Cousins Properties Incorporated (CUZ) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate a positive outlook: strong leasing pipeline, accelerating demand, and optimistic guidance on rent growth. Despite some unclear management responses, the positive trends in office space demand and strategic focus on high-demand markets like the Sunbelt outweigh concerns. The company's proactive investment strategy and potential for increased leasing activity bolster the sentiment. Given the market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Key Financial Performance
FFO (Funds From Operations) $0.71 per share in Q4 2025, $2.84 per share for the full year 2025, representing a 5.6% growth over 2024. The growth was attributed to strong leasing activity and operational performance.
Leasing Activity 700,000 square feet of leases completed in Q4 2025, the second-highest quarterly volume in 4 years. Total signed activity for the year exceeded 2.1 million square feet, the most since 2019. This was driven by robust demand and corporate migration to the Sun Belt.
Occupancy Portfolio occupancy was 88.3% at the end of 2025, reflecting the expiration of Bank of America's lease in Charlotte. The company aims to achieve 90% or higher occupancy by the end of 2026, supported by a strong leasing pipeline of over 1.1 million square feet.
Same-Property Cash NOI Increased by 0.03% in Q4 2025 compared to the previous year. Excluding the impact of Bank of America's lease expiration, same-property cash NOI increased by 2%. The slight increase was due to strong leasing activity and rent roll-ups.
Acquisition of 300 South Tryon Acquired for $317.5 million at a 7.3% cash cap rate and an 8.8% GAAP cap rate. The acquisition was strategic, expanding the company's presence in Charlotte, with in-place rents approximately 20% below market rates, offering upside potential.
Dispositions Under contract to sell Harbourview Plaza for $39.5 million and a land parcel for $23.7 million. These sales are part of a strategy to rotate into higher-quality assets and mitigate higher CapEx needs.
Leasing Economics Average net rent in Q4 2025 was $36.52, with leasing concessions at $10.58. Excluding Northpark activity, net rent was $41.02, and net effective rent was $27.96. The variations were due to specific property dynamics.
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Operating Highlights
FFO (Funds From Operations): Delivered $0.71 per share in Q4 2025 and $2.84 per share for the full year, representing 5.6% growth over 2024.
Leasing Activity: Completed 700,000 square feet of leases in Q4 2025, the second-highest quarterly volume in 4 years. Total signed activity for 2025 exceeded 2.1 million square feet, the most since 2019.
Acquisition: Acquired 300 South Tryon, a trophy lifestyle office property in Charlotte, for $317 million, expanding presence in the Uptown submarket.
Market Trends: Office fundamentals are improving as companies phase out remote work. Demand is growing, vacancy is declining, and new construction starts are minimal.
Regional Demand: Corporate migration to the Sun Belt has reaccelerated, with increased leasing interest from West Coast and NYC-based companies.
Occupancy: Portfolio occupancy at 88.3% at year-end 2025, with a goal to achieve 90% or higher by year-end 2026.
Leasing Pipeline: Late-stage leasing pipeline totals over 1.1 million square feet, with robust demand across all markets.
Investment Strategy: Focus on accretive investments in lifestyle office properties in Sun Belt markets. Plans to execute additional acquisitions and identify new development starts for late 2026 or 2027.
Dispositions: Under contract to sell Harbourview Plaza in Tampa for $39.5 million and a land parcel in Charlotte for $23.7 million to fund new investments.
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Risk or Challenges
Occupancy Risk: The company aims to achieve 90% occupancy by the end of 2026, but this goal is highly dependent on the timing of lease commencements, which are outside of their control. This timing risk could impact financial performance.
Investment Funding Risk: The company plans to fund new investments through asset dispositions, balance sheet utilization, or other means, but explicitly ruled out issuing new equity at current stock prices. This limits funding flexibility and could constrain growth opportunities.
Market Demand Risk: While demand for office space is reportedly accelerating, a slowing labor market could pose challenges to leasing activity, despite current positive trends.
Development Risk: The company plans to identify a new development start for late 2026 or 2027, but this is contingent on pre-leasing commitments and market conditions, which could delay or derail these plans.
Asset Disposition Risk: The company is under contract to sell non-core assets to fund acquisitions, but market conditions and buyer interest could impact the timing and pricing of these sales.
Debt Refinancing Risk: The company has $465 million in debt maturing in late 2026. While they plan to refinance at favorable rates, market conditions could impact the cost and availability of refinancing options.
Geographic Concentration Risk: The company is heavily focused on Sun Belt markets. While these markets are currently favorable, any economic or regulatory changes in these regions could disproportionately impact the company.
Tenant Concentration Risk: The newly acquired 300 South Tryon property has a significant portion of its space leased to a single tenant, Barings, which could pose risks if the tenant downsizes or relocates.
