Executive Summary / Key Takeaways

• Cousins Properties is strategically positioned as a premier owner and operator of "lifestyle office" properties in high-growth Sun Belt markets, benefiting from reaccelerated corporate migration and robust return-to-office trends.
• The company has demonstrated consistent financial performance, achieving FFO growth in 2024 and forecasting further growth in 2025 and 2026, a rare feat in the traditional office sector.
• A disciplined capital allocation strategy, including opportunistic acquisitions like The Link and proactive portfolio recycling, is enhancing asset quality and driving accretive growth.
• Cousins maintains a "fortress" balance sheet with industry-leading low leverage and strong liquidity, providing a distinct competitive advantage for seizing compelling investment opportunities.
• The market is experiencing a significant bifurcation, with declining supply of high-quality office space and accelerating demand, creating a favorable environment for Cousins' premium portfolio.

The Sunbelt Advantage: A Differentiated Approach to Office Real Estate

Cousins Properties Incorporated (CUZ) stands as a fully integrated, self-administered, and self-managed real estate investment trust, deeply entrenched in the dynamic Class A office and mixed-use development landscape of the U.S. Sun Belt. Founded in 1958, the company's enduring vision, rooted in integrity and purpose, has not only shaped skylines but also cultivated a distinct operational philosophy. This philosophy, centered on its "lifestyle office" portfolio, is the cornerstone of its competitive strategy.

The company's differentiation is not found in a proprietary physical technology, but rather in its integrated platform and "lifestyle office" asset strategy, which functions as its competitive "technology" in the REIT space. This involves a meticulous approach to developing, acquiring, leasing, managing, and owning properties that are either modern structures or have been extensively modernized. These buildings are professionally managed and maintained, offering a suite of amenities highly sought after by companies prioritizing the physical work environment for employee recruitment and retention. This strategic focus translates into tangible benefits: the company's lifestyle office portfolio consistently achieves higher occupancy rates than other office buildings in its markets, leading to more resilient revenue streams and a lower capital expenditure profile due to the newer vintage and superior condition of its assets.

Cousins' strategic initiatives are further bolstered by its "simple platform, trophy assets, and opportunistic investments" approach. This disciplined capital allocation includes selective developments and timely dispositions of non-core assets, ensuring a continuously upgraded portfolio of efficient properties. This strategy has been particularly evident since 2019, with the acquisition of $2.3 billion in lifestyle office properties, the initiation of approximately $600 million in new developments, and the divestment of $1.3 billion in noncore assets. This aggressive recycling of capital, even amidst a global pandemic and rising interest rates, has allowed Cousins to significantly upgrade its portfolio quality while maintaining a leverage-neutral position.

The broader office market is currently undergoing a profound rebalancing, characterized by a significant bifurcation. There is dwindling demand and capital for older, commodity-grade properties, many of which are being repriced for reimagining or demolition. Conversely, the lifestyle office market, where Cousins operates, is thriving. New construction starts are at de minimis levels, and any meaningful increase in new supply is years away. Simultaneously, leasing demand is accelerating, with net absorption reaching post-pandemic highs and vacancy declining for the first time in seven years during the third quarter of 2025. This tightening market, coupled with the reacceleration of corporate migration to the Sun Belt, creates a highly favorable environment for Cousins' premium assets.

Competitive Positioning and Market Dynamics

Cousins Properties operates in a competitive landscape alongside other prominent REITs such as Boston Properties (BXP), SL Green Realty Corp. (SLG), and Vornado Realty Trust (VNO). While these competitors also focus on high-quality office assets, Cousins' dedicated emphasis on the Sun Belt markets provides a distinct advantage. Boston Properties, for instance, primarily targets major U.S. gateway cities, offering broader diversification but potentially less specialized regional efficiency compared to Cousins. SL Green's concentration in New York City exposes it to single-market vulnerabilities, a risk mitigated by Cousins' geographically diversified Sun Belt portfolio. Vornado, with its mixed-use and urban focus, shares some similarities but also faces challenges in adapting to evolving work trends, which Cousins addresses through its modern "lifestyle office" offerings.

Cousins' competitive edge is further amplified by its "best-in-class balance sheet," which management views as an "offensive tool." This low-levered financial position, with net debt to EBITDA at an industry-leading 5.1x as of Q2 2025, allows the company to pursue compelling investment opportunities without relying on dilutive equity raises at unfavorable valuations. This financial flexibility, combined with its proven track record of closing transactions reliably, positions Cousins as a preferred buyer for sellers of high-quality office assets.

The company's operational prowess is evident in its consistent leasing performance. For the 46th consecutive quarter, Cousins delivered a positive cash rent roll-up on second-generation leasing in Q3 2025. The company leased 551,000 square feet of office space in Q3 2025, with 38% being new or expansion leases. Year-to-date through Q3 2025, 1.43 million square feet were leased or renewed, with 48% representing new or expansion activity. This robust leasing pipeline, particularly from West Coast and New York City-based financial services and large-cap technology companies, underscores the strong demand for Cousins' lifestyle office product.

Financial Performance and Operational Excellence

Cousins Properties has demonstrated a compelling financial trajectory, marked by consistent FFO growth and strategic capital deployment. For the nine months ended September 30, 2025, net income available to common stockholders was $44 million. The company's same property Net Operating Income (NOI) for consolidated and unconsolidated properties increased by 1.9% for the three months ended September 30, 2025, and 3% for the nine months ended September 30, 2025, compared to the prior year. This growth was driven by factors such as increased operating expense recoveries, higher parking revenue, and improved economic occupancy at properties like Promenade Tower and Tempe Gateway.

