Good day. Welcome to the Cousins Properties second quarter conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Pam Roper, General Counsel. Please go ahead.
Good morning, and welcome to Cousins Properties second quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer, Richard Hickson, our Executive Vice President of Operations, and Gregg Adzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon, as well as furnished on Form 8-K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information link on the investor relations page of our website.
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-K and our 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 the potential risks is contained in our filings with the SEC. Now I'll turn the call over to Colin Connolly.
Thank you, Pam. Good morning, everyone. The second quarter was transformational for Cousins Properties. We successfully closed our merger with TIER REIT, delivered strong operating results, advanced strategic property transactions, and made great progress on the development pipeline. Let me review the specifics. First, we remain extremely enthusiastic about the TIER merger, which closed on June 14th. We have enhanced the company's geographic diversification, including an expansion into Dallas, strengthened our growth profile, and maintained a fortress balance sheet. Our team has been hard at work, and I am pleased to report that the integration has gone smoothly. In addition, the impact of the merger on 2019 FFO is in line with our original guidance, and we are delivering on $18.5 million of annual G&A synergies. Gregg will discuss in more detail. Second, our trophy office portfolio continues to outperform.
We delivered an increase in cash, same property NOI of 5.5% during the second quarter. In addition, our team executed approximately 1.1 million square feet of leasing, including a 561,000 square foot lease at Hearst Tower in Charlotte for the proposed combined corporate headquarters of BB&T and SunTrust. The lease, which highlights the robust demand for leading Sun Belt urban office towers, also includes a one-time purchase option at a price of $455.5 million. We are under contract to purchase our partner's 50% interest in Terminus here in Atlanta in a transaction that values the properties at $503 million or $410 per square foot. Closing is scheduled for October. While midtown Atlanta has generated outsized demand and headlines during recent years, Buckhead continues to perform well with limited new supply and solid demand from high-growth companies like Salesforce, Workday, and FleetCor Technologies.
After adjusting for the CBRE expiration at the end of June, Terminus is approximately 79% occupied, providing a unique opportunity for the Cousins platform to create value through the lease-up of vacant space in a trophy property. Given there are few competitive blocks of large contiguous space in Buckhead, we are thrilled to rebuy Terminus, which is one of the most highly amenitized office properties in Buckhead at an attractive value add price well below replacement cost. Fourth, momentum remains strong in our development pipeline. As you likely noticed in our financial supplement, pre-leasing at 10000 Avalon in Atlanta increased to 52% at the end of the second quarter, and we have a deep pool of additional prospects looking at the remaining space. At Domain 10 in Austin, we are drafting a lease for 104,000 square feet with a Fortune 100 customer, which will increase pre-leasing to 98%.
I look forward to sharing more details on this when we finalize the lease, which would bring the office component of our $428 million development pipeline to 86% pre-lease. With Domain 10 fully committed, our leasing team in Austin has shifted their focus to pre-leasing efforts at Domain 9. We are encouraged by the initial interest. Looking to other future development opportunities, we are making great progress on our 100 Mill project in Tempe. Given the significant level of customer interest, we are likely to break ground this fall with meaningful pre-leasing. Like our Avalon project in Atlanta, we will develop this 288,000 square foot trophy office property with a total cost of approximately $150 million in a 90/10 joint venture with Hines. Overall, demand for office space in Tempe remains robust as technology companies seek growth opportunities outside of California.
The walkable urban environment, along with the engineering talent at Arizona State, are strong growth drivers for downtown Tempe. Stepping back, we have been exceptionally busy at Cousins Properties throughout 2019. We have announced a series of exciting transactions, including the Norfolk Southern headquarters project, the Gulch air rights sale, the TIER merger, the BB&T lease, and the Terminus acquisition. We appreciate that this creates complexity for our investors, especially considering significant one-time gains in 2019 from land sales and development fees. However, I want to reiterate the following three messages. First, each of these transactions is uniquely positive on a standalone basis. Second, the underlying performance of our existing portfolio remains strong. Third, we intend to maintain our leverage profile within our target range of 4 to 4.5 times net debt to EBITDA. At Cousins Properties, we strive to be the preeminent Sun Belt office REIT.
