NYSE:CUZ Cousins Properties Q1 2024 Earnings Report $27.67 +0.02 (+0.06%) Closing price 05/7/2025 03:59 PM EasternExtended Trading$27.78 +0.11 (+0.41%) As of 05:27 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Cousins Properties EPS ResultsActual EPS$0.09Consensus EPS $0.63Beat/MissMissed by -$0.54One Year Ago EPS$0.65Cousins Properties Revenue ResultsActual Revenue$209.20 millionExpected Revenue$199.35 millionBeat/MissBeat by +$9.85 millionYoY Revenue Growth+4.20%Cousins Properties Announcement DetailsQuarterQ1 2024Date4/26/2024TimeAfter Market ClosesConference Call DateFriday, April 26, 2024Conference Call Time10:00AM ETUpcoming EarningsCousins Properties' Q2 2025 earnings is scheduled for Thursday, July 24, 2025, with a conference call scheduled on Friday, July 25, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Cousins Properties Q1 2024 Earnings Call TranscriptProvided by QuartrApril 26, 2024 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:01Good morning, ladies and gentlemen, and welcome to the Cousins Properties First Quarter Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, April 26, 2024. I would now like to turn the conference over to Pamela Roper, General Counsel. Operator00:00:31Please go ahead. Speaker 100:00:33Thank you. Good morning, and welcome to Cousins Properties' Q1 earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer Richard Hixson, our Executive Vice President of Operations and Greg Edzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8 ks. In the supplemental package, the company has reconciled all non GAAP financial measures to the most directly comparable GAAP measures and of course Reg G requirements. Speaker 100:01:01If 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 ks and 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 risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly. Speaker 200:01:50Thank you, Pam, and good morning, everyone. We had a strong start to 2024 at Cousins. To summarize, we delivered $0.65 a share in FFO, which beat Street consensus and we raised our full year guidance. We reported same property net operating income growth of 6.6%. We leased 404,000 Square Feet with a positive cash rent roll up of 5.3%. Speaker 200:02:19This marks our 40th consecutive quarter with a positive cash rent roll up. We ended the quarter with net debt to EBITDA of 5.25 times, which is among the lowest in the office sector. Importantly, as Greg will mention in more detail, we received a BBB debt rating from S and P and a Baa2 debt rating from Moody's. Both are solid investment grade ratings that significantly enhance our access to capital and financial flexibility. These achievements highlight the strength and resiliency of our leading Sunbelt lifestyle office portfolio and best in class balance sheet. Speaker 200:03:01Before discussing our priorities at Cousins, I will start with a few observations on market fundamentals. First, the return to work and lifestyle office properties continues to accelerate. Many employers continue to require greater office attendance. Since just last quarter, UPS, NCR and Truist have all announced a 5 day a week in office policy here in Atlanta. More are likely to come. Speaker 200:03:28As a result, our parking garages are filling up and demand for our space is increasing. 2nd, there remains little customer or capital demand for the oldest CBD towers or suburban commodity properties. As a result, office vacancy is highly concentrated in a small subset of buildings. According to JLL, just 30% of office buildings comprise more than 90% of the overall vacancy across the country. These properties will stagnate until they are repriced and then either repurposed or torn down. Speaker 200:04:05The process has already begun. 3rd, new supply is shutting in. The math for new development just does not work in today's higher cost and higher interest rate environment. Not surprising, groundbreakings have fallen to all time lows. As a result, the overall inventory of office buildings in the United States is contracting just as leasing begins to improve. Speaker 200:04:31Much like the retail sector last decade, market forces are rebalancing the office market in real time and there will be divergent outcomes. Lifestyle office will thrive with improving demand and reduced competition, while the lowest quality commodity office disappears. Turning to the capital markets, asset level debt and equity for office remains limited and expensive. As a result, the investment sales market is soft. Conversely, the public markets show signs of improvement. Speaker 200:05:06Liquidity has grown and spreads have tightened, especially in the unsecured debt market. We hope this is a positive early indicator. Cousins remains very well positioned as the cycle improves. Today, we own the premier lifestyle office portfolio in the Sunbelt. Our lease expirations through 2025 are among the lowest in the office sector. Speaker 200:05:29Our balance sheet is undoubtedly the best in class. Our strategy has proved resilient even amid the disruption from the COVID pandemic and the impact of higher interest rates. Strategically, our team remains focused on driving earnings growth through leasing and investments, while enhancing our geographic diversification, mitigating future large lease expirations and maintaining our financial strength. Let me highlight a few of our key priorities. First, we intend to drive occupancy back to stabilize levels in the intermediate term. Speaker 200:06:08As you know, the office business can be lumpy. So this metric can bounce around from quarter to quarter due to a large move out or a large commencement. The Bank of America expiration in Charlotte next year is an example of this. However, on a multi year basis, we are optimistic that we can return occupancy in our portfolio back to normalized levels. The return to office, Sunbelt migration, flight to quality and the flight to capital are all secular trends that will support our efforts. Speaker 200:06:41We have multiple competitive advantages and we plan to grow market share. 2nd, we intend to allocate capital thoughtfully and accretively on a stabilized basis. We have a track record of identifying creative investment opportunities and funding them with the most efficient sources of capital, debt, equity, property sales and JVs. As I mentioned earlier, liquidity and pricing is more advantageous in the public market today relative to private financing. This creates a compelling environment for a REIT like Cousins. Speaker 200:07:18Near term, acquisitions appear more likely than development. We will remain focused on Sunbelt properties that are or can be repositioned into lifestyle office. We are in active discussions with several owners and lenders and are evaluating opportunities across the capital stack. Medium and longer term, the development of market leading lifestyle office and mixed use projects will remain a key part of our growth strategy. Our development and redevelopment projects will be meaningful contributors over the next few years and highlight the value of our development platform. Speaker 200:07:57In closing, there are many competing forces in today's market. However, we built Cousins to thrive during all economic cycles. And today, we are in a strong position relative to other office companies. We are in the right Sunbelt markets. We own a trophy lifestyle portfolio with modest near term lease expirations. Speaker 200:08:19We have a fortress balance sheet with minimal near term debt maturities and great access to capital, and we have a well covered dividend. I believe we have a unique opportunity and optionality in front of us. Before turning the call over to Richard, I want to thank our employees at Cousins who provide excellent service to our customers. Their dedication, resiliency, consistency and hard work continue to propel us forward. Thank you. Speaker 200:08:47Richard? Thanks, Colin. Good morning, everyone. Our operations team had a fantastic start to the year, delivering another great quarter. Before walking through our operating results, I want to provide an update on WeWork. Speaker 200:09:01As a reminder, we have 4 WeWork locations totaling 169,000 square feet in Atlanta and Charlotte, representing 1.1% of our annualized rent. Our expected outcome at each of the locations remains substantially unchanged. At this point, we have completed a modification of our WeWork lease at Terminus in Atlanta, which reduced the location size by onethree or 24,000 square feet and restructured the rent obligation. We are actively working to do substantially the same thing at 120 West Trinity in Atlanta, where we are 20% owner and expect to complete that modification shortly. At our 46,000 square foot location at 725 Ponce in Atlanta, we are still electing not to negotiate with WeWork and anticipate the lease will be rejected. Speaker 200:09:55Interest in that space from traditional office users remain strong. Last, we still expect WeWork will assume the rail yard lease in Charlotte without modification. As a reminder, we have meaningful letters of credit supporting the leases at both 725 Ponce and 120 West Journeys. Now on to our results. For the Q1, our total office portfolio weighted average occupancy and end of period lease percentages were 88.4% 90.8%, respectively. Speaker 200:10:26Our lease percentage was essentially unchanged relative to last quarter and our occupancy increased by 80 basis points. The occupancy increase was driven largely by the commencement of Apache's expansion premises at BriarLake Plaza in Houston. Looking forward, with WeWork's give back spaces soon to be fully vacated and the recent long expected move out of NASCAR at 550 South in Charlotte, we expect occupancy to move slightly lower in the second quarter. However, with our favorable 2024 lease expiration profile and over 500,000 square feet of signed new and expansion leases set to commence during the balance of this year, we expect occupancy to remain relatively flat in the second half of the year. Importantly, we are projecting our occupancy to end the year higher than at year end 2023. Speaker 200:11:20During the Q1, our team completed 37 office leases totaling 404,000 square feet with a weighted average lease term of 7.1 years. I'm very encouraged that this quarter represented our highest level of signed activity in a first quarter since 2020. Further, 25 of our completed leases this quarter were new and expansion leases, representing a solid 70 activity on a square footage basis. I would also note that expansion activity alone accounted for an impressive 24% of our total activity. We believe this highlights a broader market dynamic that companies appear increasingly confident in expanding their office presence. Speaker 200:12:02This quarter, among the customers that renewed or expanded with us, we recorded a collective net expansion of 95,000 square feet and this included 8 unique expansions and only one contraction. With regard to lease economics, 2nd generation cash rents increased yet again in the Q1 by a healthy 5.3%. Our average net rent this quarter came in at $36.06 the 3rd highest quarterly level in our company's history. This quarter average leasing concessions defined as the sum of free rent and tenant improvements were $9.25 which were higher than what we posted in 2023. Despite that, our average net effective rent this quarter came in at $24.20 essentially in line with our full year 2023 results. Speaker 200:12:52For some perspective, our average net effective rent in 2023 was the highest in our history with the exception of only 2021, which included the full building lease for Domain 9. At the market level, our Newhall mixed use development in Nashville once again contributed to quarterly activity, where we completed a 31,000 square foot office with a leading law firm. We are also in lease negotiations with 2 additional office users, both strong names in the professional services sector, totaling 51,000 square feet. We continue to be encouraged by the leasing pipeline in Newhall and the project's unique competitive position in the national market. In Atlanta, the team signed 229,000 square feet of leasing this quarter, which included some important expansions. Speaker 200:13:40Notably, we completed an early renewal and expansion of Workday at our newly redeveloped 3,350 Peachtree, with Workday more than doubling in size to 113,000 square feet. This represents an important validation of Atlanta and specifically Buckhead as a top place to attract and retain great talent. At Promenade Tower in Midtown, also newly redeveloped, we were thrilled to complete a 23,000 square foot expansion of Deloitte, increasing their footprint by nearly 25%. In Charlotte, we signed 31,000 square feet of leasing in the quarter, all at our 5th Third Center building in Uptown. As a reminder, Bank of America occupies 317,000 square feet at that building and has shared that they would prefer to locate Charlotte corporate employees and properties owned by the bank where possible. Speaker 200:14:32Based on that, we view the bank as a probable move out at their expiration in July of 2025. 