Earnings Call Transcript - CUZ Q3 2025

Operator, Operator

Good morning, ladies and gentlemen, and welcome to the Cousins Properties Inc. Conference Call. This call is being recorded on Friday, October 31, 2025. I would now like to turn the conference over to Ms. Pamela Roper, General Counsel. Thank you. Please go ahead.

Pamela Roper, General Counsel

Thank you. Good morning, and welcome to Cousins Properties' Third Quarter Earnings Conference Call. With me today are Colin Connolly, our President and Chief Executive Officer; Richard Hickson, our Executive Vice President of Operations; Kennedy Hicks, our Executive Vice President and Chief Investment Officer; and Gregg Adzema, our Executive Vice President and Chief Financial Officer. 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 the potential risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly.

Colin Connolly, CEO

Thank you, Pam, and good morning, everyone. We had a strong third quarter at Cousins. On the earnings front, the team delivered $0.69 a share in FFO and raised the midpoint of our guidance by $0.02 a share to $2.84 a share. The midpoint of our guidance now represents 5.6% growth compared to 2024. Importantly, leasing remained robust. We completed 551,000 square feet of leases during the quarter, which is our second highest quarterly volume over the last 3 years. And for the 46th consecutive quarter, we delivered a positive cash rent roll-up on second-generation leasing. We also acquired the Link for $218 million, which strategically expands our presence in the fast-growing market of Dallas. These are remarkable results all around. I will start with a few observations on the market. Most major companies are phasing out remote work. Office fundamentals are improving. Demand is growing. During the third quarter, net absorption reached a post-pandemic high. Vacancy declined for the first time in 7 years. And with new construction starts at de minimis levels, any meaningful increase in new supply is 4 to 5 years away. Importantly, for Cousins, corporate migration to the Sunbelt has firmly 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. Financial services and select large-cap technology companies are particularly active. While not necessarily full corporate relocations, they are significant hubs in some cases and highlight growth away from high tax and high regulation states once again. A recent rise in layoff announcements seems to be weighing on investor sentiment around the office sector. However, we have not seen any meaningful impact on demand. I'll explain why. Office-using employment growth was historically high during the pandemic. At some companies, headcounts almost doubled. However, 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 modest recent layoffs. Simply said, the tailwinds from the accelerating return to office remain greater than the impact of corporate layoffs from our vantage point. One more thing I'd like to note on this topic. Given the current exuberance around AI, corporate downsizing is often incorrectly tied to automation. Amazon is the most recent example. However, on last night's earnings call, Andy Jassy confirmed that Amazon's announcement of 14,000 job cuts was aimed at reversing excessive hiring during the pandemic. To put this in perspective, Amazon grew its headcount by almost 750,000 jobs since year-end 2019. To reiterate my previous comments, the return to office is a more powerful lever for office demand than corporate rightsizing, and AI is not yet the existential threat that some expect it to be. This is an excellent setup for Cousins to advance our strategic priorities. Our team remains sharply focused on driving occupancy and earnings growth while maintaining our best-in-class balance sheet and enhancing the quality of our portfolio. To do so, we are prioritizing both internal and external growth opportunities. At quarter end, the portfolio was 88.3% occupied and finally reflects the expiration of Bank of America's lease in Charlotte. Given our robust leasing pipeline and modest lease expirations in 2026, we are confident that we can grow occupancy next year. While the ramp will be heavily weighted toward the back half of the year, we have a goal of achieving occupancy of 90% or higher by year-end 2026. Our creative investment team continues to evaluate several interesting investment opportunities. Our track record highlights our openness to a wide variety of transactions, including property acquisitions, select development, debt, structured transactions, and joint ventures. However, our core strategy remains the same: invest in properties that already are or can be positioned into lifestyle office in our target Sunbelt markets. Earnings accretion is a priority. To fund any new investments, we will always consider all options. To be clear, new equity at today's stock price certainly does not make financial sense. Dispositions of non-core assets, settling shares already outstanding on our ATM, and/or utilizing the balance sheet are more likely options. While sometimes characterized as conservative, we view our low-levered balance sheet as a distinct 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, and Cousins is uniquely positioned to seize it. As I mentioned earlier, the current midpoint of our guidance forecasts 5.6% growth over 2024. This would be our second consecutive year of FFO growth. Cousins would be 1 of 1 in the traditional office sector to accomplish this multiyear growth. Our team's ability to drive both internal and external growth is key. We plan to continue the streak in 2026. We are excited about what is ahead for Cousins. Demand is accelerating, new supplies 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. Our 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.

