet and the high-quality nature of our portfolio. You're right in that we're trying to balance the financial and strategic elements. We will continue to explore various opportunities for funding. We think about asset sales in a comprehensive way. For instance, we have Harbourview and a piece of land currently under contract to sell. We could possibly combine that with an older asset that requires more capital expenditures, which might yield a higher cap rate. Our goal is to ensure that any asset sales provide a yield comparable to our reinvestment opportunities. We've been acquiring properties at cap rates in the 8s, and I expect that any sales we complete will have a weighted average cap rate at least at that level, if not lower, since achieving growth is our priority.

Your next question comes from the line of Andrew Berger from Bank of America.

Maybe just piggybacking on Blaine's first question on developments. Can you give us a sense of the type of underwriting criteria you would look for, whether that's yields and maybe the percent pre-lease that would give you enough confidence to start the project and also whether this is something you would look to do yourself or potentially bring in a joint venture partner?

We are aiming for a pre-lease basis of around 50%. I expect development yields to be at least 150 to 200 basis points higher than the current stabilized cap rates, placing us in the 8.5% to 9% range for development yield. We are open to either managing the projects ourselves or partnering with a joint venture, and we continually assess various opportunities.

Great. And as my follow-up, you mentioned some activity from companies primarily located on the West Coast and New York City. Can you just talk about which of your markets you're seeing the most of that activity in?

Sure. We're seeing a significant amount of activity in Austin from West Coast companies. We're also seeing some of that in Nashville with various tech users. And then I'd say there's been a real significant pickup in financial services firms out of New York looking at Charlotte in particular.

Your next question is from the line of John Kim from BMO Capital Markets.

Colin, it sounds like from your occupancy target this year, you have a little bit less conviction than last quarter, yet leasing activity was very strong this quarter. The investment activity with 300 South Tryon and selling Harborview should help your occupancy figure overall. So I'm wondering what has changed in the last few months for you to maybe walk that back a little bit.

No, John, I don't believe anything has changed. We still believe that achieving our goal is possible, although it is just a goal and not guidance. Considering the low levels of expirations, we think it is achievable. Regarding the leasing activity, as I mentioned, the timing of lease commencements poses a risk. For example, if faced with the choice between a 100,000-square-foot lease starting in 2026 in Charlotte or a 200,000-square-foot lease in the same area starting in 2027, we would likely opt for the larger lease if the economics are favorable. Thus, there is some timing variability on a quarter-to-quarter basis. However, we remain confident that our goals are highly attainable. You can expect to see progress in our leased percentage throughout the year, and the gap between occupied and leased percentages might widen. Still, the timing of lease commencements is somewhat out of our control.

Yes, that makes sense. I'm just wondering if you feel comfortable maybe not now or going forward on providing a leased target rather than occupancy just given those dynamics.

Yes, that we would consider. Absolutely, we would consider that. It's easier to forecast.

You mentioned in your prepared remarks, the return to office just providing a demand boost currently. Today, we're about 4 years removed from COVID restrictions ending, but I know the return to office has been various or varied across your markets. How much runway do you think we have left on the RTO demand?

Hard to say, John. There are companies like Home Depot that made this announcement and shift just a few weeks ago. What we can say is that demand is continuing to accelerate. Our pipeline continues to grow. I also think there are other trends that will likely emerge in the near future that could increase renewal activity. One such trend is the shortage I mentioned that is expected in '28 and '29. We're starting to see some tenant representatives and more informed customers recognize that they probably need to address those lease expirations sooner rather than later to avoid being boxed out of space at expiration time.

Next question comes from Manush Abek from Evercore ISI.

You talked about good traction on the former Bank of America space and also the commentary sounded positive on the Neuhoff commercial property. So I was wondering if you could share some more color on just the specifics on what type of tenants and how far along you are with those prospects in terms of like lease discussions on those 2 like projects or spaces.