5th Third Center has timeless architecture, a great presence directly on Tryon Street in Uptown and excellent access and parking. As a complement to those strengths, we are moving forward with plans to reenergize this property with amenities and upgrades similar to those we have successfully completed at projects across our Sunbelt portfolio. Feedback in the market regarding our redevelopment plans has been very positive and we are excited about what the future holds for this project. Our Phoenix team completed 66,000 square feet of leasing this quarter, including a 34,000 square foot new lease with Pulte Homes at Tempe Gateway. Speaker 200:15:19Once again, a great example of strong demand for well amenitized and newly redeveloped lifestyle office space. This demand only increases our excitement around the redevelopment of our Hayden Ferry project also in Tempe. This redevelopment is now well underway and includes a total transformation of the entire exterior hardscape and landscape, 2 of the 3 building lobbies and amenities and also the addition of a new standalone restaurant. Interest in Hayden Ferry overall continues to be strong, but especially in the 200,000 square foot availability at Hayden Ferry 1 created by the departure of SVB Financial. Overall, our leasing pipeline continues to be healthy and we are encouraged by the trends we are seeing as the year has progressed. Speaker 200:16:05The early stage leasing pipeline, namely initial inquiries and tour activity is especially encouraging, having noticeably increased just in the past 30 to 60 days. As always, early stage demand typically takes multiple quarters to translate into signed leases. I also want to note that because we have so few expirations through 2026 and therefore likely lower renewal volume to complete, this could translate into lower total volume in any given quarter in the near term. Before closing, I want to reiterate another important market dynamic that Colin has already touched on. That is this growing scarcity of new office development. Speaker 200:16:44Per JLL, 7,800,000 square feet of new office space was delivered in the Q1, the lowest volume of completions in the past several years. And in the Q1, we saw less than 300,000 square feet of office construction starts nationally, the lowest in nearly 40 years. As we continue to see an increase in demand for the highest quality lifestyle office product, this shutdown of new office supply should prove very beneficial to owners of the best existing office product. As always, I want to thank our talented operations team whose skill and hard work have us off to a great start to the year. We look forward to continuing the momentum together during the balance of the year. Speaker 200:17:27Greg? Speaker 300:17:28Thanks Richard. Good morning everyone. I'll begin my remarks by providing a brief overview of our results, spending a few moments providing some detail on our same property performance. Then I'll move on to our capital markets and development activity followed by a discussion of our recently assigned investment grade credit rating before closing my remarks with an update to our 2024 earnings guidance. Overall, as Colin stated upfront, our first quarter earnings were solid and the economics behind them were encouraging. Speaker 300:18:002nd generation leasing spreads were positive. Leasing velocity was excellent during a seasonally slow period and same property year over year cash NOI was strong. It was also a very clean quarter. There were no unusual or non recurring items of note. Focusing on same property performance for a moment, we added 2 properties to our same property pool during the Q1, 100 Mill in Phoenix and Heights Union in Tampa. Speaker 300:18:27And this pool now comprises 97% of our total NOI. These new properties have an average age of only 3 years and average gross rents of almost $50 per square foot. With these additions, we continue to improve the quality of our core office portfolio. Looking at the quarterly numbers, both same property GAAP and cash NOI increased 6.6% compared to last year. This continues a string of positive same property numbers that began in early 2022 and importantly this quarter represents our best same property cash performance since the Q2 of 2021 and our best GAAP performance since the Q2 of 2017. Speaker 300:19:15Before moving on, I also want to point out the continued positive trend in parking revenues we saw during the Q1. Overall, total parking revenues were up 10% compared to the Q1 of last year, a strong sign of performance, which continues to exceed our internal forecasts. Turning to our capital markets activity. In January, we entered into a floating to fixed interest rate swap on the remaining $200,000,000 of our $400,000,000 term loan maturing in March of 2025. With this swap, the entire term loan is now fixed at an underlying SOFA rate of 4.48% through initial maturity. Speaker 300:19:56Looking at our development activity, the current pipeline is comprised of a 50% interest in Newhall in Nashville and 100% interest of Domain 9 in Austin. Our share of the remaining estimated development costs is $66,000,000 which will be funded by a combination of our Newhall construction loan and our operating cash flow. Before discussing our updated guidance, I wanted to take a moment to highlight the assignment of an investment grade corporate credit ratings from Moody's and S and P. Subsequent to quarter end, Moody's assigned a Baa2 rating and S and P assigned a BBB rating to Cousins Properties LP. Both agencies distributed the write ups yesterday, so their full thoughts on our credit ratings are available online. Speaker 300:20:41Overall, both agencies discussed the quality of our lifestyle portfolio highlighted by above average rents, healthy occupancy and modest near term lease expirations, as well as our strong balance sheet and conservative financial policy. In the near term, these ratings allow us to receive more favorable pricing on our $1,000,000,000 credit facility and $750,000,000 in outstanding term loans. At our current debt ratings, this saves us about 12 basis points in interest expense. On a longer term basis, these ratings provide us with another important to access the capital markets as we execute our strategic plan. I'll close by updating our 2024 earnings guidance. Speaker 300:21:26We currently anticipate full year 2024 FFO between $2.60 $2.67 per share with the midpoint of $2.63.5 This is up a $0.015 per share from the original guidance we provided in February. The increase is primarily driven by higher parking revenues and termination fees. The increase in termination fees is due to a customer at our North Park property in Atlanta with the lease expiration in 20 27, notifying us of their intent to move out in early 20 25. It didn't provide notice until March, so the impact on our Q1 results were immaterial. Turning WeWork, although negotiations continue, the math is generally settled and included in our guidance. Speaker 300:22:15We believe there is no downside risk in our assumptions and a small upside potential. Our guidance remains clean. There are no significant one time non recurring items and no property acquisitions, property dispositions, development starts or capital markets transactions. If any of these do take place, we'll update you accordingly. Our guidance also continues to not include any payment of our unsecured claim in the SVB bankruptcy case, which we currently estimate to be just under $10,000,000 The exact amount and timing of recovery against this claim is not yet known, but unsecured SVB bonds are currently trading around $0.50 on the dollar. Speaker 300:22:55So we anticipate there will eventually be significant value in this claim. Bottom line, our first quarter results are excellent and we are increasing our earnings guidance. We now forecast full year positive FFO growth to 24%, a rarity among public office companies. Speaker 400:23:14Our Speaker 300:23:14best in class leverage and liquidity positions remain intact and we have added one more valuable tool to our capital markets toolbox. With that, let me turn the call back over to the operator. Operator00:23:27Thank you. Your first question comes from Blaine Heck from Wells Fargo. Please go ahead. Speaker 500:23:52Great. Thanks. Good morning. So you guys had a strong start to the year from a same store NOI perspective with 6.6% in the Q1. And I know you guys aren't going to give guidance, but I guess just directionally, how should we be thinking about the rest of the year? Speaker 500:24:07And any color you can give on the drivers of same store as we progress through 2024 would be really helpful. Speaker 300:24:14Sure. The biggest driver of NOI on a same property basis during the Q1 was increased occupancy in Austin at 300 Colorado, Colorado Tower and San Jacinto. And we had some free rent burn off at 100 Mill in Tempe. On top of that, we had some timing of lower real estate taxes. And so you rolled all that together and it added up to a really strong Q1. Speaker 300:24:40That won't replicate itself for the balance of the year, but the numbers will remain positive for the balance of the year. Speaker 500:24:49Great. Thanks, Greg. Second question, Collin, last quarter you talked about a goal of getting above 90% occupancy in the intermediate term. I think you said stabilized this quarter. But you hesitated to put a more specific timeline that, which is understandable. Speaker 500:25:05But just a couple of questions there. Has anything changed with respect to your view of the timing on that goal, especially with the upcoming termination at North Park? And just generally, does that stabilized or 90% goal include all of the properties in your redevelopment properties too like Hayden Ferry and potentially 5th 3rd when BofA comes out? Speaker 200:25:36No, Blaine. Nothing has really changed at all with our goal to drive occupancy back up to stabilize levels. And you mentioned a 90% metric. I mean really our goal here at Cousins is to drive that back up to more normalized levels past cycles and we've reached occupancy as high as 92% to 93%. And given the quality of the portfolio that we own, the repositionings that we have done, and the strength of the markets that we're in, we're confident that we can do that. Speaker 200:26:14It will likely be a multiyear process. We've got some ultimately you always have some gives and takes. We've got a larger expiration next year, but we also have a significant amount of signed but not yet commenced leases. But over time given the strength of our