COUSINS PROPERTIES INC

Previous wording

Cousins Properties Incorporated ("Cousins") (and collectively, with its subsidiaries, the "Company," "we," "our," or "us") is a publicly traded (NYSE: CUZ), self-administered, and self-managed real estate investment trust, or REIT. Cousins conducts substantially all of its business through Cousins Properties LP ("CPLP"). Cousins owns in excess of 99% of CPLP and consolidates CPLP. CPLP owns Cousins TRS Services LLC, a taxable entity that owns and manages its own real estate portfolio and performs certain real estate related services for other parties. Our strategy is to create value for our stockholders through ownership of the premier urban office portfolio in the Sun Belt markets, with a particular focus on Atlanta, Austin, Phoenix, Tampa, Charlotte, Dallas, and Nashville. This strategy is based on a disciplined approach to capital allocation that includes opportunistic acquisitions, selective developments, and timely dispositions of non-core assets with a goal of maintaining a portfolio of newer and more efficient properties with lower capital expenditure requirements. This strategy is also based on a simple, flexible, and low-leveraged balance sheet that allows us to pursue compelling growth opportunities at the most advantageous points in the cycle. To implement this strategy, we leverage our strong local operating platforms within each of our major markets.

Current wording

Cousins Properties Incorporated ("Cousins") (and collectively, with its subsidiaries, the "Company," "we," "our," or "us") is a publicly traded (NYSE: CUZ), self-administered, and self-managed real estate investment trust, or REIT. Cousins conducts substantially all of its business through Cousins Properties LP ("CPLP"). Cousins owns in excess of 99% of CPLP and consolidates CPLP. CPLP owns Cousins TRS Services LLC, a taxable entity that owns and manages its own real estate portfolio and performs certain real estate related services. Our strategy is to create value for our stockholders through ownership of the premier urban office portfolio in the Sun Belt markets, with a particular focus on Atlanta, Austin, Phoenix, Tampa, Charlotte, Dallas, and Nashville. This strategy is based on a disciplined approach to capital allocation that includes opportunistic acquisitions, selective developments, and timely dispositions of non-core assets with a goal of maintaining a portfolio of newer and more efficient properties with lower capital expenditure requirements. This strategy is also based on a simple, flexible, and low-leveraged balance sheet that allows us to pursue compelling growth opportunities at the most advantageous points in the cycle. To implement this strategy, we leverage our strong local operating platforms within each of our major markets.

Previous wording

In the quarter, we leased or renewed 391,000 square feet of office space, including 240,000 of new and expansion leases representing 61% of the total leasing activity. Straight-line basis net rent per square foot increased 37.6%forthose office spaces that were under lease within the past year. Same property net operating income (defined below) for consolidated properties and our share of unconsolidated properties increased 4.2% between the three months ended June 30, 2024 and 2023.

Current wording

In the quarter, we leased or renewed 763,000 square feet of office space, including 611,000 of new and expansion leases representing 80% of the total leasing activity. Straight-line net rent per square foot increased 30.7%forthose office spaces that were under lease within the past year. Same property net operating income (defined below) for consolidated properties and our share of unconsolidated properties increased 4.2% between the three months ended September 30, 2024 and 2023.

Previous wording

For the six months ended June 30, 2024 we have leased or renewed 794,000 square feet of office space, including 526,000 of new and expansion leases representing 66% of the total leasing activity. Straight-line basis net rent per square foot increased by 28.8% forthose office spaces that were under lease within the past year. Same property net operating income for consolidated properties and our share of unconsolidated properties increased 5.4% between the six months ended June 30, 2024 and 2023.

Current wording

For thenine months ended September 30, 2024 we have leased or renewed 1,557,000 square feet of office space, including 1,137,000 of new and expansion leases representing 73% of the total leasing activity. Straight-line net rent per square foot increased by 29.9% forthose office spaces that were under lease within the past year. Same property net operating income for consolidated properties and our share of unconsolidated properties increased 5.0% between the nine months ended September 30, 2024 and 2023.

