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CP

COUSINS PROPERTIES INC (CUZ)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered resilient operating performance and accretive portfolio upgrades: FFO per share was $0.69 (vs. $0.65 in Q4’23), cash same-property NOI grew 3.4%, and leasing volume hit 462k sf with 6.7% cash rent roll-up .
  • Management invested ~$1.0B in trophy lifestyle office assets (Sail Tower in Austin, Vantage South End in Charlotte) funded on a leverage-neutral basis via two equity raises ($186.1M, $282.8M) and $400M public notes; these transactions were “immediately accretive to earnings” .
  • Initial FY2025 guidance: FFO/share $2.73–$2.83; Net income/share $0.25–$0.35; includes $4.6M SVB claim disposition and assumed refinancing of a $250M senior note in July 2025; excludes acquisitions/dispositions/development starts .
  • Catalysts to monitor: near-term accretion from Sail/Vantage, continued leasing momentum and occupancy rebuild post Bank of America move-out (temporary trough expected mid-2025), access to unsecured debt at tight spreads vs. peers, and potential incremental investments (including debt-side opportunities) as private/public valuations converge .

What Went Well and What Went Wrong

  • What Went Well

    • Accretive external growth: “We invested almost $1 billion into trophy lifestyle office properties...These transactions were immediately accretive to earnings and were funded on a leverage neutral basis,” said CEO Colin Connolly .
    • Strong leasing and pricing: 462k sf signed in Q4; second-generation cash rents +6.7%; net effective rent $23.88/sf/yr; same-property cash NOI +3.4% YoY .
    • Balance sheet access and pricing: $400M notes priced (5.375% due 2032); management highlighted bonds trade at tightest spreads to Treasuries among traditional office REITs .

  • What Went Wrong

    • GAAP earnings pressure: Q4 Net income/share fell to $0.09 (from $0.12 in Q4’23), “primarily attributable to increased depreciation expense” .
    • Interest expense drift: Q4 interest expense rose to $33.1M vs. $27.5M in Q4’23 (partly funding growth and higher rates), contributing to lower GAAP EPS despite FFO growth .
    • Near-term occupancy headwind: Management flagged a temporary occupancy trough in 2H 2025 due to Bank of America’s Charlotte move-out and OneTrust in Atlanta, before rebuilding thereafter .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$212.978 $209.212 $225.327
Rental Property Revenues ($USD Millions)$211.474 $207.260 $220.221
Net Income to Common ($USD Millions)$7.840 $11.198 $13.636
GAAP EPS ($/share)$0.05 $0.07 $0.09
FFO ($USD Millions)$103.346 $102.334 $108.916
FFO per Share ($)$0.68 $0.67 $0.69
EBITDAre ($USD Millions)$133.840 $134.731 $143.895

Segment (Market) NOI Mix (% of Portfolio NOI)

MarketQ3 2024Q4 2024
Atlanta36.0% 35.7%
Austin32.7% 32.4%
Tampa9.1% 8.6%
Charlotte7.7% 9.0%
Phoenix7.8% 8.1%
Houston4.1% 3.8%
Dallas2.6% 2.4%

KPIs and Operating Metrics

KPIQ2 2024Q3 2024Q4 2024
Office Leasing Volume (sf)391,000 762,895 462,499
Net Effective Rent ($/sf/yr)$24.85 $34.57 $23.88
Second-Gen Cash Rent Change (%)+18.2% +7.2% +6.7%
Same-Prop Cash NOI YoY (%)+5.1% +4.4% +3.4%
End-of-Period Leased (%)91.2% 91.1% 91.6%
Weighted Avg Occupancy (%)88.5% 88.4% 89.2%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income per ShareFY 2024$0.31–$0.36 $0.26–$0.30 Lower midpoint (expense/tax dynamics)
FFO per ShareFY 2024$2.63–$2.68 $2.66–$2.70 Raised midpoint by $0.025
Net Income per ShareFY 2025—$0.25–$0.35; includes $4.6M SVB claim New
FFO per ShareFY 2025—$2.73–$2.83; assumes $250M note refi in Jul-2025 New
DividendsFY 2024Quarterly $0.32 shown in KPI schedule Quarterly $0.32 shown in KPI schedule Maintained