While this goal might sound simple, we believe it is compelling and puts us at the intersection of two powerful long-term trends. Ongoing migration to the Sun Belt and urbanization in our targeted sub-markets. With these supporting tailwinds, the company is exceptionally positioned for the future. Our markets are healthy. The balance sheet is strong. The portfolio is best in class. Importantly, we have an excellent growth profile with both increasing same-property NOI and a well-leased development pipeline. Before turning the call over to Richard, I want to express my thanks and admiration to the Cousins team. Your tireless work and passion for the company is recognized and appreciated. Richard?
Thanks, Colin. I'm pleased to report that our strong first quarter operational performance continued in the second quarter. As a reminder, given we closed our merger with TIER REIT in mid-June, many of the operating metrics that I will cover include the effect of the TIER operating portfolio. As Colin referenced, at the portfolio level, we completed nearly 1.1 million sq ft of leasing this quarter. Our quarterly leasing volume was our highest since 2015, and I would note that only about 8% of our total leasing this quarter came from the TIER portfolio. Rent growth was also strong, with second-generation net rents increasing 21.5% on a GAAP basis and 4.9% on a cash basis. However, when excluding the sizable and unique BB&T lease, which represented a modest increase in net rent, second-generation net rents increased 26% on a GAAP basis and 11.9% on a cash basis.
With this solid leasing activity and including the addition of TIER's operating properties, our total portfolio weighted average occupancy for the quarter was 91.1%, and we ended the quarter at 93.7% leased. Our same property portfolio was slightly higher than our total portfolio, with weighted average occupancy of 91.8% and ending the quarter at 93.9% leased. Before moving to some market specifics, I want to briefly highlight the favorable rankings of our core Sun Belt markets in CBRE's recently published 2019 Tech Talent Scorecard. This is an annual survey that ranks major U.S. and Canadian markets based on their ability to attract and grow tech talent. All six of our core markets screened well with both Austin and Atlanta in the top 10. CBRE also cited that Atlanta is the fourth fastest-growing market for technology jobs, adding over 32,000 jobs in the past five years.
Given how critical demand from the technology sector has become, these survey results are very encouraging for the continued strength of our core markets and the Sun Belt overall. I'll now turn to some details about our two largest markets in terms of NOI, Atlanta and Austin. First, in Atlanta. The overall market continues to be healthy and active in all respects. According to JLL, Atlanta Class A asking rental rates continued their growth in the second quarter, increasing 5.2% year-over-year. CoStar recently noted that rent growth in Buckhead and Midtown in particular, where about 75% of our portfolio is located, has materially outpaced other Atlanta submarkets, citing that rents in these two prominent submarkets on a combined basis are now 50% above where they were in 2010.
The trend of solid absorption has continued as well, with JLL noting that year-to-date net absorption in the Class A office segment stood at over 1 million square feet, of which about 60% has been in Midtown. In terms of supply, Atlanta construction activity remains manageable as a percent of inventory, though there is a concentration of new construction in Midtown. Despite this dynamic, we view the supply-demand balance as healthy. With active projects in the core of Midtown sitting at over 70% pre-leased. This quarter, our Atlanta team executed 251,000 square feet of leases. This solid level of activity spanned across all our sub-markets and included a 15,000 square foot expansion and 85,000 square foot extension of OneTrust at Northpark in the Central Perimeter. Our over 7 million square foot Atlanta portfolio continues to be well-positioned at 93% leased as of quarter end. Moving on to Austin.