Richard Hickson, Executive Vice President of Operations

Thanks, Colin. Good morning, everyone. Our operations team once again delivered exceptional results in the third quarter. This quarter, our total office portfolio end-of-period lease and weighted average occupancy percentages were 90% and 88.3%, respectively. As expected, both were down this quarter, almost exclusively due to the known move out of Bank of America at 201 North Tryon in Charlotte. Without Bank of America's expiration, our occupancy would have been steady this quarter. Like last quarter, I want to reiterate that our near-term occupancy expectations remain generally the same. We still see the third quarter as a bottom. And then expect occupancy to be stable or modestly increase for a couple of quarters and then build higher in the back half of 2026. I would be remiss if I didn't once again point out that a big driver of our occupancy expectations continues to be our best-in-class near-term expirations profile. As of third quarter end, we only had 6.3% of annual contractual rent expiring through the end of 2026. We continue to be laser-focused on proactively managing our expirations. During the third quarter, our team completed 40 office leases totaling an impressive 551,000 square feet with a weighted average lease term of 9.4 years. Total leasing volume was up 65% sequentially and even exceeded our strong first quarter activity. This quarter's volume was also well above our 1-, 3-, and 5-year volume run rates. We are very pleased with our year-to-date leasing activity, which stands at 1.4 million square feet. Our leasing pipeline also continues to be very healthy at all stages, has grown nicely throughout the year, and as a result, remains at record high levels. As Colin mentioned, our pipeline also reflects a notable increase in large user activity including new-to-market requirements looking to either relocate or build a new talent base in the Sunbelt. With regard to lease economics, second-generation cash rents increased yet again in the third quarter by a healthy 4.2%. Dallas and Tampa posted the largest cash rent roll-ups this quarter, with Austin and Charlotte not far behind. Average net rent this quarter landed at $39.18 which is the third highest quarterly level in our company's history. Average leasing concessions with some free rent or tenant improvements were $8.12, which is 13.8% below last quarter and 7.6% below the full year 2024. The result was average net effective rent of $28.37, slightly higher than last quarter and the second highest quarterly level in the company's history. Our net effective rents were solid in every market once again, a testament to the broad strength of our Sunbelt markets and assets. Turning to the markets. JLL reported that transaction volume in Austin totaled 1.3 million square feet in the third quarter, a sequential increase and 16% above the 3-year quarterly average. Across our Austin portfolio, we signed 97,000 square feet of leases in the third quarter, also sequentially higher. Of that activity, 52,000 square feet were new leases at the Terrace in Southwest Austin, where demand continues to be impressive. The Austin team also completed an important 40,000 square foot renewal of a law firm at Colorado Tower in the CBD. Our Austin portfolio ended the quarter at 94.9% leased. Similar to Austin, JLL reported a quarterly leasing activity in Atlanta increase at 15.5% quarter-over-quarter. They also noted that this quarter, new leasing made up a greater share of leasing volume than in recent years, with renewals accounting for just 17% of volume. We signed a strong 125,000 square feet of leasing in our Atlanta portfolio this quarter and on a transaction count basis, 2/3 of our activity was new and expansion leasing. That included a 24,000 square foot headquarters expansion of a customer at North Park in the central perimeter, effectively doubling their footprint. Of particular note is that expansion was driven by a recent decision to bring employees back to the office as soon as possible. Also in North Park, I'm very excited to report that we are in advanced lease negotiations with a Fortune 50 company to lease 166,000 square feet at the property on a long-term basis, which when complete will represent incremental occupancy of nearly 12% for the 1.4 million square foot project. This will clearly be a huge boost for North Park, but also for our occupancy trajectory at the total portfolio level. This quarter, our overall Atlanta portfolio occupancy increased to 83.4%, driven primarily by a handful of new and expansion lease commencements in Buckhead. Turning to Charlotte. Fundamentals for high-quality office remain strong with Class A space representing 70% of all new leasing during the quarter. Further, new development inventory in South End and Uptown is very close to fully leased. As such, we continue to be very excited about our redevelopment projects at both 550 South and 201 North Tryon in Uptown, which we view as the highest quality existing office projects with availability in the market. Consistent with the new supply dynamic I just mentioned, we are pleased to say that in the third quarter, we completed an early long-term renewal with McGuire Woods at 201 North Tryon for 127,000 square feet. This was an important win, and we view this long-term commitment to 201 North Tryon as a validation of the building's quality location and of our ongoing property redevelopment. Same positive market dynamics are in play in Phoenix as well; in the past few months, we have been remarkably active on the leasing front. You may recall that we signed a 39,000 square foot new lease at Hayden Ferry I in the second quarter. Since then, but subsequent to third quarter end, we signed an additional 52,000 square foot new lease at the building with a commencement date before year-end 2025. On top of that, we are in lease negotiations with another new customer for Hayden Ferry I that would bring the building to approximately 95% leased in a very short quarter. During the third quarter, the team also completed 2 important renewals at both Hayden Ferry II and Tippy Gateway, totaling 44,000 square feet. We could not be more pleased with the recent performance of our Phoenix portfolio. Last, I'll touch on Dallas. With the addition of the Link, we now own a 3-building, 808,000 square foot portfolio in Dallas with the largest asset being the 319,000 square foot Legacy Union 1 building in the legacy submarket of North Dallas. Ovintiv is the sole customer in the building, so they subleased substantially all of the building years ago. In the third quarter, we proactively entered into an early termination agreement with Ovintiv. And upon Ovintiv's new expiration in mid-2026, all of the subtenants will automatically become direct tenants. Through this agreement, we essentially multi-tenanted the building and can now more effectively engage with the subtenancy about future renewals. This move also greatly improves our flexibility in executing creative strategies to proactively backfill whatever space we may ultimately get back. Encouragingly, interest in the building has been very robust even in the short period of time since we executed this agreement, both with existing subtenants and potential new tenants. It is clear that demand for high-quality office in Dallas is very healthy, and we are excited to capitalize on it. I'll conclude with a brief revisit of our leasing pipeline. Again, our overall pipeline is at record levels for Cousins, and 68% is new and expansion leasing. Further, we have 715,000 square feet of leases either signed fourth quarter year-to-date or in lease negotiations, of which 77% are new and expansion leases. That represents a total of 551,000 square feet of new and expansion leasing in our late-stage pipeline alone. For perspective, that's roughly 2x our year-to-date quarterly new and expansion leasing run rate. This is a very encouraging trend. As always, I want to thank our operations team for all of your hard work. Your talent and excellent customer service continue to position our company exceptionally well.

