COUSINS PROPERTIES INC Q4 FY2024 earnings call

• Exceptional fourth quarter with $0.69 a share in FFO, above guidance midpoint. Same property net operating income increased 3.4% on a cash basis.
• Strong leasing: 462,000 square feet of leases completed, 6.7% cash rent roll-up.
• Invested almost $1 billion in Trophy lifestyle office properties in Sunbelt markets, transactions accretive to earnings.
• Raised $469 million of equity and $400 million of debt to fund growth.
• Market fundamentals improving: Existing office supply declining, leasing demand accelerating, vacancy reaching peak and market tightening ahead for lifestyle office sector.
• Portfolio occupancy at year-end 89.2%, up from 87.6% year-end 2023.
• Completed acquisitions of Vantage South End and Sail Tower, which were strategically aligned with the company's core strategy.

The total office portfolio end of period leased was 91.6% and weighted average occupancy was 89.2% in the fourth quarter. Leasing activity was strong with 462,000 square feet of leases completed during the quarter and a 6.7% cash rent roll-up. In terms of acquisitions, the company closed on the acquisition of Vantage South End in Charlotte for $328.5 million and Sail Tower in Austin for $521.8 million. Revenue contribution from these segments wasn't explicitly stated in terms of percentage, but the acquisitions were immediately accretive to earnings.

• 2025 FFO expected between $2.73 per share and $2.83 per share, midpoint $2.78, representing approximately 3.5% growth compared to 2024.
• Includes disposition of SVB Financial Group bankruptcy claim ($4.6 million) included in FFO.
• Assumes refinance of $250 million senior note maturing July 6 and payoff of mezzanine loan in Radius property in Nashville on September 30.
• Guidance does not include speculative property acquisitions, dispositions, or development starts.

• Private capital markets challenging for office: Asset level debt and equity limited and expensive, many private equity investors on sidelines.
• Macroeconomic uncertainty could impact leasing and investment activity.
• Long-anticipated move outs of One Trust in Atlanta and Bank of America in Charlotte could lead to temporary trough in occupancy through third quarter.

Q: Can you talk a little bit more about the investment pipeline as you look into 2025. Have you found that the acquisition market has become more competitive Does that change your strategy or the size of your pipeline at all? And I guess just generally what's your confidence in being able to continue to make, you know, accretive investments this year?

A: Morning, Blaine. Colin. The know, the pipeline remains, I think, very strong. And from cousin's perspective, just stepping back, as we look at The market and the opportunity today, I think fundamentals are improving. You know, supply new supply is virtually non-existent, and we're seeing leasing demand accelerate. And at the same time, They're the The capital market still remains somewhat dislocated. With many of the private players still on the sidelines struggling with limited and, let's say, relatively expensive. Secure debt. So I think it's a a particularly compelling time for for cousins to invest And I think as we come out of this dislocated market, we are hopeful you're gonna see more transactions, but I think the competition is still relatively limited. And and we hope that we're, again, with an advantageous cost of capital, a a for for groups that are looking to monetize high quality office Q: Can you just talk about the mix between kind of the opportunities on on high yielding debt versus operating properties that are in your pipeline?

A: Yeah. Certainly, the for for us, the the bias is is typically, you know, is is equity positions. But but again, we remain very constructive at at this point in the cycle, investing in trophy lifestyle office But but at this point in the cycle, sometimes the best way to invest from a risk adjusted perspective at the right basis could be through debt. We certainly demonstrated a an openness and a willingness to invest in the debt part of the capital structure. If it's, you know, the the quality of the asset, if we're comfortable with any outcome, we'll certainly look at those opportunities. And potentially do more of them. But the, you know, the pipeline today has kind of a wide variety of of opportunities. Our our long term bias is is as an equity investor, but but again, at certain points in the cycle, us having the flexibility to to invest across the capital structure, I think, is a differentiator. And we'll continue to evaluate all opportunities, again, that are consistent with the long term strategy of continuing to build the you know, this premier portfolio of the highest quality lifestyle assets in the Sunbelt Q: Just, you know, sitting back and thinking about all of the comments and how you know, quickly, the markets are improving and you know, the accomplishments you had in twenty four. I guess just sitting back when you you know, talked about your your plan for twenty five or if you could do a three year plan. Has anything changed in terms of the three year plan or messaging you know, to leasing this year?

A: Good morning, Jeff. It's Colin. And and real know, our plan remains unchanged and and it is firmly centered around continuing to execute execute, you know, the strategy of of building the the leading Sunbelt lifestyle office company. With, you know, the best assets and the most resilient submarkets with the highest growth. And our plan around that as I mentioned earlier, is It is is kinda multi pronged. We're we're gonna continue to first prioritize organic growth within the portfolio. That means driving occupancy. Back. To more stabilized levels, and we feel like we're we're on a path To do that, Secondly, in this in this environment, we are going to capitalize on external growth opportunities. And we certainly demonstrated that last year and we think the environment is still Positive. For that and potentially still in the early innings coming out of a dislocated office cap market. And third, we're we're gonna continue to maintain a a fortress best in class balance sheet that gives us the flexibility to, again, capitalize on opportunities both in driving leasing market share as well as compelling and accretive new investments