Executive Summary / Key Takeaways

• Balance Sheet as Offensive Weapon: Cousins Properties' industry-leading 5.1x net debt-to-EBITDA ratio and investment-grade credit rating provide a distinct competitive advantage, enabling accretive acquisitions of trophy assets while peers remain capital-constrained, positioning the company to capture disproportionate value as Sun Belt office markets tighten.

• Portfolio Transformation Payoff: The strategic pivot since 2019—$2.3 billion of lifestyle office acquisitions, $600 million of new developments, and $1.3 billion of non-core dispositions—has created a portfolio of newer, more efficient properties that generated 6.1% core FFO growth and 7.3% core FAD growth through the pandemic and rising rate environment, leverage-neutral.

• Leasing Momentum Accelerating: Record-high leasing pipelines, 46 consecutive quarters of positive cash rent roll-ups, and same-property NOI growth of 1.9% in Q3 2025 demonstrate that demand for trophy Sun Belt assets remains robust, supporting management's target of 90%+ occupancy by year-end 2026.

• Market Rebalancing Favors Quality: The bifurcated office market is experiencing historic supply contraction—10 million square feet removed from U.S. inventory since 2024 with another 40 million potential removals this decade—while return-to-office mandates and Sun Belt migration drive demand, creating a shortage of premium space that CUZ's lifestyle portfolio is uniquely positioned to capture.

• Key Risk/Reward Variable: The thesis hinges on whether CUZ can maintain its disciplined capital allocation and leasing velocity while deploying over $130 million in remaining development commitments, as any misstep in execution could pressure the fortress balance sheet that underpins its competitive moat.

Setting the Scene: The Sun Belt Office Revolution

Cousins Properties Incorporated, founded in 1958 and headquartered in Atlanta, has evolved from a regional developer into the preeminent pure-play Sun Belt office REIT. The company operates as a fully integrated, self-administered, and self-managed real estate investment trust focused exclusively on Class A lifestyle office properties and opportunistic mixed-use developments in high-growth markets: Austin, Atlanta, Charlotte, Tampa, Phoenix, Dallas, and Nashville. This geographic concentration is not accidental—it reflects a deliberate strategy to capture the structural tailwinds of corporate migration, population growth, and business-friendly policies that define the Sun Belt's economic ascendancy.

The office real estate sector remains deeply bifurcated. Commodity and older vintage properties face obsolescence, with JLL reporting 10 million square feet removed from U.S. inventory since 2024 and predicting up to 40 million additional square feet could be demolished or converted by decade's end. Simultaneously, trophy lifestyle assets—modern, amenity-rich properties in walkable, mixed-use districts—are experiencing accelerating demand as major companies phase out remote work policies and return-to-office mandates drive occupancy gains. New construction starts remain at de minimis levels, meaning any meaningful supply increase is four to five years away. This supply-demand imbalance creates a compelling backdrop for owners of quality assets.

Cousins Properties sits at the intersection of these trends with a portfolio that has been methodically upgraded over the past six years. Since 2019, the company has acquired $2.3 billion of lifestyle office properties, initiated $600 million of new developments, and divested $1.3 billion of non-core assets—all while growing core FFO 6.1% and core FAD 7.3% on a leverage-neutral basis. This transformation positions CUZ to capture outsized value as the market rebalances toward quality.

Business Model & Strategy: The Fortress Balance Sheet Advantage

Cousins Properties' strategy rests on three pillars: owning trophy lifestyle assets in high-growth Sun Belt markets, maintaining a fortress balance sheet, and opportunistically deploying capital when others cannot. The company's definition of "lifestyle office"—well-located, modern or modernized buildings with high-demand amenities designed to improve employee recruitment and retention—directly addresses the flight-to-quality trend reshaping office demand.

