Cousins Properties Incorporated Q4 FY2025 earnings call

• Strong 2025 earnings: Delivered $0.71 per share in FFO for the fourth quarter, in line with consensus, and $2.84 per share for the full year, a 5.6% growth over 2024.
• Robust leasing: Completed 700,000 square feet of leases in Q4, second highest quarterly volume in 4 years, and 47th consecutive quarter of positive cash rent roll-up on second-generation leasing.
• Acquisition: Acquired 300 South Tryon, a trophy lifestyle office property in Charlotte for $317 million, expanding presence in Uptown submarket.
• Market fundamentals: Office fundamentals improving with demand growing, vacancy declining, and new construction starts at de minimis levels. Corporate migration to Sub Belt reaccelerated.
• 2026 priorities: Plan to grow occupancy to 90% or higher by year-end 2026, execute accretive investment opportunities, and identify a new development start.

In the fourth quarter, Cousins Properties' total office portfolio end-of-period leased was 90.7% and weighted average occupancy was 88.3%. Leasing volume was strong, with 700,000 square feet of leases completed during the quarter, the second highest quarterly volume in the last 4 years. For the full year 2025, the company delivered $2.84 per share in FFO, representing 5.6% growth over 2024. The office segment contributed significantly to the overall financial performance, with robust leasing activity and improving market fundamentals.

• 2026 FFO guidance: Midpoint of $2.92 per share, implying 2.8% growth over 2025, third consecutive year of FFO growth.
• Refinancing: Anticipates refinancing $465 million in debt maturing between August and October 2026, leveraging unsecured bonds with favorable spreads.
• Acquisition funding: Assumes 300 South Tryon acquisition funded by proceeds from Harbourview Plaza and 303 Tremont sales, and approximately $200 million in additional noncore asset sales.

• Timing risk: Timing of lease commencements affecting ability to achieve 90% occupancy goal.
• Economic risk: Slowing labor market raising concern about office leasing, though demand acceleration from return to office mitigates some risk.
• Market risk: Potential impact of new supply and competition on portfolio performance.

Q: Blaine Heck asked about developments and rent spreads on the late-stage pipeline.

A: Michael Connolly mentioned potential development in markets like Dallas, Austin, and Charlotte, with rent spreads looking in line with recent activity net of Northpark. Richard Hickson noted a high conversion rate for the late-stage pipeline.

Q: Andrew Berger asked about underwriting criteria for developments and market activity.

A: Michael Connolly said targeting plus or minus 50% pre-lease and development yields at least 150-200 basis points higher than stabilized cap rates. He also mentioned activity from West Coast and New York City-based companies in Austin, Nashville, and Charlotte.

Q: John Kim asked about occupancy target and leased target.

A: Michael Connolly stated occupancy goal is achievable but dependent on lease commencement timing. He mentioned considering a leased target as it's easier to forecast.

Q: Unknown Analyst asked about tenants in former Bank of America space and Neuhoff commercial property.

A: Richard Hickson said there's encouraging demand from large users in Charlotte and technology-driven activity in Nashville. Michael Connolly noted no software companies in portfolio showing underutilization of space.

Q: Anthony Paolone asked about activity in Atlanta and occupancy outlook.

A: Michael Connolly mentioned scaled-back plans by Microsoft in Atlanta, but Richard Hickson noted strong leasing activity and diversified demand mix in Atlanta. Richard also discussed lease commencements and retention rates impacting occupancy.