According to JLL, overall asking rental rates once again grew meaningfully, increasing 23% over the second quarter of 2018. CoStar puts overall market Class A vacancy at 6.4%, with the North Domain sub-market running at a remarkable 1.8% vacancy level. The CBD continues to run at under 6% vacancy. Market-wide construction activity in Austin is tracking at robust levels, with JLL pegging it at 5.2 million sq ft and approximately 56% pre-leased. Our portfolio, which through the TIER merger now consists of over 4 million sq ft located across the CBD, Domain, and Southwest sub-markets, ended the quarter at 95.8% leased. Across the market, our team signed leases totaling 116,000 sq ft during the quarter, including a 47,000 sq ft expansion of an energy services company at 111 Congress, and a 35,000 sq ft renewal of Stitch Fix at 816 Congress.
Like last quarter, our existing pipeline of leasing activity continues to be strong in Austin. Our remaining core markets of Charlotte, Tampa, Phoenix, and Dallas are also tracking nicely, with all four characterized by positive year-to-date net absorption, steady vacancy, rental rate growth, and manageable supply. Our teams in these four markets executed 647,000 square feet of leasing this quarter, including the 561,000 square foot BB&T lease. Note that via the TIER merger, we added the 891,000 square foot Bank of America Plaza to our Uptown Charlotte portfolio. As you will recall from our prior discussions around TIER, this property is currently 89.7% leased and Bank of America will vacate approximately 295,000 square feet at the end of 2020.
We were aware of this known move-out prior to announcing the TIER merger, underwrote the investment with that in mind, and view it as a fantastic value-add opportunity at a main-and-main location. Our primarily Uptown Charlotte portfolio is 95% leased overall, with otherwise very few lease expirations over the next couple of years. The TIER merger also provided us an opportunity to establish a larger position in Dallas, adding 516,000 sq ft and two properties located in the Preston Center and Legacy North Dallas sub-markets. 5950 Sherry Lane and Legacy Union are high-quality assets that are currently 97.2% leased. We are thrilled to have a team on the ground and this foothold to build upon in a market that has posted some of the most impressive job growth in the country since 2010, at just over 900,000 jobs. With that, I'll hand it off to Gregg.
Thanks, Richard, and good morning, everyone. I'll begin my remarks by providing an overview of our financial results, including same property performance. I'll move on to our capital markets activity, followed by a discussion of our balance sheet before closing my remarks with an update of our 2019 guidance. Before I begin, just a quick reminder that we closed the TIER transaction on June 14th. As a result, our second quarter numbers, including our weighted average share and unit count, only includes 17 days of TIER data. Coincident with the TIER closing, we also completed a one-for-four reverse stock split, and all second quarter per-share numbers reflect this reverse split.
I know that's a lot of moving parts, just to be clear, we had $114.7 million weighted average shares and units outstanding during the second quarter, and $148.5 million shares and units outstanding at the end of the second quarter. As you can tell from Colin and Richard's comments, it was a solid quarter on many fronts. At $0.71 per share, excluding TIER transaction costs, FFO was up 18% over last year, and the important operating metrics that both you and we focus on were very strong. Leasing velocity was outstanding. Second-generation leasing spreads were positive. Same property year-over-year cash NOI increased for the 30th consecutive quarter. Within our same property portfolio, year-over-year cash NOI was up a very strong 5.5% during the second quarter, driven by 5.2% revenue growth and 4.6% expense growth.
This marks the second quarter in a row that NOI growth has exceeded our expectations. As a result, we are raising the midpoint of our full-year 2019 same property cash NOI projection yet again, this time by 25 basis points. Combined with our 100 basis point increase last quarter, we have now raised the midpoint of our same property cash NOI growth by 125 basis points since the beginning of the year. Soon after the TIER closing, we issued $650 million in unsecured debt through a private placement. The issuance was comprised of three maturity tranches, eight, nine and 10 years, priced at par with a weighted average coupon of 3.88%. Proceeds from this issuance were used to pay off all of TIER's outstanding $575 million in term loans, as well as their outstanding credit facility balance.