Notes: FY2025 guidance excludes acquisitions/dispositions/development starts; includes SVB claim sale and assumed refinancing of the July 2025 senior note .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4 2024)Trend
Leasing demand/Return-to-officeImproving fundamentals; raised FY24 FFO midpoint (Q2/Q3) “Leasing demand is accelerating… vacancy peaking… return to office transitioning to return to normal” Positive momentum building
Capital markets accessAchieved investment-grade ratings (Q2); inaugural $500M bond (Q3) $400M notes; bonds at tightest spreads vs. peers Access and pricing improving
Accretive acquisitions pipelineProscenium JV (Q3) Sail Tower ($521.8M) and Vantage South End ($328.5M); accretive, below replacement cost Executing high-quality deals
Occupancy trajectory91.1% leased in Q3; occupancy rising Temporary trough in 2H25 (BofA/OneTrust move-outs); rebuild thereafter Near-term headwind, medium-term recovery
Austin/Domain strengthDomain nearly 100% leased (Q3) Domain area stays robust; Time Warner renewal conservative in guidance Stable/constructive
Neuhoff (Nashville) leasingInitial operations; leasing progress (Q3) Office/retail ~46% leased; apartments 38%; tours converting at high-end rents Gradual lease-up continues
Competitive landscapePE largely sidelined (Q3) Expect more buyers later; near-term Cousins remains preferred given cost of capital Window to deploy capital

Management Commentary

  • Strategy and accretive growth: “We invested almost $1 billion into trophy lifestyle office properties in our Sun Belt markets… immediately accretive to earnings… funded on a leverage neutral basis” — Colin Connolly, CEO .
  • Market backdrop: “Leasing demand is accelerating… net absorption positive for first quarter since 2021… vacancy is reaching a peak… return to office transitioning to return to normal” .
  • Balance sheet quality: “Our bonds currently trade at the tightest spread to treasuries among all traditional office REITs… net debt to EBITDA is an industry-leading 5.16x” — Gregg Adzema, CFO .
  • Outlook and focus: “We are prioritizing both internal [occupancy] and external growth [accretive investments], while maintaining our best-in-class balance sheet” — CEO .
  • Charlotte redevelopments: Expect strong reception given minimal new construction; redevelopment quality “second to none” .

Q&A Highlights

  • Pipeline and competition: Fundamentals improving; private capital still dislocated; competition remains “relatively limited” near-term, favoring Cousins as a buyer .
  • Funding approach: Case-by-case; aim for accretive, leverage-neutral deals; potential dispositions to fund selectively .
  • Development starts: Unlikely in 2025; early conversations for 2028–2029 requirements as premium lifestyle space may be in short supply; longer-term development opportunity remains .
  • Austin dynamics: Tech demand picking up; Downtown supply digestion ongoing; Domain submarket stronger and may lead to earlier development opportunities .
  • Sail Tower tenants: Google’s buildout progressing; sublease space interest is strong; potential multi-tenant opportunity and mark-to-market upside over time .
  • Guidance sensitivities: Biggest swing factor is rates; FY2025 midpoint assumes no Fed cuts; one $250M maturity to refinance in 2025 .

Estimates Context

  • S&P Global (Capital IQ) consensus data for Q4 2024 was unavailable due to vendor limits at the time of retrieval; as a result, we cannot quantify beat/miss vs. Street for revenue/FFO/EPS this quarter. Management stated FY2025 FFO/share midpoint ($2.78) was above the Street consensus, but exact consensus figures were not retrieved .
  • If you want, we can re-run S&P Global consensus pulls later today and add a beats/misses table once access is restored.

Key Takeaways for Investors

  • Accretive external growth and leverage-neutral funding strengthen the medium-term earnings profile; near-term carry from Sail/Vantage supports FY2025 FFO growth (midpoint +~3.5% YoY) .
  • Leasing momentum persists across core Sun Belt markets; same-property cash NOI growth remained positive through 2024, suggesting durable demand at lifestyle assets .
  • Expect a temporary occupancy trough in 2H 2025 (BofA/OneTrust), then rebuild; monitor re-leasing progress and Charlotte/Austin pipelines for upside .
  • Balance sheet flexibility and unsecured market access at tight spreads are material strategic advantages in a still-challenged private market backdrop .
  • Watch rate path: FY2025 guidance assumes no cuts; upside to FFO if short/long rates drift lower, downside if higher-for-longer persists .
  • Stock narrative drivers near term: accretive acquisitions, evidence of leasing/occupancy rebuild, incremental accretive investments as private/public valuation gap narrows, and clarity on key renewals (e.g., Time Warner at Domain Point) .
  • Tactical: dips tied to occupancy headlines (BofA) may be opportunities if leasing pipelines and accretive investments continue to translate into FFO growth and NOI stabilization .