Kennedy Hicks, Chief Investment Officer

Thanks, Richard. Before I discuss the transaction environment, I want to touch on our mixed-use development project, Neuhoff in Nashville. We finished the quarter with the apartment component up to 86% leased, and we still expect for this part of the project to be stabilized at the end of the year. On the commercial side, we signed 2 spec suite leases, both of which commenced in 2025, and brought that component up to 53% leased. We've been very encouraged by the recent uptick in tenant demand in the Nashville market with several large office prospects currently considering Neuhoff for both near-term requirements and future expansion needs. As you may recall, as part of the overall project, we have the ability to develop a 280,000 square foot office tower adjacent to the current one. Given the infrastructure that is already in place, we believe we have a competitive advantage in our ability to offer expansion space and an expedited timeline upon tenant commitment. As a reminder, Neuhoff is located in the Germantown neighborhood of Nashville, directly across the Cumberland River from Oracle's soon-to-be-developed state-of-the-art headquarters campus. Oracle has reportedly hired nearly 1,000 employees in the city to date and has pledged to have at least 8,500 workers in Nashville by the end of 2031. Just this month, the company released renderings showing its extensive plans for the campus. These plans include a pedestrian bridge that the company will build across the river to link its campus to Neuhoff. This multibillion-dollar investment by Oracle, as well as the recent tenant activity in the market, is a testament to both Nashville's talented and growing workforce as well as a company's desire for high-quality differentiated office environments. We are excited about the response from the market for Neuhoff to date and feel that the momentum is only building for this iconic project. Turning to our acquisition activity. As previously announced, we closed on the Link in Uptown Dallas during the third quarter. The Link is a trophy building that fits squarely into our lifestyle Sunbelt office strategy while expanding our footprint in Dallas. We acquired the 94% leased property for $218 million or $747 per square foot, pricing that represents a discount to replacement cost and has been immediately accretive to earnings. We remain very enthusiastic about the Dallas office market and our ability to continue to expand our presence there. Uptown Dallas is receiving an outsized share of demand, thanks to its appeal as an urban walkable mixed-use district and the ongoing migration of financial and professional service jobs to the region, largely from New York and California. There are very few large blocks of available space remaining in Uptown and we are already witnessing near-term demand exceed supply. The increasing tenant demand that we are experiencing across all of our markets has led to continued improvement in investor sentiment towards office, which is creating higher transaction volumes. Debt for office assets is now readily available and equity is following, albeit still selectively and generally more oriented towards smaller assets. We continue to seek out acquisition opportunities that meet our criteria. Sunbelt assets that are consistent with or better than the quality of our current portfolio that we can fund in a manner that is accretive to earnings and cash flow. We are mindful of maintaining geographic diversity and will remain laser-focused on asset quality and location. With better debt increasing and buyers becoming more constructive around underwriting, we also intend to selectively explore dispositions as a funding source for new acquisitions and eventually development. Given the quality of our portfolio, we don't have a lot of assets that qualify as non-core and we don't need to sell. But when there are opportunities to accretively rotate into assets that improve our portfolio composition and mitigate higher CapEx needs, we will execute.

