考辛斯房產 (CUZ) 2026 年第三季法說會：上修 FFO 財測，租賃動能強勁

重點摘要

• Cousins Properties 將 2026 全年 FFO 指引中位數調升 0.02 美元至每股 2.97 美元，較 2025 年成長 4.6%。管理層將此調升主要歸因於強於預期的租賃活動與手續費收入。
• 第三季同店現金淨營運收入 (NOI) 年增 7.4%，主要受惠於營收成長 5.5% 與費用成長 2.0%。若扣除 201 North Tryon 的重建計畫，同店現金 NOI 則成長 8.6%。
• 該公司完成 54.6 萬平方英尺的租賃合約，其中包含 22 萬平方英尺的新租與擴租合約。管理層表示，Cousins 仍朝著年底達到 90% 出租率的目標穩步邁進。
• 二代續租現金租金 (Second-generation cash rents) 成長 19.8%，創五年來最佳表現，也是該公司連續第 50 個季度實現正向租金調升 (rent roll-up)。平均淨有效租金季增 11.4% 至 31.24 美元。
• Cousins 取得持有一座位於達拉斯 Uptown 2401 McKinney 開發用地之合資企業 97.5% 的權益。目前計劃於 2027 年開工建造一座約 70 萬平方英尺的頂級辦公大樓，具體進度視最終規劃、成本與預租狀況而定。
• 後期租賃洽談管線達到約 140 萬平方英尺，在營運中資產組合與潛在開發項目之間大致各佔一半。

關鍵財務數據

業務與營運表現

科技與金融服務業占第三季租賃面積的約 49%。今年至今新租與擴租活動累計達 110 萬平方英尺，而該公司本季完成了 32.6 萬平方英尺的續租合約。

截至 2027 年底，僅有 85.3 萬平方英尺（佔已出租資產組合總面積的 4.6%）的租約到期。在 2027 年底前，Cousins 沒有單一超過 10 萬平方英尺的到期租約。管理層表示，這種有限的近期到期風險，加上已簽署但尚未開始的租約，為達成年底入住率目標提供支撐。

亞特蘭大以 24.5 萬平方英尺的租賃面積領跑本季活動。該市場在季末的已出租率為 92.4%，入住率為 86.3%，已出租率與入住率之間存在 6.1 個百分點的差距。

奧斯汀產生了 18 萬平方英尺的租賃面積，其中 77% 涉及科技公司，包含 AI 領域的企業。該地區資產組合已出租率為 97.1%，加權平均租期為 6.9 年。

在夏洛特，已完成的租約帶來了超過 35% 的現金租金成長。201 North Tryon 的重建進度符合預期，預計將於 2027 年年中大幅竣工。該公司正在與四位潛在客戶談判該物業 5.4 萬平方英尺的租約。

達拉斯的已出租率達到 97.6%，已完成租務活動的現金租金成長率達 40%。Cousins 也正與一家主要客戶進行後期談判，以補缺 Legacy Union 約 16 萬平方英尺的空間。擬議的租約將從 2027 年底至 2028 年初分階段開始，這將在 2027 年造成短暫的空置期 (downtime)。

Cousins 以 2.08 億美元（或每平方英尺 400 美元）售出奧斯汀的 111 Congress。公司還承諾向 5th & Walsh 開發項目提供高達 3,150 萬美元的特別股股權 (preferred equity)，該項目在動工時預租率已達 58%，預計於 2029 年完工。該投資在資金到位後可獲得 10% 的特別股報酬率，並包含未來優先購買權。

該公司對 2401 McKinney 合資企業的初始投資約為 5,000 萬美元，包含 4,220 萬美元土地費用及 780 萬美元前期開發費用。管理層指出，達拉斯 Uptown 類似項目的建造成本可能在每平方英尺 900 至 1,000 美元之間，但尚未最終確定該項目的總成本。

管理層指引

Cousins 預計 2026 全年每股 FFO 為 2.95 至 2.99 美元，中位數為 2.97 美元。更新後的展望假設 2026 年不會結算透過遠期 ATM（At-The-Market，按市價）協議售出的股票。

指引繼續假設第四季將出售 303 Tremont 土地。該指引不包含 2026 年期間任何額外的收購、出售或新開發項目的開工。

管理層預計辦公資產組合的入住率將在年底達到 90%。長期來看，管理層認為入住率可望朝疫情前 92% 至 93% 或更高的水準邁進，但並未提供具體時間表。

針對二代續租合約，管理層表示預計未來幾個季度將繼續實現雙位數的租金上揚 (rent roll-up)。管理層亦指出，免租期優惠可能比承租人裝修補貼更早開始減少。

風險與觀察重點

利率居高不下且波動劇烈，提高了新開發項目的報酬門檻，並減緩了辦公室交易活動。管理層表示，任何投資在營運穩定後，都必須具有增添獲利 (earnings-accretive) 且對槓桿保持中立 (leverage-neutral) 的明確路徑。

2401 McKinney 項目仍取決於最終建築規劃、建造費用、租約簽署及正式開發決策。Cousins 已承諾收購土地，但尚未承諾開工建造。

資產組合已出租率 93.0% 與入住率 89.5% 之間的差距，反映了已簽署但尚未開始生效的租約。雖然這能支撐未來的入住率，但裝修建造的時間與租戶入住進度會延後相關 NOI 的貢獻。

重建計畫使 201 North Tryon 的現金 NOI 年減 35%。Legacy Union 在潛在主要租約分階段開始生效之前，預計也將在 2027 年面臨空置期。

