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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. 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 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 Regulation 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.

Thank you, Pam, and good morning everyone. We had an excellent second quarter at Cousins. On the earnings front, the team delivered $0.75 a share in FFO. In addition, we increased the midpoint of our FFO guidance by $0.01 per share to $2.95 per share for the full year in 2026, which represents 3.9% growth over 2025. This will 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 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. On the ground, we are seeing AI-related office demand broaden across the country into all of our markets.

As an example, according to BTS, there is approximately 1.2 million sq ft 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 Sun Belt migration continues to re-accelerate. 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 Sun Belt 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. What are the implications of these trends? Simply stated, the office market has bifurcated. The commodity office sector has minimal demand and is significantly oversupplied or said differently, under demolished. At the same time, the lifestyle office sector is increasingly undersupplied. The net result for Cousins is an emerging shortage of premier lifestyle office space in the best submarkets of the Sun Belt, 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 Sun Belt 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 in the Sunbelt 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 and to serving our customers and each other is the foundation of our success. Richard?

Thanks, Colin. Good morning, everyone. Our operations team delivered another exceptional performance in the second quarter. Our 924,000 sq ft of quarterly leasing activity matched our strong first quarter, resulting in 1.9 million sq ft of total volume for the first half of the year. For context, if you look to the past decade, our average annual leasing volume was roughly equal to what we have posted in the first six months of this year. Our second quarter square footage volume was also the second highest quarterly level since mid-2019, with the technology and legal sectors each accounting for about 30% of our activity. On a square foot basis, 43% of our completed leases this quarter were new and expansion leases, totaling 395,000 sq ft, well above our three-year run rate.

The team also completed 19 renewals during the second quarter, with renewal square foot volume at its highest level in well over a decade. This included five renewals greater than 50,000 sq ft, spanning four different markets. Importantly, all five of those renewals either retained or expanded their footprint. Beyond our fantastic completed activity, our overall leasing pipeline remains strong and at a level consistent with last quarter. As far as our late-stage pipeline is concerned, in our June investor presentation, we shared that 1 million sq ft of activity was either signed second quarter to date or in lease negotiations. As of today, one month into the third quarter, we have approximately 820,000 sq ft of leases signed or in lease negotiations. Given the strength of our early-stage pipeline, we are confident that number should again surpass the 1 million sq ft mark soon. Turning to lease economics.

Quarterly average net rent came in at $41.35. Average leasing concessions were $10.17, and average net effective rent was $28.05. Second quarter and first half of 2026 average net effective rent both grew nicely relative to the full year 2025, at 8.5% and 16.8%, respectively. Second generation cash rents increased again this quarter by 9.2%, with the increases broad-based across nearly all of our markets. For the quarter, our total office portfolio end of period leased and weighted average occupancy percentages were 92.8% and 89.4%, respectively. Both went up meaningfully sequentially as well as for the third consecutive quarter. Our portfolio lease percentage increased in all but two markets, with Atlanta as the largest positive contributor by a wide margin. The largest market contributors to organic growth in our weighted average occupancy were Atlanta and Charlotte.

I would also note that the current 3.4% spread between our leased and occupied percentages is at its widest in over three years. As Colin Connolly mentioned, our year-end occupancy outlook is unchanged. I want to remind everyone that we have a couple of large expirations in Charlotte that could result in a modest downtick in occupancy next quarter. With low lease expirations and a large backlog of new and expansion leases set to commence in the second half and weighted toward the fourth quarter, we remain comfortable with our 90% year-end occupancy goal. Turning to the markets. CBRE notes that this quarter, the Atlanta office market recorded its strongest quarterly activity in four years, and that for the first time in 15 years, no new office projects over 100,000 square feet are underway, which is truly remarkable.

We continue to see outsized demand in our portfolio, where we signed 404,000 square feet of leases this quarter, and 51% were new and expansion leases. With this quarter's outstanding activity, I'm pleased to say that Atlanta now stands at 91.6% leased with a leased to occupied spread of 5.9%. Our new activity included a 46,000 square foot lease with a technology company at 725 Ponce in Midtown, as well as three leases totaling 77,000 square feet at Terminus in Buckhead. The team also rolled up cash rents by 14.3% this quarter. Charlotte saw market fundamentals continue to improve during the quarter, and vacancy reached its lowest level since the third quarter of 2023, per JLL. Our 550 South redevelopment has delivered and is receiving great market feedback.

Occupancy at the property increased nearly 10% this quarter with the commencement of Scout Motors, and we are in lease negotiations with three new customers totaling 24,000 square feet. The redevelopment of 201 North Tryon is progressing well, and we still expect substantial completion during the first quarter of 2027. Like we stated last quarter, we are taking a patient approach to leasing at this property as the redevelopment progresses. Even still, we are encouraged by our early-stage leasing pipeline. In fact, our overall leasing pipeline in Charlotte is nearly 3x what it was this time last quarter. In Austin, JLL notes that the office market recorded over 200,000 square feet of net absorption in the first half of 2026, marking the first positive first half reading since 2022.