Previous wording

Even amidst economic headwinds, we believe the Sun Belt, and in particular the seven Sun Belt markets in which we operate, will continue to outperform the broader office sector evidenced by a clear bifurcation between Sun Belt and Gateway market fundamentals. In addition, as the flight to quality trend accelerates among office users, we believe our trophy portfolio is well positioned to benefit from, and ultimately outperform in, the current real estate environment.

Current wording

We believe the Sun Belt, and in particular the seven Sun Belt markets in which we primarily operate, will continue to outperform the broader office sector evidenced by a clear bifurcation between Sun Belt and Gateway market fundamentals. In addition, as the flight to quality trend accelerates among office users, we believe our trophy portfolio is well positioned to benefit from, and ultimately outperform in, the current office real estate environment.

Previous wording

Results of Operations For The Three and Six Months Ended June 30, 2024

Current wording

Results of Operations For The Three and Nine Months Ended September 30, 2024

Previous wording

Net income available to common stockholders for the three and six months ended June 30, 2024 was $7.8 million and $21.1 million respectively. For the three and six months ended June 30, 2023, the net income available to common stockholders was $22.6 million and $44.8 million respectively. We detail below material changes in the components of net income available to common stockholders for the three and six months ended June 30, 2024 compared to 2023.

Current wording

Net income available to common stockholders for the three and nine months ended September 30, 2024 was $11.2 million and $32.3 million, respectively. For the three and nine months ended September 30, 2023, the net income available to common stockholders was $19.4 million and $64.2 million, respectively. We detail below material changes in the components of net income available to common stockholders for the three and nine months ended September 30, 2024 compared to 2023.

Previous wording

Same Property Rental Property Revenues increased for the three and six months ended June 30, 2024 compared to the same periods in the prior year primarily due to an increase in economic occupancy at our BriarLake Plaza, San Jacinto Center, and 300 Colorado office properties and related increases in revenues recognized from tenant funded improvements owned by us. In addition, parking revenue from our Same Property portfolio increased compared to the same period in the prior year.

Current wording

Same Property Rental Property Revenues increased for the three and nine months ended September 30, 2024 compared to the same periods in the prior year primarily due to an increase in economic occupancy at our BriarLake Plaza, San Jacinto Center, and Promenade Tower office properties and increases in revenues recognized from tenant funded improvements owned by us. In addition, parking revenue from our Same Property portfolio increased compared to the same period in the prior year.

Previous wording

Non-Same Property Rental Property Revenues, Rental Property Operating Expenses, and NOI increased for the three and six months ended June 30, 2024 compared to the same period in the prior year primarily due to the commencement of operations at our Domain 9 building in the first quarter of 2024 and increased economic occupancy at our recently renovated Promenade Central operating property. This increase is partially offset by a full building redevelopment at our Hayden Ferry 1 building, which began in the fourth quarter of 2023.

Current wording

Non-Same Property Rental Property Revenues, Rental Property Operating Expenses, and NOI increased for the three and nine months ended September 30, 2024 compared to the same period in the prior year primarily due to the commencement of operations at our Domain 9 building in the first quarter of 2024 and increased economic occupancy at our recently renovated Promenade Central operating property. This increase is partially offset by a full building redevelopment at our Hayden Ferry 1 building, which began in the fourth quarter of 2023.

Previous wording

Interest expense, net of amounts capitalized, increased $3.8 million, or 14.5% and $7.6 million, or 15.0% for the three and six months ended June 30, 2024, respectively, compared to the same periods in the prior year. This increase is primarily due to decreases in capitalized interest as we finished construction on the core building and began operations at our Domain 9 building in the first quarter of 2024. In addition to the decreases in capitalized interest, increases in variable interest rates and a higher average outstanding balance on our line of credit contributed to the increase in interest expense on floating rate debt.