分析師問答重點

• 開發經濟效益：管理層表示，Cousins 歷史上的開發收益率目標通常比收購資本化率高出 150 至 200 個基點，而目前會偏向該區間的高端。核心辦公資產的成交資本化率（cap rate）約在 7% 左右，具體取決於租期、租戶信用及市場租金定位。
• 融資策略：開發項目的潛在資金來源包括約 1.2 億美元未結算的遠期 ATM 增資權益、非核心資產出售以及額外的合資企業。在近期償還抵押貸款後，合併債務中有 94% 為無擔保債務。
• 租賃洽談管線：若不計開發項目，後期管線中約有 63% 為新租與擴租合約。若納入更廣泛的早期管線，該比例則升至約 75%。
• AI 相關需求：第三季與 AI 相關的租賃主要集中在奧斯汀，由超大規模業者以及跨 AI 軟硬體營運的公司領頭。管理層亦提及先前在納許維爾、坦佩與亞特蘭大的活動。
• 其他開發選項：管理層證實，達拉斯以外的項目也可能向前推進，這取決於客戶需求、預租率與報酬率。潛在地點包括奧斯汀的 Domain 和納許維爾的 Neuhoff。
• 2027 年 NOI 時程：管理層並未提供 2027 年指引。管理層指出，強勁的租賃活動與租金成長需要時間才能反映在同店 NOI 上，因為承租人裝修、搬入與起租時程會產生時間差。

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管理層陳述

Operator

Good morning, ladies and gentlemen, and welcome to the Cousins Properties Third Quarter Conference Call. [Operator Instructions] Note that this call is being recorded on Friday, October 30, 2026.

I would now like to turn the conference over to Pamela Roper, General Counsel. Please go ahead.

Pamela Roper

Thank you. Good morning, and welcome to Cousins Properties Third 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 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 potential risks is contained in our filings with the SEC.

With that, I'll turn the call over to Colin Connolly.

Michael Connolly

Thank you, Pam, and good morning, everyone. We had a very strong third quarter at Cousins. We increased our earnings guidance, completed strategic transactions that will increase the quality of our portfolio, and had robust leasing and operational metrics. I would like to start by highlighting several important trends that continue to shape the office landscape.

First, demand is improving. According to JLL, leasing activity during 2026 is on pace for a post-pandemic high. Net absorption has also been positive for 5 straight quarters. Together, stronger leasing and sustained positive absorption point to a tightening market with available space 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. On the ground, we are seeing AI-related office demand broaden across the country, including into many of our markets. We have not seen any evidence in the employment data, but material negative trends attributable to AI, and these observations are very encouraging, and we'll continue to monitor them going forward.

Third, the flight to quality is unrelenting. Customers are prioritizing high-quality, well-located buildings that promote engagement and collaboration. The preference for newer buildings is particularly clear. Again, according to JLL, nearly all positive net absorption in the office sector since the onset of COVID has occurred in buildings delivered from 2010 to the present.

Fourth, we are seeing renewed momentum in Sun Belt migration. Alongside full corporate relocations, we see an uptick in companies opening new Sun Belt corporate hubs from high-cost less business-friendly cities in the Northeast and on the West Coast. We believe the trend remains in its early stages and expect these announcements to continue.

Lastly, new construction starts are at historic lows. Given the 3, in some cases, 4-year lead time to deliver a new project, any meaningful uptick in new supply is unlikely until 2030 at the very earliest.

So 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, it is underdemolished. 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. We are uniquely positioned to benefit from these trends.

At Cousins, our strategy remains unchanged. We are sharply focused on driving sustainable earnings growth while maintaining our best-in-class balance sheet and continuously enhancing the quality of our Sun Belt lifestyle office portfolio. Importantly, we advanced the strategy during the third quarter. I will share some highlights.

First, we are growing earnings. We increased FFO guidance by $0.02 a share to $2.97 per share for the full year in 2026, which represents 4.6% growth over 2025. [indiscernible] FFO growth and represents a 4.3% compounded annual growth rate since 2023. Cousins track record of delivering earnings growth during this 3-year time frame is simply unmatched among traditional office REITs and frankly, I believe, underappreciated by investors.

Second, we leased 546,000 square feet during the quarter, including 220,000 square feet of new and expansion leases. In addition, we have an exceptionally strong leasing pipeline. As a result, we are on track to hit our 90% occupancy target by year-end.

Third, our cash rent roll-up on second-generation leasing was 19.8%, our strongest performance in 5 years. This marks 50 consecutive quarters of positive rent roll-ups and reflects our continued emphasis on aggressively increasing rental rates.

Lastly, we closed on a series of new investments and dispositions, which upgraded the quality of our portfolio, enhanced our geographic diversification and positions Cousins for long-term earnings growth.

I would like to highlight one transaction through a newly formed joint venture, we acquired a 97.5% equity interest in a 2.3-acre land parcel at 2401 McKinney in Uptown Dallas. Uptown continues to attract significant out-of-market demand and has a shortage of large blocks of space in premier properties. We believe 2401 McKinney is simply the best site in the city and an extraordinary opportunity for Cousins.

As I've previously said, new development is becoming more compelling. Thus, our current plan is to commence construction in 2027 on a trophy office tower with a planned size of approximately 700,000 square feet. While I recognize there's been much media speculation regarding 2401 McKinney, I obviously cannot comment on that today. But rest assured, in any future development announcements that we make we are confident that investors will find the pre-leasing metrics and return profile very compelling, even in today's higher interest rate environment.

We are excited about what lies ahead for Cousins. Despite ongoing macro volatility, we continue to outperform, supported by a strong operating platform, a trophy Sun Belt portfolio, a highly efficient G&A structure and one of the strongest balance sheets in the office sector. These strengths position us for a market that is rebalancing. New construction is virtually nonexistent high-quality lifestyle office space is becoming increasingly scarce and overall fundamentals in the Sun Belt are tightening. We expect the positive momentum to continue.