Despite being nearly 96% leased to start the quarter, the Austin team still signed 74,000 sq ft of new and expansion leases, 42,000 sq ft of that was with technology companies. The team also rolled up cash rents by 16.3%. Finally, subsequent to quarter end, we also completed a 76,000 sq ft renewal with a Fortune 10 technology company at Domain 7, which was previously a 2027 expiration. In Tampa, JLL notes that trophy buildings had a vacancy rate of only 8.9% in the second quarter, with the direct asking full-service rents in the low $50s per sq ft, more than double the average for Class B assets. Our portfolio is also now seeing full service rents strike north of $50 per sq ft.

For the quarter, we signed 168,000 sq ft of leases, including an 89,000 sq ft renewal with a law firm at Corporate Center, a 23,000 sq ft renewal with Deloitte at The Point. Cushman & Wakefield reports the Phoenix office vacancy rate fell this quarter by the fastest pace in over a decade. Further, CBRE recently placed Phoenix fourth nationally for net corporate headquarters relocations. Our portfolio has certainly been a beneficiary of that activity over the past few quarters. We do not see it stopping. This quarter, our team signed 139,000 sq ft of leases, including a 109,000 sq ft renewal with the same Fortune 10 technology company that we just renewed in Austin. The team also completed two smaller new leases with companies in the AI space. In Dallas, JLL notes the quarter saw positive absorption, restrained new construction, and continued large corporate in-migrations.

In our portfolio, we signed 57,000 sq ft of renewals, including a 52,000 sq ft renewal with U.S. Renal Care at Legacy Union 1 in Plano. Recall that we took over management of Legacy Union 1 from Ovintiv in the first quarter. Ovintiv has now since expired at second quarter end, enabling us to go direct with all of their subtenants, now collectively occupying 282,000 sq ft of space in the building. Of that square footage, roughly 80% is set to expire in May of 2027. With that said, I am pleased to announce that we are in lease negotiations with three customers totaling 214,000 sq ft. This includes two renewals and one large new lease. Upon execution of these leases, we would be 91% leased on what will ultimately be about a 300,000 sq ft building.

Note, the new lease does not commence until early 2028. We expect to have downtime on that space and possibly the remaining pending vacancy, which totals 187,000 sq ft starting in June 2027 through commencements. Last but not least, our leasing volume this quarter included 49,000 sq ft of activity at Neuhoff in Nashville. Kennedy will share more details about Neuhoff in her remarks. As always, thank you to our entire team for the work you put in to make the start of this year incredibly positive. We appreciate everything you do. I'll now turn it over to Kennedy.

Thanks, Richard. I'll start by giving a little more detail on Neuhoff, our recently delivered mixed-use project in Nashville. As Richard mentioned, we have now signed the two-floor lease that I referenced on last quarter's call, which is an expansion with Oracle. Bringing the tech firm's footprint to 161,000 square feet. This lease, combined with a new spec suite lease, brings the office component of the project to 96% leased, all with occupancy that will commence by the end of the year. The multifamily component continues to perform well, having reached over 94% leased and 90% occupancy in recent weeks. As a reminder, we have a future development phase that can accommodate over 300,000 square feet of additional office space. With the initial phase of Neuhoff stabilized, we are focused on securing some pre-leasing for the next building and encouraged by early discussions.

On the investment side, we had another productive quarter, advancing our core goal of enhancing both our portfolio composition and earnings while maintaining our balance sheet. With each month, the office investments market appears to be functioning better as sales volumes increase and more debt options become available. We have used this opportunity to selectively dispose of a few non-core assets. In June, we sold Research Park Plaza 5 in Austin for a gross price of $42 million or $243 per square foot. Research Park was a standalone building for us in Northwest Austin with what we viewed as a lower growth profile, and we felt our capital and focus was best invested elsewhere. We have also now closed on the previously announced sale of One Eleven Congress, a CBD Austin building built in the late 1980s.

We sold the 519,000 square foot tower for a gross price of $208 million or $400 per square foot. Both of these marketed assets received good buyer interest and traded around a 9% combined cap rate. As a reminder, these were non-core assets with limited remaining lease term, and in the case of One Eleven Congress, ongoing capital needs, which was reflected in the prices. This profile is not reflective of our overall portfolio, which is why we chose to sell. We are always evaluating our portfolio and weighing dispositions relative to new opportunities and the impact to earnings. As we have discussed in the past, there are very few assets remaining within our portfolio that we consider non-core, we will only pursue sales if we have identified a better use of proceeds.

On the acquisition side, we bought out our partner's 10% interest in 100 Mill for $18.5 million, which was based on a value of $158.7 million or $552 per square foot. 100 Mill is a trophy office building in the heart of Tempe that we delivered in 2022. Today, it is over 98% leased. The buyout was always part of our business plan, giving us 100% ownership of our premier Tempe portfolio. As Richard commented, we're enthusiastic about how quickly the vacancy has dropped in this sub-market and believe that this asset offers a great long-term growth profile given the ongoing rent growth that we are experiencing. We also entered into a new joint venture in Austin on a development project called 5th and Walsh, which broke ground this month.