We also assumed one non-recourse mortgage from TIER associated with the Legacy Union Office asset in Dallas. This is a $66 million note with a 4.24% coupon that matures in January 2023. Turning to the balance sheet, our reported second quarter net debt to EBITDA ratio in the financial supplement is 5.2 times. However, this doesn't reflect the full story. As I mentioned earlier, we closed the TIER transaction in the middle of June, and there are only 17 days of TIER EBITDA in our second quarter numbers. In contrast, there's 100% of the associated TIER debt as of June 30th. This timing mismatch temporarily skews this ratio. This will resolve itself in the third quarter, when we will have a full quarter of TIER data in our numbers. I'll wrap up my comments today by updating our 2019 FFO guidance.
Please note this guidance excludes the costs associated with closing the TIER transaction. We currently anticipate 2019 FFO in the range of $2.81-$2.93 per share. All of the assumptions behind this guidance are unchanged from the guidance we provided on April 24th, except for the following. First, we anticipate year-over-year same property NOI growth of 3.25%-5.25% on a cash basis. This is up from our previous guidance of 3%-5%. Moving on, we anticipate a gain on land sale of $14.5 million, up from $13.1 million, due to a gain recognized on the sale of land in Tempe to the city to widen roads for a new streetcar line.
We anticipate fee and other income of $32 million-$34 million, up from the previous range of $28 million-$30 million, due to an increase in termination fees at Hearst Tower in connection with the new BB&T lease. We anticipate general and administrative expenses of between $34 million and $36 million, net of capitalized salaries. This is up a half a million dollars from our previous guidance of $33.5 million-$35.5 million. We anticipate interest in other expenses, net of capitalized interest, of $66 million-$68 million, up from the previous range of $50.5 million-$52.5 million. We anticipate GAAP straight line rental revenue of $28.5 million-$30.5 million, up from the previous range of $22.5 million-$24.5 million.
We anticipate above and below market rental revenue of $10 million-$12 million, up from the previous range of $5.5 million-$7.5 million. All of these changes are driven by the closing of the TIER transaction in mid-June. Finally, Colin discussed a couple of new property transactions during the second half of 2019 that you should incorporate into your projections. First, on the investment front, we've entered into a contract to acquire our partner's 50% interest in Terminus. This transaction values both of the Terminus assets at $503 million. As part of this transaction, we will assume our partner's interest in the Terminus mortgage debt, which currently has a total outstanding balance of approximately $196 million. Our purchase represents approximately 50% of both of these numbers. We anticipate closing this transaction early in the fourth quarter.
Please note, this transaction will trigger the consolidation of these two properties at fair value and result in us recognizing a gain on the stepped-up basis in calendar year 2019. This gain will have no impact on FFO. On the disposition front, we have commenced the process of selling our Woodcrest asset in N.J. and have classified it as held for sale in our second quarter financial statements. We aren't selling this asset to delever, and we don't need the proceeds to achieve our targeted leverage levels. Quite simply, this is a non-core, legacy TIER asset in a non-core market. We anticipate closing this disposition late in the fourth quarter. Some of the assumption changes I just walked you through were driven by the TIER transaction, and some of them were not.
Specifically, outside of TIER, our same property growth continues to exceed expectations. We've announced several positive leasing and investment transactions. Now that we have closed TIER, we think it's important to isolate its earnings impact and compare our current expectations to our original expectations back in March, when we announced the deal. In March, we projected the TIER transaction would reduce 2019 FFO by $0.01 or $0.02 a share, which equates to between $0.04 and $0.08 per share after adjusting for the reverse stock split. We currently project the reduction will be approximately $0.06 per share after adjusting for the reverse split, right in the middle of our range.
Said differently, on an apples-to-apples basis, we are squarely in the middle of the penny or two original range that we announced in March, and overall, the financial implications of the TIER transaction are in line with our expectations. With that, let me turn the call back over to the operator.
We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Jamie Feldman with Bank of America. Please go ahead.
Great. Thank you. Good morning. Gregg, I guess going back to your in line with the $0.06 that you originally expected from the TIER merger. I know you guys have said over time that starts to burn off based on signed leases that have yet to commence. Can you just talk through how we should think about that ramp, to get to a point where it's actually kind of neutral to earnings or even accretive in the timing?