Before turning the call over to Richard, I want to thank our talented Cousins employees. Their commitment to excellence and to serving our customers is the foundation of our success. Richard?

Richard Hickson

Thanks, Colin. Good morning, everyone. Coming off a record-breaking 1.9 million square feet of total leasing in the first half of the year, our team added another 546,000 square feet of total leasing in the third quarter which is on par with our quarterly run rate since the beginning of 2023. The technology and financial services sectors were the largest contributors to our overall activity at about 49% combined with the balance being well diversified by industry. On a square foot basis, 40% of our completed leases this quarter were new and expansion leases at 220,000 square feet taking our year-to-date new and expansion leasing to approximately 1.1 million square feet.

Team also completed an impressive 326,000 square feet of renewals during the quarter with renewal square foot volume 25% higher than our 3-year run rate. This included 6 renewals of a full floor or greater, 4 of which expanded their footprint. With our solid today renewal leasing, we now only have 853,000 square feet expiring through the end of 2027, representing 4.6% of total portfolio lease space. For context, that is roughly half of what we have had expiring on average at the same point in the last 2 years. Not only that, but there are also no expirations over 100,000 square feet through the end of next year. In fact, looking at 2027, our largest expiration that is either not backfilled or in leases to be backfilled is only 26,000 square feet. I'm hard-pressed to think of a time when we have enjoyed such a phenomenal near-term expiration setup.

Beyond our healthy completed activity and expirations profile, our overall leasing pipeline remains strong. As far as our late-stage pipeline is concerned, in our September investor presentation, we shared that 1 million square feet of activity was either signed quarter-to-date or in lease negotiations. Nearly one month into the fourth quarter, that number is now at approximately 1.4 million square feet, which is roughly evenly split between the operating portfolio and prospective new development activity.

Turning to lease economics. Quarterly average net rent was $42.41. Both free rent and tenant improvements were lower this quarter, resulting in average leasing concessions of $8.25, all leading to average net effective rent coming in 11.4% higher sequentially at $31.24. Third quarter and year-to-date 2026 average net effective rent both grew nicely relative to the full year '25 at 21% and 18%, respectively. Finally, second-generation cash rents increased yet again this quarter by 19.8% with only 3 second-generation leases posting a roll down this quarter.

For the quarter, our total office portfolio end of period lease and weighted average occupancy percentages were 93% and 89.5%, respectively, both up sequentially and occupancy was up for the third consecutive quarter. Our portfolio lease percentage increased or held steady in all but 2 markets with Atlanta once again as the largest positive contributor.

I would also note that the current 3.5% difference between our lease and occupied percentages remains at the widest level in over 3 years. With our favorable lease expiration profile and strong backlog of leases signed but not yet commenced, we remain confident we can hit 90% occupancy by year-end.

Turning to our markets. Our Atlanta portfolio continues to deliver strong leasing activity, where we signed 245,000 square feet of leases this quarter. While we completed a couple of sizable renewals, I would characterize activities broad-based across the entire Atlanta portfolio. With this quarter's activity, I'm pleased to say that Atlanta's leased and occupancy percentages are up to 92.4% and 86.3%, with a very large lease-to-occupied spread of 6.1%. The team also rolled up cash rents over 18% this quarter. In Austin, JLL notes that the third quarter net absorption was the highest since the second quarter of 2019. And for Endeavour Group, total tenants in market grew 24% year-over-year in square foot terms, with the technology sector accounting for 39% of current demand.

Our Austin team signed 180,000 square feet of leases this quarter, and 77% of that was with technology companies, including some in the AI space. Our activity also included an important 76,000 square foot renewal with a Fortune 10 technology company at Domain 7, which was previously a mid-'27 expiration. Our Austin portfolio now stands at 97.1% leased with a weighted average lease term of 6.9 years.

In Charlotte, we continue to see a tightening of available space in the trophy office segment with supply constraints arguably the most acute of any of our markets. Not surprisingly, we were able to roll up cash rents over 35% on our completed activity this quarter. For JLL, market-wide trophy rents have grown over 30% in the last 18 months, and total tenants in the market are also 20% higher than last year.

Redevelopment of 201 North Tryon is progressing as planned, with the team delivering a top of the market, new amenity floor at the property during the quarter. The balance of that project will be substantially complete in mid-2027. Like we stated last quarter, we are taking a patient approach to leasing at this property as the redevelopment progresses. Even still, demand has picked up, and we are currently in lease negotiations with 4 potential new customers totaling 54,000 square feet. I would also note that our early-stage lease pipeline in Charlotte continues to be very encouraging.

Finally, in Dallas, we signed 62,000 square feet of leases this quarter and our 97.6% leased portfolio and the team rolled up cash rents 40%. Building on last quarter's renewal of U.S. Renal Care at Legacy Union in Plano, we completed 2 additional full-floor renewals, which included some expansion totaling 54,000 square feet. Recall that the previous full building customer, Ovintiv, expired at second quarter end, enabling us to go direct with all of our sub-tabs -- of those -- of all of their substance. Of those now direct tenants, roughly 65% are currently set to expire in the second quarter of '27. However, as a reminder, we are in very late-stage lease negotiations with a major new customer to backfill approximately 160,000 square feet of that or all but one floor of the building's availability.

On execution of this large new lease, we would be 91% leased on what will ultimately be about a 300,000 square foot building. Note that the new lease is expected to commence in phases starting in late 2027 with the final phase in early 2028. So we will see some downtime in 2027.

As always, thank you to our entire team for the contributions you have made to this fantastic operating year. We appreciate everything you do.

I will now turn it over to Kennedy.