5th and Walsh is in the dynamic and highly desirable Clarksville neighborhood, just on the western edge of downtown, one mile from Sail Tower. Clarksville benefits from high barriers to entry and great access to affluent residential neighborhoods. It is known for its vibrancy with a wide array of walkable amenities authentic to the city. The boutique 199,000 sq ft building will feature 22,000 sq ft of ground level retail and four stories of trophy quality office space, which is already 58% leased. Our investment in the project is in a preferred equity position of up to $31.5 million. We anticipate funding this mostly over the second half of 2027, and upon funding, we'll receive a 10% preferred return. As part of the agreement, we have a right of first offer to purchase the building post-completion.

We believe that this is a great way to generate near-term earnings coupled with a future acquisition opportunity with an underlying building that fits squarely into our strategy. Colin mentioned we continue to evaluate other development opportunities and have the ability to be flexible in terms of structure. Given the emerging scarcity of available lifestyle office space, we maintain our belief that there will be select office development projects that offer an appropriate and compelling return premium. These could come both in the form of a JV with a developer or developments that we execute ourselves utilizing our strong land bank. We also intend to remain acquisitive. We are laser focused on quality and executing acquisitions in a manner that is accretive to earnings.

We believe that we have a continued competitive advantage given the limited pool of investors that can transact on large office assets, our best-in-class balance sheet, and market intelligence. In short, we are optimistic about the second half of the year. With that, I'll turn the call over to Gregg.

Thanks, Kennedy. I'll begin my remarks by providing a brief overview of our results, spending a moment on our same property performance, then moving on to our property transactions and capital markets activity before closing my remarks by updating our 2026 earnings guidance. Overall, as Colin stated upfront, our second quarter results were outstanding. Second generation cash leasing spreads were positive. Same property year-over-year cash NOI increased and leasing volume was exceptionally strong. Focusing on same property performance for a moment, cash NOI grew 5.9% during the second quarter compared to last year. This follows a 5.5% increase during the first quarter. These numbers are a clear reflection of the increasingly healthy office fundamentals in our Sun Belt markets. As Kennedy discussed earlier, we closed several property-level transactions since our last earnings call.

Although she outlined the rationale and the economics for these deals, I thought it might be helpful to provide a little clarity on the accounting treatment for each. First transaction, the purchase of our joint venture partner's 10% interest in 100 Mill, was recorded as an equity transaction under GAAP, and therefore did not result in any gain or loss running through our income statement. Second transaction, our sale of Research Park Five, generated a gain of $9.2 million, which ran through net income, but not FFO or FAD. The third, our preferred equity investment in Fifth & Walsh, will be classified as an investment in real estate debt, and the cash flow will run through our income statement as interest income. Finally, we moved One Eleven Congress to hold for sale on our balance sheet during the second quarter.

As you may recall, we marked this asset to market last quarter, and therefore the sale did not generate a significant gain or loss upon closing earlier this week. Moving to our capital markets activity, it was a very busy and productive quarter. We closed on a recast of unsecured credit facility, extending the term by five years and increasing the size to $1.2 billion. We also added extension options on two term loans totaling $500 million. With that, I'll close our prepared remarks by updating our 2026 earnings guidance. We currently anticipate full year 2026 FFO between $2.92 and $2.98 per share, with a midpoint of $2.95. This is up from a prior midpoint of $2.94 per share and represents an increase of 3.9% over the prior year.

The increase in FFO guidance is primarily driven by leasing activity that exceeded our prior forecast, as well as the impact of the property-level transactions that have recently taken place. Our updated guidance also assumes the 2.9 million shares we previously issued on a forward basis are settled during the third quarter, a quarter later than our prior guidance. We continue to monitor the office sales market, as Kennedy discussed earlier, and explore additional non-core property sales. If we do move forward with additional sales, we may again delay the share settlement. However, for modeling purposes, we assume the settlement of all outstanding forward shares during the third quarter, and that's what's in our guidance. Beyond the transactions completed to date, the only remaining property transaction currently included in our updated guidance is the sale of our 303 Tremont land parcel during the fourth quarter.

If we do ultimately complete any other sales, purchases, or development starts during 2026, we'll update our guidance accordingly. With that, let me turn the call back over to the operator for your questions.

Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you do have any questions. First, we will hear from Anthony Paolone at JPMorgan Chase. Please go ahead.

Great. Thank you, and good morning. My first question relates to rent spreads. I think back in June at the Nareit conference, you talked about how there had been so much leasing for top space that you were starting to see some real step functions up in rent, and I think your spreads in the quarter were good, but they've been at about that 10% level on average for a while now. I was wondering if you can talk to whether we should expect to see some movement in that, or maybe just add a bit more color on what's been happening to market rents.