lifestyle Sunbelt portfolio, we do believe that we can push occupancy back to normalized levels. And as those developments and redevelopments stabilize, those will certainly help our efforts to get back to those normalized levels. Speaker 400:26:52Got it. Thanks guys. Speaker 200:26:54Thank you, Blayne. Operator00:26:56Your next question comes from John Kim from BMO Capital Markets. Please go ahead. Speaker 600:27:04Thank you. Just given the strength of parking on your results, can you just provide more color on what percentage of rental revenue comes from parking and maybe the components of the 10% increase this quarter? How much of that was occupancy versus rate driven? Speaker 300:27:23Hey, John, it's Greg. So think you're right to point out that the best way to look at parking as a percentage of total revenues versus in an absolute basis. Our portfolio has changed pretty dramatically over the past few years. In the 1st 2 years of the COVID pandemic 2020 and 2021, I mean, we sold almost $1,500,000,000 worth of properties and reinvested half of that in our development pipeline and half of that new acquisition. So the composition of the portfolio has changed pretty dramatically. Speaker 300:27:53So the best metric to kind of compare today versus pre COVID is as a percentage of total revenues. And when you take a look at that, pre COVID, parking represented kind of between 7% 8% of our total revenues. Today, it's a little over 6%. So we think there's still a little room there. That's not to say we're going to get back to exactly 7% to 8% going forward because as I said, the composition has changed. Speaker 300:28:19But we're certainly not exceeding it. And that 6% that I just gave for the Q1 has worked its way up over the past couple of years. I mean it bottomed out somewhere around just I think just under 5%. So we've been grinding it up slowly every quarter. And as I mentioned in my prepared remarks, we've kind of exceeded our internal expectations almost every quarter. Speaker 300:28:37So it's a positive trend. Remind me of the second part of your question, John? Speaker 600:28:44I was just wondering as far as further upside, is that going to be rate driven or can you continue to drive occupancy higher? Speaker 300:28:53Yes, the improvement that we've seen in parking is a combination of both rates and volume. And the mix is probably, give or take, 75%, twenty five percent, seventy 5 volume, 25% rate. Speaker 600:29:08Okay. That's helpful. And then on occupancy, how do you see that progressing in 2025? I mean, that is you gave really good numbers around this year. Next year, you have 8.5% expiring. Speaker 600:29:22You mentioned BOA is likely to not renew. Time Warner's looks like that's expiring as well. But how do you basically see occupancy as far as any early indication of how that goes next year? Speaker 200:29:39Yes. Good morning, John. It's we're going to avoid providing 2025 guidance. But as I mentioned, we do have a multi year goal to continue to push occupancy upwards to more stabilized levels. And we do, as I said, have a handful of expirations that will provide a small headwind. Speaker 200:30:06But again, I think the quality of those properties is we reposition and redevelop those. As we look over a couple of years, we feel like we can start to drive that occupancy to more stabilized levels. Speaker 600:30:20I guess maybe a better way to ask that is how much of that 8.5% do you think are going to move out? Speaker 200:30:27Well, again, there's kind of one specific discrete expiration of over 300,000 square feet. So that will obviously skew the overall retention level, but we've had pretty strong consistent retention levels over the last couple of years that you would expect given the quality of the lifestyle properties that we own. But that specific move out will provide a bit of a headwind. But again, we've got great plans to reposition that property and begin the lease up. And I think that will allow us as we get towards the end of 2025 into 2026 to perhaps after we take one step back hopefully 2 steps forward. Speaker 600:31:15Thank you. Operator00:31:19Your next question comes from Anthony Paolone from JPMorgan. Please go ahead. Speaker 700:31:25Thanks. Good morning. If maybe I'll just if I could ask one just related to that last question John talked about. As it relates to the BofA space next year, given the redevelopment plans, will that come out of service, the space or the building? Just should we even think about those being in the occupancy stats? Speaker 300:31:45Tony, we're still finalizing our redevelopment plans there. Give us a little bit more time to finalize and we'll let you know. But we're going to be as we've been all along, we're going to be transparent. We're not going to try to hide anything. If we pull it out of service and we do significant redevelopment, we will. Speaker 300:32:02But we haven't gotten to that point in the redevelopment plans yet to make a decision. Speaker 700:32:07Okay, got it. Then just Greg, stay on you. You got the IG ratings now. Anything contemplated on that front in the near term? Or is there anything kind of that you're thinking about in guidance to give you room to do something on the public bond side? Speaker 300:32:24So, yes, we're really pleased with how that came out considering kind Speaker 500:32:27of the overall macro environment at the moment. Speaker 300:32:31But we did it as a kind of a proactive step. We've had the same balance sheet for the past decade at least. So we haven't not had an investment grade rating because we couldn't get it. We haven't had an investment grade rating because we didn't feel like we're in a position to advantageously use it. But we are now and that's why we proactively got it. Speaker 300:32:49Even with no impending debt maturities, as Colin said in his opening remarks, we really have got a lot of optionality or debt maturity schedule right now. No significant maturities until the summer of 2025. And even then, we've got enough capacity in our credit facility if we had to, to really push the first refinancing out to the summer of 'twenty six. That's not to say that's what we'll do, but we've got the optionality if need be. What this investment grade rating gives us is the ability to be very opportunistic and to pull the trigger quickly when the capital markets present an opportunity and that's what we intend to do. Speaker 700:33:27Okay. And if I can just sneak one in for Colin. You've talked about just the idea of opportunities emerging out there for a little while now. Just any further color on what you think a transaction might look like, if it's something going in with a high current yield or an asset that needs to be turned around or geographically? Just any other brackets on what seems to be emerging would be helpful. Speaker 200:33:54Yes. Appreciate the question, Tony. I'd say we've got a, I'd say, very clearly defined strategy here at Cousins to invest in high quality lifestyle office in the Sunbelt that either currently is or can be repositioned in the lifestyle with a, I'd say, very clear focus on driving accretion in our financial results and ultimately complementing the existing lifestyle portfolio that we have. So we're out looking at a lot of different opportunities. I'd say we are certainly in this environment applying our creative instincts to look at all sorts of transactions, as I mentioned earlier across the capital stack. Speaker 200:34:45But ultimately, our focus will be on lifestyle office within the Sunbelt and with a focus on near term accretion. Speaker 700:34:56Okay. Thank you. Operator00:35:01Your next question comes from Camille Bohnal from Bank of America. Please go ahead. Speaker 800:35:07Good morning. Nice job on the investment grade ratings. Greg, I believe each quarter you reset your budgets against the sulfur curve. Just given how much the curve has shifted and uncertainty around the timing for the next rate cut, what are you factoring into guidance today and how much of an impact did that have with your updates? Speaker 300:35:27Thanks, Camille. Good morning. It's a great question considering the volatility that's happening in the short end of the curve right now. So we at the beginning of the year, as I explained in the last quarterly conference call, we were using the Fed dot plots in our forecast. And so at the beginning of the year, the Fed had 3 rate cuts in 2024. Speaker 300:35:50As you know, the Fed meets next week and odds are they'll probably change that. But we've gone ahead and kind of proactively changed our internal assumption to 2 rate cuts in calendar year 2024. That being said, we only have we're low levered to begin with and then 15% of our leverage is floating rates. So the impact on that in calendar year 2024 is minimal. For example, if they had no rate cuts for the balance of the year, that would only impact our earnings by about 0.5 dollars so not significant at all. Speaker 300:36:23And a lot of the I think that other companies have struggled with that change in assumptions where they've assumed more rate cuts and those rate cuts haven't come to fruition. When we obtained the investment grade debt rating, as I mentioned in my prepared remarks, it had a positive impact on the pricing grid for the floating rate debt that we do have, term loans and the credit facility. So really they offset each other and that was one of the reasons that we didn't have any impact on our guidance from a reduction in the assumption around rate cuts for the balance of 2024s because it was offset by a better pricing grid. Speaker 800:37:02That's very helpful. I understand it might be early in the process, but what kind of downtime are you expecting on the space at North Park? How do you feel this building is positioned in its submarket? And is it something that can be easily marketed or need some CapEx? Speaker 200:37:21No, the space at up at North Park is really terrific space. It was relatively recently built out for an innovative tech company here in Atlanta. And so that space shows terrific. It's effectively move in ready if we were to find the right user. And just for a little bit of broader perspective on North Park that sits in the central perimeter, It's right at a great highway intersection with MARTA access on the property. Speaker 200:37:59There has been a large highway improvement project just outside our front door for the last 3 to 4 years and that project is now wrapping up. And I think that will position North Park really well. The space is terrific and we already have the opportunity to get out there and start showing that space. Speaker 800:38:20Thanks. And I just wanted to ask on the lease expiration front, since you don't have much more to address near term, but 2025 has picked up from the factors you highlighted. Are your leasing teams seeing any shift in tenant mindset to push forward on early renewals or are people still waiting till the last minute before they make decisions? Thanks. Speaker 200:38:42No, we Yes. Great question, Camille. And we are starting to see some shift in the mindset of our customer base. And I think that's very encouraging. And it's certainly encouraging as we think about occupancy in 2025 and moving into 2026, which a lot of decisions today will really impact that timeframe. Speaker 200:39:05But we are seeing more I'd say particularly large companies that had been on the sideline now starting to think about their long term real estate needs and I think doing so with a view that they're going to be in the office more often than not. So that has been a very positive trend. And we're also seeing some signs of life from an in migration perspective. Companies once again considering moves typically hubs or large regional offices once again in the Sunbelt. And I'd say one other trend that we've taken note of over the last 60, 90 days is some