Jane Hicks

Thanks, Richard. Despite increased uncertainty in the capital markets, we had another active investments quarter. As we discussed previously, in July, we closed the sale of 111 Congress, a 519,000 square foot tower in Austin's Central Business District built in the late 1980s. The asset sold for a gross price of $208 million or $400 per square foot. This sale allowed us to recycle proceeds from an older vintage asset into new opportunities that are accretive to earnings and should require less future capital.

Also in Austin, we committed to a preferred equity position for 5th & Walsh, a development project by Endeavor. 5th & Walsh is currently under construction in the Clarksville neighborhood on the Western side of Austin's vibrant CBD. Upon completion in 2029, it will feature almost 200,000 square feet of creative office and high-end retail space. The building was 58% pre-leased at the time of groundbreaking and continues to receive great interest from the market. As mentioned, our role is a preferred equity position of up to $31.5 million with a future right to purchase the building. We anticipate funding this mostly over the second half of 2027, and the pun funding will receive a 10% preferred return. The investment allows us to generate near-term earnings, coupled with the future acquisition opportunity of a high-quality neighborhood building.

As Colin just discussed, we also acquired a 2.3-acre development site at 2401 McKinney in Uptown Dallas. We bought this in a joint venture with Trammell Crow Company, of which we are 97.5% of the venture. Our share of the initial investment in the venture was approximately $50 million, which includes $42.2 million for the land and $7.8 million of predevelopment costs.

We were attracted to this opportunity for a few reasons. First, we view it as one of the best located sites in Dallas, situated in the heart of Uptown in one of the strongest office markets in the country. Dallas is a huge beneficiary of job migration from gateway markets, particularly finance jobs. And accordingly, the city has experienced tremendous rent growth. Uptown Dallas is a target growth market for us and one of the few submarkets that was not previously represented in our land bank.

We also benefit from the partnership with Trammel Crow, a prominent developer headquartered in Dallas, who has advanced predesign on a trophy building that could be over 700,000 square feet. As Colin shared, this work puts us in a position to be able to break ground if we so choose in the first half of 2027. We look forward to sharing more as plans and pre-leasing efforts evolve.

As you know, we evaluate all investment opportunities with 3 guiding principles: first, increase earnings; second, enhance the quality of our Sun Belt portfolio; and third, maintain our best-in-class balance sheet. To that end, we continue to explore both acquisitions as well as select development opportunities that achieve this strategy. While the bar remains high for new office starts, we're evaluating potential development opportunities with free leasing that offer an attractive return premium to acquisitions. We believe the scarcity of trophy office space, combined with a record low national development pipeline, could create multiple development options within our portfolio.

Against that backdrop, we are strategically advancing predevelopment efforts across our markets. Our attractive land bank and flexibility and investment structure support those efforts. In Austin, we are about to begin demolition of Domain 4, a now empty single-story office building on approximately 5 acres in the epicenter of Domain.

In Nashville, at Neuhoff, parking and infrastructure are already in place to accommodate an additional 300,000 square foot building. The new building would complement our existing office component, which is now 96% leased with long-term leases. As always, we will be mindful of our overall balance sheet exposure to development and remain selective in the opportunities in which we ultimately choose to invest. If there is a compelling opportunity set that is beyond our financial comfort zone, we could look to bring in joint venture partners.

The recent increase in interest rates and limited equity in the office sector will likely constrain overall transaction volume in the near term. We don't need to sell assets and will remain selective on dispositions. Our portfolio is in excellent shape, and our strong balance sheet positions us to pursue the right growth opportunities, both acquisitions and development. We have capitalized on our competitive advantages in past periods of dislocation and remain optimistic about our ability to do that going forward.

With that, I will turn the call over to Gregg.

Gregg D. Adzema

Thanks, Kennedy. I'll begin my remarks by providing a brief overview of our results, spending a moment on our same-property performance. And then I'll move on to our capital markets and transactions activity before closing my remarks by updating our 2026 earnings guidance.

Overall, as Colin stated upfront, not only was the third quarter busy and productive, but our operating results were excellent as well. The positive office fundamentals that we've been discussing for the past few quarters are increasingly translating into historically strong operating metrics in our reported results.

Focusing on same property operations for a moment. Third quarter same-property cash NOI increased 7.4% over last year, driven by a 5.5% revenue growth number and 2% expense growth. This is the strongest same-property cash NOI growth since the first quarter of 2020. As a quick note, we left 201 North Tryon in our same-property pool. As Richard discussed earlier, this asset is currently undergoing a major redevelopment. And as a result, cash NOI was down 35% compared to last year. Excluding 201 North Tryon, same-property cash NOI for the balance of the portfolio increased 8.6% in the third quarter.

Moving on to our capital markets activity. We recently paid off 2 mortgages at maturity and raised additional future proceeds from our ATM program. In early September, we repaid a $100 million mortgage on Colorado Tower in Austin. And in early October, we repaid $116 million mortgage on 201 North Tryon. Both maturities were funded with proceeds from the $500 million unsecured bond deal we executed earlier in 2026.

With these payoffs, we now have only one remaining consolidated mortgage left on our balance sheet. Our total consolidated debt is 94% unsecured. We've made the decision to pursue an unsecured debt strategy in 2024 when we obtained investment-grade ratings from both Moody's and S&P, and we remain committed to this plan. To date, we have issued $1.9 billion in unsecured public debt and our bonds currently trade at the tightest spread to treasuries among all traditional office REITs.

We also sold 917,000 shares on a forward basis under our ATM program at an average gross price of $31.37. Combined with the shares we sold in 2025, we now have sold 3.9 million shares on a forward basis at an average price of $30.66 per share, none of which have settled. This represents approximately $120 million of attractively priced equity that is available for future investment opportunities. I believe this is an underappreciated asset in today's volatile capital markets environment.

