Thank you for watching. Thank you. Thank you for watching. Thank you for watching. Thank you for watching. Thank you. Thank you for watching! Good morning, ladies and gentlemen, and welcome to the Cousins Properties third quarter conference call. At this time, note that all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you require assistance, please press star zero for the operator. Note that this call is being recorded on Friday, October 30th, 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 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 8K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website, cousins.com. Please be aware that certain matters discussed today may constitute forward-looking statements within the meaning of federal securities laws and actual results may differ materially from these statements due to a variety of risks and uncertainties and other factors, including the risk factors set forth in our annual report on Form 10-K and our other SEC filings. The company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise. The full declaration regarding forward-looking statements is available in the supplemental package posted yesterday and a detailed discussion of some potential risk 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 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 five 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. 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 of 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 Sunbelt migration. Alongside full corporate relocations, We see an uptick in companies opening new Sunbelt 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 three, in some cases four-year lead time to deliver a new project, Any meaningful uptick and 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 Sunbelt, 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 Sunbelt 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 two cents a share to $2.97 per share for the full year in 2026, which represents 4.6% growth over 2025. Thank you for joining us. 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 five 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 and premier properties. We believe 2401 McKinney is simply the best site in the city and an extraordinary opportunity for Cousins. As I have 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 plan 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 Sunbelt 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 non-existent, High-quality lifestyle office space is becoming increasingly scarce, and overall fundamentals in the Sunbelt 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? 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. The team also completed an impressive 326,000 square feet of renewals during the quarter, with renewal square foot volume 25% higher than our three-year run rate. This included six renewals of a full floor or greater, four of which expanded their footprint. With our solid-to-date renewal leasing, we now only have 853,000 square feet expiring through the end of 2027, representing 4.6% of total portfolio lease base. For context, that is roughly half of what we have had expiring on average at the same point the last two 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 unleases 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 Thank you for joining us. 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 three 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 two markets, with Atlanta once again as the largest positive contributor. I would also note that the current 3.5% difference between our leased and occupied percentages remains at the widest level in over three 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 activity as 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 leased to occupied spread of 6.1%. The team also rolled up cash rents over 18% this quarter. In Austin, JLO notes that the third quarter net absorption was the highest since the second quarter of 2019, and Per Endeavor Group, total tenants and 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. 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 four 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% lease 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 two additional full floor renewals, which included some expansion, totaling 54,000 square feet. Recall that the previous full building customer, Oventive, expired at second quarter end, enabling us to go direct with all of our subtenants. Of all of their subtenants, of those now direct tenants, Roughly 65% are currently set to expire in the second quarter of 27th. 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.

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 Fifth & Walsh, a development project by Endeavor. Fifth & 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 upon funding will receive a 10% preferred return. The investment allows us to generate near-term earnings coupled with a 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 pre-development 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 Trammell Crow, a prominent developer headquartered in Dallas, who has advanced pre-design 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 three guiding principles. First, increase earnings. Second, enhance the quality of our Sunbelt 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 pre-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 pre-development efforts across our markets. Our attractive land bank and flexibility in 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 five acres in the epicenter of Domain. In Nashville, at Newhoff, 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.

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 up front, 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 Tron, 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 two 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 a $116 million mortgage on 201 North Tron. 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 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 Thank you for joining us. As you may recall, we marked 1-11 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 upon closing this quarter. Second, our preferred equity investment in Fifth and 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 not 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 pre-development costs, with the pre-development 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 two cents 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 I 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.

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First will be Blaine Heck at Wells Fargo. Please go ahead, Blaine.

Great, thanks. Good morning. 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 timeline from here, and anything you can tell us about pre-leasing, given that, as you mentioned, Colin, there's been a lot of reporting about this project.

Yeah, good morning, Blaine. You know, 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 costs of that. And when those are complete, we'll be in a position to hopefully sign leases and commence construction and and many more. and I 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.

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 know, you mentioned interest rates. So, you know, how were the elevated and volatile interest rates kind of accounted for as you were committing to this project and negotiating the terms?

Yeah, again, as Kennedy mentioned, we have a 97.5, 2.5 joint venture with our good friends at Trammell 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. 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 Thank you for joining us.

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 upsized individual leases in that number? You know, which markets drove the strength, and maybe what a reasonable expectation for spreads looks like over the next several quarters, given the marked market left in the portfolio?

Mr. 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 five 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 and 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, you know, 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.

Okay, great. Thanks a lot, everyone. Thanks, Blaine.

Next question will be from Manis Abeke at Evercore ISR.

Please go ahead, Manis.

Thanks for taking the question. 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 of how you could spend the development spending over time. And then kind of like maybe help us and investors think through the exact like Early impact for like 2027. Totally understand that the total kind of like budget and project is still under planning. But like if we think about like the commencement of development spending in 2027, 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. Thank you.

Good morning. It's Gregg. So first, when we talk about, you know, funding any investment, including development, as Kennedy pointed out in her remarks you know from a funding perspective we've got two north stars which is we it'll be a creative and it'll be a leverage neutral so as we look at this specific development that we're talking about in Dallas it'll be both of those things we'll fund it on an accretive basis once it stabilizes and um and we'll fund it on a leverage neutral basis once it stabilizes um and then in terms of kind of what we'll do specifically you know we've got give or take 120 million dollars of um and many other 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 non-core 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 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 a 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 a 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 you're talking about an asset of this size, as Colin has said a couple times on the call already, once this thing stabilizes, it'll drive earnings. And we think that any impact on earnings in the interim is overcome by the eventual accretion upon stabilization.

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

Sure. This is Richard. In terms of the mix, if you just X development, I would say the 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, you know, with our low expiration 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.

Got it. Thanks a lot.

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

Please go ahead, Jana.