companies that we had leased space with over the last 12 to 24 months, who had perhaps contracted now coming back and looking for more space as their return to office efforts hit a positive inflection point. Speaker 800:40:07Thank you. Operator00:40:10Your next question comes from Steve Sakwa from Evercore. Please go ahead. Speaker 900:40:17Yes, thanks. Not to beat a dead horse here on the occupancy. I know Richard had said that occupancy would be flat in second half, but that occupancy year end 2024 would be above 23. I just want to make sure, are you talking about spot occupancies or average occupancies? I don't think you guys disclose spot occupancy. Speaker 900:40:37So just making sure I understand kind of which metrics you guys are talking about exactly? Speaker 200:40:42Yes, Steve. This is Richard. That would be weighted average occupancy as we report occupancy versus in the period is how we or spot is Speaker 300:40:50how we report our lease Speaker 900:40:53percentage. Got you. Okay. Thanks. And then maybe Colin, there was news that Oracle is moving its headquarters from Texas up to Nashville. Speaker 900:41:03That site that they have is directly across the river from your Neuhof project. I'm just wondering, are there any near term benefits from that move? Or are you seeing maybe other derivative benefits potentially from them coming into the market? And the tenants that you did talk about that you've got leases out for, are those existing Nashville tenants or are those new to market tenants? Speaker 200:41:27Yes, great question, Steve. And obviously, we were thrilled to see the announcement from Oracle earlier this week that they would indeed in time make what had already been announced as a large regional hub in Nashville, their global headquarters and that project sits just across the Cumberland River from our New Hough project and they are in fact going to start construction on a pedestrian bridge over that river to connect directly into the downtown Newhall side of Nashville. So I think that's going to be a huge positive for Cousins, a big positive for Newhall and we are starting to see some of those derivative benefits. Oracle's move has been underway for multiple years and we are seeing more potential customers, professional services companies in particular as well as other healthcare oriented investment firms look to locate themselves in close proximity to Oracle. And I think the leasing that we're doing right now and underway are going to be direct benefits of that recent announcement. Speaker 900:42:44Great. Thanks. Operator00:42:49Your next question comes from Nick Thielman from Baird. Please go ahead. Speaker 1000:42:54Hey, good morning. Richard, you touched on 500,000 square feet of signed leases yet to commence. So I was wondering if you could update on timing of when those leases are going to commence. And is that inclusive of Domain 9 and for Domain 9 like sort of move in timing? Is that kind of just be pro rata, kind of equally weighted through 2025 Q1 stabilization? Speaker 200:43:17Yes. So the $500,000 in 20.24 is weighted mid 3Q of this year, But it does not include domain remaining phases because those both occur or commence in 2025. That's helpful. And then maybe just touching Speaker 1000:43:41a little bit on new to market kind of requirements. You guys touched on it already a little bit. But what markets are you seeing kind of the most activity for tenants kind of looking to enter these markets? And are there any Speaker 200:43:51of that are a little more sluggish? It really is, I'd say, consistent across the Sunbelt. We're seeing examples, really in all of our markets of companies moving from places like the West Coast excuse me, the Northeast and in the Midwest into places like Texas and Arizona, Georgia and North Carolina. It is pretty consistent. I'd say it's very encouraging. Speaker 200:44:24While there are announcements like Oracle moving a global headquarters, I'd say what we're seeing more predominantly are regional hubs like the Workday announcement here in Atlanta where they went from approximately 50,000 square feet to 100,000 square feet in very short order. And I'd say a lot of that is the same themes that we've been discussing here at Cousins for the last 10 years. It's the quality of the workforce in the Sunbelt, the low cost, the ease of doing business. And after a little bit of a pause during the last 12 to 24 months, we're starting to see that rebound. Speaker 1000:45:08Thanks. Operator00:45:13Your next question comes from Brandon Lynch from Barclays. Please go ahead. Speaker 400:45:18Great. Thanks for taking my question. Greg, maybe you could go into a little bit more detail about the same store expenses that were down year over year where most of your peers are facing tax increases and insurance headwinds. So maybe just give us a little bit more detail on what you're seeing in your portfolio? Speaker 300:45:37Sure. The largest driver to the same property expense number this quarter was property taxes. And inside of the property tax line item, the largest component was Texas property taxes. And if you recall, I think it happened in the Q3 of last year, They put on the ballots a reduction in the property tax rate in the state of Texas and it passed overwhelmingly. And so we had, up until that the time of that vote, been accruing at the old tax rate in Texas. Speaker 300:46:11And as soon as that vote happened, we accrued at the new tax rate in Texas. And so the year over year comps, last year's Q1 old tax rate, this year's Q1 new tax rate. And so you had some adjustments. If you pulled out property taxes in total from our same property performance in the Q1, that 6.6% cash number turns into a positive 5.4% cash number on a year over year basis. So it had an impact, but it was not the sole impact. Speaker 300:46:40We still had a really good quarter even without that property tax adjustment. Speaker 400:46:45Great. That's helpful. And should we think about any other potential tax adjustments in the second through Q4 of this year? Or is it just in the first? Speaker 300:46:54No. The biggest impact by far was in the first. Speaker 400:46:58Okay. Thanks. That's helpful. And maybe could you also talk about tenant improvements per square foot? Looks like those increased fairly significant amount year over year. Speaker 400:47:08So just any color that you can share there would be helpful. Speaker 200:47:12Sure. Yes, the TIs did increase versus last quarter and certainly versus 2023. I'd say that the context with that in this particular quarter, we did accomplish a lot of leasing in 1st generation kind of shelf space. And it knew off obviously some of that new development activity showed up and those tend to be higher per square foot per year TI packages. But otherwise, we view TIs and concessions as hopefully stabilizing at this point on a broader basis. Speaker 400:47:51Great. Thanks for the color. Operator00:47:55Your next Speaker 600:48:05Just I guess on the acquisition pipeline today, are you starting to see more opportunities arise? And I guess just as you sort of think about the near term pipeline, I mean, do you guys expect to start to see capitulation on behalf of sellers? Or do you expect to sort of be an elongated process? Speaker 200:48:24Well, I think it's already been an elongated process to date and I'd say that's fairly typical of most cycles. But we are starting to see I think more actionable opportunities. And as I said, the overall property sales market has remained a bit tepid, but we are starting to see some signs of life in the debt market, which I think is a catalyst. And I also think the recent pickup in leasing activity, which ultimately requires leasing capital to be another catalyst for transactions. And so they are becoming I hope and believe more actionable in the near term. Speaker 200:49:13And again at Cousins we're going to continue to apply our kind of creative skills to source and find opportunities that could be very traditional in nature as well as some that are a little less traditional, but all again with a focus on investing in Sunbelt Lifestyle Office and with a priority on kind of near term accretion if possible. Speaker 600:49:43As you guys sort of think about markets, I mean, is there a potential to put capital to work in markets that you're not currently in? And if so, how do you guys kind of think about that process? Would it require higher going in yield to sort of make that decision? Speaker 200:50:01We're going to stay focused on our Sunbelt markets. Again, I think they we believe that there are long term secular trends in migration trends that will continue to favor the markets that we're invested in. So we'll stay focused within the Sunbelt. There's a market or 2 within the Sunbelt that we're not invested in today that we continue to monitor. But I also think as we look at the company more broadly, we do want to continue to enhance our geographic diversification within the Sunbelt. Speaker 200:50:37And so certainly there's some markets like Dallas and Charlotte and Nashville and Tampa and others that over time we'd like to increase our exposure to those markets and are very constructive on them long term. Speaker 600:50:54Thanks. Operator00:51:04Your next question comes from Upal Rana from KeyBanc. Please go ahead. Speaker 600:51:09Great. Thanks for taking the question. Richard, could you give us some color or detail on the leasing pipeline you mentioned in your prepared remarks? Any numbers or any types of tenants or general demand commentary will be helpful. Thanks. Speaker 200:51:22Sure. It continues to be healthy across the board frankly. Atlanta has been a great outperformer for us for a while now as you know and it continues to be really solid. But the only thing I'd point out is that Austin continues to be slower, but we are seeing maybe not on a square footage basis, but certainly in the number of transactions in our pipeline, late stage for certain in Austin is improving. So still soft there, but overall broad based. Speaker 200:51:56And there isn't really one industry that I'd call out at this point that's driving the lion's share of our pipeline. It's well diversified. Speaker 600:52:06Great. That was helpful. And Greg, could you give us some color on what gets you to the high end or low end of your guidance? Any moving pieces or timing in particular that gets you to either end? Speaker 300:52:18Sure. We tightened the range. So now that we're 1 quarter into the year, there are less moving pieces. But as we sit here and look at that, as is often the case, the 2 things that could be the most and I don't think it's unique to our company at all are interest rates and leasing assumptions. And in both instances, we've got I've already talked earlier in this call about our interest rate assumptions. Speaker 300:52:44And we obviously have some leasing assumptions as well. And I believe that they're on the conservative end of our typical range of leasing assumptions. So we don't see a lot of risk in the range that we've provided, but those are the 2 biggest moving pieces inside that range. Speaker 600:53:02Okay, got it. That's all for me. Thanks. Speaker 200:53:05Thanks, Uphol. Operator00:53:07And there are no further questions at this time. I will turn the conference back over to Colin Connolly for closing remarks. Speaker 200:53:15Thank you for joining us on our Q1 earnings call. We appreciate your interest in Cousins Properties. If you have any follow-up questions, please do not hesitate to reach out to our team. Have a great weekend. Operator00:53:29Ladies and gentlemen, this concludes your conference call for today. You may now disconnect your lines. Thank you.