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Guidance & Outlook
Market Trends and Demand: Office fundamentals are improving as major companies phase out remote work. Demand for office space is growing, with leasing hitting a post-pandemic high in 2025. Vacancy rates are declining, and new construction starts are minimal, leading to a potential shortage of high-quality office space by 2028-2030. Corporate migration to the Sun Belt has reaccelerated, with increased leasing interest from West Coast and New York City-based companies.
Occupancy Goals: The company aims to grow occupancy to 90% or higher by the end of 2026, up from the current 88.3%. This goal depends on the timing of lease commencements, which may be outside the company's control.
Investment Strategy: Plans to execute additional accretive investment opportunities, including property acquisitions, debt, structured transactions, and joint ventures. The focus remains on lifestyle office properties in Sun Belt markets. New equity issuance is unlikely, with funding options including asset dispositions and balance sheet utilization.
Development Plans: The company aims to identify a new development start by late 2026 or 2027, targeting large users with lease expirations in 2028-2030. This is in response to a projected shortage of premier office space.
Financial Guidance: Introduced 2026 FFO guidance of $2.92 per share at the midpoint, representing 2.8% growth over 2025. This marks the third consecutive year of FFO growth, with a 3.7% compounded annual growth rate over this period.
Dispositions and Funding: Plans to sell non-core assets, including Harbourview Plaza and a land parcel in Charlotte, to fund new investments. Additional non-core asset sales of approximately $200 million are anticipated in 2026.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you talk about which markets are most supportive of development from a yield perspective and whether you'll develop on land you own, redevelop something in your portfolio, or purchase new land?
A:Michael Connolly mentioned that there isn't a specific development yet, but opportunities are being explored in markets like Uptown Dallas, The Domain, Charlotte, and Buckhead. These areas show tight markets and increasing rents. Development could involve land they currently own, ventures with others, or new acquisitions.
Q:Is there any color you can provide on rent spreads for the late-stage pipeline and general thoughts on '26 rent spreads on a cash basis?
A:Richard Hickson stated that rent spreads are in line with past quarter activity, excluding Northpark. Michael Connolly highlighted that achieving another positive cash rent roll-up in Q1 would mark 48 consecutive quarters of positive second-generation rent roll-ups.
Q:Can you discuss the optionality for funding the 300 South Tryon acquisition and your thoughts on sales versus debt or equity issuance?
A:Michael Connolly explained that the company has flexibility due to its low-levered balance sheet and trophy-quality portfolio. They are considering dispositions, including Harbourview and a piece of land under contract, and aim for disposition yields comparable to reinvestment yields, targeting accretion.
Q:What type of underwriting criteria would you look for in developments, and would you consider joint ventures?
A:Michael Connolly stated they target around 50% pre-leasing and development yields 150-200 basis points higher than stabilized cap rates, approximately 8.5%-9%. They are flexible about doing projects independently or with joint venture partners.
Q:Which markets are seeing activity from companies primarily located on the West Coast and New York City?
A:Michael Connolly noted significant activity in Austin from West Coast companies, Nashville from tech users, and Charlotte from financial services firms out of New York.
Q:What has changed in the last few months regarding your occupancy target, and would you consider providing a leased target instead of occupancy?
A:Michael Connolly stated that nothing has changed, and the occupancy target remains achievable. Timing of lease commencements poses a risk, but they are considering providing a leased target as it is easier to forecast.
Q:How much runway is left on return-to-office (RTO) demand?
A:Michael Connolly mentioned that demand is accelerating, and trends like a shortage of space in 2028-2029 could increase renewal activity. Companies are addressing lease expirations earlier to avoid being boxed out of space.
Q:Can you share specifics on tenant types and lease discussions for 201 North Tryon and Neuhoff commercial property?
A:Richard Hickson highlighted demand from financial services and fintech firms for 201 North Tryon and technology-driven activity in Nashville. Discussions are ongoing, and they are optimistic about near-term leasing progress.
Q:Are there any concerns about underutilization of space by software companies in your portfolio?
A:Michael Connolly stated that their tech tenants, including Amazon and Google, are well-capitalized, and there are no signs of underutilization or negative impacts on their business.
Q:Can you provide an update on Atlanta's growth plans and leasing activity?
A:Michael Connolly and Richard Hickson noted positive leasing activity in Atlanta, with diversified demand from financial services, professional services, and tech sectors. Microsoft scaled back some plans but remains active in the market.
Q:Can you quantify leases signed but not yet commenced for 2026 and tenant retention expectations?
A:Richard Hickson stated that 460,000 square feet of Q4 '25 leasing will commence in '26, with retention expected around 50%. Additional leases signed earlier will also impact 2026 occupancy.
Q:Was the Harborview sale asset-specific or market-driven, and how many similar assets might be recycled?
A:Jane Hicks clarified that the sale was asset-specific, not market-driven. Similar assets represent a small percentage of the portfolio, likely less than 10%.