As both Colin and Kennedy discussed earlier, we closed several property transactions during the third quarter. And although they outlined the rationale and economics for these deals, I thought it might be helpful to provide a little clarity on the accounting treatment where appropriate.

First, as you may recall, we marked 111 Congress to market earlier in the year as the sale became probable. And because final proceeds aligned with our prior valuation, the sale did not generate a significant gain or loss on closing this quarter.

Second, our preferred equity investment in 5th & Walsh will be classified as an investment in real estate debt and the cash flow will be recognized as interest income. Third, Domain 4 is now classified as land on our balance sheet and is included in our land inventory schedule in the earnings supplement.

Finally, the joint venture that acquired 2401 McKinney is consolidated, and it shows up on our balance sheet as both land and predevelopment costs, with predevelopment costs included in other assets.

With that, I'll close our prepared remarks with our outlook for the balance of 2026. We currently anticipate full year '26 FFO between $2.95 and $2.99 per share with a midpoint of $2.97. This is up $0.02 from our prior midpoint. The higher FFO outlook is primarily driven by better-than-forecast leasing activity and fee income. Our updated guidance also assumes that none of the shares that are issued on a forward basis settle in 2026. Finally, our updated guidance continues to assume the sale of the 303 Tremont land parcel during the fourth quarter. It does not include any additional acquisitions, dispositions or development starts this year.

With that, let me turn the call back over to the operator.

Operator

[Operator Instructions] First will be Blaine Heck at Wells Fargo.

分析師問答

Blaine Heck

Colin and Kennedy, congratulations on the 2401 McKinney venture. I was hoping you could frame up the project a little bit for us by commenting to whatever extent you can on a few things, total expected spend at your share, the yield you're underwriting, the time line from here? And anything you can tell us about pre-leasing given that as he mentioned, Colin, there's been a lot of reporting about this project.

Michael Connolly

Yes. Blaine, in terms of what we can share, I would tell you from a process perspective, we are still finalizing the building plans and the ultimate cost of that. And when those are complete, we'll be in a position to hopefully sign leases and commence construction and make an announcement and be able to provide you much more detail. So based on the current time line, that's going to be in the first half of 2027. So at the moment, I cannot give you kind of a specific total cost. I'd say overall construction costs in the Dallas Uptown market on a per square foot basis, depending on what you build range somewhere between $900 to $1,000 a foot.

And I'd just pivot back to my earlier comments that when we do make any future announcements that we do think that investors will find very compelling, the pre-leasing metrics that we achieve as well as the return profile that those will be very compelling. And I think 2401 McKinney, we believe, will be a very strong driver of future earnings growth for the company.

Blaine Heck

Okay. That's fair for now. Just related to it, can you comment at all on how the JV is structured economically between you and your partner? And then you mentioned interest rates. So how were the elevated and volatile interest rates kind of accounted for as you were committing to this project and negotiating the terms?

Michael Connolly

Yes. Again, as Kennedy mentioned, we have the 97.5, 2.5 joint venture with our good friends at Trammel Crow in Dallas, they will be responsible for kind of the day-to-day development process. We, obviously, as an LP have control of major decisions. The -- in terms of interest rates and the impact, they're obviously going up the bar for new development in today's cost of capital environment is without question higher we have certainly thought about that.

And as I said, when we're in a position to provide more specifics, we do think investors will find the return profile, very compelling even in today's environment. But again, today, the only thing that we've actually committed to is buying land, and we've done that. And so as we go forward, we'll manage through changes in the interest rate environment. But we're really confident that, like I said, the returns will be compelling and I think a big driver of future earnings growth for Cousins.

Blaine Heck

All right. Look forward to hearing more. Maybe I'll sneak in one more. Just cash spreads of 19.8% were a big step up from 9.2% last quarter. Can you talk about whether there were any upside individual leases in that number? Which markets drove the strength? And maybe what a reasonable expectation for spreads looks like over the next several quarters given the mark-to-market left in the portfolio?

Richard Hickson

Sure, Blaine, this is Richard. In our third quarter activity, there really weren't any single leases that drove the higher roll-up. I'd note that all but one of our markets that had second gen activity were double-digit growers. So it really was broad-based across the portfolio. Obviously, 19.8% is a high number. I think it's the highest in 5 years, and we acknowledge that. But we're in a very interesting environment right now with the supply and demand formula that Colin went in depth on in his remarks in the fast-moving market.

So I'd say that we feel like it's actually hard to put a tag on how much we're going to see continued growth in the portfolio, but it's probably going to be higher than we've been used to seeing in years past. And we're 14.2% roll up year-to-date, and we feel confident we can continue to probably achieve something in that range. But again, the market is moving fast and rents are growing fast, and it's tough to really predict at this point.

Operator

Next question will be from Manus Ebbeck at Evercore ISI.

Manus Ebbeck

Just wanted to ask if you can expand on the funding side for the new development side, just like how we should think about this? Obviously, you have different avenues kind of at hand, how you could spend the development spending over time? And then kind of maybe help us and investors think through the exact like early impacts for like 2027. I totally understand that the total kind of like budget and probably you're still under planning. But like if we think about like the commencement of development spending in '27, like how meaningful or kind of like what type of spending maybe starts in like the next quarter so we can kind of think through the moving pieces here?

Gregg D. Adzema

Manus, it's Gregg. First, when we talk about funding any investment, including developments, as Kennedy pointed out in her remarks, from a funding perspective, we've got 2 north stars, which is, it will be accretive and it will be leverage-neutral. So as we look at the specific development that we're talking about in Dallas, it will be both of those things. We'll fund it on an accretive basis once it stabilizes, and we'll fund it on a leverage-neutral basis when it stabilizes.