Gregg D. Adzema, Chief Financial Officer

Thanks, Kennedy. Good morning, everyone. I'll begin my remarks by providing a brief overview of our results, spending a few minutes on our same-property performance then moving on to our capital markets transactions before closing my remarks with an update to our 2025 earnings guidance. Overall, as Colin stated upfront, our third quarter results were outstanding. Second-generation cash leasing spreads were positive, same property year-over-year cash NOI increased and leasing velocity was very strong. Focusing on same-property performance for a moment, GAAP NOI grew 1.9% and cash NOI grew 0.3% during the third quarter compared to last year. These numbers were negatively impacted by the Bank of America departure at our 201 North Tryon property that Richard discussed earlier. Despite initiating a significant redevelopment plan at this property, we left it in our same-property pool. I also want to take a moment to point out the lumpiness that can sometimes run through our quarterly same-property expense numbers, usually driven by property taxes. Property tax true-ups as we get clarity through the tax assessment and appeal process can push the quarterly numbers around quite a bit. So it's always best to use longer time frames when looking at these numbers. For example, same-property tax expenses that ran through our P&L were up 21.9% in the fourth quarter of '24, they were down 12.1% in the first quarter of this year, down 22.4% in the second quarter, and up 14.7% this quarter. That's a lot of movement compared to the prior year. However, if you take a step back and look at all of 2025, we currently forecast our net property tax expenses to be essentially flat compared to 2024. Moving on to our capital markets activity. Our Neuhoff joint venture, of which we own 50%, proactively approached our lender and amended its existing construction loan during the quarter. Our goal was to lower the SOFR spread and extend the maturity date, which we accomplished by paying down $39 million of the outstanding principal balance. In connection with this amendment, we also loaned our joint venture partner $19.6 million at an interest rate of SOFR plus 625 basis points, which they used to fund their portion of the repayment. Although we didn't sell any common shares during the third quarter, to date, we've sold 2.9 million shares through our ATM program on a forward basis at an average gross price of $30.44 per share. None of these shares have yet been settled. In addition, we paid off a $250 billion note upon maturity in early July, using proceeds from our most recent $500 million bond offering in June. We also used proceeds from this bond to partially fund our acquisition of the Link property in Dallas that Kennedy just discussed. We continue to assess alternatives to fund the remainder of the Link acquisition and, as I discussed in our last earnings call, settling some of the shares we have issued on a forward basis and/or selling some non-core assets are 2 of the alternatives available to us. With our sector-leading balance sheet, we're in a position to be patient on this front. With that, I'll close our prepared remarks by updating our '25 earnings guidance. We currently anticipate full year 2025 FFO between $2.82 and $2.86 per share with the midpoint of $2.84. This is up $0.02 from last quarter. The increase in FFO guidance is driven by higher parking income, higher termination fees, lower SOFR, and interest income from the loan to our joint venture partner. Our guidance assumes no additional SOFR cuts for the remainder of '25. Bottom line, our third quarter results are excellent, and we're raising the midpoint of our full-year earnings guidance yet again. The current midpoint is $0.06 per share above the midpoint we provided when initiating the guidance in February. And although it's not in our guidance, as Colin said earlier, we anticipate the potential to continue deploying additional capital into compelling and 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.

Blaine Heck, Analyst

Colin, I appreciate your commentary on AI and layoffs, very helpful. Just a follow-up, and I know it was a very recent announcement. But given that Amazon is your largest tenant, have you spoken to them about their space within your portfolio and whether the recent announcement might change their utilization at all? And more broadly, I think there's an idea being brought up in our conversations that the Sunbelt might be a bit more susceptible to AI and displacement given the amount of corporate back-office type jobs housed in those markets. So I'm wondering how you would respond to that and how you think your portfolio is insulated from that potential trend?