Morning, Tony. It's Colin. Again, we were very pleased to have our 49th straight quarter of positive rent roll-ups. You mentioned the 9% number, which is very strong. What was below the double-digit cash rent spread we had in the first quarter. I would remind you that quarter to quarter, the rent spreads are a function of the mix in that particular quarter. At the same time, they're really a function of terms that were perhaps agreed to a quarter or two prior. As I mentioned in past meetings, we have had, I'd say, at Cousins, a bit of a bias to drive occupancy.

We now think that we are at an inflection point, certainly in most of our sub-markets, where we'll have an opportunity, given the fewer blocks of space, to both drive occupancy but also drive net effective rents through hopefully higher rents and lower concessions. We're pretty optimistic that in coming quarters, we're going to continue to post some pretty strong rent numbers.

Okay. Thanks for that. Excuse me, my follow-up is just with regards to cap rates. You talked about just the non-core being in that 9%-10% range on the dispositions. Any sense as to if you continue to make investments, and it sounds like you're still considering some further asset sales, what the spread might be that we should think about? Where is the spread if the non-core stuff is 9%-10%, versus maybe where you might buy?

Yeah. Tony, again, it's Colin. One, I would say with the recycling activity that we've done really over the last 18 months, but even over the last five years. While we might have a non-core asset or two left, we really believe that at Cousins, we're in a fortunate position where we're almost at a non-core, and we just are transitioning to we'll always have a bottom 5%. I think in time, the spread of any sale that we make relative to how we reinvest it will be much tighter, which is a great position to be in. I would just refer back again to our strategic priority, which is to drive sustainable earnings growth while maintaining our best-in-class balance sheet and continuing to enhance the quality of our Sunbelt office portfolio.

With leverage levels as strong as they are and the overall portfolio as strong as it is, we're not in a position where we need to sell. We will sell if we can make sense that the source of the cash, i.e., a disposition relative to the return on the use of cash, it creates accretion to our earnings profile. If it doesn't, we're just unlikely to be a seller.

Okay. Thank you.

Our next question will be from Blaine Heck at Wells Fargo. Please go ahead.

Great. Thanks. Good morning, everyone. It sounds like the interest in 201 North Tryon is strong and potentially outpacing your expectations. I guess, can you give a little more color on the overall square footage of prospective tenants that you're having discussions with? What types of tenants are most interested, kind of what industry, and how motivated you guys are to get some near-term pre-leasing done as you get closer to completion versus maybe continuing to wait for better rent economics?

Sure. Hey, it's Richard. The size range of the prospects in our pipeline right now are pretty diverse. We have a couple that are as large as 200,000 sq ft. I would say they're really early, and they've frankly been in the pipeline for a little while. Not terribly fast to move. What we have seen over the last couple of months is more activity in the single floor to two to three floor level, so call it 25,000 to 75,000 sq ft. Those tend to be not the larger traditional financial services, but more niche financial services uses, and then also legal and general professional services. It's a good diverse pipeline from an industry perspective. In terms of how aggressive we'll be, again, we are being patient, but we are by no means hitting the brakes completely on leasing.

If we see a great business that we think is a good fit, we are going to be aggressive and still look in certain instances, and I think 201 North Tryon is one, where we will look to drive occupancy. Again, we're also keeping an eye on doing what's right for the long term and where we think we can hold out, especially on a bigger requirement and get better economics. We're going to look to do that.

Okay, great. That's helpful. I guess related to that, if you were to sign a lease on that space today, could it be rent-paying in early 2027 at completion, or would the build-out of the specific space kind of push revenue recognition till later in the year or even 2028?

We do have a couple of floors that are leftover floors from prior tenants that are in really good condition. It is possible that if somebody wanted plug-and-play space, we could get them, depending on their timing, get them in pretty quickly. I would not expect that to be the base case. I think what we're going to see is that it will likely be late 2027 to maybe 2028 when we actually start to get occupancy on a traditional deal that requires a full build-out.

Yeah, Blaine-

Okay, Great.

Last quarter, I mentioned that.

Go ahead, Colin.

Last quarter, I mentioned that based on our prior experience with a lot of the renovations that we've done, that we oftentimes see a pretty material change in the rental rate that we can achieve. In some cases, $5 a square foot or more from the, call it, the mid-construction rent profile to, hey, this is a finished product. You can walk, tour, kind of experience the space. We're very mindful of that, particularly when we think we'll be signing 10 and 15-year leases. If kind of waiting till year-end to achieve a $5 a foot premium is out there, we'll certainly be very thoughtful and think through that. Again, if there's certain situations that come along for a floor or two that can drive some near-term occupancy, we'll look at it.

I think we just got to balance it because it's a pretty significant, we think, jump in the rental rate profile when this project is done at year-end.

Okay. That makes a lot of sense. Last one, just switching gears to the potential development opportunities you're pursuing. I was hoping you could give some color on where your required returns or yields are in the current environment, whether you'd lean towards build to suit or have the capacity to take on some risk in speculative construction, and related to that, whether there are any pre-leasing hurdles that you'd kind of need to clear.