The balance sheet is the company's most powerful competitive weapon. With net debt-to-EBITDA of 5.1x as of Q3 2025, CUZ maintains industry-leading low leverage that provides both defensive resilience and offensive flexibility. This metric compares favorably to direct competitors like Highwoods Properties (HIW) at 1.39x debt-to-equity and Piedmont Office Realty Trust (PDM) at 1.43x debt-to-equity, both of which carry higher leverage ratios that limit their acquisition capacity. CUZ's investment-grade ratings from Moody's and S&P, combined with $916 million of available capacity on its $1 billion credit facility, create a "sector-leading" liquidity position that management explicitly describes as a "distinct offensive tool" to seize compelling opportunities.

This balance sheet strength enabled CUZ to execute three major acquisitions in the past year while maintaining leverage neutrality. In December 2024, the company acquired Vantage South End in Charlotte for $328.5 million ($514 per square foot) and Sail Tower in Austin for $521.8 million ($649 per square foot). In July 2025, CUZ added The Link in Uptown Dallas for $218 million ($747 per square foot). Each acquisition was immediately accretive, funded through a combination of equity raises at approximately $30 per share and unsecured senior note offerings at 5.25%-5.46% yields. The ability to raise equity at accretive prices while peers struggle to access capital markets demonstrates the market's confidence in CUZ's strategy and execution.

Financial Performance: Segment-Level Momentum Validates the Thesis

The portfolio transformation is delivering measurable results across every Sun Belt market. Austin, CUZ's largest market, exemplifies the earnings power of strategic acquisitions. Q3 2025 NOI increased 24.8% year-over-year to $60.2 million, driven primarily by the Sail Tower acquisition. The Austin portfolio ended the quarter 94.9% leased, with 97,000 square feet of leases signed in Q3 including 52,000 square feet of new leases at The Terrace. More importantly, the 2.5 million square feet owned at The Domain is essentially 100% leased with no sublease availability, and management notes that strong demand could lead to new development opportunities "sooner than expected." This signals that CUZ's trophy assets are not just maintaining occupancy but creating embedded development options that can drive future growth without requiring speculative capital deployment.

Charlotte demonstrates even more dramatic transformation, with NOI surging 61.0% in Q3 2025 to $15.6 million, entirely due to the Vantage South End acquisition. The Charlotte market has become a leader in office-using job growth among large domestic markets, with new development inventory in South End and Uptown nearly fully leased and the construction pipeline at zero. CUZ is undertaking a $40 million redevelopment of 201 North Tryon (formerly Fifth Third Center) with anticipated completion in Q1 2027, positioning the asset to capture premium rents in a supply-constrained market. This redevelopment mirrors successful projects at Promenade Tower in Atlanta and Hayden Ferry in Phoenix, demonstrating a repeatable playbook for value creation.

Dallas represents the newest market expansion, with NOI jumping 98.8% in Q3 2025 to $7.1 million following The Link acquisition. The Link is 94% leased with a weighted average remaining lease term of 9.3 years and in-place rents nearly $20 per square foot below current market rates, providing clear embedded NOI growth as leases roll. Uptown Dallas is receiving an outsized share of demand due to its appeal as an urban, walkable mixed-use district and migration of financial and professional service jobs from high-tax states. CUZ now owns an 808,000 square foot, three-building portfolio in Dallas, establishing critical mass in a market where "near-term demand exceeds supply."

Phoenix and Tampa show organic growth momentum. Phoenix NOI increased 12.0% in Q3 2025 to $12.2 million, driven by increased occupancy at Tempe Gateway and a 52,000 square foot new lease at Hayden Ferry I signed subsequent to quarter-end. Tampa posted the largest cash rent roll-ups in Q3 2025, with leasing velocity 12.5% ahead of last year and the portfolio 95.1% leased. These markets benefit from similar supply-demand dynamics, with Class A net absorption positive and vacancies declining.

Same-property NOI for consolidated properties increased 1.9% in Q3 2025 and 3.0% for the nine months ended September 30, 2025, marking a string of positive same-property numbers since early 2022. This organic growth is crucial because it demonstrates that the portfolio is not just expanding through acquisitions but generating internal momentum through rent growth and occupancy gains. The increase was driven by higher economic occupancy at properties like Promenade Tower, Corporate Center, and 3350 Peachtree, plus increased parking revenue.