Colin Connolly, CEO

Blaine, I appreciate the question. There's a lot in there. And I think in particular, there's a lot of misconceptions in there. And the first that I would highlight is kind of a narrative of kind of gateway markets are pushing that the Sunbelt is full of back-office jobs. And that is just far from the case. As we look around the Sunbelt, the migration of technology and financial services companies has been largely driven by moving out of high-tax and high regulation states into markets where there is a highly educated workforce and exciting and dynamic markets. So think Austin, think Atlanta, think Charlotte, think Nashville. And again, I could point to a lot of companies that have made those moves and intentionally made this decision to distribute their workforce more broadly around the country so as to not be overly concentrated in markets like San Francisco or Seattle or New York, where there have been some significant challenges. So I think Oracle moving their corporate headquarters to Nashville, think of the large hubs with Amazon in Austin and Nashville, as well as D.C. Think about Goldman Sachs establishing a new hub, building an 800,000 square foot campus in Uptown Dallas for 5,000 employees, many of whom will be front-of-house bankers. So I think that is very much a misconception. I think in particular, many of those companies are highly engaged in AI. And so while the kind of the start-up AI universe is largely located in San Francisco in time that AI demand will find itself distributed again throughout the country and we are already seeing that today. Amazon, as I touched on in my prepared remarks, we have great conversations with Amazon all the time. Again, I think Andy Jassy dissuaded any fears that those risks were AI-related; it was more about rightsizing the headcount to become more efficient. But as I look at Amazon around the country, I think you're likely to see them be a net expander, not contractor. And so I want to make sure to highlight that, that certainly has been the trend with them as of late, and I don't see that changing. And then just kind of stepping back with a few statistics, with the enthusiasm around San Francisco and New York over the last 12 months, if you actually drill into the data and look at actual leasing activity in growth markets, which would include all of our markets relative to gateway markets, and this is JLL Research, the growth markets are at 104% of the leasing levels over the last 12 months compared to 2019. The gateway markets, which would include San Francisco, New York, Seattle, Boston, that's at about 65%. So that's just the last 12 months. Despite the exuberance over certain markets, the Sunbelt and growth markets continue to outperform.

Blaine Heck, Analyst

Okay. Great. That's really helpful and all makes sense from my perspective. And then my second question is your expiration schedule, as you guys have mentioned, is relatively light in the next couple of years, which I think should help with the occupancy build. But I was hoping you could give some color on whether the expirations in the next couple of years are kind of proportional relative to your market exposure? Or if there are any specific markets that have a high concentration of expirations in '26 or '27?

Richard Hickson, Executive Vice President of Operations

Yes, Blaine, this is Richard. So we've talked about in the past, really the only large expiration that we have through the end of 2026 is Samsung in Houston at Briar Lake. There are 123,000 square feet. Nothing much has changed in terms of the status of that. A lot of that space has already been sublet. We're engaged with some of the subtenants on going direct or extensions when the subleases expire. We're actually talking with Samsung as well directly for some sort of a renewal. We'll see how that plays out, but it's going well so far, and we feel good about our ability to take care of the vast majority of that space. And so really, there's just not a lot of lumpy big activity right ahead of us. Obviously, we all know that BofA is now in the numbers and behind us. So proportionately, we feel good. I mean we obviously have a lot of wood to chop in Charlotte and feel very good about what we're doing with deploying capital to redevelop both 550 South and 201 North Tryon, and we know that this play works in that when we've done these projects in the past, the most recent being Hayden Ferry, once we get these projects done and the redevelopment can be touched and felt by potential customers and existing customers, we've seen has been robust and very encouraging. So we also feel good about our position there.

Colin Connolly, CEO

Blaine, it's Colin. I'd just add back to your question, I’d say the expirations are pretty evenly distributed throughout the portfolio. There's not kind of any one market that has significantly more than the others. I'd point out Austin probably has some of the more modest expirations over the next couple of years, and that would be kind of the one market that would stick out for its modest expirations.

Andrew Berger, Analyst

Great. And thank you for the thorough opening remarks. Just wanted to circle back on the comments around the balance sheet and leverage. I appreciate the current leverage levels are a bit lower than maybe some of your peers. What's sort of the upper bound of how high you would potentially be willing to take leverage at this point?