Blaine, it's a broad question, I think ultimately, our view is it's very situational. I think certainly development as an overall opportunity is becoming more viable to Cousins because we do have our own capital And our own development platform. There are fewer and fewer blocks of available space. I think ultimately what the return profile is on a development, it absolutely would be a premium over acquisition cap rates. Depending though, ultimately what that level is. Is it more build to suit? Is it speculative? We would expect to be compensated if we're taking more speculative risk. I think we're going to just ultimately have to evaluate those opportunities as they come. I do think we're seeing that more broad-based across a lot of our different markets.

We are hopeful that we are going to identify compelling projects that will have compelling returns relative to the risk. I want to be careful in terms of quoting a specific number. I think competitively, that could put us at a disadvantage.

Great. Thanks a lot. Nice quarter.

Thanks, Blaine.

Next question will be from Andrew Berger at Bank of America. Please go ahead.

Great. Thank you, and congratulations on another strong quarter. I just wanted to touch on leasing volume and sort of level-set expectations going forward. Obviously, again, very strong first half of the year, just given you have relatively lower expirations for the remainder of this year and 2027, could you just help us think about whether or not the volume should taper off at all as we sort of get back into the back half of this year in 2027? Or it sounds like the late-stage pipelines still pretty robust. Do you feel like there's enough new demand coming for later and later, so let's say 2028 and beyond, to sort of just help sustain this type of volume going forward? Thank you.

Yeah. Good morning. Again, it's hard for us to predict forward leasing volumes, because again, that is very situational, and sometimes things beyond our control. I guess I would characterize the first half of this year, the two quarters were both in the top five largest leasing volumes in the history of the company, going back 60-plus years. I think kind of looking forward, though, we're still confident that leasing volumes could achieve above average levels relative to the last three to five years because we are seeing increasing demand, and it is really supported by the two trends we've talked about, the flight to quality and the Sun Belt migration. We do think we're going to be above average trend. At the same time, we can't promise kind of top five quarters every single quarter, but we're optimistic that volumes will continue to be strong.

I'd say kind of one other trend that I think will be supportive of leasing volumes. While you're right, we've got less available space, one thing that we're now seeing in the market is a trend of early renewal asks from some of our larger customers. I think if anybody is evaluating the office market and understanding the relative strength or is it a landlord or tenant-friendly market, when you see an uptick in early renewals, that typically signals customers expect that rental rates are going up, and they're going to have fewer options in the future. They're trying to pull forward and lock in some of those renewals early. I think that could be a strong source of leasing demand for our portfolio.

Great. Thank you. I just wanted to circle back to Charlotte. I know it was mentioned that there's a couple of larger expirations coming up. Can you just talk about prospects for those spaces and whether or not the current leases are above or below market? Thank you.

Sure. This is Richard. I spoke to the fact that the pipeline in Charlotte has increased pretty substantially quarter-over-quarter. That applies not just to 201 North Tryon, but also to 550 South. We've had probably the most robust pipeline at 550 so far this year as we've had year-to-date. Feel good about it. As I mentioned, we've got 24,000 sq ft. It's roughly about a floor of new deals and leases. To be clear, the expirations that we have that are at 550 were actually more or less end of second quarter. They've happened. They'll just show up in the occupancy numbers starting in the third quarter.

We've talked about these expirations many times in the past.

That's right.

Thank you.

Next question will be from John Kim at BMO Capital Markets. Please go ahead.

Thank you. Colin, you mentioned net new supply not increasing until 2030. I just wanted some clarity as to if this is all of your markets or are there certain markets where this supply might come earlier. Aside from that, where do you think rents could go over the next few years? Just given it seems like a unique situation with not a lot of new supply, especially the type of assets that you own and improving demand at the same time.

Yeah. Great question, John. We've been predicting this for many quarters of a pending shortage of Tier 1, high-quality space because demand was improving and there has been no new supply. My commentary around 2030 is here we are in the second half of 2026, and the lead time to build is typically somewhere between three and four years. I really don't think you're going to see any meaningful uptick in deliveries until that time. Again, if the market is already tightening today and very little new supply able to deliver in that timeframe, I do think that you're ultimately going to see, in some cases, a pretty material increase in net effective rents. It's just basic supply and demand. We've already seen that in some markets.

I think if you looked at Uptown Dallas, that is, I'd say, a pretty good proxy of how that works. It's not a simple 3% a year change. We've seen rents in Uptown Dallas over the last five years, probably almost double on their base net rental rates. Not saying that's going to be the case in every market, but as you have increasing demand and just few options for customers, it will lead to, I'd say, more meaningful rent growth and net effective rent growth that is not just a linear 3% a year. I think it could be double-digit type rent growth.

Okay. I'm not sure if you addressed this on the call, Fifth and Walsh, your preferred investment, what is the coupon rate on your investment? Do you plan to acquire the assets upon completion? Has the demand in AI in Austin, has that changed your view on increasing your overall exposure to that market?

Hey, John, it's Kennedy. Yeah, we're really excited about Fifth and Walsh. I did mention that we are getting a 10% preferred return on our position. As you alluded to, we do have a right of first offer to purchase it. We'll make that decision if and when that comes up. It's the type of asset that fits right within our portfolio, and it's already 58% pre-leased, which I think is a testament to its reception in the market. We're excited about that and I think have always remained confident in Austin's ability to be pretty resilient. Certainly having this AI demand is helping that. We've been able to rebalance our position there a little bit with the recent dispositions. We really like our portfolio that's there.