Non-Same Property NOI saw significant increases, primarily due to strategic acquisitions. The Dallas market, for example, experienced a 98.81% NOI growth for the three months ended September 30, 2025, largely attributable to the acquisition of The Link in July 2025. Similarly, Charlotte's NOI surged by 61% in Q3 2025 due to the Vantage South End acquisition in December 2024. These acquisitions, along with Sail Tower in Austin, have not only expanded the portfolio but also immediately contributed to earnings.

The company's liquidity remains robust, with $916.30 million available under its credit facility and $4.70 million in cash and cash equivalents as of September 30, 2025. Cousins' debt profile is conservative, with 90% of its consolidated debt bearing fixed interest rates. The company has actively managed its debt, including the issuance of $500 million in public senior notes in June 2025 and the repayment of $250 million in privately placed senior notes in July 2025. This proactive debt management, coupled with an industry-leading low leverage, ensures ample capacity for future investments.

Operational highlights include a 23.8% increase in straight-line basis net rent per square foot for office spaces under lease within the past year in Q3 2025. The average net effective rent in Q2 2025 reached $28.35, the second-highest quarterly level in the company's history, reflecting solid performance across all markets. The company's ability to drive parking revenues, with approximately 75% of the increase attributed to higher utilization, further signals the accelerating return to office across its portfolio.

Outlook, Guidance, and Strategic Initiatives

Cousins Properties has consistently raised its FFO guidance throughout 2025, reflecting management's confidence in its strategic direction and market fundamentals. The company's latest guidance for full-year 2025 FFO is between $2.82 and $2.86 per share, with a midpoint of $2.84, representing 5.6% growth over 2024. This projection positions Cousins for its second consecutive year of FFO growth, a notable achievement in the current office environment, with plans to continue this streak into 2026. This guidance assumes no additional SOFR cuts for the remainder of 2025 and excludes any speculative property acquisitions, dispositions, or development starts.

A key operational target is to achieve 90% or higher occupancy by year-end 2026, with the ramp heavily weighted towards the latter half of the year. While the expiration of Bank of America (BAC)'s lease at 201 North Tryon in Charlotte in Q3 2025 created a temporary dip, management anticipates occupancy to stabilize and then build higher. The redevelopment of 201 North Tryon, a $40 million project anticipated for completion in Q1 2027, is expected to reposition the asset as a premier lifestyle office destination.

Strategic acquisitions remain a core focus. The acquisition of The Link in Uptown Dallas for $218 million in July 2025 exemplifies this, expanding Cousins' presence in a high-growth market with a trophy asset that is 94% leased and immediately accretive to earnings. The in-place rents at The Link are nearly $20 per square foot below current market rates, offering significant future upside. Similarly, the proactive early termination agreement with Ovintiv at Legacy Union 1 in Dallas aims to multi-tenant the building and capitalize on future renewal opportunities.

The Neuhoff mixed-use development in Nashville continues to gain momentum. The apartment component was 86% leased by the end of Q3 2025 and is expected to stabilize by year-end. The commercial component, 53% leased, is now anticipated to stabilize in Q3 2026. The proximity to Oracle (ORCL)'s multibillion-dollar headquarters campus and a planned pedestrian bridge linking to Neuhoff is expected to be a significant long-term demand driver.

Risks and Challenges

Despite a compelling outlook, Cousins Properties faces several risks inherent to the real estate sector and broader economic conditions. Changes in general economic and capital market conditions, including inflation, interest rates, and labor market disruptions, could impact financial performance. The real estate industry is susceptible to the inability to enter into or renew leases on favorable terms, adverse changes in tenant financial conditions, and intense competition from other developers and owners.

The company's forward-looking statements acknowledge that actual results may vary materially from expectations due to these uncertainties. While management believes the return-to-office trend outweighs the impact of corporate layoffs, a sustained economic downturn or a significant shift in remote work preferences could pressure occupancy and rental rates. Furthermore, while Cousins' balance sheet is strong, refinancing existing debt at higher rates, as seen with some maturities, could impact interest expense. The company's reliance on Sun Belt markets, while currently a strength, could become a vulnerability during regional economic slowdowns. Cybersecurity risks and potential liabilities from environmental or regulatory requirements also remain ongoing considerations.

Conclusion

Cousins Properties is a well-positioned and resilient REIT, uniquely poised to capitalize on the evolving dynamics of the U.S. office market. Its unwavering commitment to the "lifestyle office" strategy in high-growth Sun Belt markets, coupled with a disciplined capital allocation approach and a robust balance sheet, forms a powerful investment thesis. The company's consistent FFO growth, strategic acquisitions, and proactive asset management underscore its operational excellence.

As the office market continues its bifurcation, with declining supply of premium space and accelerating demand driven by reaccelerated corporate migration and return-to-office mandates, Cousins' high-quality portfolio is set to outperform. The company's ability to leverage its financial strength for opportunistic investments, coupled with a clear roadmap for occupancy and earnings growth, positions it favorably for sustained value creation for its shareholders. The focus on modern, amenity-rich properties in vibrant urban centers, effectively serving as its competitive "technology," ensures its relevance and appeal in a rapidly changing environment.