Gregg D. Adzema, Chief Financial Officer

Andrew, it's Gregg. Looking back over the past 12 years, our leverage has consistently been around 5x net debt to EBITDA, fluctuating between 4.5 and 5.5 during that time. When we've reached the higher end of that range, it was linked to periods of growth, as Colin mentioned earlier. The two significant times this occurred were during the mergers with TIER and Parkway in the last decade. In both cases, we leveraged our low-debt balance sheet strategically to fund those transactions without needing to issue additional equity, and we subsequently reduced our leverage back to 5x. We believe we are entering another opportunity to operate in a similar manner now. While we aim to maintain an industry-leading balance sheet, we feel we have some leeway. From the rating agencies' viewpoint, we hold an investment-grade rating from both Moody's and S&P, which indicates that a leverage ratio of 6 and below aligns with our current rating. Although we haven't increased to 6 in over a decade, I'm not ruling it out entirely. However, that would definitely be the maximum we would consider. Currently, we're at approximately 5.38, which is slightly higher than in recent times due to the acquisition of Link, which we haven't fully funded yet. We have various options to address that, including asset sales or fulfilling some shares we've issued ahead of time under our ATM program. We do have some flexibility in our balance sheet to enhance earnings and drive growth at what we see as a very favorable time to do so.

Andrew Berger, Analyst

Great. And as my follow-up, the parking income has been an area where you've frequently been able to beat over the last several quarters. Can you just talk about how much more upside there is from here? What are at a high level, I guess the physical utilization of your buildings and of the parking lots and then also the pricing relative to pre-COVID and also how you forecast this?

Gregg D. Adzema, Chief Financial Officer

Sure. So if you go back to kind of pre-COVID times 2018, 2019, total parking revenues generally represented about 8% of our total revenues. Now the portfolio has changed quite a bit since 2019. But using that as a kind of as a starting point, our current parking revenues as a percentage of total revenues are at just under 7%. So below where they were pre-COVID as a percentage of total revenues; by the way, they bottomed at around 5%. So they’ve come up significantly since kind of '21, which represented the bottom. But using that prior baseline of 8%, we still think we probably have a little bit of room to push. In terms of kind of what we've seen in that increases, and we keep surprising ourselves every quarter, it's about 75% utilization and 25% price, right? You can drive revenues either by using it more or by increasing the price. It’s been a 75% to 25% balance as we move forward through this. So yes, we think there's still a little bit of room there. We do a ground-up analysis of this every quarter as we reforecast, and we continue to surprise ourselves every quarter. It's a good surprise though because it really is an indication of better utilization of our decks, which is exactly what we want to see. It plays into what Colin had talked about at the top of the call, which is the return to office continues and if anything, is accelerating. And then finally, in terms of a breakdown of parking revenues, our parking revenues are about 75% contractual and about 25% transient or noncontractual. And that relationship, that 75-25 relationship, is that incredibly consistent over the years; it doesn't move much.

Brendan Lynch, Analyst

It sounds like you're still on track for your previous expectations for occupancy to trough in the third quarter and improve from here kind of be steady and then improve. How should we expect that to kind of flow through to the trajectory for same-store cash NOI growth going forward?

Gregg D. Adzema, Chief Financial Officer

I'll talk about the trajectory, and Colin can probably provide more details. The increase in occupancy that we've mentioned, reaching 90% or better by the end of 2026, is likely to be more weighted toward the end of the period rather than the beginning. In terms of how this affects our same-property performance, we need to address the significant move-out from Bank of America that occurred in July. As we compare year-over-year, this will impact our numbers until we reach July 2026. Therefore, you can expect somewhat lower figures in the upcoming quarter; we still anticipate them to be positive, but lower, especially in the first half of next year. Once that prior year comparison is no longer in play, we expect to see a notable increase in our same-property performance in the latter half of 2026.

Brendan Lynch, Analyst

Great. That's helpful. And maybe sticking with Bank of America and the 201 North Tryon asset, it sounds like you're already making progress backfilling some of that space, I understand there's some redevelopment still going on. Maybe talk about the prospect of leasing up the rest of the space that has become available.

Richard Hickson, Executive Vice President of Operations

This is Richard. Again, we feel really good. Again, we just started in the past quarter, the redevelopment of 201 North Tryon, but we're well underway. The market can see it. 550 South, I would notice it's further along, but the activity that we're seeing, I'd say, broadly in Charlotte is very encouraging. There are plenty of large users that are looking in Uptown and South End who are figuring out that there's really no space left in South End to lease. And so they're all starting to concentrate almost exclusively on Uptown and big blocks that are available. There's new-to-market activity, as Colin alluded to, that we're seeing that's extremely encouraging. So we feel good about our position relative to supply and demand in the market and think we're going to have success here in the next 12 months or so.