Parking revenue, typically 8% of total revenues in pre-COVID times, has recovered to just under 7% in Q3 2025, driven 75% by utilization increases and 25% by price increases. This recovery indicates that return-to-office is translating into tangible ancillary income streams that flow directly to NOI with minimal incremental cost.

Market Dynamics & Competitive Positioning: Why the Moat is Widening

The Sun Belt office market is experiencing a structural rebalancing that favors owners of trophy assets. Corporate migration to the Sun Belt has "firmly reaccelerated," with a notable pickup in leasing interest from West Coast and New York City-based companies, particularly financial services and large-cap technology firms. This is not just anecdotal—Austin's Q2 2025 market leasing volume reached 1.2 million square feet, 11.4% above the three-year quarterly average and up 32% year-over-year. Sublease availability in Austin is down over 14% relative to mid-2024, indicating that excess space is being absorbed.

The supply side of the equation is equally compelling. New construction starts are at de minimis levels, with any meaningful increase in new supply four to five years away. Atlanta's office inventory decreased by 2.9 million square feet in Q2 2025, the largest quarterly reduction ever recorded. Charlotte's development pipeline hit its lowest level since 2013. This supply contraction ensures that as demand recovers, there will be no new competitive supply to cap rent growth or occupancy gains for trophy assets.

Cousins Properties' competitive positioning within this landscape is strengthened by several factors. First, the company's pure-play Sun Belt focus provides deeper market expertise and relationships than diversified peers like Boston Properties (BXP), which concentrates on gateway cities with higher regulatory burdens and slower growth. While BXP's 54.6 million square foot portfolio dwarfs CUZ's 21.1 million square feet, CUZ's regional intensity allows for more agile decision-making and better local market intelligence.

Second, CUZ's trophy asset quality creates a moat against competition from Highwoods Properties (HIW) and Piedmont Office Realty Trust (PDM). HIW's portfolio, while also Sun Belt-focused, includes more secondary locations that face greater vacancy pressure. PDM's negative profit margins (-12.44%) and higher leverage (1.43x debt-to-equity) limit its ability to compete for the best assets. CUZ's 68.17% gross margin and 20.65% operating margin demonstrate superior asset quality and operational efficiency.

Third, the fortress balance sheet provides a funding advantage. While many private equity buyers remain on the sidelines due to legacy portfolio issues, CUZ can move quickly on off-market opportunities like The Link, which was "softly marketed really, over the past couple of years" before CUZ's relationship with the developer enabled a swift execution. This certainty of close is a competitive advantage that can win deals without paying top-of-market prices.

The company's development expertise provides another layer of differentiation. The Neuhoff mixed-use project in Nashville demonstrates CUZ's ability to create value through ground-up development. The apartment component is 86% leased and expected to stabilize by year-end, while the commercial component is 53% leased with Oracle (ORCL)'s multi-billion dollar campus development across the Cumberland River serving as a significant demand driver. The ability to develop a 280,000 square foot office tower adjacent to the current building with existing infrastructure provides a competitive advantage in offering expansion space on expedited timelines.

Outlook, Guidance, and Execution Risk

Management's guidance frames a compelling earnings trajectory. The midpoint of 2025 FFO guidance is $2.84 per share, representing 5.6% growth over 2024 and marking what would be the second consecutive year of FFO growth—making CUZ "1 of 1 in the traditional office sector" to achieve this multi-year growth streak. The guidance has been raised multiple times throughout 2025, with the current midpoint $0.06 per share above the initial February guidance, demonstrating consistent outperformance.

The occupancy ramp is heavily weighted toward the back half of 2026, with management targeting 90% or higher by year-end 2026. This implies a multi-year earnings growth story rather than a one-time bounce. The leasing pipeline supports this ambition, sitting at "record high levels" with 715,000 square feet either signed Q4 year-to-date or in active negotiations, of which 77% is new and expansion leasing. The fact that only 6.3% of annual contractual rent expires through the end of 2026 provides exceptional revenue visibility.