Current wording

Interest expense, net of amounts capitalized, increased $3.8 million, or 13.9%, and $11.4 million, or 14.6%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year. This increase is primarily due to decreases in capitalized interest as we finished construction on the core building and began operations at our Domain 9 building in the first quarter of 2024. In addition to the decreases in capitalized interest, increases are driven by higher variable interest rates and an increase in borrowings following the issuance of the public unsecured senior note, which were partially offset by the payment of $100.0 million on the 2021 Term Loan and a full repayment of the outstanding balance of the credit facility in the third quarter of 2024.

Previous wording

Same Property depreciation and amortization increased for the three and six months ended June 30, 2024 compared to the same periods in the prior year primarily due to an increase of assets in service during the current periods, primarily from tenant improvements, as well as a change in the estimated useful lives of building and tenant improvements at some of our operating properties.

Current wording

Same Property depreciation and amortization increased for the three and nine months ended September 30, 2024 compared to the same periods in the prior year due to an increase of assets in service during the current periods, primarily from tenant improvements.

Previous wording

Non-Same Property depreciation and amortization increased for the three and six months ended June 30, 2024 compared to the same periods in the prior year primarily due to the completion of development and commencement of operations at our Domain 9 building, partially offset by a full building redevelopment at our Hayden Ferry 1 building, which began in the fourth quarter of 2023.

Current wording

Non-Same Property depreciation and amortization increased for the three and nine months ended September 30, 2024 compared to the same periods in the prior year primarily due to the completion of development at Domain 9 and a full building redevelopment at Promenade Central, as well as changes in the estimated useful lives of building and improvements at some of our operating properties. These increases were partially offset by our suspension of depreciation related to our full building redevelopment at our Hayden Ferry 1 building, which began in the fourth quarter of 2023.

Previous wording

Income from unconsolidated joint ventures decreased and interest from unconsolidated debt increased for the three and six months ended June 30, 2024 primarily due to an increase in interest expense driven by the June 2023 refinancing of a mortgage by our Crawford Long joint venture and a reduction in capitalized interest related to the development at our Neuhoff joint venture as operations began in January 2024.

Current wording

Income from unconsolidated joint ventures decreased and interest from unconsolidated debt increased for the three and nine months ended September 30, 2024 compared to the same periods in the prior year primarily due to an increase in interest expense driven by the June 2023 refinancing of a mortgage by our Crawford Long joint venture and a reduction in capitalized interest and operating expenses related to the development at our Neuhoff joint venture as operations began in January 2024. Unconsolidated depreciation and amortization expense increased for the three and nine months ended September 30, 2024 compared to the same periods in the prior year primarily due to development activities winding down and operations beginning at our Neuhoff joint venture in January 2024.

Previous wording

The reconciliation of net income to FFO is as follows for the three and six months ended June 30, 2024 and 2023 ($ in thousands, except per share information):

Current wording

The reconciliation of net income to FFO is as follows for the three and nine months ended September 30, 2024 and 2023 ($ in thousands, except per share information):

Previous wording

Our material capital expenditure commitments as of June 30, 2024 include $104.0 million of unfunded tenant improvements and construction costs. As of June 30, 2024, we had $317.1 million drawn under our credit facility with the ability to borrow the remaining $682.9 million, as well as $6.0 million of cash and cash equivalents. We expect to have sufficient liquidity to meet our obligations for the foreseeable future.

Current wording

Our material capital expenditure commitments as of September 30, 2024 include $114.8 million of unfunded tenant improvements and construction costs. As of September 30, 2024, we had no amounts drawn under our credit facility with the ability to borrow the full $1.0 billion, as well as $76.1 million of cash and cash equivalents on hand. We expect to have sufficient liquidity to meet our obligations for the foreseeable future.