Thank you. Good morning and 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 timeline around that. and maybe how you balance a specific timeframe with also getting the very impressive cash releasing spreads you achieved this quarter.

Good morning, Jana. It's Colin. We were 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, pre-COVID, we were running the portfolio 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. 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 timeline, 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, We look forward to the market and tightening fundamentals. We do think, as we've described, that we're in an inflection point between supply and demand. While we will continue to prioritize occupancy, we are also sharply focused on driving rental rates. There will be a healthy tension there, but I'm confident we're going to achieve both. Again, with both, I'm reluctant to give a specific timeline.

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

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 at sequential change and 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 rent come down first. and then ultimately TI hopefully, but at this point our focus is on raising headline rents, chipping away at free rent and then TI at some point further on in the future.

Thank you. Next question comes from Anthony Pallone at JPMorgan Chase.

Please go ahead, Anthony.

Great, thanks, good morning. 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 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 timeline and so forth?

Hey, Tony, I'll let Kennedy kind of jump in and talk about, you know, where spot cap rates are in our markets for high quality product. But, you know, we've historically looked at development and said that, you know, we're looking for spreads of 150 to 200 basis points over spot 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 are 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.

Yeah, and I would say there hadn'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 rent. Some variability in that as there is with the yield on costs and development deals, but hopefully that gives you a good view of how we're thinking about this.

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.

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 others that are playing in the AI space and the kind of software, hardware side of things,

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 how I would characterize that is 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 the 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 and 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, 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.

Okay. Thanks for that.

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

Great. Good morning. Thanks for the question. With cash rent spreads nearly 20% of the quarter, how do the economics in your existing 1.4 million square foot pipeline compare to that? Is that spread sustainable as the pipeline converts?

Well, 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 roll-ups within the leases that we execute.

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

Yeah, good question, Mr. Kennedy. In short, it frees us 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. 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 two sites together and having that building that was on the Domain 4 site torn down.

Yeah, and 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.

Okay, great. Thank you.

Next question comes from John Kim at BMO Capital Markets.

Please go ahead, John.

Thank you. If you don't mind, I'm going to try a three-part question on your Austin tenants or some of your Austin tenants. There might be quick answers, but first, Google, they're self-managing their space now at the sale 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 their commitment to their space, just given more recent, recently announced layoffs that they've had.

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, 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 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.

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

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

Well, again, I think a lot of the media speculation regarding a particular group has been focused on public statements that they've made as well as incentives that they have received. And 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 costs to that and that's very much what we're focused on and ourselves and our partnership Tremel Crow are working on and as I said hopefully that will get wrapped up you know call it in the certainly in the first half of next year we hope sooner and that that work has to be done before you can you can ultimately sign a lease and make an announcement that's where we are. I think it's an extraordinarily exciting opportunity. And again, I think we feel fortunate to be partners and with the opportunity to invest significantly in a market like Uptown Dallas with Trammell Crow and to now be an owner of a site that is getting significant interest, demand interest from some pretty extraordinary companies.

Next question will come from Michael Lewis at Truist Security.

Please go ahead, Michael.

Thank you. 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?

Sure. Well, so today 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.

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, you know, any different dynamics in Austin and Nashville regarding pre-leasing and returns, etc., versus what you said about Uptime Dallas?

It's Colin, and I think your insights are correct. There are other opportunities that were 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 the and how we think about pre-leasing. But I'm confident anything that we do on the development front that we announce that investors as they evaluate both the pre-leasing and the return profile will 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.

Thank you.

Next question comes from Dylan Brzezinski at Green Street.

Please go ahead, Dylan.

Morning, guys. Thanks for taking the question. Maybe just sort of thinking about 2027. Obviously, in 2026, you continue to post consecutive quarters of positive net absorption. The least 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 sort of wide growth, I mean, to us, it feels like, you know, mid single digits and potential acceleration versus 26 could be a reasonable assumption. But just wanted to sort of think about, you know, anything that we might be missing or if that sort of feels, you know, reasonable given the backdrop that you guys have sort of outlined.

Hey Dylan, it's Gregg. Good morning. You know, clearly we're not providing 27 guidance. We'll do that like we always do, and I think most of our peers do on our fourth quarter call. But, you know, when you take a look at same property performance, it's typically a bit of a lagging indicator. You know, the leases that we sign, that we then obviously, this most recent quarter, roll up these rents, you got to get through the machine, right? You got to build out the space, you got to move the people in, you got to recognize rent, and then will get recognized in the same property NOI performance. So it's a bit of a lagging indicator, but the strength that Colin and Richard have discussed on this call will eventually flow through same property NOI. Whether it's the first half of 22nd or the first half of 28, it'll eventually roll through, but it's more of a lagging indicator than a leading indicator.

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

Thank you so much for joining us. When there are sellers with 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.

Yeah, Dylan, I would just add that, you know, certainly equity capital in particular seems to be a bit constrained, and Kennedy touched on this earlier, and many times in past years, We've been able to capitalize on some really attractive opportunities to buy some trophy assets below replacement costs in a creative 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 a real opportunity for us.

Great. Thanks, all.

Next question comes from Ali Yassin at Wolf Research. Please go ahead, Ali.

Thanks. I just have one quick one and to ask about one more tenant. ADP is one of your top tenants and the remaining lease terms a year and a half. So I was just wondering what your expectation is for the tenant renewing there.

Hey, Ali. This is Richard. You know, 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.

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.

Got it. Thank you. Next question comes from Michael Lewis at Truist Security.

Please go ahead, Michael.

Thanks. 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?

Yeah, so typically when you do these forward agreements with issuing banks or banks, a common term is one year, but they're very extendable. As long as, you know, 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 one, 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 an agreement with the bank for another year.

Okay, got it. Thank you.

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

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

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.