Sure. Jamie, good morning. As we talked about back in March when we announced the TIER transaction, it will be dilutive to 2019 and generally to 2020 FFO. Beginning in 2021 and 2022, as you alluded to, the development pipeline starts to produce results from the TIER side and the dilution flips and turns into accretion, moving out in the second half of 2021 and into 2022 and beyond. In terms of 2020 dilution, it should be similar on a percentage basis to what we thought 2019 would be. We only have about a half year results here, $0.06. We're not going to provide you with 2020 guidance yet. In terms of the impact, the earnings impact of the TIER transaction on 2020 numbers, it should be similar to 2019 on an annualized basis.
You're saying $0.12 in 2020 or $0.06 in 2020?
Closer to 12.
Closer to 12. Okay. I thought you guys had said it starts to kind of burn off throughout the year.
It starts to burn off. I mean, the Domain properties, as you know, begin to deliver in 2020. People start to move in in 2020, but it takes time. That's why the impact on 2020 is the back half of 2020, and it's muted. The positive impact really starts kicking in 2021 and then firmly in 2022 and beyond.
Okay. Thinking about Buckhead, can you guys just talk about some of the lease expirations in that sub-market overall, and then your prospects to fill up Terminus? My understanding is there's a decent amount of sizable expirations coming. I'm just curious what your outlook is.
Jamie, good morning, it's Colin, we're very excited about the transaction at Terminus. As I noted in my prepared remarks, we've got a terrific value-add acquisition opportunity to put the Cousins platform at work. As I said, we've got about 20% of the project is currently vacant. As we look forward, there's roughly 1 million or so square feet according to JLL, of demand in the market. I think importantly, for us at Terminus, outside of our vacancy, we've got about 6.3 years of weighted average term. We don't have a lot of near-term expirations, but as you look at the market as a whole, between now and 2022, there's just over 4 million square feet of space expiring. As we think about leasing up the balance of Terminus, that'll certainly be the lift that our team will be focused on.
Can you quantify any large chunky expirations that are coming in that market that might be competitive?
We certainly can, and we do have a list, but I think for competitive reasons, we'd rather not share that on this call. Rest assured, our team knows exactly where those expirations are, and we'll have those conversations as we try to go lease up the balance of that space. We're excited about the opportunity.
Okay. Finally from me, you mentioned the New Jersey asset for sale. Can you talk about your thoughts on some of the other, whether it's kind of new markets you may not want to stay in or just other assets from TIER or even from Cousins that you might be thinking about selling?
Yeah, Jamie, I'm glad you asked that question. I think as we look at the portfolio, we're clearly doing an analysis of the portfolio, going forward and evaluating what's core and non-core. I want to make sure I reinforce the point, if we do evaluate and decide that there's some additional non-core sales, as I said in my prepared remarks, we're committed to keeping the leverage levels within our target of four to four and a half times. We identify additional non-core sales in the future. We're optimistic in the team's ability to source and identify new investment opportunities, whether they be an acquisition like Terminus or potentially a new development start, like 100 Mill. I think the net of that through some capital recycling, we do intend to keep that leverage between four to four and a half times.
I know there's been some discussion in the investment community, will we look to do a big strategic disposition like the Orlando portfolio post the Parkway transaction that took us down to mid-3s. We don't see such a strategic move coming. I think you could see some additional sales in non-core markets like a Fort Worth, potentially a Houston. Again, those are markets where we don't have platforms, but we think we can balance those with some additional new investment opportunities.
How do you think about managing the dilution?
Again, I think.
The earnings impact.
Yeah. Well, what I was trying to hit at, Jamie, as we look at some additional future non-core sales, there's opportunities for us to reinvest some of that capital in whether it be an acquisition opportunity or a development opportunity, which might have some timing to it if we sell on the front end. Again, I think we're confident we can keep that leverage level in between those long-term stated goals of 4-4.5 times, and recycle capital as needed, potentially use some of those non-core sales to fund new opportunities.
Okay. All right. Thank you.
Next question comes from the line of Blaine Heck with Wells Fargo. Please go ahead.