Previous wording

In addition to our $1 billion unsecured Credit Facility (with $317.1 million outstanding as of June 30, 2024), we also have unsecured debt from two term loans totaling $750 million and five tranches of unsecured senior notes totaling $1 billion. Under our Credit Facility and our 2022 and 2021 Term Loans, the interest rates applicable vary according to the Company's leverage ratio and current applicable credit ratings (see note 7). In April 2024, the Company notified the administrative agent of the Credit Facility and the terms loans of corporate investment grade ratings received. These ratings reduced the Credit Facility's current applicable spread to 0.775% and 2022 and 2021 Term Loans' current applicable spreads to 0.85% and 1.00%, respectively. There can be no assurance that the Company will maintain any particular rating in the future and if our credit ratings decrease, then we may be subject to higher applicable spreads.

Current wording

In addition to our $1 billion unsecured Credit Facility (with no amount outstanding as of September 30, 2024), we also have unsecured debt from two term loans totaling $650 million, one public unsecured senior note of $500 million, and five tranches of privately place unsecured senior notes totaling $1 billion. Under our Credit Facility and our 2022 and 2021 Term Loans, the interest rates applicable vary according to the Company's leverage ratio and current applicable credit ratings (see note 7). In April 2024, the Company notified the administrative agent of the Credit Facility and the terms loans of corporate investment grade ratings received. These ratings reduced the Credit Facility's current applicable spread to 0.775% and 2022 and 2021 Term Loans' current applicable spreads to 0.85% and 1.00%, respectively. There can be no assurance that the Company will maintain any particular rating in the future and if our credit ratings decrease, then we may be subject to higher applicable spreads.

Previous wording

Our existing mortgage debt is comprised of non-recourse, fixed-rate mortgage notes secured by various real estate assets. We expect to either refinance our non-recourse mortgage loans at maturity or repay the mortgage loans with other capital resources, including our credit facility, unsecured debt, non-recourse mortgages, construction loans, the sale of assets, joint venture equity, the issuance of common stock, the issuance of preferred stock, or the issuance of units of CPLP. For each non-recourse mortgage loan, the Company provides a customary "non-recourse carve-out guaranty." Additional guarantees related to re-leasing costs may also apply. Many of our non-recourse mortgages contain covenants that, if not satisfied, could result in acceleration of the maturity of the debt. We expect to either refinance the non-recourse mortgages at maturity or repay the mortgages with proceeds from asset sales, debt, or other capital resources. The portion of our consolidated debt bearing interest at a fixed rate is 88%. The 12% of consolidated debt that bears interest at a floating rate is based on SOFR.

Current wording

Our existing mortgage debt is comprised of non-recourse, fixed-rate mortgage notes secured by various real estate assets. We expect to either refinance our non-recourse mortgage loans at maturity or repay the mortgage loans with other capital resources, including our credit facility, unsecured debt, non-recourse mortgages, construction loans, the sale of assets, joint venture equity, the issuance of common stock, the issuance of preferred stock, or the issuance of units of CPLP. For each non-recourse mortgage loan, the Company provides a customary "non-recourse carve-out guaranty." Additional guarantees related to re-leasing costs may also apply. Many of our non-recourse mortgages contain covenants that, if not satisfied, could result in acceleration of the maturity of the debt. We expect to either refinance the non-recourse mortgages at maturity or repay the mortgages with proceeds from asset sales, debt, or other capital resources. The portion of our consolidated debt bearing interest at a fixed rate is 91%. The 9% of consolidated debt that bears interest at a floating rate is based on SOFR.

Previous wording

To meet capital requirements for future investment activities over the long-term, we intend to actively manage our portfolio of properties and strategically sell assets to exit our non-core holdings and reposition our portfolio of income-producing assets. We expect to continue to utilize cash retained from operations, as well as third-party sources of capital such as indebtedness, to fund future commitments as well as utilize construction facilities for some development assets, if available and under appropriate terms. We may also generate capital through the issuance of securities that include common or preferred stock, warrants, debt securities, or the issuance of CPLP limited partnership units. The Company and CPLP have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of CPLP, which will be fully and unconditionally guaranteed by the Company. Separate Consolidated Financial Statements of CPLP have not been presented in accordance with the amendments to Rule 3-10 of Regulation S-X. Furthermores, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for CPLP as the assets, liabilities and results of operations of the Company and the CPLP are not materially different than the corresponding amounts presented in the Consolidated Financial Statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.