Sure. This is Richard. Regarding 201 North Tryon, we are seeing encouraging demand from large users. Charlotte has always been a hub for financial services, and that hasn't changed. It has evolved to include some fintech and technology aspects within traditional financial services firms, and we are seeing positive interest from that sector as well as large users looking to move significant operations to Charlotte. While we don't have specific updates on 201 North Tryon at this moment, we are optimistic that we'll have something to share soon. In Nashville, technology continues to drive activity and complement new market opportunities, so we remain optimistic about demand there, both from local and out-of-market prospects.

Got you. And maybe one follow-up question. There seems to be some concern in the market regarding software companies and their outlook. Are there any areas in your portfolio or tenants that you're monitoring closely for any potential underutilization of space? I don't want to sound overly negative, as your overall commentary is very positive. I just wanted to check on that given the current theme.

No. The tech component of our customer base consists mainly of very large, well-capitalized technology companies, with Amazon and Google being our two largest customers. However, we have not observed any software companies in our portfolio that are underutilizing their space or showing any signs of negative impact to their business. Therefore, it is far too early to draw any conclusions.

Your next question comes from the line of Anthony Paolone from JPMorgan.

You mentioned the activity in Austin and financial services in Charlotte. But can you talk a bit more about Atlanta? I think the narrative around really strong growth plans for firms like Microsoft and Google were pretty prominent over the last few years. But maybe give us an update on maybe where they are in that hiring and whether or not sort of the anticipated ecosystem around those employers has developed.

You mentioned Microsoft purchasing a significant amount of land in West Midtown. I believe they have scaled back their plans for the new development. However, they have committed to a large office development project in Midtown. In total, they likely achieved about half of what they initially planned. Overall, Richard can provide more insight on Atlanta. We're seeing really positive leasing activity across all of our markets, which continues to represent a significant portion of our leasing activity. Richard can share more details on that.

That's absolutely right. If you look at what we've completed recently, again, the volume has been phenomenal. Looking out in both the late and early-stage pipelines for Atlanta, the new and expansion activity is roughly half of our demand. Looking at the industry mix, financial services are very much focused on Atlanta. But it's also tended to be a more diversified demand mix in Atlanta too. So we're seeing a little bit of everything, plenty of professional services. There is the tech component. And so it's very healthy from a diversification standpoint.

Okay. Regarding occupancy this year, can you provide details on how many leases have been signed and are just waiting to start in 2026? Additionally, what are your expectations for tenant retention related to expirations? Ultimately, I'm trying to understand what adjustments may be necessary on the leasing side to improve occupancy.

Sure. At a high level, we’ve always indicated that retention is likely to be in the 50% range over time. We currently have about 1 million square feet expiring in 2026. Regarding signed but not yet commenced leases, nearly all of our new and expansion leasing for Q4 2025, which totals approximately 490,000 square feet, is set to commence in 2026. Specifically, the number is around 460,000 square feet, with a weighted average commencement expected in mid-third quarter. However, even though these commencements will happen in the third quarter, we won’t see their impact on occupancy until the entirety of the fourth quarter. A lot of the leasing activity we've undertaken recently will manifest in 2026. Looking at both our late-stage and early-stage pipeline, we continue to see numerous 2026 commencements from our uncompleted or unsigned activities, but we are mindful of the calendar. As Colin pointed out, there may be instances where we choose a later commencement if it serves our long-term strategic goals, even if that doesn’t benefit our occupancy in 2026. So, while there will be significant impacts from the leasing work we’ve done for 2026, we are also approaching a period where 2027 commencements will become increasingly frequent.

Okay. So if I could just kind of make sure I understand all that, if you keep half your tenants expiring this year, that's almost 0.5 million square feet, then you've got another almost 0.5 million square feet that's just scheduled to commence. So that kind of gets you to flat as a starting point, everything that gets done at this point that you can get commenced and '26 becomes the pickup. Is that kind of a fair summary then?

Yes. And also what Richard referenced was just the signed leases in the fourth quarter. There were also leases signed before the fourth quarter that will have an impact on 2026, Tony, to ultimately drive the occupancy as well as any other new speculative leasing that we do that we're working on now that will have a positive impact on 2026.

