Good day and welcome to the Cousins Properties' fourth quarter 2011 conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Skip (sic) [Harry] Sullivan of Corporate Communications.

Thank you. Certain matters the company will be discussing today are forward-looking statements within the meaning of federal securities laws. For example, the company may provide estimates about expected operating income from properties, as well as certain categories of expenses, along with expectations regarding development, acquisition and disposition opportunities. Such forward-looking statements are subject to uncertainties and risk, and actual results may differ materially from these statements. Please refer to the company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2011 for additional information regarding certain risks and uncertainties. Also, certain items the company may refer to today are considered non-GAAP financial measures within the meaning of Regulation G, as promulgated by the SEC. For these items, the comparable GAAP measures and related reconciliations may be found through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of its website at www.cousinsproperties.com. I'll turn the call over to Larry Gellerstedt.

Good morning, everyone. Our strategy for Cousins is 3-fold; simple platform, trophy assets and opportunistic investments. Our portfolio will be increasingly comprised of Class A office assets that are well placed within high growth Sunbelt markets. Further playing to our strengths, we will use this stable platform as the base from which we will see conditional returns through opportunistic investments. The fourth quarter and full year results demonstrated significant and consistent progress towards this vision. 3 key areas of progress characterized 2011; leasing success, the sale of non-core assets, and a return to office. Our ability to continue driving results in each of these areas will be paramount to our success in 2012 and to achieving our strategy for the future. First, let's talk about leasing success. In a still challenging economy, our team did a solid job of leasing additional space and extending existing leases, leaving the portfolio in excellent shape for the coming years. For the year, our team executed over 1 million square feet of leases in the office portfolio, and over 850,000 square feet in the retail portfolio. Our retail assets were 89% leased at the end of 2011, up from 86% in the beginning of the year. Our office properties held steady at 90% on a same-property basis, but this doesn't capture the full extent of our success. We were able to extend our 2 largest near-term lease expirations in the portfolio, together totaling over 320,000 square feet for at least another 10 years. While this isn't immediately apparent in the leasing statistics, it is every bit as important. Thanks to this progress, the weighted average remaining lease term in our portfolio is now more than 7 years. Specific to the fourth quarter, we successfully backfilled the 64,000 square foot Kids II space at 555…

Thanks Larry. Good morning everyone. Excluding the non-cash impairments Larry just reviewed, we had a solid fourth quarter. FFO was $0.16 per share, which is up from $0.14 last quarter, and it's our best 3-month number since the second quarter of 2009. So what's going on? First and foremost, we are leasing up space. As Larry said, we signed 1.9 million square feet of leases this year and these leases are translating into increased NOI. At 191 Peachtree alone, our headquarters building here in Atlanta, NOI increased from $3.2 million in the first quarter of this year over $3.9 million in fourth-quarter. That's $700,000 or $2.8 million annualized in growth this year alone from 191. For perspective, that's $0.03 per share in FFO. Clearly, leasing up our large properties can move the needle. Another reason for our solid quarter was a land sale at a North Point development here at Atlanta for a gain of $2.6 million. This is a true gain off our original basis that was driven by a rezoning we successfully completed it earlier this year. The sale clearly illustrates the value our development team can create. Finally, I'd like to draw your attention to our G&A expenses. For the year, G&A was down 15% from 2010. It's down 23% from 2007. Although this is a significant decline, the full story of how much leaner and more efficient we are reveals itself when you look at our gross G&A expenses. This is the number prior to any capitalization. Using this number, our true G&A expenses are down 43% from 2007. Net G&A now represents 1.3% of our total un-depreciated assets, and we've accomplished this while leaving our value-add capability intact. As Larry said earlier, we have 2 active developments underway with an attractive pipeline behind that. You…

[Operator Instructions] Our first question comes from the line of Jamie Feldman with Bank of America Merrill Lynch.

I was hoping you could talk a little bit more about the impairments in the quarter, just kind of walk us through the process of how you guys see evaluations, and then if you could talk about demand for some of the parcels that you have on announced sales.