Current wording

To meet capital requirements for future investment activities over the long-term, we intend to actively manage our portfolio of properties and strategically sell assets to exit our non-core holdings and reposition our portfolio of income-producing assets. We expect to continue to utilize cash retained from operations, as well as third-party sources of capital such as indebtedness, to fund future commitments as well as utilize construction facilities for some development assets, if available and under appropriate terms. We may also generate capital through the issuance of securities that include common or preferred stock, warrants, debt securities, or the issuance of CPLP limited partnership units. The Company and CPLP have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of CPLP, which are fully and unconditionally guaranteed by the Company. Separate Consolidated Financial Statements of CPLP have not been presented in accordance with the amendments to Rule 3-10 of Regulation S-X. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for CPLP as the assets, liabilities and results of operations of the Company and the CPLP are not materially different than the corresponding amounts presented in the Consolidated Financial Statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.

Previous wording

Cash Flows from Operating Activities. Cash flows provided by operating activities decreased $7.3 million between the 2024 and 2023 six month periods primarily due to the following: timing of receipt of prepaid rents from tenants and the full building redevelopment of Hayden Ferry 1 in the fourth quarter of 2023; partially offset by rent abatement ending at our 100 Mill property and the commencement of operations in the first quarter of 2024 at our Domain 9 property.

Current wording

Cash Flows from Operating Activities. Cash flows provided by operating activities decreased $6.3 million between the 2024 and 2023 nine month periods primarily due to the following: timing of receipt of prepaid rents from tenants and the suspension of operations related to our full building redevelopment of Hayden Ferry 1 that began in the fourth quarter of 2023 partially offset by rent abatement ending at our 100 Mill property and the commencement of operations in the first quarter of 2024 at our Domain 9 property.

Previous wording

Cash Flows from Investing Activities. Cash flows used in investing activities increased $31.6 million between the 2024 and 2023 six month periods primarily due to the acquisition of investments in real estate debt in May and June of 2024, an increase in capital expenditures (see table below), and a return of capital distribution from our Crawford Long unconsolidated joint venture received in May 2023. These increases are partially offset by a decrease in contributions to our Neuhoff Holdings LLC ("Neuhoff") joint venture needed to fund our equity share of the development of the Nashville mixed-used project.

Current wording

Cash Flows from Investing Activities. Cash flows used in investing activities increased $41.8 million between the 2024 and 2023 nine month periods primarily due to the acquisition of investments in real estate debt in May and June of 2024, initial contributions related to the formation of our new joint venture to acquire the Proscenium operating property in August of 2024, and a return of capital distribution from our Crawford Long unconsolidated joint venture received in May 2023. These increases are partially offset by a decrease in contributions to our Neuhoff Holdings LLC ("Neuhoff") joint venture needed to fund our equity share of the development of the Nashville mixed-used project and a decrease in capital expenditures (see table below).

Previous wording

Cash Flows from Financing Activities. Cash flows from financing activities increased $35.9 million between the 2024 and 2023 six month periods primarily due to an increase in net borrowings on our Credit Facility.

Current wording

Cash Flows from Financing Activities. Cash flows from financing activities increased $116.4 million between the 2024 and 2023 nine month periods primarily due to the issuance of the $500 million public unsecured senior note in August of 2024, partially offset by the 2024 payoff of all amounts outstanding on our credit facility and a 2024 repayment of $100 million on our 2021 Term Loan.

Previous wording

Capital Expenditures. We incur costs related to our real estate assets that include acquisition of properties, development of new properties, redevelopment of existing or newly purchased properties, leasing costs (including tenant improvements) for new or replacement tenants, and ongoing property repairs and maintenance.