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCousins Properties Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Cousins Properties Earnings HeadlinesCousins Properties: The 5.5% Dividend Yield Is Not A BuyMay 6 at 5:18 PM | seekingalpha.comCousins Properties: The 5.5% Dividend Yield Is Not A BuyMay 6 at 5:02 PM | seekingalpha.comTrump to redistribute trillions of dollars Seeing how the media and other analysts are covering Trump’s actions – it’s laughable. 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Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cousins Properties and other key companies, straight to your email. Email Address About Cousins PropertiesCousins Properties (NYSE:CUZ) ("Cousins") is a fully integrated, self-administered, and self-managed real estate investment trust (REIT). The Company, based in Atlanta and acting through its operating partnership, Cousins Properties LP, primarily invests in Class A office buildings located in high-growth Sun Belt markets. Founded in 1958, Cousins creates shareholder value through its extensive expertise in the development, acquisition, leasing, and management of high-quality real estate assets. 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There are 11 speakers on the call. Operator00:00:01Good morning, ladies and gentlemen, and welcome to the Cousins Properties First Quarter Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Friday, April 26, 2024. I would now like to turn the conference over to Pamela Roper, General Counsel. Operator00:00:31Please go ahead. Speaker 100:00:33Thank you. Good morning, and welcome to Cousins Properties' Q1 earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer Richard Hixson, our Executive Vice President of Operations and Greg Edzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8 ks. In the supplemental package, the company has reconciled all non GAAP financial measures to the most directly comparable GAAP measures and of course Reg G requirements. Speaker 100:01:01If 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 ks and 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 risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly. Speaker 200:01:50Thank you, Pam, and good morning, everyone. We had a strong start to 2024 at Cousins. To summarize, we delivered $0.65 a share in FFO, which beat Street consensus and we raised our full year guidance. We reported same property net operating income growth of 6.6%. We leased 404,000 Square Feet with a positive cash rent roll up of 5.3%. Speaker 200:02:19This marks our 40th consecutive quarter with a positive cash rent roll up. We ended the quarter with net debt to EBITDA of 5.25 times, which is among the lowest in the office sector. Importantly, as Greg will mention in more detail, we received a BBB debt rating from S and P and a Baa2 debt rating from Moody's. Both are solid investment grade ratings that significantly enhance our access to capital and financial flexibility. These achievements highlight the strength and resiliency of our leading Sunbelt lifestyle office portfolio and best in class balance sheet. Speaker 200:03:01Before discussing our priorities at Cousins, I will start with a few observations on market fundamentals. First, the return to work and lifestyle office properties continues to accelerate. Many employers continue to require greater office attendance. Since just last quarter, UPS, NCR and Truist have all announced a 5 day a week in office policy here in Atlanta. More are likely to come. Speaker 200:03:28As a result, our parking garages are filling up and demand for our space is increasing. 2nd, there remains little customer or capital demand for the oldest CBD towers or suburban commodity properties. As a result, office vacancy is highly concentrated in a small subset of buildings. According to JLL, just 30% of office buildings comprise more than 90% of the overall vacancy across the country. These properties will stagnate until they are repriced and then either repurposed or torn down. Speaker 200:04:05The process has already begun. 3rd, new supply is shutting in. The math for new development just does not work in today's higher cost and higher interest rate environment. Not surprising, groundbreakings have fallen to all time lows. As a result, the overall inventory of office buildings in the United States is contracting just as leasing begins to improve. Speaker 200:04:31Much like the retail sector last decade, market forces are rebalancing the office market in real time and there will be divergent outcomes. Lifestyle office will thrive with improving demand and reduced competition, while the lowest quality commodity office disappears. Turning to the capital markets, asset level debt and equity for office remains limited and expensive. As a result, the investment sales market is soft. Conversely, the public markets show signs of improvement. Speaker 200:05:06Liquidity has grown and spreads have tightened, especially in the unsecured debt market. We hope this is a positive early indicator. Cousins remains very well positioned as the cycle improves. Today, we own the premier lifestyle office portfolio in the Sunbelt. Our lease expirations through 2025 are among the lowest in the office sector. Speaker 200:05:29Our balance sheet is undoubtedly the best in class. Our strategy has proved resilient even amid the disruption from the COVID pandemic and the impact of higher interest rates. Strategically, our team remains focused on driving earnings growth through leasing and investments, while enhancing our geographic diversification, mitigating future large lease expirations and maintaining our financial strength. Let me highlight a few of our key priorities. First, we intend to drive occupancy back to stabilize levels in the intermediate term. Speaker 200:06:08As you know, the office business can be lumpy. So this metric can bounce around from quarter to quarter due to a large move out or a large commencement. The Bank of America expiration in Charlotte next year is an example of this. However, on a multi year basis, we are optimistic that we can return occupancy in our portfolio back to normalized levels. The return to office, Sunbelt migration, flight to quality and the flight to capital are all secular trends that will support our efforts. Speaker 200:06:41We have multiple competitive advantages and we plan to grow market share. 2nd, we intend to allocate capital thoughtfully and accretively on a stabilized basis. We have a track record of identifying creative investment opportunities and funding them with the most efficient sources of capital, debt, equity, property sales and JVs. As I mentioned earlier, liquidity and pricing is more advantageous in the public market today relative to private financing. This creates a compelling environment for a REIT like Cousins. Speaker 200:07:18Near term, acquisitions appear more likely than development. We will remain focused on Sunbelt properties that are or can be repositioned into lifestyle office. We are in active discussions with several owners and lenders and are evaluating opportunities across the capital stack. Medium and longer term, the development of market leading lifestyle office and mixed use projects will remain a key part of our growth strategy. Our development and redevelopment projects will be meaningful contributors over the next few years and highlight the value of our development platform. Speaker 200:07:57In closing, there are many competing forces in today's market. However, we built Cousins to thrive during all economic cycles. And today, we are in a strong position relative to other office companies. We are in the right Sunbelt markets. We own a trophy lifestyle portfolio with modest near term lease expirations. Speaker 200:08:19We have a fortress balance sheet with minimal near term debt maturities and great access to capital, and we have a well covered dividend. I believe we have a unique opportunity and optionality in front of us. Before turning the call over to Richard, I want to thank our employees at Cousins who provide excellent service to our customers. Their dedication, resiliency, consistency and hard work continue to propel us forward. Thank you. Speaker 200:08:47Richard? Thanks, Colin. Good morning, everyone. Our operations team had a fantastic start to the year, delivering another great quarter. Before walking through our operating results, I want to provide an update on WeWork. Speaker 200:09:01As a reminder, we have 4 WeWork locations totaling 169,000 square feet in Atlanta and Charlotte, representing 1.1% of our annualized rent. Our expected outcome at each of the locations remains substantially unchanged. At this point, we have completed a modification of our WeWork lease at Terminus in Atlanta, which reduced the location size by onethree or 24,000 square feet and restructured the rent obligation. We are actively working to do substantially the same thing at 120 West Trinity in Atlanta, where we are 20% owner and expect to complete that modification shortly. At our 46,000 square foot location at 725 Ponce in Atlanta, we are still electing not to negotiate with WeWork and anticipate the lease will be rejected. Speaker 200:09:55Interest in that space from traditional office users remain strong. Last, we still expect WeWork will assume the rail yard lease in Charlotte without modification. As a reminder, we have meaningful letters of credit supporting the leases at both 725 Ponce and 120 West Journeys. Now on to our results. For the Q1, our total office portfolio weighted average occupancy and end of period lease percentages were 88.4% 90.8%, respectively. Speaker 200:10:26Our lease percentage was essentially unchanged relative to last quarter and our occupancy increased by 80 basis points. The occupancy increase was driven largely by the commencement of Apache's expansion premises at BriarLake Plaza in Houston. Looking forward, with WeWork's give back spaces soon to be fully vacated and the recent long expected move out of NASCAR at 550 South in Charlotte, we expect occupancy to move slightly lower in the second quarter. However, with our favorable 2024 lease expiration profile and over 500,000 square feet of signed new and expansion leases set to commence during the balance of this year, we expect occupancy to remain relatively flat in the second half of the year. Importantly, we are projecting our occupancy to end the year higher than at year end 2023. Speaker 200:11:20During the Q1, our team completed 37 office leases totaling 404,000 square feet with a weighted average lease term of 7.1 years. I'm very encouraged that this quarter represented our highest level of signed activity in a first quarter since 2020. Further, 25 of our completed leases this quarter were new and expansion leases, representing a solid 70 activity on a square footage basis. I would also note that expansion activity alone accounted for an impressive 24% of our total activity. We believe this highlights a broader market dynamic that companies appear increasingly confident in expanding their office presence. Speaker 200:12:02This quarter, among the customers that renewed or expanded with us, we recorded a collective net expansion of 95,000 square feet and this included 8 unique expansions and only one contraction. With regard to lease economics, 2nd generation cash rents increased yet again in the Q1 by a healthy 5.3%. Our average net rent this quarter came in at $36.06 the 3rd highest quarterly level in our company's history. This quarter average leasing concessions defined as the sum of free rent and tenant improvements were $9.25 which were higher than what we posted in 2023. Despite that, our average net effective rent this quarter came in at $24.20 essentially in line with our full year 2023 results. Speaker 200:12:52For some perspective, our average net effective rent in 2023 was the highest in our history with the exception of only 2021, which included the full building lease for Domain 9. At the market level, our Newhall mixed use development in Nashville once again contributed to quarterly activity, where we completed a 31,000 square foot office with a leading law firm. We are also in lease negotiations with 2 additional office users, both strong names in the professional services sector, totaling 51,000 square feet. We continue to be encouraged by the leasing pipeline in Newhall and the project's unique competitive position in the national market. In Atlanta, the team signed 229,000 square feet of leasing this quarter, which included some important expansions. Speaker 200:13:40Notably, we completed an early renewal and expansion of Workday at our newly redeveloped 3,350 Peachtree, with Workday more than doubling in size to 113,000 square feet. This represents an important validation of Atlanta and specifically Buckhead as a top place to attract and retain great talent. At Promenade Tower in Midtown, also newly redeveloped, we were thrilled to complete a 23,000 square foot expansion of Deloitte, increasing their footprint by nearly 25%. In Charlotte, we signed 31,000 square feet of leasing in the quarter, all at our 5th Third Center building in Uptown. As a reminder, Bank of America occupies 317,000 square feet at that building and has shared that they would prefer to locate Charlotte corporate employees and properties owned by the bank where possible. Speaker 200:14:32Based on that, we view the bank as a probable move out at their expiration in July of 2025. 