Key assumptions underpinning the guidance include no additional SOFR cuts for the remainder of 2025 and the refinancing of a $250 million senior note that matured in July 2025. The guidance excludes any speculative acquisitions, dispositions, or development starts, suggesting that any such activity would represent upside to the base case. Management explicitly states that "although it's not in our guidance, we anticipate the potential to continue deploying additional capital into compelling and accretive investment opportunities."

Execution risks center on three areas. First, the $131.6 million of unfunded tenant improvements and construction commitments must be deployed efficiently. While these investments are expected to generate attractive returns, any cost overruns or delays could pressure near-term cash flows. Second, the company must maintain leasing velocity in a potentially slowing macro environment. Management acknowledges that "recent rise in layoff announcements seems to be weighing on investor sentiment," but counters that "the return to office is a more powerful lever for office demand than corporate rightsizing." Third, CUZ must continue to source accretive acquisitions in what is becoming a more competitive market. While private capital remains largely on the sidelines, the investment sales market is accelerating and "private market pricing will soon provide a boost to public market valuations," potentially making future deals more expensive.

Valuation Context: Premium for Quality and Growth

At $25.59 per share, Cousins Properties trades at 73.1x trailing earnings and 10.3x operating cash flow, with an enterprise value of $7.65 billion representing 12.7x EBITDA. These multiples appear elevated relative to traditional office REITs but reflect the company's unique positioning and growth trajectory. The dividend yield of 5.0% provides income while investors wait for the occupancy and earnings inflection.

Comparing CUZ to direct Sun Belt peers highlights the premium valuation. Highwoods Properties trades at 23.6x earnings with a 7.4% dividend yield but is experiencing revenue contraction (-1.5% growth) and margin pressure. Piedmont Office Realty Trust trades at a discount (0.69x book value) but has negative profit margins (-12.44%) and higher leverage. Boston Properties, with its gateway city focus, trades at a similar EV/EBITDA multiple (15.3x) but faces different market dynamics. Kilroy Realty (KRC), with its tech-oriented coastal portfolio, trades at 15.2x earnings with superior profit margins (28.68%) but lacks CUZ's Sun Belt growth exposure.

The key valuation consideration is whether CUZ's 5.6% FFO growth, fortress balance sheet, and trophy asset portfolio justify the premium. The company's ability to raise equity at approximately $30 per share in late 2024 while making immediately accretive acquisitions suggests the market believes it can. With net debt-to-EBITDA of 5.1x versus a covenant limit of 6.0x, CUZ has $150-200 million of additional debt capacity that could fund acquisitions without equity dilution, providing a clear path to earnings growth.

Conclusion: A Multi-Year Inflection Story

Cousins Properties has engineered a portfolio and balance sheet uniquely suited for the current office market inflection. The six-year transformation from a diversified regional developer to a pure-play Sun Belt trophy asset owner is reaching an earnings inflection point, with same-property NOI growth, record leasing pipelines, and strategic acquisitions all converging to drive 5.6% FFO growth in 2025 and a credible path to 90%+ occupancy by 2026.

The central thesis hinges on two variables: management's ability to maintain disciplined capital deployment in an increasingly competitive acquisition environment, and the durability of return-to-office demand in the face of macro uncertainty. The fortress balance sheet provides a clear advantage on the first front, while leasing metrics across all markets suggest the second remains intact. With new supply effectively nonexistent for the next four to five years, any continued demand recovery will flow directly to owners of trophy assets like CUZ.

The stock's premium valuation leaves little margin for error, but the company's financial performance and strategic positioning suggest the premium is justified. For investors, the key monitorables are leasing velocity, particularly for large blocks of vacancy at properties like 201 North Tryon and Hayden Ferry, and the spread between acquisition cap rates and CUZ's cost of capital. If CUZ can continue executing its playbook of accretive acquisitions and organic leasing gains, the multi-year earnings inflection story should play out as management envisions, making it a compelling way to gain exposure to the Sun Belt office market rebalancing.