And then in terms of kind of what we'll do specifically, we've got, give or take, $120 million of unsettled ATM shares that we've issued. So that could be a good starting point. We may use it on McKinney, we may not. And so clearly, issuing equity on a forward basis gives you the flexibility to settle kind of as needed. It's a very effective tool to fund development. So the fact that we've already done $120 million of it is terrific.

Obviously, we've got other avenues available to us as well. We can sell noncore assets, whether it be property or land. We've done that this year. We've done that in the past and we may do that in the future to fund 2401 McKinney. And then as Kennedy said, I mean, JVs are always available to us. This is going to be a compelling investment. We've talked about that several times now. And so if we decided to use a joint venture to fund some of the 2401 McKinney, that's another alternative available to us.

And then in terms of its impact on '27, hard to say right now because we don't have specific time, we don't have specific amounts. We don't have the lease or leases. So it's really hard for me to tell you exactly what you should put in your model for 2027. But as you know, whenever you model development, once it becomes probable, you're able to capitalize most of the costs associated with that investment, not the least of which is interest. And so the impact early on is not terribly large either way. And bottom line, once this asset, we'll talk about 2401 McKinney, but it could be any big development asset, once it stabilizes, the accretion to earnings will be significant.

So when we talk about an asset of this size, as Colin has said a couple of times on the call already, once this thing stabilizes, it will drive earnings. And we think that any impact kind of on earnings in the interim is overcome by the eventual accretion upon stabilization.

Manus Ebbeck

Got it. I appreciate it. Maybe one quick follow-up on the leasing pipeline. Obviously, you talk about -- sounds very encouraging. I just wanted to see if you can expand a little bit on the mix between like new and renewals that are within the leasing pipeline that you quoted? And where -- in which market in your portfolio, you see the biggest like potential for net effective rent growth compared to the other ones?

Richard Hickson

Sure. This is Richard. In terms of the mix, if you just ex development, I would say that late-stage pipeline is about 63% new and expansion and then if you look at the broader pipeline, including early stage, that new and expansion mix skews even more to roughly 75%. So we're definitely seeing with our low exploration profile at this point. New and expansion is probably going to be a larger percentage of our activity. Again, we've got pockets of rental rate growth across the company. So it's hard to just pick just one. But I'd say we've seen the most aggressive rental rate growth, obviously, in Dallas, frankly, at all of our buildings there and continue to see really compelling rent growth in Charlotte with the supply constraints there. So again, we're feeling really good about virtually every one of our markets in terms of rent growth.

Operator

Next question will be from Jana Galan at Bank of America.

Jana Galan

Congrats on a great quarter. With the 90% occupancy target in reach, low expirations, I'm kind of curious how you're thinking about setting the next goalpost time line around that? And maybe how you balance a specific time frame with also getting the very impressive cash re-leasing spreads you achieved this quarter?

Michael Connolly

Jana, it's Colin. The -- we are excited to get to 90% by year-end. It was a goal. It was always an interim goal. And we do believe we can continue to push occupancy of higher to more stabilized levels. If you looked at the company more broadly over time, in pre-COVID, we were running the portfolio of 92% to 93% occupied. When we compare the portfolio we have today,to the pre-COVID portfolio, we have significantly enhanced the quality of it and it's just a better overall portfolio of real estate. So we're confident that we're going to continue pushing occupancy to those 92%, 93% plus levels.

In terms of a specific time line, I'm a little bit hesitant to do that for the following reason. While we have been prioritizing occupancy over the last 12, 18 months, as we look forward to the market and tightening fundamentals, we do think as we described that we're in an inflection point between supply and demand. And so we are -- while we will continue to prioritize occupancy, we are also sharply focused on driving rental rates. And so there will be a healthy tension there. And -- but I'm confident we're going to achieve both because, again, with both, I'm reluctant to give a specific time line.

Jana Galan

And then maybe just on the great rents you achieved. Curious if you can maybe talk to any changes around the tenant improvements, free rent, anything around that?

Richard Hickson

Jana, this is Richard. So obviously, this quarter, we saw both free rent and tenant improvements come down fairly meaningfully. It's always difficult to look at any one quarter and a sequential change in isolation because the business can be lumpy in that regard. But we do expect that with our ability to raise rents also will come hopefully some continued mitigation and concessions. At this point, our expectation is that we'll probably see free rents come down first and then ultimately, TI, hopefully. But at this point, our focus is on raising headline rents chipping away free rent and then TI at some point further on in the future.

Operator

Next question comes from Anthony Paolone at JPMorgan Chase.

Anthony Paolone

You mentioned doing development at yields greater than acquisition cap rates. And so whether this is McKinney or any other projects you might be looking at, can you talk about just where you see cap rates for or premium assets right now in your markets? And how do you think about appropriate spreads against that on a development depending on pre-leasing and time line and so forth?

Michael Connolly

Tony, I'll let Kennedy kind of jump in and talk about where spot cap rates are in our markets for high-quality product. But we've historically looked at development and said that we're looking for spreads of 150 to 200 basis points over stock cap rates. I think in today's environment, we probably skew towards the higher end of that range and a bit of the higher rate environment, a little bit more volatility.

But in terms of sharing kind of specific yield requirements on development, many of the opportunities that we're looking at across our potential development pipeline or build-to-suit-oriented situations. And we want to be careful from a competitive standpoint of kind of citing a specific yield requirement. But again, I think they'll be very attractive and be a driver of growth for the company.

Jane Hicks

Yes. And I would say there hasn't been too many data points in this new higher rate environment. But generally, you're still seeing core office assets trade in that plus or minus 7% range. And obviously, that's a function of lease term, credit and just the overall profile relative to market rents. So some variability in that as there is the yield on cost and development deals, but hopefully, that gives you a good view of how we're thinking about this.