5th Third Center has timeless architecture, a great presence directly on Tryon Street in Uptown and excellent access and parking. As a complement to those strengths, we are moving forward with plans to reenergize this property with amenities and upgrades similar to those we have successfully completed at projects across our Sunbelt portfolio. Feedback in the market regarding our redevelopment plans has been very positive and we are excited about what the future holds for this project. Our Phoenix team completed 66,000 square feet of leasing this quarter, including a 34,000 square foot new lease with Pulte Homes at Tempe Gateway. Speaker 200:15:19Once again, a great example of strong demand for well amenitized and newly redeveloped lifestyle office space. This demand only increases our excitement around the redevelopment of our Hayden Ferry project also in Tempe. This redevelopment is now well underway and includes a total transformation of the entire exterior hardscape and landscape, 2 of the 3 building lobbies and amenities and also the addition of a new standalone restaurant. Interest in Hayden Ferry overall continues to be strong, but especially in the 200,000 square foot availability at Hayden Ferry 1 created by the departure of SVB Financial. Overall, our leasing pipeline continues to be healthy and we are encouraged by the trends we are seeing as the year has progressed. Speaker 200:16:05The early stage leasing pipeline, namely initial inquiries and tour activity is especially encouraging, having noticeably increased just in the past 30 to 60 days. As always, early stage demand typically takes multiple quarters to translate into signed leases. I also want to note that because we have so few expirations through 2026 and therefore likely lower renewal volume to complete, this could translate into lower total volume in any given quarter in the near term. Before closing, I want to reiterate another important market dynamic that Colin has already touched on. That is this growing scarcity of new office development. Speaker 200:16:44Per JLL, 7,800,000 square feet of new office space was delivered in the Q1, the lowest volume of completions in the past several years. And in the Q1, we saw less than 300,000 square feet of office construction starts nationally, the lowest in nearly 40 years. As we continue to see an increase in demand for the highest quality lifestyle office product, this shutdown of new office supply should prove very beneficial to owners of the best existing office product. As always, I want to thank our talented operations team whose skill and hard work have us off to a great start to the year. We look forward to continuing the momentum together during the balance of the year. Speaker 200:17:27Greg? Speaker 300:17:28Thanks Richard. Good morning everyone. I'll begin my remarks by providing a brief overview of our results, spending a few moments providing some detail on our same property performance. Then I'll move on to our capital markets and development activity followed by a discussion of our recently assigned investment grade credit rating before closing my remarks with an update to our 2024 earnings guidance. Overall, as Colin stated upfront, our first quarter earnings were solid and the economics behind them were encouraging. Speaker 300:18:002nd generation leasing spreads were positive. Leasing velocity was excellent during a seasonally slow period and same property year over year cash NOI was strong. It was also a very clean quarter. There were no unusual or non recurring items of note. Focusing on same property performance for a moment, we added 2 properties to our same property pool during the Q1, 100 Mill in Phoenix and Heights Union in Tampa. Speaker 300:18:27And this pool now comprises 97% of our total NOI. These new properties have an average age of only 3 years and average gross rents of almost $50 per square foot. With these additions, we continue to improve the quality of our core office portfolio. Looking at the quarterly numbers, both same property GAAP and cash NOI increased 6.6% compared to last year. This continues a string of positive same property numbers that began in early 2022 and importantly this quarter represents our best same property cash performance since the Q2 of 2021 and our best GAAP performance since the Q2 of 2017. Speaker 300:19:15Before moving on, I also want to point out the continued positive trend in parking revenues we saw during the Q1. Overall, total parking revenues were up 10% compared to the Q1 of last year, a strong sign of performance, which continues to exceed our internal forecasts. Turning to our capital markets activity. In January, we entered into a floating to fixed interest rate swap on the remaining $200,000,000 of our $400,000,000 term loan maturing in March of 2025. With this swap, the entire term loan is now fixed at an underlying SOFA rate of 4.48% through initial maturity. Speaker 300:19:56Looking at our development activity, the current pipeline is comprised of a 50% interest in Newhall in Nashville and 100% interest of Domain 9 in Austin. Our share of the remaining estimated development costs is $66,000,000 which will be funded by a combination of our Newhall construction loan and our operating cash flow. Before discussing our updated guidance, I wanted to take a moment to highlight the assignment of an investment grade corporate credit ratings from Moody's and S and P. Subsequent to quarter end, Moody's assigned a Baa2 rating and S and P assigned a BBB rating to Cousins Properties LP. Both agencies distributed the write ups yesterday, so their full thoughts on our credit ratings are available online. Speaker 300:20:41Overall, both agencies discussed the quality of our lifestyle portfolio highlighted by above average rents, healthy occupancy and modest near term lease expirations, as well as our strong balance sheet and conservative financial policy. In the near term, these ratings allow us to receive more favorable pricing on our $1,000,000,000 credit facility and $750,000,000 in outstanding term loans. At our current debt ratings, this saves us about 12 basis points in interest expense. On a longer term basis, these ratings provide us with another important to access the capital markets as we execute our strategic plan. I'll close by updating our 2024 earnings guidance. Speaker 300:21:26We currently anticipate full year 2024 FFO between $2.60 $2.67 per share with the midpoint of $2.63.5 This is up a $0.015 per share from the original guidance we provided in February. The increase is primarily driven by higher parking revenues and termination fees. The increase in termination fees is due to a customer at our North Park property in Atlanta with the lease expiration in 20 27, notifying us of their intent to move out in early 20 25. It didn't provide notice until March, so the impact on our Q1 results were immaterial. Turning WeWork, although negotiations continue, the math is generally settled and included in our guidance. Speaker 300:22:15We believe there is no downside risk in our assumptions and a small upside potential. Our guidance remains clean. There are no significant one time non recurring items and no property acquisitions, property dispositions, development starts or capital markets transactions. If any of these do take place, we'll update you accordingly. Our guidance also continues to not include any payment of our unsecured claim in the SVB bankruptcy case, which we currently estimate to be just under $10,000,000 The exact amount and timing of recovery against this claim is not yet known, but unsecured SVB bonds are currently trading around $0.50 on the dollar. Speaker 300:22:55So we anticipate there will eventually be significant value in this claim. Bottom line, our first quarter results are excellent and we are increasing our earnings guidance. We now forecast full year positive FFO growth to 24%, a rarity among public office companies. Speaker 400:23:14Our Speaker 300:23:14best in class leverage and liquidity positions remain intact and we have added one more valuable tool to our capital markets toolbox. With that, let me turn the call back over to the operator. Operator00:23:27Thank you. Your first question comes from Blaine Heck from Wells Fargo. Please go ahead. Speaker 500:23:52Great. Thanks. Good morning. So you guys had a strong start to the year from a same store NOI perspective with 6.6% in the Q1. And I know you guys aren't going to give guidance, but I guess just directionally, how should we be thinking about the rest of the year? Speaker 500:24:07And any color you can give on the drivers of same store as we progress through 2024 would be really helpful. Speaker 300:24:14Sure. The biggest driver of NOI on a same property basis during the Q1 was increased occupancy in Austin at 300 Colorado, Colorado Tower and San Jacinto. And we had some free rent burn off at 100 Mill in Tempe. On top of that, we had some timing of lower real estate taxes. And so you rolled all that together and it added up to a really strong Q1. Speaker 300:24:40That won't replicate itself for the balance of the year, but the numbers will remain positive for the balance of the year. Speaker 500:24:49Great. Thanks, Greg. Second question, Collin, last quarter you talked about a goal of getting above 90% occupancy in the intermediate term. I think you said stabilized this quarter. But you hesitated to put a more specific timeline that, which is understandable. Speaker 500:25:05But just a couple of questions there. Has anything changed with respect to your view of the timing on that goal, especially with the upcoming termination at North Park? And just generally, does that stabilized or 90% goal include all of the properties in your redevelopment properties too like Hayden Ferry and potentially 5th 3rd when BofA comes out? Speaker 200:25:36No, Blaine. Nothing has really changed at all with our goal to drive occupancy back up to stabilize levels. And you mentioned a 90% metric. I mean really our goal here at Cousins is to drive that back up to more normalized levels past cycles and we've reached occupancy as high as 92% to 93%. And given the quality of the portfolio that we own, the repositionings that we have done, and the strength of the markets that we're in, we're confident that we can do that. Speaker 200:26:14It will likely be a multiyear process. We've got some ultimately you always have some gives and takes. We've got