John, I'd just add to that. We're excited to partner with Endeavor. They are a terrific local sharpshooter in Austin. We've known them for many years and worked with them for many years. They help us lease our product up at The Domain. To expand our relationship with them to this new project at Fifth and Walsh, we're excited and look forward to working with them more.

Okay. Can I just ask on Neuhoff, now that the office is basically stabilized or fully leased, what is the updated stabilized NOI on that project, and what kind of pre-leasing are you required to move forward with phase II?

I'm not sure we've given an updated stabilized NOI. In terms of phase II, look, we're having discussions with a variety of size customers. The rents, and as Colin alluded to, need to be higher than our current project, but we feel like we can achieve those. There's not a black and white line, but we want to make sure that the rents and that we feel like the project's been validated, but that the rents are achievable. We're closely watching that. We do have a partner in that project, so we'll make that decision together as the discussions evolve.

Okay. Thank you.

Question will be from Nick Thillman at Baird. Please go ahead.

Hey, good morning. Colin Connolly, you touched a little bit on just the pull forward of renewals for 2028, 2029. I was hoping you could maybe bucket the renewal activity in Q2 and what's included in the pipeline of those leases that are rolling out in 2028 and 2029 compared to 2026, 2027. I know that the 2027 pool has a little bit of some shift with 111 coming out of there. I know there was some near-term roll and move out from that asset in particular. If you could just break that out. I'm guessing it has to do with the five larger over 50,000 sq ft ones, just point of clarification on that.

Well, if you looked at the second quarter activity, I think renewals accounted for about 55-ish%.

That's right.

Activity. As we look forward to the existing late stage pipeline that Richard outlined, I'd say the percent of new and renewal there is about 50%, which is what it typically is. I think that as we look out in future quarters, perhaps we could see more of these early renewals happen. I'd say this is a recent phenomenon of discussions on some of these early renewals, and I'd say they're really not yet reflected in our late stage leasing pipeline.

Okay. The 50% number that you're quoting isn't 50% of 2028, 2029 expirations were addressed in that renewal-

No.

Bucket.

No.

Okay.

No, I'm just saying our leasing activity in the second quarter renewals accounted for about 55% of the activity. As we look at our late-stage leasing pipeline, renewals account for about 50% of that. No, we were not saying that 50% of our 2028 expirations are in discussions. We're just saying we are seeing, as a general statement, more 2028 and 2029 expirations reach out and want to discuss renewal possibilities.

Got it.

One other data point that might be helpful. For the second quarter activity, if you look at, we did 19 renewals. I would characterize three of those as early renewals, so an expiration that was beyond 2027, 2028. The majority of the activity were 2027 expirations, if that helps.

That's helpful. It seems as though you guys are angling a little bit more on the development side, potentially, of getting a start here by year-end. Colin, you've talked about the investment cycle. First, it's the core product. Those yields sort of compress there. You can move to the core plus product. I guess, is there any opportunities you're seeing with maybe some, now given the lease-up in a lot of the properties for some more, maybe newly delivered but with some vacancy, that you guys could still potentially get in at a good basis, and still have some upside?

We're absolutely open to that. I'd say what's a bit unique in this cycle is that, for some very structural reasons with core funds and private REITs, we still have not seen a real re-emergence of core capital. We've seen kind of the, maybe the greatest pricing opportunity or kind of mispriced office real estate has been more on the core side. If that opportunity continues to exist like we've done at Sail Tower and like we did at 300 South Tryon in Charlotte, we think that there's still some opportunity there. If capital shifts in and cap rates compress, we'll absolutely look at some core plus opportunities. As Kennedy and I have both mentioned, development, select development, is a possibility as well. We're a bit agnostic.

Again, we always pivot back to our strategic plan, which is to grow earnings while maintaining the balance sheet and upgrading the quality of the portfolio. If we can do that through core acquisitions, core plus or development, we're a bit agnostic. We look at the risk-return profile and how ultimately, it impacts that strategic goal, that's how we make our decisions.

Just a cleanup question for Gregg. Does the guidance assume just the payoff of the two notes with the proceeds of the forward equity and then the disposition sale in three-two?

The two notes that mature for a little over $200 million, one in September, one in October, we pre-refinanced those with our bond deal back in February.

Okay. That's it for me. Thank you, all.

Next question will be from Vikram Malhotra at Mizuho. Please go ahead.

Morning. Congrats on a strong quarter. If you could expand, you mentioned AI leases or AI leasing. Do you mind digging into that a bit across your markets, how does that specific pipeline look? In the same vein, just on AI, any other thoughts or data points on sort of the concerns some people have on the Sun Belt and just a greater theoretical risk, in their minds of, AI and support jobs and how that may be playing out? Thanks.

Why don't you take the first half about kind of AI pipeline we're seeing across our markets, and I'll touch on the broader.

