-$0.80
$21.48
bear -$0.80
base $13.55
bull $21.48
margin of safety $7.00
market price* $27.64
Cousins Properties owns and operates Class A office buildings in Sun Belt cities: Austin, Atlanta, Charlotte, Tampa, Phoenix, Dallas and Nashville. It earns rent under multi-year leases, and its biggest ongoing cost is re-leasing space (tenant improvements and commissions) as leases expire. We value the properties first, then subtract what the company owes. How we measure earnings. We start with operating cash flow, remove the year-to-year swings in receivables and payables, deduct stock compensation, and deduct capital spending on buildings and leasing, except for a growth portion estimated from how fast revenue grew. Straight-line rent (rent booked ahead of cash actually received) is not part of operating cash flow, so it does not flatter these figures. On this basis, earnings after interest were about $0.75, $0.85, $0.15, $0.59, $0.84 and $1.05 per share for 2020 through 2025. 2022 was weak because capital spending reached $342 million, including $172 million of leasing costs. Because Cousins borrows heavily, we add back the cash interest it pays to see what the properties earn before lenders: about $1.17, $1.30, $0.62, $1.25, $1.54 and $1.89 per share. Interest paid rose from $108 million in 2024 to $141 million in 2025, and operating cash flow was up only $2.0 million, so the acquisitions of recent years have added rent but not per-share cash after interest. Starting level. We use $1.70 per share of pre-interest cash flow, the midpoint of 2024 and 2025. In December 2024 Cousins bought Sail Tower and Vantage for $838 million, so 2025 is the first year that resembles today's portfolio, but 2025 capital spending ($267 million, 27% of revenue) was lighter than the 2020-2025 average of 34%, so we did not use the full 2025 figure. First-half 2026 operating cash flow of $197 million was 18% above the first half of 2025, so this level looks intact. We did not read the full second-quarter 2026 report, so 2026 figures rely on its structured financial data. What the company owes. At June 30, 2026 Cousins had $3.75 billion of borrowings and $6.7 million of cash, plus $7.9 million belonging to outside owners of a partly owned property. In February 2026 it bought 300 South Tryon, a 638,000 square foot office building in Charlotte, for $317.5 million. That building's income is not in the history we can verify, so we removed its cost from the debt and give it neither credit nor blame. That leaves net debt of $3.44 billion, or $20.80 per share on 165.3 million diluted shares. Interest paid was about 4.4% of average debt in 2025 and about 4.7% in early 2026, below the 6% we use to value cash flows. In the base and bull cases we lower net debt by about $150 million for that saving over the remaining life of the debt, to $3.29 billion, or $19.89 per share; the bear case takes no such credit. At year-end 2025 about $1.2 billion of the $3.36 billion of notes payable fell due in 2026 or 2027, followed by $250 million in 2028, $275 million in 2029 and $500 million in 2030. In early 2026 the company issued $496 million of notes and repaid $150 million, so refinancing is ongoing and its cost matters. Base case, $13.55 per share. The properties are worth $33.44 per share ($5.5 billion) and the company owes $19.89 per share ($3.3 billion). At year-end 2025 the portfolio was 90.7% leased but earning rent on only 88.3% (the rest is signed leases in free-rent periods), so we credit growth of 4% in year one and 3% in year two as those leases start paying. In years three to seven we credit 2% a year, and 1% a year in years eight to ten, from built-in rent increases and renewals at higher cash rents (up 8.5% in 2024 and 3.5% in 2025), tapering because about 29% of contractual rent expires between 2026 and 2029. After year ten we assume no growth. Cash flow grew 26% per share after interest in 2025; the year-one assumption is well below that. We left out filling vacant space beyond signed leases, new development and more acquisitions. Redevelopment (about $47 million a year) is charged as a cost without credit for the rent it may bring. Bear case, -$0.80 per share. The properties are worth $20.00 per share ($3.3 billion) and the company owes $20.80 per share ($3.4 billion), so it owes slightly more than the properties are worth and shareholders would be left with nothing. This case starts at $1.20 per share, roughly the 2020 and 2023 outcomes ($1.17 and $1.25), and never grows. The named risk is leasing cost: in 2022 capital spending reached 45% of revenue, and leases covering 4.8%, 6.7%, 8.8% and 9.1% of contractual rent expire in 2026 through 2029. At that level the properties would generate roughly $198 million a year against about $168 million of annual interest, leaving little to cover dividends (first-half 2026 dividends were $108 million). Bull case, $21.48 per share. The properties are worth $41.37 per share ($6.8 billion) and the company owes $19.89 per share ($3.3 billion). It starts at 2025's actual $1.89, assumes capital spending stays at the 27% to 30% of revenue seen in 2024 and 2025, and credits growth of 6%, then 4%, then 3% a year through year ten, in line with recent renewal rent gains. After year ten there is no growth. What would make this wrong. The shares are highly sensitive to the properties' value because debt is about 60% of it: a 10% change in the base-case property value moves the shares by about $3.30, or roughly a quarter of their value. Weaker office demand, higher leasing costs or refinancing at rates well above 6% would hurt; faster lease-up of the vacant space would help. We treated 300 South Tryon as neutral; if it earns more than the cost of the debt used to buy it, the shares are worth more than shown. Compared with our previous view ($8.75 / $14.37 / $19.95), we now value the properties before interest and subtract the debt explicitly, and we charge more capital spending (about $220 million against $160 million a year). The base case is little changed, the bull case is higher, and the bear case is lower because it now shows the effect of leverage fully.