a larger expiration next year, but we also have a significant amount of signed but not yet commenced leases. But over time given the strength of our lifestyle Sunbelt portfolio, we do believe that we can push occupancy back to normalized levels. And as those developments and redevelopments stabilize, those will certainly help our efforts to get back to those normalized levels. Speaker 400:26:52Got it. Thanks guys. Speaker 200:26:54Thank you, Blayne. Operator00:26:56Your next question comes from John Kim from BMO Capital Markets. Please go ahead. Speaker 600:27:04Thank you. Just given the strength of parking on your results, can you just provide more color on what percentage of rental revenue comes from parking and maybe the components of the 10% increase this quarter? How much of that was occupancy versus rate driven? Speaker 300:27:23Hey, John, it's Greg. So think you're right to point out that the best way to look at parking as a percentage of total revenues versus in an absolute basis. Our portfolio has changed pretty dramatically over the past few years. In the 1st 2 years of the COVID pandemic 2020 and 2021, I mean, we sold almost $1,500,000,000 worth of properties and reinvested half of that in our development pipeline and half of that new acquisition. So the composition of the portfolio has changed pretty dramatically. Speaker 300:27:53So the best metric to kind of compare today versus pre COVID is as a percentage of total revenues. And when you take a look at that, pre COVID, parking represented kind of between 7% 8% of our total revenues. Today, it's a little over 6%. So we think there's still a little room there. That's not to say we're going to get back to exactly 7% to 8% going forward because as I said, the composition has changed. Speaker 300:28:19But we're certainly not exceeding it. And that 6% that I just gave for the Q1 has worked its way up over the past couple of years. I mean it bottomed out somewhere around just I think just under 5%. So we've been grinding it up slowly every quarter. And as I mentioned in my prepared remarks, we've kind of exceeded our internal expectations almost every quarter. Speaker 300:28:37So it's a positive trend. Remind me of the second part of your question, John? Speaker 600:28:44I was just wondering as far as further upside, is that going to be rate driven or can you continue to drive occupancy higher? Speaker 300:28:53Yes, the improvement that we've seen in parking is a combination of both rates and volume. And the mix is probably, give or take, 75%, twenty five percent, seventy 5 volume, 25% rate. Speaker 600:29:08Okay. That's helpful. And then on occupancy, how do you see that progressing in 2025? I mean, that is you gave really good numbers around this year. Next year, you have 8.5% expiring. Speaker 600:29:22You mentioned BOA is likely to not renew. Time Warner's looks like that's expiring as well. But how do you basically see occupancy as far as any early indication of how that goes next year? Speaker 200:29:39Yes. Good morning, John. It's we're going to avoid providing 2025 guidance. But as I mentioned, we do have a multi year goal to continue to push occupancy upwards to more stabilized levels. And we do, as I said, have a handful of expirations that will provide a small headwind. Speaker 200:30:06But again, I think the quality of those properties is we reposition and redevelop those. As we look over a couple of years, we feel like we can start to drive that occupancy to more stabilized levels. Speaker 600:30:20I guess maybe a better way to ask that is how much of that 8.5% do you think are going to move out? Speaker 200:30:27Well, again, there's kind of one specific discrete expiration of over 300,000 square feet. So that will obviously skew the overall retention level, but we've had pretty strong consistent retention levels over the last couple of years that you would expect given the quality of the lifestyle properties that we own. But that specific move out will provide a bit of a headwind. But again, we've got great plans to reposition that property and begin the lease up. And I think that will allow us as we get towards the end of 2025 into 2026 to perhaps after we take one step back hopefully 2 steps forward. Speaker 600:31:15Thank you. Operator00:31:19Your next question comes from Anthony Paolone from JPMorgan. Please go ahead. Speaker 700:31:25Thanks. Good morning. If maybe I'll just if I could ask one just related to that last question John talked about. As it relates to the BofA space next year, given the redevelopment plans, will that come out of service, the space or the building? Just should we even think about those being in the occupancy stats? Speaker 300:31:45Tony, we're still finalizing our redevelopment plans there. Give us a little bit more time to finalize and we'll let you know. But we're going to be as we've been all along, we're going to be transparent. We're not going to try to hide anything. If we pull it out of service and we do significant redevelopment, we will. Speaker 300:32:02But we haven't gotten to that point in the redevelopment plans yet to make a decision. Speaker 700:32:07Okay, got it. Then just Greg, stay on you. You got the IG ratings now. Anything contemplated on that front in the near term? Or is there anything kind of that you're thinking about in guidance to give you room to do something on the public bond side? Speaker 300:32:24So, yes, we're really pleased with how that came out considering kind Speaker 500:32:27of the overall macro environment at the moment. Speaker 300:32:31But we did it as a kind of a proactive step. We've had the same balance sheet for the past decade at least. So we haven't not had an investment grade rating because we couldn't get it. We haven't had an investment grade rating because we didn't feel like we're in a position to advantageously use it. But we are now and that's why we proactively got it. Speaker 300:32:49Even with no impending debt maturities, as Colin said in his opening remarks, we really have got a lot of optionality or debt maturity schedule right now. No significant maturities until the summer of 2025. And even then, we've got enough capacity in our credit facility if we had to, to really push the first refinancing out to the summer of 'twenty six. That's not to say that's what we'll do, but we've got the optionality if need be. What this investment grade rating gives us is the ability to be very opportunistic and to pull the trigger quickly when the capital markets present an opportunity and that's what we intend to do. Speaker 700:33:27Okay. And if I can just sneak one in for Colin. You've talked about just the idea of opportunities emerging out there for a little while now. Just any further color on what you think a transaction might look like, if it's something going in with a high current yield or an asset that needs to be turned around or geographically? Just any other brackets on what seems to be emerging would be helpful. Speaker 200:33:54Yes. Appreciate the question, Tony. I'd say we've got a, I'd say, very clearly defined strategy here at Cousins to invest in high quality lifestyle office in the Sunbelt that either currently is or can be repositioned in the lifestyle with a, I'd say, very clear focus on driving accretion in our financial results and ultimately complementing the existing lifestyle portfolio that we have. So we're out looking at a lot of different opportunities. I'd say we are certainly in this environment applying our creative instincts to look at all sorts of transactions, as I mentioned earlier across the capital stack. Speaker 200:34:45But ultimately, our focus will be on lifestyle office within the Sunbelt and with a focus on near term accretion. Speaker 700:34:56Okay. Thank you. Operator00:35:01Your next question comes from Camille Bohnal from Bank of America. Please go ahead. Speaker 800:35:07Good morning. Nice job on the investment grade ratings. Greg, I believe each quarter you reset your budgets against the sulfur curve. Just given how much the curve has shifted and uncertainty around the timing for the next rate cut, what are you factoring into guidance today and how much of an impact did that have with your updates? Speaker 300:35:27Thanks, Camille. Good morning. It's a great question considering the volatility that's happening in the short end of the curve right now. So we at the beginning of the year, as I explained in the last quarterly conference call, we were using the Fed dot plots in our forecast. And so at the beginning of the year, the Fed had 3 rate cuts in 2024. Speaker 300:35:50As you know, the Fed meets next week and odds are they'll probably change that. But we've gone ahead and kind of proactively changed our internal assumption to 2 rate cuts in calendar year 2024. That being said, we only have we're low levered to begin with and then 15% of our leverage is floating rates. So the impact on that in calendar year 2024 is minimal. For example, if they had no rate cuts for the balance of the year, that would only impact our earnings by about 0.5 dollars so not significant at all. Speaker 300:36:23And a lot of the I think that other companies have struggled with that change in assumptions where they've assumed more rate cuts and those rate cuts haven't come to fruition. When we obtained the investment grade debt rating, as I mentioned in my prepared remarks, it had a positive impact on the pricing grid for the floating rate debt that we do have, term loans and the credit facility. So really they offset each other and that was one of the reasons that we didn't have any impact on our guidance from a reduction in the assumption around rate cuts for the balance of 2024s because it was offset by a better pricing grid. Speaker 800:37:02That's very helpful. I understand it might be early in the process, but what kind of downtime are you expecting on the space at North Park? How do you feel this building is positioned in its submarket? And is it something that can be easily marketed or need some CapEx? Speaker 200:37:21No, the space at up at North Park is really terrific space. It was relatively recently built out for an innovative tech company here in Atlanta. And so that space shows terrific. It's effectively move in ready if we were to find the right user. And just for a little bit of broader perspective on North Park that sits in the central perimeter, It's right at a great highway intersection with MARTA access on the property. Speaker 200:37:59There has been a large highway improvement project just outside our front door for the last 3 to 4 years and that project is now wrapping up. And I think that will position North Park really well. The space is terrific and we already have the opportunity to get out there and start showing that space. Speaker 800:38:20Thanks. And I just wanted to ask on the lease expiration front, since you don't have much more to address near term, but 2025 has picked up from the factors you highlighted. Are your leasing teams seeing any shift in tenant mindset to push forward on early renewals or are people still waiting till the last minute before they make decisions? Thanks. Speaker 200:38:42No, we Yes. Great question, Camille. And we are starting to see some shift in the mindset of our customer base. And I think that's very encouraging. And it's certainly encouraging as we think about occupancy in 2025 and moving into 2026, which a lot of decisions today will really impact that timeframe. Speaker 200:39:05But we are seeing more I'd say particularly large companies that had been on the sideline now starting to think about their long term real estate needs and I think doing so with a view that they're going to be in the office more often than not. So that has been a very positive trend. And we're also seeing some signs of life from an in migration perspective. Companies once again considering moves typically