Sure. We mentioned Austin has a pretty robust pipeline, and we've seen that in our portfolio. If you look to 2Q, how I would characterize the AI demand that showed up in our executed activity, we saw companies that are obviously technology companies that either had an AI driver or component to their business, all the way to hyperscalers like an Oracle, in Atlanta, in Austin, obviously, in Nashville with our Oracle activity, also in Phoenix. I'd say beyond Austin, we continue to see some interesting bubbling up of AI companies continue to happen. It is very clear that Austin is the most robust market for us in terms of AI activity.

Yeah. To your broader question about AI and implications for the Sun Belt. I think it's a bit of a false narrative that the Sun Belt is more back office than the West Coast or the Northeast. Vikram, I think you've actually done some research on that that we found kind of confirms what we see on the ground. I think it's kind of more important to, as you think about risk relative to AI, is to think about what's the underlying quality of the asset that you own. At Cousins, we're fortunate to have Arguably one of the highest quality portfolios across the office REIT sector. If you tour our properties, I think you'll very quickly realize that none of our properties are occupied by back office type workers. Their rent profile simply wouldn't support that use.

We're, again, full of knowledge workers. I think over time, again, maybe in my opinion, a bit of a false narrative is that unlike the technology sector as a whole, which has made a very intentional decision to grow, including their front of house revenue producing employees to grow outside of places like San Francisco and Seattle, instead do that in places like Austin and Nashville, that for some reason, the AI component of the tech sector is going to buck that trend and not also move their future growth to some of these exciting cities because they're far easier to do business with. They're actually much more open and less regulated as it relates to AI, and they're also much more affordable for their employees, while also still offering all of the vibrancy and a great place to live.

I think time will prove that out.

That's helpful. Thanks so much. Just maybe one last one. You've talked about the strong demand profile and very limited supply. I'm wondering, whether you compare to pre-COVID or just what you're seeing on market rents, what's the tipping point for Cousins in occupancy? Like, you hit 90% this year. At what point can you really see rent spikes such that the rent spread profile almost elongates for you? What's that tipping point? Are we there now? Is it a couple of 100 basis points? Maybe just can you give us some context, that'll be helpful.

I think 90% is a pretty good proxy, and it's less about kind of what is a hard and fast line for Cousins. At 90%, when you look around what the available blocks of space are across a particular sub-market, at 90%, there are very few large blocks of space. A lot of times that 90% is made up of a half floor here and a three-quarters floor there. When a customer needs to renew on 50,000 feet or 75,000 square feet, they just have fewer options and therefore, the simple laws of supply and demand allows you to increase the price. I'd use the market that I'm sitting in today, being Buckhead, as a pretty good proxy.

The market as a whole, if you were to go look at kind of CoStar statistics, it would tell you that the Buckhead sub-market is some, call it 18 million sq ft or more, and that it's probably 25% vacant. The reality is, when we look at the subset of buildings that we actually compete with, Enterprises, approximately 7.5 million sq ft, and it is closer to 88%, 89% leased. If somebody that needed 75,000 sq ft of contiguous space in the Buckhead sub-market today, they have exactly one option. In the coming quarter or two, they could have zero options, which means a landlord looking to renew a customer like that is in a pretty strong position.

Great. Thanks so much.

Next question will be from Upal Rana at KeyBanc Capital Markets. Please go ahead.

Great. Thank you. Just had a quick one on Hayden Ferry I. The building's fully leased now, but at 50% occupancy. Any timing there that you plan on adding the property back into the same sort of pool? How much incremental NOI do you expect from there? Thanks.

Sure. This is Richard. Good question. The timing on stabilization, we expect to be early 2027, so you'll see it come back into our operating statistics then. I don't believe we've commented on a stabilized NOI.

It's great. We'd have to have a good year-over-year comp to do a same property number. It's probably going to come back in at 2029 because you're not going to have a full year 2027, so you can't build it in 2028. You're going to have to wait a little bit. In terms of the operating statistics, we'll pull it back into all the operating statistics very soon.

Yeah. We do, though, also publish quarterly NOI numbers, so you'll be able to see that number.

Yeah. That's true. Yeah. Putting it into the same property pool is not nearly as relevant for you from a modeling perspective, a performance perspective, as just getting it back into operations and us pulling it out and giving you the NOI on a quarterly basis, which we're going to do very soon.

Okay, great. That was helpful. Maybe a quick one for Kennedy. Could you give us a sense on the types of transaction opportunities you are seeing in your markets, whether it's quality, pricing, size, or geographically? I know you're looking at everything and ultimately deciding on what to transact has many moving pieces, wanted to get your sense of what you're seeing out there. Thanks.

Yeah. Hey. Good question. It's a total mixed bag in terms of what's being marketed. We're looking at things that are marketed that fit our profile. As we've done with some past transactions, we're also looking at things that maybe aren't being broadly marketed and leveraging our relationships to try to find assets that fit the profile and make sense for us price-wise. Still, I would say it's a fairly limited pool of assets on the market, just given that there hadn't been the data points, and as Colin Connolly mentioned, there hadn't been the core buyer pool to sell into. We're confident that we'll find some opportunities that will work for us.