Colin Connolly, CEO

Yes. And Brendan, it's Colin. I'd just add on. Consistent with my earlier comments about the reacceleration of Sunbelt migration, I think Charlotte, in particular, you're seeing quite a bit of activity at large New York City-based financial services firms looking to do growth and establish large hubs in Charlotte. I can't speak to the specifics of what's driving that, but it's been a noticeable acceleration over the last 3 to 6 months.

Nicholas Thillman, Analyst

Maybe, Colin, you mentioned sort of the New York West Coast sort of migration into Sunbelt markets. As you look at the vacancy within the portfolio and these larger requirements, do you think you have the vacancy in the right spots and sell markets to kind of attract these tenants? I guess how are you feeling about the pockets where you do have some vacancy on leasing that space up? Obviously, the new North Park AT&T stuff kind of pending here, but just some other stuff.

Colin Connolly, CEO

Yes, we believe we have significant blocks of space available. As mentioned, we have North Park, Neuhoff, 201 North Tryon, and Hayden Ferry. In each case, we're witnessing interest from larger users considering these spaces, which is very encouraging. Additionally, in certain areas where we lack available space, we are initiating preliminary conversations with large users from New York and the West Coast who are interested in new developments. This is a positive indication, and we aim to address those potential needs.

Kennedy Hicks, Chief Investment Officer

Yes. I mean, as we've said, we will only look to dispositions when we have exciting acquisition opportunities. So we are – we’re monitoring the market, monitoring our portfolio, and assets where we think that match up well with the depth of the buyer pool today, we'll look to transact. So yes, I would say generally smaller and maybe less tied in to the rest of our portfolio in specific markets.

Steve Sakwa, Analyst

Richard, I was just wondering if you could provide maybe a little more granularity on that pipeline. It sounds obviously impressive. Can you give us maybe a sense of number and kind of size? I guess I'm just thinking if tenants are somewhat larger getting them into occupancy by end of the year becomes a little bit more of a challenge, if they're smaller in that 25,000, 50,000, 75,000-foot range, they can get in quickly. So I'm just trying to get a sense of number and ultimate size of that pipeline.

Richard Hickson, Executive Vice President of Operations

Sure. The pipeline overall is definitely partly being driven by larger activity. And again, new-to-market activity that we're seeing. But to your point, the larger users tend to be slower moving just by the sheer nature of the size and the lift of getting that much space built out and occupied. I think right now, we have roughly 100 total prospects within the pipeline overall. But we've actually had some interesting cases just in the last couple of months. I alluded to one in Phoenix where we had a 50,000 square foot new customer that we signed a lease with a very fast-moving lease negotiation, and they're going to occupy the space that they leased literally within 60 days. So that's unusual, but there are little pockets of activity where we're seeing actually a little faster occupancy. And for a 50,000 square foot customer to do that, that's pretty impressive. So again, it takes time for the bigger users to filter through the system. End of the day, we welcome large user activity. I think it's wonderful to have that engine beginning to fire again on all cylinders, and are happy to waive those into our portfolio if we have the opportunity.

Colin Connolly, CEO

And Steve, it's Colin. You're right that larger users take longer to lease up, and the timing of commencements and build-outs is a significant variable that ultimately affects our goals. However, I would say that the goal of over 90% by year-end 2026 is primarily driven by the leases we have already signed but have not yet commenced, or leases we expect to secure in the fourth quarter. Still, those won't have a considerable impact. The timing of the commencements in that pipeline is accounted for in our projections, and we're optimistic about reaching our goal.

Michael Connolly, CEO

Yes. I think there are further complexities that we have to navigate with regards to expansions and or renewals. I can't speak to the specifics of what some of those construction timelines look like, but I would just tell you, again, that we do feel good about positioning.

John Kim, Analyst

This quarter, other than the Neuhoff loan, you didn't make any investments either on the assets or debt mezz side. I was wondering if you could talk about cap rate or yield compression you've seen just given the increased competition. And if I could focus on Dallas, there was recently a hardware portfolio sale, which included Saint Ann Court that recently traded. I was wondering if you could discuss how close you were to acquiring that portfolio? And any commentary you have on pricing?