Current wording

Capital Expenditures. We incur costs related to our real estate assets that include acquisition of properties, development of new properties, redevelopment of existing or newly purchased properties, leasing costs (including tenant improvements) for new or replacement tenants, and ongoing property repairs, maintenance, and improvements.

Previous wording

Capital expenditures for assets we develop or acquire and then hold and operate are included in the property acquisition, development, and tenant asset expenditures line item within investing activities on the condensed consolidated statements of cash flows. The change in amounts accrued are removed from the table below to show the components of these costs on a cash basis. Components of costs included in this line item for the three and six months ended June 30, 2024 and 2023 are as follows ($ in thousands):

Current wording

Capital expenditures for assets we develop or acquire and then hold and operate are included in the property acquisition, development, and tenant asset expenditures line item within investing activities on the condensed consolidated statements of cash flows. The change in amounts accrued are removed from the table below to show the components of these costs on a cash basis. Components of costs included in this line item for the nine months ended September 30, 2024 and 2023 are as follows ($ in thousands):

Previous wording

Capital expenditures increased $1.8 million between the 2024 and 2023 periods primarily due to increased spending on leasing costs. The primary driver in increased leasing costs is spending on tenant improvements as economic occupancy increased at our Briarlake Plaza operating property. This increase in leasing costs is partially offset by decreases in development, redevelopment, and related capitalized interest and salaries due to the following: (i) the Domain 9 development commenced initial operations in the first quarter of 2024 primarily driving the decreased spending on projects under development and a related decrease in capitalized interest and salaries and (ii) spending on operating properties for redevelopments decreased compared to 2023 as the renovations at 3350 Peachtree and Promenade Central were substantially completed in 2023, offset by the commencement of a full building redevelopment of Hayden Ferry 1 in the fourth quarter of 2023.

Current wording

Capital expenditures decreased $14.1 million between the 2024 and 2023 periods primarily due to decreases in development, redevelopment, and related capitalized interest and salaries due to the following: (i) the Domain 9 development commenced initial operations in the first quarter of 2024 primarily driving the decreased spending on projects under development and a related decrease in capitalized interest and salaries and (ii) spending on operating properties for redevelopments decreased compared to 2023 as the renovations at 3350 Peachtree and Promenade Central were substantially completed in 2023, offset by the commencement of a full building redevelopment of Hayden Ferry 1 in the fourth quarter of 2023. These decreases are partially offset by increased spending on leasing costs.

Previous wording

Dividends. We paid common dividends of $98.0 million and $97.3 million in the six months ended June 30, 2024 and 2023, respectively. We expect to fund our future quarterly common dividends with cash provided by operating activities, also using proceeds from any investment property sales, distributions from unconsolidated joint ventures, indebtedness, and proceeds from offerings of equity and other securities, if necessary.

Current wording

Dividends. We paid common dividends of $146.7 million and $145.9 million in the nine months ended September 30, 2024 and 2023, respectively. We expect to fund our future quarterly common dividends with cash provided by operating activities, also using proceeds from any investment property sales, distributions from unconsolidated joint ventures, indebtedness, and proceeds from offerings of equity and other securities, if necessary.

Previous wording

Debt. At June 30, 2024, our unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $335.3 million. These loans are mortgage or construction loans, which are generally non-recourse to us. In addition, in certain instances, we provide “non-recourse carve-out guarantees” on these non-recourse loans. Certain of these loans have variable interest rates, which creates exposure to the ventures in the form of market risk from interest rate changes.

Current wording

Debt. At September 30, 2024, our unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $347.3 million. These loans are mortgage or construction loans, which are generally non-recourse to us. In addition, in certain instances, we provide “non-recourse carve-out guarantees” on these non-recourse loans. Certain of these loans have variable interest rates, which creates exposure to the ventures in the form of market risk from interest rate changes.