Okay, great. Thank you.

Next question will be from Brendan Lynch at Barclays. Please go ahead.

Good morning. Thanks for taking the questions. Obviously, you're making a lot of progress on capital recycling down to fewer non-core assets. Colin, I think you mentioned there's always a bottom 5% in your pool. How should we think about that in terms of redevelopment opportunities? I think you've made a lot of progress on that. I'm just curious if there's other ones that you've identified more recently that we could see over the next couple of years.

Yeah. Good morning. In addition to the recycling that we've done, we've also, over the last year or five years, pursued a pretty aggressive redevelopment campaign. I'd say largely that was driven by a view that If an asset, we believe can be upgraded and firmly repositioned into that tier 1 lifestyle office sector, the best time to execute that repositioning was when our customers were actually not using the property. We made a lot of headway during COVID. More recently, we're very hard at work in Charlotte, having just completed 550, 201 North Tryon, obviously, as I mentioned, will complete kind of end of the year, first quarter. As we look forward, there's far fewer of those redevelopment projects. The ones that I'd point out that are kind of upcoming would be Terminus here in Atlanta.

We just completed a repositioning of the lobby of the Terminus 200 building, we're now going to turn our attention to the 100 building. A great location in the middle of Buckhead, a trophy iconic building. Our team's going to do great work there. Richard touched on Legacy in Dallas, in the Legacy submarket of Dallas. We are in the midst of effectively turning a single tenant building into a multi-tenant building. We're excited that we've already knocked out the vast majority of the leasing. As a part of those leases, we have committed to the repositioning, again, to convert it to its multi-tenant use. Again, we're excited that we've significantly de-risked that from an occupancy perspective, from a leasing perspective.

Great. Thanks. That's helpful. Maybe one for Gregg on the equity settlement. You suggested you could delay it again. Can you just walk us through the mechanics and your considerations in potentially doing so?

Well, the mechanics are pretty simple. We're not plowing new ground here. We've issued equity on a forward basis using our ATM. You've got an agreement with the institutions on the other side of that transaction. The current agreement that we have with the institutions expires year-end 2026, but you can extend those. They're commonly extended. There really isn't a governor on our ability to extend based just on the agreement. Then in terms of our decision making around it, as Colin said upfront, as we've said many times, it just comes down to a sources and uses for us. We want to make sure that we do these transactions that we're talking about, whether it's an acquisition or development, on an accretive basis. Got to increase earnings. That's the North Star. We're not going to do it at the expense of our balance sheet.

The genius of having these forward shares outstanding is as we uncover new investment opportunities and we look to fund them, if we can fund them with dispositions on an accretive basis, perfect. If we can't, we've got these shares that we can settle that we know we can do on an accretive basis. I know it's not a lot, it's only $90 million, I think it's an underappreciated and undervalued asset on our balance sheet that gives us all kinds of optionality as we go out there and look at new investments.

Great. Thank you very much.

Our last question will be from Dylan Burzinski at Green Street. Please go ahead.

Hi, guys. Thanks for taking the question. I guess just sort of looking at the spread between portfolio lease percentage and occupancy. I think it's sort of at a recent high of, call it 3.5% versus the historical average in the low 2% range. Can you sort of help us think about, I guess, the timeline of when that would compress? Obviously that's going to be a natural boost to NOI growth. Just curious there.

This is Richard. Well, obviously some component of that is going to live in 2026 commencements in the second half. You'll see that continue to compress. Obviously, this is going to be contingent on future activity in the mix, it's hard to really predict. It should start to compress again as we get into 2027. It's really hard to predict quarter to quarter what that spread is going to be.

Yeah. Not necessarily looking at it on a quarter-to-quarter basis, just on, is this a one-year process, two-year process, three-year process? Anything sort of related to that outlook, I think, is more so what I was looking for.

Well, yeah. Obviously, as we're signing leases, we also always have some component of expirations and move-outs. Those numbers, you've got multiple factors kind of flowing in there. Our target for year-end is to bring occupancy, to compress that and achieve the 90% occupancy. As we look forward over the coming years, again, we're not going to make a specific goal today, but our hope is that the percentage lease is a signal that we're going to have the ability to drive occupancy past 90% in the coming years. That's all driven by strong underlying demand and less available supply, and we intend to continue to push the portfolio back to, I'd say, more historical normalized levels of leasing and occupancy.

I think the portfolio today is as strong as it's ever been, we remain confident that we're going to do that.

Great. Thanks, guys. Appreciate it.

Thanks, Dylan.

Thank you. At this time, we have no other questions registered. I would like to turn the call over to Colin Connolly.

Well, thank you all for your time this morning and your continued interest in Cousins Properties. If you have any additional follow-up questions, please feel free to reach out to Gregg Adzema or Roni Imbeaux. Have a great rest of the day and a great weekend.

Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending, and at this time, we ask that you please disconnect your lines.