Thanks, good morning. Colin, maybe to follow up on the question on Buckhead move-out. Can you also give some color on some of the major upcoming expirations you guys listed associated with TIER in the supplement? Bank of America, 300,000 square feet next year in Charlotte, obviously being the largest one. Conduent, I guess, should be sold by then, and then Time Warner, 112,000 square feet next year in Austin.
Yeah. Blaine, happy to answer that, good morning. The Bank of America expiration that you referenced, approximately 300,000 feet in December of next year, Richard touched on that in his prepared remarks, that is a known move-out. We knew that going into the TIER transaction priced that accordingly into the overall merger. We feel like that's a fabulous value add acquisition opportunity for us, similar to what we're doing at Terminus. We've got a terrific team in Charlotte. They've just demonstrated their ability to backfill a significant block of space also vacated by Bank of America. We look forward to that opportunity, I'm confident in time, as we get the space back, we'll do quite well. The rents are a fair bit below market at the Bank of America space. We feel like that, again, gives us a great opportunity.
Looking towards the other two you touched on, the Conduent, our goal is to have that project sold by August of 2020. Over in Austin, with Time Warner Cable, just over 100,000 feet at Domain Point. I'd say it's a bit premature. We have no reason at this point to think that that's not an opportunity to renew, but it's still very early in the process.
Okay, that's fair. On the Bank of America space, what type of tenant profile will you guys be targeting for a backfill?
Look, I think some recent announcements in Charlotte give us quite a bit of confidence and encouragement that there's going to be a pretty diverse set of customers who will look at that space. Obviously, Charlotte is geared towards financial services companies and large banks, and we've seen them be quite active. At the same time, we've seen some really terrific announcements, new move-ins to Uptown Charlotte from more diversified companies. Honeywell has just announced they're going to move their corporate headquarters from New Jersey to Uptown. Lowe's, which has historically been a suburban Charlotte company, has elected to take quite a bit of space in Uptown Charlotte. Again, as we look at the pool of potential customers, we're optimistic that it'll be a diverse set across wide-ranging industries.
Okay, great. Then lastly, it looked like CapEx per sq ft and concessions in general were higher this quarter. Can you just talk about whether that was a mix issue with the BB&T lease this quarter and more generally, what you're seeing with respect to TIs and free rent in your markets?
Yeah. You hit it, Blaine, in terms of the tick up there. That was, I'd say, directly associated with the BB&T lease, which was a 15-year lease with, I'd say, a typical amount of capital in the TIs associated with that. In addition to that, we did have some buyouts that we had to do, that we had discussed previously to put together that 500,000 square foot block of space. You see some of those costs aggregated and capitalized into that number. I think that's skewed upwards of where it's typically been. I think as we look across our markets as a whole and think about concessions, both TIs and free rent, as I said on previous calls, construction costs continue to kind of inch up, we've seen TIs inch up accordingly. 12 months ago, 18 months ago, they were $5 per square foot per year.
Today, maybe they've inched up to $5.50 per sq ft per year. At the same time, we've seen net rents, base rents, continue to inch up, and we've actually seen free rent moderate and some markets actually decline. Overall, net effect of rents in our markets continue to move up.
Thanks, Colin.
Thank you, Blaine.
Next question comes from the line of John Guinee with Stifel. Please go ahead.
Great. You guys have been busy. This is more of a two curiosity questions. The first one is Hearst Tower, 966,000 square feet, 97% occupied per your sup. How on earth does one generate 561,000 square feet of available space instantaneously? Were the tenants just not occupying the space and just ready to leave?
John, all the various customers were occupying the vast majority of their space. I'd say it took a lot of ingenuity and hard work, and relationships amongst the team. I think the biggest block of that space, roughly 300,000 square feet, was Bank of America. As we've discussed on previous calls, we're moving to a new building where they were consolidating several different locations into one space. That was the vast majority of it, and it certainly helped give us a leg up that there was a path there. We had to really work it with a few other customers. As I mentioned, there were some termination fees that we paid as a part of that to help make that possible. As we said, those were capitalized into the overall deals, and I think explains why our costs inched up slightly this quarter.
