Cousins Properties Incorporated

New York Times New York Times New York Times New York Times New York Times New York Times Thank you for watching. Good morning, ladies and gentlemen, and welcome to the Cousins Properties second quarter conference call. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Friday, July 31st, 2026. I would now like to turn the conference over to Pamela Roper, General Counsel. Please go ahead.

Thank you. Good morning and welcome to Cousins Properties' second 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 8K. 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 some potential risks 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 an excellent second quarter at Cousins. On the earnings front, the team delivered 75 cents a share in FFO. In addition, we increased the midpoint of our FFO guidance by 1 cent per share to $2.95 per share for the full year in 2026, which represents 3.9% growth over 2025. This would be our third consecutive year of FFO growth and represents a 4% compounded annual growth rate since 2023. Cousins' earnings growth during this three-year timeframe is unmatched among traditional office REITs. Leasing remained robust. For the second consecutive quarter, we delivered one of our highest leasing volumes in the history of the company. We completed 924,000 square feet of leases, bringing an occupancy to 98.8% leased, the highest level since the first quarter of 2020. Our cash rent roll-up on second-generation leasing was 9.2%, which marks 49 consecutive quarters of positive rent roll-ups. These results underscore the strength of our portfolio and the depth of customer demand for high-quality lifestyle office space. Let me highlight several important trends that continue to shape the office landscape. First, demand is improving. According to JLL, leasing activity hit a post-pandemic high during the second quarter. In addition, net absorption has been positive for four straight quarters, and as a result, again, according to JLL, available space is declining at one of the fastest paces in office market history. Second, to date, AI is proving to be more of a friend than a foe to the office sector. Employment data has shown no material negative trends due to AI. And on the ground, we are seeing AI-related office demand broaden across the country into all of our markets. As an example, according to VTS, there is approximately 1.2 million square feet of AI office demand in Austin. Third, The flight to quality is unrelenting. Customers are prioritizing high-quality and well-located buildings to promote engagement and collaboration. Again, according to JLL, nearly all of the positive net absorption in the office sector since the onset of COVID has occurred in buildings that were delivered from 2010 to the present. Fourth, the Sunbelt migration continues to reaccelerate. In addition to full corporate relocations, we see an uptick in companies from high cost, less business friendly cities in the Northeast and West Coast open new Sunbelt corporate hubs. We believe that we are still in the early innings of this migration trend and expect these announcements to continue. Lastly, new construction starts are at historic lows. Given the three to four year lead time to deliver a new project, Supply is unlikely to grow until 2030 at the earliest. is an emerging shortage of premier lifestyle office space in the best submarkets of the Sunbelt, a shortage that will become increasingly acute over the next several years and favor landlords. Cousins is uniquely positioned to benefit from these trends. Turning to our strategy, as we outlined on prior earnings calls, our focus remains unchanged. We are sharply focused on driving sustainable earnings growth while maintaining our best-in-class balance sheet and continuing to enhance the quality of our Sunbelt Lifestyle office portfolio. During the second quarter, we advanced this strategy. First, we increased occupancy by 50 basis points to 89.4% across the portfolio as a result of the robust leasing activity. Second, we closed on a series of new investments and dispositions which upgraded the quality of our portfolio and enhanced our geographic diversification. Third, we closed on a new five-year, $1.2 billion unsecured credit facility and improved the borrowing spread by 15 basis points. Looking ahead, our team's ability to drive both internal and external growth will be key to increasing FFO. We are in a great position to do both. Looking at internal growth opportunities, we remain confident that the portfolio will reach 90% occupancy at year-end. We have modest near-term lease expirations and a robust late-stage leasing pipeline that will support this effort. Shifting to external growth opportunities, the strength of our balance sheet provides us flexibility to selectively pursue compelling new investments, including both acquisitions and new developments. As I said previously, the lack of large blocks of available space in many of our markets is likely to be the catalyst for new development opportunities. While nothing is done yet, we are hopeful to have news to share in coming quarters. We are excited about what lies ahead for Cousins. The office market is rebalancing, new construction is virtually non-existent, and high-quality lifestyle office space is becoming increasingly scarce. The office fundamentals and the Sun Belt are without a doubt tightening, and we expect the positive momentum to continue. Despite ongoing macro volatility, Cousins continues to outperform, supported by a strong operating platform, a highly efficient G&A structure, and one of the strongest balance sheets in the office REIT sector. Before turning the call over to Richard, I want to thank our talented Cousins employees, their commitment to excellence, into serving our customers and each other is the foundation of our success. Richard?