Anthony Paolone

Okay. Got it. And then second for Richard, I think you mentioned the AI demand picking up across your markets. Can you talk a bit more about what the nature of that is? What types of AI companies? Are you seeing this demand ramp up from and size of the leases? Any color around that would be great.

Richard Hickson

Sure. for this quarter, the AI demand was in Austin. In prior quarters, it had been a little bit more widespread across Nashville and Tempe and Atlanta. But in this quarter, I would say the hyperscaler demand was the largest component and then a couple of others that are playing in the AI space and the kind of software hardware side of things, but the hyperscaler demand is definitely the biggest component.

Michael Connolly

And Tony, this is Colin. I would just add on. Obviously, there's been a lot of discussion about AI demand being focused on San Francisco and New York. And I guess what I would -- how I would characterize that as you've seen perhaps the AI native companies that are relatively new in their history have been focused on San Francisco and New York. But some of the largest players in AI space are these hyperscalers who are already well underway in distributing their workforce more broadly across the country, and a lot of that focused on markets like Austin, in Nashville and Atlanta. And I think you'll continue to see that happen.

And our expectation is, over time, those AI native companies, just like the large hyperscalers will begin a process to distribute their workforce more broadly across the country. And I think down the road, that could be a nice tailwind of demand.

Operator

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

Upal Rana

With cash rent spreads nearly 20% in the quarter, how did the economics in your existing 1.4 million square foot pipeline compared to that? Is that spread sustainable as the pipeline converts?

Michael Connolly

Well, Upal, it's Colin. I appreciate the question. Again, one, as Richard described, a significant component of that pipeline is potential new development prospects. So those will be at market. And then as Richard alluded to, the pipeline in our existing portfolio is going to benefit from these tightening conditions of lack of new supply and strong demand. And as he alluded to, we're confident that over the next few quarters, we expect double-digit double-digit roll-ups within the leases that we execute.

Upal Rana

Okay. Great. That was helpful. And then maybe on the Domain 4 site, combining that with Domain Central's parcel, how does that change the scale and the potential use of the opportunity there? Could the larger site support a phased mixed-use development there? And what other milestones we need to be reached before if you consider starting development there?

Jane Hicks

Yes. Good question. This is Kennedy. I mean, in short, it frees up for a lot of flexibility. So we're working on a master plan there that certainly includes a large component of office space, but also retail and the potential for some other uses as well. And to answer your question, it can be phased, but we certainly want to be thoughtful around how those future phases would interact. But it just gives us a lot of flexibility going forward having those 2 sites together and having that building that was on the Domain 4 site [indiscernible].

Michael Connolly

Yes. In total, it effectively doubles the size of the site from 5 acres to 10 acres. And Domain 4 being most closely proximate or adjacent to the high street retail of the Domain. And so it might change our plans and allow us to actually start the project next to the existing retail and work our way out to the Domain Central site that we've had for some time.

Operator

Next question comes from John Kim at BMO Capital Markets.

John Kim

If you don't mind, I'm going to try a 3-part question on your Austin tenants or some of your Austin tenants. There might be quick answers. But first Google is self-managing their space now at [indiscernible] building, has that had any impact on NOI? Expedia, wondering if it's too early to discuss early renewal for their space and if that's part of your pipeline? And then finally, with Amazon, just your latest views on the commitment to their space, just given more recent recently announced layoffs they've had?

Richard Hickson

This is Richard. So let's start with Google. They did elect to self-manage the property not long ago that really has no net impact on net operating income. So it's really just a geography issue for us. So you'd see OpEx kind of come out of the equation for us, but the NOI is still the same.

With regard to Expedia, I would just -- a quick answer, no. That is not in our pipeline as far as an early renewal. And Amazon's commitment, what I'd say is that we have a very strong relationship with Amazon. We're in a very continuous contact with them with regard to their office space needs and they are absolutely very committed to their footprint with us and we're hopeful that they continue to need to grow in our markets. And that certainly is the sense sitting here today.

Michael Connolly

Yes. I'd just add, we've executed numerous renewals with a large-scale Fortune 10 technology company across Austin and Temp. And to date, we've recently -- and amidst kind of the other announcements of layoffs, we -- and each of those renewals with a Fortune 10 tech company, they have kept 100% of their space.

John Kim

Okay. And Colin, I just wanted to follow up on 2401 McKinney. I realized there's some sensitivity behind the reported finance. But can you just comment on why that hasn't been announced yet? Is it an announcement on their part? Are they still finalizing lease terms with you and your partner? Or has the media speculation just got ahead of itself and is not quite accurate?

Michael Connolly

Well, again, I think a lot of the media speculation regarding particular group has been focused on public statements that they've made as well as incentives that they have received. I think that should show some pretty significant commitment. I think on our end, before you can sign a lease, you have to finalize the building plans and the ultimate cost to that. And that's very much what we're focused on and ourselves and our partnership with Trammell Crow are working on. And as I said, hopefully, that will get wrapped up call it, in the -- certainly in the first half of next year, we hope sooner. And that work has to be done before you can ultimately sign a lease and make an announcement. That's where we are.

Yes. Again, I think it's an extraordinarily exciting opportunity. And again, I think we feel fortunate to be partners and in -- with the opportunity to invest significantly in a market like Uptown, Dallas, with Trammell Crow and to now be an owner of the site that is getting significant interest, demand, interest from some pretty extraordinary companies.

Operator

Next question will come from Michael Lewis at Truist Security.

Michael Lewis

So you talked about 201 North Tryon and the strong fundamentals in Charlotte. I wanted to ask about 550 South where you had the Cardinal Health move out and some other space there to lease. Is there any update there?

Richard Hickson

Sure. There -- well, so today -- let's say, in the recent past, we signed about 82,000 square feet of new leases. At this point, we have one smaller 6,000 square foot customer in lease negotiations. And then behind that, we have proposals out for roughly 50,000 square feet of additional space.