Great. Okay. The second, looks like you're going to buy your way into Terminus at about $410 a square foot and likely sell Hearst at $471 a foot. What do you think it costs to build new product in both of those markets right now?
John, in kind of the urban areas to build large towers, I'd say it's ±$500 a square foot. It can depend based on land and TIs or a particular customer, but I'd say that's a pretty down the middle estimate.
Great. Thank you very much.
Thank you, John.
As a reminder, if you'd like to ask a question, please press star followed by one. The next question comes from the line of Dave Rodgers with Baird. Please go ahead.
Good morning. Colin, you talked a little bit earlier about Domain Point, and obviously, TIER REIT had some aggressive development, redevelopment plans for the entire Domain. As you looked at it, I think you mentioned potential renewal with Time Warner. I guess maybe give us a little more thought on what your thoughts are on Domain and kind of how you might view the pace of development or redevelopment there versus maybe what had been communicated with TIER REIT previously.
Yeah, Dave, I'd say the plans that TIER had for the long-term redevelopment of that project, we share those plans. As we continue to look at the opportunity, I think our enthusiasm about The Domain as a whole continues to rise as we get under the hood. I referenced the lease that we're in process of doing at Domain 10. The demand for space in The Domain is strong. I would say that if we move forward with a renewal of Time Warner at Domain Point, it doesn't necessarily preclude the redevelopment of the site. There's some adjacent land, there's some things you can do with the parking garages. By signing that renewal, it doesn't necessarily preclude some redevelopment on a portion of that site.
Maybe just sticking with Austin, now with The Domain, with the CBD assets that you previously owned, and then some of the assets that they had owned in the Southwest sub-markets in the suburbs. How do you view Austin, and is that all kind of a core holding for you now? Can you rank those in terms of how you think and feel about Austin in the various sub-markets?
Austin, as a whole, is a market that Cousins has been in for 20-plus years, and a market that we continue to see a fantastic growth profile. I think, again, if you back up prior to the TIER merger, as our management team and board put together our strategic plan for the company, we had absolutely identified the Southwest and The Domain as sub-markets that we wanted to be invested and active in. Again, I think the TIER transaction presented us an opportunity to advance that strategic plan, and we feel like we now have a fortress asset with The Terrace in Southwest, and couldn't be more excited about the buildings that we have at The Domain and the potential to add to that over time as the demand continues to grow.
Maybe for Gregg, Colin talked about potential development starting the second half of the year and continued activity and discussions. Do you kind of view asset sales as the primary source of funding for the development spending as you go forward, and how aggressive do you feel like you'd need to be to sell assets to fund the growth?
Every time we've got a use of proceeds, Dave, we look at the most cost-efficient source of capital. Right now, the most cost-efficient source of capital for us would be asset sales. You layer on top of that the strategic reasons behind that, i.e., we've acquired some assets through the TIER transaction that are in non-core markets for us. It makes asset sales by far the most likely source of capital for any incremental investments in the second half of 2019. Remind me of the second part of your question?
I think you addressed it. I guess part of it is you'll use some of the proceeds from Hearst, it sounds like, assuming that happens, to fund and reverse Terminus. I guess maybe the second part would be how much do you feel like you'd need to sell starting new developments, or do you feel pretty well-positioned, at least for the near term, with those two events?
Yeah. Dave, it's a great question. The way to think about that is from a leverage perspective. It's certainly the way we think about it. We've said it several times in this call, and we mean it. Our targeted leverage level is between four to four and a half times net debt to EBITDA. We've essentially been running the company in that range since 2014, for almost six straight years. We're not just saying it, we're actually doing it. We'll adjust our asset sales accordingly to make sure that we stay within that range.
Okay, great. Thank you.
Next question comes from the line of Daniel Ismail with Green Street Advisors. Please go ahead.
Thanks, guys. Good morning. Can you maybe describe the decisions that consolidate Terminus? Was this the JV partner looking to exit, or did you approach them and maybe the appetite to consolidate other JV interests in the portfolio?