Your next question comes from the line of Brendan Lynch from Barclays.

A couple on Harborview and Tampa. Was this asset sale more consideration of asset being asset specific relative to being a consideration for the Tampa market? And also, how many assets do you have that have similar characteristics to Harborview that are older, lower occupancy and need redevelopments that you would be interested in potentially recycling?

Kennedy mentioned that this situation is specific to the assets. He expressed optimism about the Tampa market and the overall portfolio there. Regarding other assets, he noted that they represent a very small portion of the total. The focus is on understanding investor demand and determining the most effective use of capital moving forward. This segment constitutes less than 10% of the portfolio, potentially even much lower.

Okay. That's helpful. And maybe you could also give an update on Proscenium as you've made progress with the repositioning and how demand has been for the space in that asset?

Sure. Good question. We are just now opening up the repositioning. So it's, I'd say, 2/3 of the way done. And as we've seen with some of our other assets, that's generally been a good indicator of when the leasing activity starts to pick up. So we're in good discussions with several prospects there and really encouraged by the response that we've gotten to the renovation work.

Next question comes from the line of Nick Thillman from Baird.

Maybe, Richard, following up on just the late-stage leasing pipeline and the 1.1 million square feet. As we think of just larger tenants within that pipeline, say, above 100,000 square feet, are there any big chunkier deals within that number? And just remind us what the actual close rate historically has been for signed deals on that pipeline?

Yes. The late-stage pipeline is generally very reliable, with a usual conversion rate of 95% to 100%. In the last couple of years, there have been a few instances where someone fell out of that pipeline, typically due to specific business decisions or approval processes related to certain tenants. The conversion rate is very good. There is some variability in the late-stage pipeline, with activity in Atlanta showing particularly positive developments. We also have some significant renewal activity in the pipeline. Overall, the activity is fairly evenly distributed across all of our markets.

And on that Atlanta number, is that related to renewal or new? I just wanted to clarify that.

They're both actually, but the largest is new deal.

Okay. And then maybe just touching on a couple of the larger blocks that are coming up. Just an update on overall in Houston with Samsung? And then also, can you remind us what the plans are with Ovintiv space that's currently a sublet that's expiring next year with the 88% of the subtenants in the space. Is the plan to go direct with subtenants? Or is there some larger users looking at that space? Maybe some more commentary there, so those 2 spaces.

Sure thing. Maybe I'll start with Legacy Union in Plano and the Ovintiv building. Again, as a reminder, what we did last quarter was we entered into an agreement with Ovintiv as the prime tenant to take over management for one, get control of the building because we did not have that. And then terminate them early in the middle of '26, at which time we will go direct with the subtenant base, which is extensive at the project. So you look at that square footage that will still expire out in '27. We're having very positive constructive discussions with 4 different subtenants currently at the project. So we feel good about our prospects of potentially taking those direct. When you kind of back those out and look at what the opportunity is to go do new leases with new tenants and continue to multi-tenant the building, that's roughly 150,000, 175,000 square feet out in '27. And the pipeline in Plano and North Dallas, in particular, it's extremely robust. And we're seeing just in the last month, probably at least 3, 4 different tours of the building greater than 150,000 square feet, but we also have plenty of inquiries of a single floor, 2 floors, 3 floors. So very positive demand backdrop there. At Briarlake in Houston with the Samsung expiration. As a reminder, that expiration is in at the end of November of this year. So really minimal impact either way on 2026. It's 123,000 square feet. I'd say that at this moment in time, only about 70,000 of that is exposure. We're having very positive discussions with a number of subtenants there as well and also some new deals and very similar demand backdrop to North Dallas.

Your next question comes from the line of Dylan Burzinski from Green Street.

Colin, you mentioned, obviously, the strong demand backdrop, which is accelerating Cousins' portfolio is likely to be sort of 90% leased, call it, towards the end of this year, it sounds like. And then you mentioned new development not likely coming for the next 4 to 5 years. And obviously, replacement rents are sort of well above market rents today. So just sort of wondering, can you sort of give us an outlook for where you guys sort of see the growth in net effective rents shaking out over the next 1, 2, 3 years?