Q:What is the progress on the Proscenium repositioning and demand for its space?
A:Jane Hicks mentioned that the repositioning is 2/3 complete, and leasing activity is expected to pick up as the work concludes. Discussions with prospects are ongoing.
Q:Are there any large tenants in the late-stage leasing pipeline, and what is the historical close rate?
A:Richard Hickson stated that the late-stage pipeline has a 95%-100% conversion rate. There are large tenants in the pipeline, including new and renewal activity, spread across markets.
Q:What are the plans for the Ovintiv space and Samsung's space in Houston?
A:Richard Hickson explained that Ovintiv's space will transition to direct leases with subtenants by mid-'26, with positive demand in Plano. For Samsung's space in Houston, discussions with subtenants and new tenants are ongoing.
Q:What is the outlook for net effective rent growth over the next few years?
A:Michael Connolly highlighted a favorable backdrop with accelerating demand, minimal construction, and space shortages expected by 2028. Rent growth is expected to be significant, with some markets already showing double-digit increases.
Q:How is private capital interest in your markets impacting your capital deployment strategy?
A:Jane Hicks noted increased interest from private capital, particularly family offices and high-net-worth individuals, focused on smaller deals. This hasn't yet impacted competition for larger acquisitions.
Q:What pricing assumptions are baked into guidance for refinancing term loans?
A:Gregg Adzema stated that refinancing will likely involve unsecured debt, with 7-year debt priced around 5% and 10-year debt around 5.35%-5.40%.
Q:What are the bigger requirements in Austin, and how is the market performing?
A:Richard Hickson noted positive activity in Austin, particularly from the tech sector, which is starting to show signs of recovery and growth.
Q:What is the outlook for tenant improvement (TI) spend in '26 and '27?
A:Richard Hickson stated that TI spend may remain elevated in the near term as they prioritize occupancy, but tightening market conditions should allow for reduced concessions over time.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the following: 1) The exact development project they are targeting by year-end, 2) Specific net effective rent growth projections over the next few years, 3) Detailed tenant retention rates beyond general expectations, and 4) Precise plans for refinancing term loans, as they only provided general pricing ranges.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Barings
Cousins
Demand
New York
Northpark activity
South End
South Tryon
Sub Belt
acquisition disposition
activity expansion
activity lease
cap
completion
contract
date lease
dynamic
expansion leasing
foot Northpark
gain
lease Charlotte
lease negotiation
lease volume
leasing demand
leasing foot
market investment
negotiation foot
occupancy outlook
option
outlook lease
project Tempe
quality space
rent foot
site
stage leasing
technology company
trend
update
volume Atlanta
volume year
CUZ Transcript
Cousins Properties Incorporated (CUZ) Q4 2025 Earnings Call Transcript
Positive2-6
The earnings call summary and Q&A indicate a positive outlook: strong leasing pipeline, accelerating demand, and optimistic guidance on rent growth. Despite some unclear management responses, the positive trends in office space demand and strategic focus on high-demand markets like the Sunbelt outweigh concerns. The company's proactive investment strategy and potential for increased leasing activity bolster the sentiment. Given the market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Cousins Properties Incorporated (CUZ) Q3 2025 Earnings Call Transcript
Positive10-31
The earnings call summary and Q&A reveal a positive outlook. Financial performance is strong with increased FFO guidance and accretive acquisitions. Market strategy is promising, focusing on high-demand Sun Belt markets. Expenses are managed with stable leverage and planned capital recycling. Shareholder returns are bolstered by positive leasing trends and improved parking income. Despite some uncertainties in lease economics, overall sentiment is optimistic. The market cap suggests moderate sensitivity, leading to a 'Positive' stock price prediction (2% to 8%) over the next two weeks.
Cousins Properties Incorporated (CUZ) Q2 2025 Earnings Conference Call Transcript
Positive8-1
The earnings call summary and Q&A session reflect a positive outlook with strong financial performance, strategic market positioning, and optimistic guidance. Despite some uncertainties in specific markets, the company's growth prospects in key areas like Uptown Dallas and Austin, along with a solid leasing pipeline, are encouraging. The market cap indicates moderate sensitivity to news, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
Cousins Properties Incorporated (CUZ) Q1 2025 Earnings Call Transcript
Positive5-2
The earnings call summary indicates strong financial performance and optimistic guidance, particularly in leasing and rental rates. The Q&A section reveals positive demand trends in key markets and a diversified acquisition pipeline, despite some uncertainties in funding acquisitions and refinancing strategies. The company's ability to maintain lower concessions and attract early renewals are positive indicators. Given the market cap and the positive catalysts, the stock price is likely to experience a positive movement, within the 2% to 8% range, over the next two weeks.
CUZ Slides
CUZ Report
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