Morning, Danny. At Terminus, again, as we look at Buckhead, felt like there's a terrific opportunity. In conversations with our partner, which is a multi-billion-dollar fund, they were making some of their own fund-level decisions, and we saw an opportunity to put together the transaction and move forward with, again, what we think is going to be a terrific and a value-add opportunity. I think there were certain fund-level decisions that they were making, and again, created a good opportunity. I think more broadly speaking, as we look at other joint venture interests, we've got some, and are fortunate to have some terrific partners that we've worked very well with and created value with. I think at times where it makes sense for those parties to exit, and we think that it's a good investment opportunity going forward, we're always interested in pursuing those.
As we sit here today, again, I think we've got some great partners that we're working very well together.
On future dispositions or potential dispositions, any potential tax consequences from, say, a sale of First Tower or any of the legacy TIER assets?
Danny, it's Gregg. Good morning. No, we have a clear line of sight to be able to sell the assets that we've talked about, and then some, without the requirement of a special distribution or a 1031.
Okay. Just last one from me. It looks like there was some modest cost savings in the Domain d evelopments. Any of those relating to just accounting differences or anything we should be aware of in terms of energy, relating to the TIER transaction?
Yeah, Danny, those were more accounting adjustments as you brought it over from TIER to Cousins.
Okay, great. Thanks, guys.
Next question comes from the line of Anthony Paolone with JP Morgan. Please go ahead.
Thank you. Good morning. I'm just looking at the development pipeline in the supplemental, and now that you've got the TIER projects rolled in, can you give us an update on where the pipeline's expected yield is and how that might compare to where you see the private market?
Sure, Tony. I think as we've rolled TIER into Cousins and their development pipeline, I think it looks very similar to the projects that we have, which in total, look at the shadow pipeline could support over 3.5 million sq ft. We've consistently been able to deliver GAAP yields at a north of an 8% yield. I think that remains unchanged with the TIER projects now within Cousins. I think if you look at the private market for new trophy-quality properties, we're seeing cap rates certainly in the 5s. I would tell you in terms of some recent trades, it's been in the very low 5s for stabilized properties in Austin. As you look at the other markets within our portfolio, they've tended to range in that 5.5%-5.75% range.
There's quite a bit of spread, quite a bit of margin, and quite a bit of customer interest and demand. That's why we remain so encouraged about the opportunities in front of us.
Maybe this is a Gregg question, just to understand as we think about just talking about development yields going forward. If I look at the TIER assets that were added, I think the basis you show is actually a little bit less than where TIER used to show them, and it seemed like you paid a premium for their basis for the entity. I didn't know if this was an allocation thing or how we should think about that.
Tony, you're dead on. We hire a third-party, as do all companies when they do a transaction like the TIER transaction, to provide an independent third-party evaluation of what's called a PPA, a purchase price allocation. The numbers that you see in our documents right now are preliminary. They'll actually get finalized in the third quarter, but we use Duff & Phelps. You'll probably see a slight tweak. Yeah, the numbers that we put the TIER assets on our financial statements at are the results of a purchase price allocation of the macro, the total price that we paid for TIER.
Okay. It sounds like between that and Colin's comments, when TIER used to talk about 9% kind of development yields, your yields, given what you think you paid for these assets, will be comparable. You didn't allocate more money to those, and so you're taking an eight or something like that.
Tony, again, we're almost where it gets allocated, whether it's specifically into the land or elsewhere onto the balance sheet. I would just kind of point you to my earlier comments that we look at our development pipeline and remain confident that we can continue to deliver north of those 8% yields across the entirety of our portfolio, and I think Austin included. We're excited about what's in front of us there.
Okay, great. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Colin Connolly for any closing remarks.
We appreciate you spending the time with us this morning. As you can tell, we're excited about having the TIER merger behind us, and we're excited about the opportunity in front of us for Cousins Properties. We appreciate your interest, and we'll look forward to talking to you again next quarter.
Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.