Dylan, as you mentioned, the situation is very positive. Demand is increasing while construction is minimal. Approximately 20 million square feet a year is being removed from inventory. We anticipate a shortage of premium space starting in 2028 and beyond, suggesting we are nearing a turning point that will shift the market in favor of landlords. Tenant representatives are beginning to recognize this trend by approaching us early about renewals. While I can't specify the exact changes in net effective rents, I believe that rents will rise and concessions will decrease. Certain submarkets are already reflecting this shortage, with Dallas being a prime example where rents for trophy properties in uptown have doubled over the last four years, alongside reduced concessions. Rent growth in the office sector doesn't generally follow a straightforward single-digit pattern; it's typically more variable. We are observing some markets today experiencing double-digit rent growth within the last year. For instance, at our Hayden Ferry project, rents have increased by 10% to 20% in the last 12 to 18 months. Overall, it's a very favorable environment for owners of premium lifestyle office spaces, especially in the Sun Belt, where population growth and migration trends remain strong.

Your next question comes from the line of Upal Rana from KeyBanc.

Colin, you mentioned in the past of an increased interest in private capital in your markets. Could you give us an update on how that looks today and how that is impacting how you're thinking about deploying capital on external growth opportunities?

This is Kennedy. I'll jump in on that. Yes, I mean, as I mentioned, certainly seeing more private capital generally, family offices, kind of high net worth capital has been leading the way. There's certainly a lot of debt capital out there now that's being much more constructive around office. But those types of capital sources generally are more focused on the smaller deals. So that's where we're, again, trying to align some of our disposition thoughts as well. So we really haven't seen that capital start to compete with us on acquisitions. We think it's probably coming, but still feel like we've got a good window and a competitive advantage when it comes to investing in some of the larger assets.

Okay. Great. That was helpful. And then Greg, on your full year guidance, assumes the refinancing on the term loan, Colorado Tower and 201 North Tryon. What do you have currently baked into your guidance on where pricing could potentially shake out?

We're committed to an unsecured borrowing strategy. So we will likely refinance all of those 3 maturities with unsecured debt. And I'm not saying I'm going to do it right now, but if I did it right now, we have a hole in our maturity schedule in 7 years and 10 years. So we have some flexibility in what we do. And the 7-year debt would probably get priced, if I did it today, somewhere, give or take, around 5% and the 10-year debt would be priced somewhere around probably 3.5% to 5.40%.

Your last question comes from the line of Shashank Saurav from Mizuho.

This is Shashank on for Vikram Malhotra from Mizuho. It appears that Austin as a market has inflected positively. Any more color on bigger requirements there?

I think we are definitely seeing some signs of positive activity in the tech sector. A significant part of Austin's success in the past has been driven by tech demand, and we notice that beginning to emerge in our pipeline and specific activities. So yes, we are observing some positive movement in that area.

My next question is, how should we think about TI spend in '26 and as we go into '27?

Well, obviously, the TIs drove some elevation in concessions this past quarter. I would point you back toward my comments about ex-Northpark and looking at lease economics in that context, you're going to continue to see with the elevation of TIs, our prioritization of occupancy and driving occupancy. And so that could continue. But what I'd like to stress, and this has been a theme over, frankly, many years as we've talked about at different points of time where we see pressure in TIs or concessions in general, that we have been able to successfully maintain net effective rents. And I think that was the case this past quarter, even with elevated TIs. And it's important to note that with the tightening conditions that we see ahead, certainly in the medium term that we're going to be able to back off of that over time. I think it's going to become a more constructive market for owners and landlords. So I would call that a more near-term dynamic as we prioritize occupancy.

There are no further questions at this time. I would like to turn the call back to Colin Connolly for closing comments. Sir, please go ahead.

Thank you for joining us this morning, and we appreciate your continued interest in Cousins Properties. If you have follow-up questions, please feel free to reach out to Gregg Adzema or Roni Imbeaux. Have a great day and a great weekend.

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