hubs or large regional offices once again in the Sunbelt. And I'd say one other trend that we've taken note of over the last 60, 90 days is some companies that we had leased space with over the last 12 to 24 months, who had perhaps contracted now coming back and looking for more space as their return to office efforts hit a positive inflection point. Speaker 800:40:07Thank you. Operator00:40:10Your next question comes from Steve Sakwa from Evercore. Please go ahead. Speaker 900:40:17Yes, thanks. Not to beat a dead horse here on the occupancy. I know Richard had said that occupancy would be flat in second half, but that occupancy year end 2024 would be above 23. I just want to make sure, are you talking about spot occupancies or average occupancies? I don't think you guys disclose spot occupancy. Speaker 900:40:37So just making sure I understand kind of which metrics you guys are talking about exactly? Speaker 200:40:42Yes, Steve. This is Richard. That would be weighted average occupancy as we report occupancy versus in the period is how we or spot is Speaker 300:40:50how we report our lease Speaker 900:40:53percentage. Got you. Okay. Thanks. And then maybe Colin, there was news that Oracle is moving its headquarters from Texas up to Nashville. Speaker 900:41:03That site that they have is directly across the river from your Neuhof project. I'm just wondering, are there any near term benefits from that move? Or are you seeing maybe other derivative benefits potentially from them coming into the market? And the tenants that you did talk about that you've got leases out for, are those existing Nashville tenants or are those new to market tenants? Speaker 200:41:27Yes, great question, Steve. And obviously, we were thrilled to see the announcement from Oracle earlier this week that they would indeed in time make what had already been announced as a large regional hub in Nashville, their global headquarters and that project sits just across the Cumberland River from our New Hough project and they are in fact going to start construction on a pedestrian bridge over that river to connect directly into the downtown Newhall side of Nashville. So I think that's going to be a huge positive for Cousins, a big positive for Newhall and we are starting to see some of those derivative benefits. Oracle's move has been underway for multiple years and we are seeing more potential customers, professional services companies in particular as well as other healthcare oriented investment firms look to locate themselves in close proximity to Oracle. And I think the leasing that we're doing right now and underway are going to be direct benefits of that recent announcement. Speaker 900:42:44Great. Thanks. Operator00:42:49Your next question comes from Nick Thielman from Baird. Please go ahead. Speaker 1000:42:54Hey, good morning. Richard, you touched on 500,000 square feet of signed leases yet to commence. So I was wondering if you could update on timing of when those leases are going to commence. And is that inclusive of Domain 9 and for Domain 9 like sort of move in timing? Is that kind of just be pro rata, kind of equally weighted through 2025 Q1 stabilization? Speaker 200:43:17Yes. So the $500,000 in 20.24 is weighted mid 3Q of this year, But it does not include domain remaining phases because those both occur or commence in 2025. That's helpful. And then maybe just touching Speaker 1000:43:41a little bit on new to market kind of requirements. You guys touched on it already a little bit. But what markets are you seeing kind of the most activity for tenants kind of looking to enter these markets? And are there any Speaker 200:43:51of that are a little more sluggish? It really is, I'd say, consistent across the Sunbelt. We're seeing examples, really in all of our markets of companies moving from places like the West Coast excuse me, the Northeast and in the Midwest into places like Texas and Arizona, Georgia and North Carolina. It is pretty consistent. I'd say it's very encouraging. Speaker 200:44:24While there are announcements like Oracle moving a global headquarters, I'd say what we're seeing more predominantly are regional hubs like the Workday announcement here in Atlanta where they went from approximately 50,000 square feet to 100,000 square feet in very short order. And I'd say a lot of that is the same themes that we've been discussing here at Cousins for the last 10 years. It's the quality of the workforce in the Sunbelt, the low cost, the ease of doing business. And after a little bit of a pause during the last 12 to 24 months, we're starting to see that rebound. Speaker 1000:45:08Thanks. Operator00:45:13Your next question comes from Brandon Lynch from Barclays. Please go ahead. Speaker 400:45:18Great. Thanks for taking my question. Greg, maybe you could go into a little bit more detail about the same store expenses that were down year over year where most of your peers are facing tax increases and insurance headwinds. So maybe just give us a little bit more detail on what you're seeing in your portfolio? Speaker 300:45:37Sure. The largest driver to the same property expense number this quarter was property taxes. And inside of the property tax line item, the largest component was Texas property taxes. And if you recall, I think it happened in the Q3 of last year, They put on the ballots a reduction in the property tax rate in the state of Texas and it passed overwhelmingly. And so we had, up until that the time of that vote, been accruing at the old tax rate in Texas. Speaker 300:46:11And as soon as that vote happened, we accrued at the new tax rate in Texas. And so the year over year comps, last year's Q1 old tax rate, this year's Q1 new tax rate. And so you had some adjustments. If you pulled out property taxes in total from our same property performance in the Q1, that 6.6% cash number turns into a positive 5.4% cash number on a year over year basis. So it had an impact, but it was not the sole impact. Speaker 300:46:40We still had a really good quarter even without that property tax adjustment. Speaker 400:46:45Great. That's helpful. And should we think about any other potential tax adjustments in the second through Q4 of this year? Or is it just in the first? Speaker 300:46:54No. The biggest impact by far was in the first. Speaker 400:46:58Okay. Thanks. That's helpful. And maybe could you also talk about tenant improvements per square foot? Looks like those increased fairly significant amount year over year. Speaker 400:47:08So just any color that you can share there would be helpful. Speaker 200:47:12Sure. Yes, the TIs did increase versus last quarter and certainly versus 2023. I'd say that the context with that in this particular quarter, we did accomplish a lot of leasing in 1st generation kind of shelf space. And it knew off obviously some of that new development activity showed up and those tend to be higher per square foot per year TI packages. But otherwise, we view TIs and concessions as hopefully stabilizing at this point on a broader basis. Speaker 400:47:51Great. Thanks for the color. Operator00:47:55Your next Speaker 600:48:05Just I guess on the acquisition pipeline today, are you starting to see more opportunities arise? And I guess just as you sort of think about the near term pipeline, I mean, do you guys expect to start to see capitulation on behalf of sellers? Or do you expect to sort of be an elongated process? Speaker 200:48:24Well, I think it's already been an elongated process to date and I'd say that's fairly typical of most cycles. But we are starting to see I think more actionable opportunities. And as I said, the overall property sales market has remained a bit tepid, but we are starting to see some signs of life in the debt market, which I think is a catalyst. And I also think the recent pickup in leasing activity, which ultimately requires leasing capital to be another catalyst for transactions. And so they are becoming I hope and believe more actionable in the near term. Speaker 200:49:13And again at Cousins we're going to continue to apply our kind of creative skills to source and find opportunities that could be very traditional in nature as well as some that are a little less traditional, but all again with a focus on investing in Sunbelt Lifestyle Office and with a priority on kind of near term accretion if possible. Speaker 600:49:43As you guys sort of think about markets, I mean, is there a potential to put capital to work in markets that you're not currently in? And if so, how do you guys kind of think about that process? Would it require higher going in yield to sort of make that decision? Speaker 200:50:01We're going to stay focused on our Sunbelt markets. Again, I think they we believe that there are long term secular trends in migration trends that will continue to favor the markets that we're invested in. So we'll stay focused within the Sunbelt. There's a market or 2 within the Sunbelt that we're not invested in today that we continue to monitor. But I also think as we look at the company more broadly, we do want to continue to enhance our geographic diversification within the Sunbelt. Speaker 200:50:37And so certainly there's some markets like Dallas and Charlotte and Nashville and Tampa and others that over time we'd like to increase our exposure to those markets and are very constructive on them long term. Speaker 600:50:54Thanks. Operator00:51:04Your next question comes from Upal Rana from KeyBanc. Please go ahead. Speaker 600:51:09Great. Thanks for taking the question. Richard, could you give us some color or detail on the leasing pipeline you mentioned in your prepared remarks? Any numbers or any types of tenants or general demand commentary will be helpful. Thanks. Speaker 200:51:22Sure. It continues to be healthy across the board frankly. Atlanta has been a great outperformer for us for a while now as you know and it continues to be really solid. But the only thing I'd point out is that Austin continues to be slower, but we are seeing maybe not on a square footage basis, but certainly in the number of transactions in our pipeline, late stage for certain in Austin is improving. So still soft there, but overall broad based. Speaker 200:51:56And there isn't really one industry that I'd call out at this point that's driving the lion's share of our pipeline. It's well diversified. Speaker 600:52:06Great. That was helpful. And Greg, could you give us some color on what gets you to the high end or low end of your guidance? Any moving pieces or timing in particular that gets you to either end? Speaker 300:52:18Sure. We tightened the range. So now that we're 1 quarter into the year, there are less moving pieces. But as we sit here and look at that, as is often the case, the 2 things that could be the most and I don't think it's unique to our company at all are interest rates and leasing assumptions. And in both instances, we've got I've already talked earlier in this call about our interest rate assumptions. Speaker 300:52:44And we obviously have some leasing assumptions as well. And I believe that they're on the conservative end of our typical range of leasing assumptions. So we don't see a lot of risk in the range that we've provided, but those are the 2 biggest moving pieces inside that range. Speaker 600:53:02Okay, got it. That's all for me. Thanks. Speaker 200:53:05Thanks, Uphol. Operator00:53:07And there are no further questions at this time. I will turn the conference back over to Colin Connolly for closing remarks. Speaker 200:53:15Thank you for joining us on our Q1 earnings call. We appreciate your interest in Cousins Properties. If you have any follow-up questions, please do not hesitate to reach out to our team. Have a great weekend. Operator00:53:29Ladies and gentlemen, this concludes your conference call for today. You may now disconnect your lines. Thank you.Read morePowered by