Colin Connolly, CEO

John, at Harwood we were around 6.7%. We appreciate it. I’ll start by discussing cap rates. As Kennedy mentioned, there’s certainly an increase in investor interest in office spaces, and debt is readily available. Therefore, we believe that cap rates are likely to compress. We haven’t observed much compression yet, but as more equity investors decide to invest in office spaces, we anticipate this change will occur, particularly at Harwood. We were involved with the Saint Ann’s asset, which has now had its entire portfolio brought to market. You may have seen some recent updates regarding this process. It’s something we’ve considered, and we are strategically focused on expanding our presence in Dallas. However, we’ve ultimately decided to concentrate our efforts in other areas.

Richard Hickson, Executive Vice President of Operations

Sure, I'll start. The leasing has been pretty broad-based. The 50,000-ish square foot customer that we signed subsequent to quarter end was a regional engineering firm that actually has a very nice high-growth data center component to their business. We have previously signed a regional headquarters lease with a financial services company. The company that is in lease negotiations right now is a corporate headquarters. It's not new to market. And I'd characterize it as a health care/consumer goods-focused company. So it's very diverse. Actually, the new tenants that we're bringing into the project. And again, we've been very pleased with the profile of all of these customers, their headquarters, their high-end uses, not back office. So very excited about the new tenancy at Hayden Ferry 1 and elsewhere in the project.

Gregg D. Adzema, Chief Financial Officer

And then in terms of when we bring it back into our same-property pool, likely Jan 1, '28. We only change our same-property pool one time a year, January 1 of each year. And so in January 1, '27, which would be the next logical time to do it, we won't have a good year-over-year comp because it's not going to stabilize until later in '26. So it'll be Jan 1, '28.

Operator, Operator

And your last question comes from the line of Dylan Burzinski from Green Street.

Dylan Burzinski, Analyst

I guess maybe following up on one of John's questions. Given that bidding tenant are growing, and I think in the past, you guys have focused most of your acquisition efforts towards what you could describe as sort of mispriced core assets. Given it seems like cap rates are compressing in the subset of investment opportunities, is it your expectation that most of what you guys are going to be looking at going forward will sort of be more closer to the risk profile, say, Proscenium versus Sail Tower Vantage in the Link?

Colin Connolly, CEO

No, it's Colin. I think, as I said, we expect them to likely compress, but we still have not seen that compression yet. And so I do think that there is more opportunity consistent with what we have been doing. And certainly, those type of assets fit our quality profile. We're not opposed to looking at high-quality assets that have vacancy and taking lease-up risk. But I would just kind of point out that in our Sunbelt and urban markets where Cousins operates, just given how robust the leasing has been, there are not that many high-quality buildings that have significant vacancy. And so those like Proscenium can arise from time to time, and we would absolutely look to capitalize on those opportunities. But I do think there's more of the recently developed, stabilized, immediately accretive to earnings type opportunities that we're pursuing. And then lastly, as I mentioned before, we are starting to see some large users who are migrating from the West Coast and New York City, very much open to got a new development with deliveries out, call it in 2029. And so we are also spending time on those type of situations as well that I think would come with a significant amount of pre-leasing and very, very attractive return on cost.

Michael Connolly, CEO

Yes, I think there's still some runway there, again, highlighting Amazon who grew their headcount over the last 5 years by 750,000 people and had not signed a significant amount of leasing along the way. And that's representative of what we're seeing from a lot of different companies. So I do think that there's some runway there. At some point, as you indicated, that will run off. But nothing else is static either, and we would anticipate over time while we're in a bit of a softer patch now at some point, hopefully, the economy begins to grow and job reductions become job growth once again. And so again, that has us very bullish on what's in front of us. I think it's important to continue to highlight the lack of new supply that gives us really positive runway over the next 4 to 5 years. And the economy will cycle, but without new supply, the market will tighten, and I think it's a good time to be an owner of existing lifestyle office buildings in the Sunbelt.

Operator, Operator

And that ends our question-and-answer session. I will now hand the call back to Mr. Colin Connolly for any closing remarks.

Colin Connolly, CEO

We appreciate your time and interest in Cousins Properties. I want to wish everybody a happy Halloween. If you have any follow-up questions, please feel free to reach out to Gregg Adzema or Roni Imbeaux, and we hope to see many of you at the NAREIT Conference in Dallas in December. Have a good weekend.

Operator, Operator

And this concludes today's call. Thank you for participating. You may all disconnect.