Michael Lewis

Okay. Great. And then my second question, maybe I'm stating the obvious here, I don't know. But based on Kennedy's remarks, it sounded like McKinney might not be your only development start in '27. So is that fair? And are there any different dynamics in Austin and Nashville regarding pre-leasing and returns, et cetera, versus what you said about uptime Dallas?

Michael Connolly

Yes. Look, it's Colin. And I think your insights are correct. There are other opportunities that we're in discussions with customers in other markets outside of Dallas that I think could also be very compelling. And I think it's just going to be situational in terms of each opportunity, the size of the opportunity and how we think about pre-leasing. But I'm confident anything that we do on the development front that we announced that investors as they evaluate both the pre-leasing and the return profile we'll find them to be compelling. And if they, in our opinion, would not, that's not a project that we would pursue, but there is demand in really all of our markets for, again, customers coming in into the market kind of in migration in many cases, out of the Northeast and the West Coast and they're just not large blocks of space. And with that demand, in many cases, the only solution is new development at today's market rents and we hope to identify those.

And as Kennedy said, if the scale of that opportunity is larger than we think appropriate for Cousins, we will leverage joint venture partners to ensure that we get to participate in the upside of those opportunities.

Operator

Next question comes from Dylan Burzinski at Green Street.

Dylan Burzinski

Maybe just sort of thinking about 2027, obviously, in 2026, you continue to post consecutive quarters of positive net absorption. The lease percentage gap versus occupancy continues to widen. And you guys mentioned solid rent growth prospects. So as we sort of think about next year same-store NOI growth. I mean, to us, it feels like mid-single digits and potential acceleration versus '26 could be a reasonable assumption. But I just wanted to sort of think about anything that we might be missing or if that sort of feels reasonable given the backdrop that you guys have sort of outlined.

Gregg D. Adzema

Dylan, it's Gregg. Clearly, we're not providing '27 guidance. We'll do that like we always do, and I think most of our peers do in our fourth quarter call. But when you take a look at same property performance, it's typically a bit of a lagging indicator. The leases that we signed and that we then obviously, this most recent quarter roll up these rents, you got to get through the machine, right? You've got to build out the space, you got to move the people in, you got to recognize rent and then to get recognize the same-property NOI performance. So it's a bit of a lagging indicator.

But the strength that Colin and Richard has discussed on this call will eventually flow through same-property NOI, whether it's the first half [indiscernible] or the first half of '28, it will eventually roll through but it's more of a lagging indicator than a leading indicator.

Dylan Burzinski

That's fair. And then maybe just touching on sort of a broader capital markets environment. And you guys mentioned development sort of being active opportunity. But are you guys still active in going out and looking for acquisitions? Or do you guys still like with one, potentially 2 development starts happening in the near term that you guys are sort of comfortable with where you guys are at on that front?

Jane Hicks

I'd say we can do both. I mean, we're certainly actively evaluating opportunities that are on the market. As I mentioned, the transactions market has slowed some, just given the volatility in the market and then would be sellers adjust to higher interest rates. So we haven't seen the type of product that we'd be interested in buying come to market per se. But we think we can be competitive when there are sellers with the assets that we like. We will still certainly look to pursue those and evaluate them relative to development opportunities and what else is at hand.

Michael Connolly

Yes. Dylan, I would just add that certainly, equity capital, in particular, seems to be a bit constrained and Kennedy touched on this earlier and many times in past environments like that. We've been able to capitalize on some really attractive opportunities to buy some trophy assets below replacement cost and accretive day one. And so if those situations present themselves, we have the flexibility to capitalize on those.

But again, just stepping back for us, any use of capital, whether it's development or an acquisition, we have to look at that. At the same time, and identify the sources and see a path forward to doing that eventually leverage neutral and accretive to earnings. And so we never pause looking at opportunities. That's our job. And I think in this environment with less capital to compete, that could be real -- could be a real opportunity for us.

Operator

Next question comes from Ale Yasin at Wolfe Research.

Alexandra Lauren Yaseen

I just have one quick one and to ask about one more tenant. ADP is one of your top tenants and their remaining lease term is 1.5 years. So I was just wondering what your expectation is for the tenant renewing there?

Richard Hickson

Ale, this is Richard. I'd say it's a little early for us to be able to talk in any depth about ADP and a potential renewal. But I would emphasize that we have a great relationship.

Michael Connolly

And it's for them, a great real estate situation in the middle of downtown Tempe and they control the entire building and have great signage. And as Richard said, we've got a great relationship with them. It's just early.

Operator

Next question comes from Michael Lewis at Truist Security.

Michael Lewis

I had just one follow-up for Gregg. The forward equity sales from last year, those had an initial maturity date of the end of this year. I saw your guidance, I think, excluded settlement of those. And I see language now that says it's extendable by mutual agreement. I guess all this is to ask, do you need to settle forward shares in 4Q? Or should we assume that's not the case that those will be settled next year?

Gregg D. Adzema

Yes. So typically, when you do these forward agreements with the issuing banks or bank or banks, a common term is one year but they're very extendable. As long as -- from the bank's perspective, as long as the credit hasn't deteriorated, they have no problem with an extension. We've already extended that once -- the '25 ones once. So no, we do not have to settle those shares by the end of the year. We will much more than likely just extend that agreement with the bank for another year.

Operator

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

Michael Connolly

Thank you for your time this morning and interest in Cousins Properties. We hope to see many of you at the NAREIT Conference here in Atlanta in November. In the meantime, if you have any follow-up questions, please reach out to GreGregg Adzema or Roni Imbeaux. Have a great rest of your day and a great weekend.

Operator

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