Sure, Jamie. I'll start off and Gregg can add on to it. First of all, the process itself has been painstakingly thorough. We went through and actually hired a third-party company to go through every parcel of land we had, both on the residential side of the business and the commercial side of the business, and give us appraised values of that land. We also went through an internal process of looking at the values. Obviously, we didn't just accept the appraised values. We did get feedback and came up with something that we thought was probably the most accurate look. We then looked at that land and said, well, if that's the appraise value today, what do we think that value is going to be 3 years from now, 5 years from now, what type of capital is going to be required? On the commercial side, how likely is it that development will occur on that land, and if so, what kind of development has the highest probability? So just given the extent and diversity of our land holdings, it was a very broad effort, but also a very deep effort. In addition to that, obviously, Deloitte, our auditors, were very involved in the process as they always are both on a quarterly basis and on the annual year-end look. So if I would sort of characterize the residential piece, I would mainly look at the -- or we'd look at the residential piece really with 3 large buckets. One is our CL-Temco JV, which I talked about just in my prepared remarks, and that's been a -- it cost us about $2 million a year just in carry. It's generating about $1 million and it's come back to the current level where it's generated about $1.5 million in…

No, I think that was pretty thorough.

Okay. And then, I think in your comments you had said there is some that you expect to rise in value in coming years. Which assets are you talking -- which land are you talking about, and how did you decide on that mark?

Well, a lot of it just -- we don't plan on carrying much land. By the time we get through with this recycling, just to give a goal we have, we're probably talking about total land holdings for Cousins being in the $30 million range, plus or minus. So when we look at certain landholdings, a lot of them had to do -- they're really consistent with our strategy, they’re the more infill sites. They're sites that we see the redevelopment or development of those are more consistent with our desires in terms of what we develop in the future. Just to pick one as an example would be Research Park in Austin, Texas, which is the final site of an existing development that we've done. We've sold the buildings off, but we've got 4 buildings there and Austin is a vibrant market and we think that would be -- that's a site that's got a high probability of us developing on it. There are a handful of other sites, relatively small, that we think the -- we looked at it and we said, we don't think it's prudent to sell them at this time because we do think the market will come back in the next 3 to 5 years and there'll be a better time to harvest. But there's not a lot of that. We really are aggressively moving towards more of that $30 million goal.

But those sites, where those not impaired or those were impaired also to what you think is market value?

There were certain sites that we looked at that did not have impairments. It wasn't like every single site was impaired that we have -- certain sites when we went and looked at them were at or above what the appraisal numbers came in at. If you look at our portfolio, some of the sites had very little basis in them.

Okay. But it’s not like if you weren't -- if there was something you think you can still develop, but it's on your books above market, you still would have impaired it, or are there some that's still out there at above kind of market value or appraised value?

No. I think this was very thorough. So we go through and we look at their sites and existing developments we have, future pads that you would say maybe a development opportunity for us, some of those sites were impaired. So we didn't go through and say we're going have certain land assets that we're going to exclude from this analysis. We asked a third party in Deloitte, they looked at every single piece we have whether we intended on holding it, developing it or whatever.

Our next question comes from the line of Brendan Maiorana with Wells Fargo.

Wanted to follow-up on the land a little bit. What value -- where do you guys think you are at the end of the year given you've got the sale to Forestar and then you took aggressive write downs on Blalock and Callaway? So does that mean that there's something that's likely in process there? Do you have a good indication of value and where do you think you are on your residential land holdings as you get towards the end of 2012 and then may be at the end of 2013?

Well, the markets -- we never know what the market is. There are some parcels on the commercial side that we have under varying forms of contract that we think will proceed and be sold. Some of the commercial land, the big ones being Blalock and Callaway, Blalock, with this action that we've taken this quarter, we will be marketing Blalock and looking to sell it as quickly as is prudent. But we don't have, on every single parcel that we're planning on selling, we obviously don't have contracts on all of them. But Brendan, I would tell you that on some these, and Blalock would be a good example, it really was a challenge for the appraisers to appraise it because there's just not been a lot of liquidity in terms of similar type of second home developments that have cleared the market and very little comps in the area. But we took that into account and the way we looked at it, the auditors took that into account the way they looked at the appraisals, did the same thing. So we will be aggressive now that we've taken this step to get the benefit. We'll be aggressive on moving the land out as quickly as we can get it marketed and sold. And we certainly have worked hard to make sure that the values that now are on the books with these impaired things reflect that.

And Brendan, it's Gregg. Maybe this will help us well in addition to Larry's comments. The strategic decision to change the intent on these land parcels was not made until after year-end. So if you look at our balance sheet, really there's nothing held for sale at December 31 because the decision to change, it wasn't made until after December 31. But now that the decision has been made, you will see the assets start to be held for sale March 30, June 30, September 30, which will give you I think a much clearer indication of kind of the pace that which we're moving forward with us.

Okay, that's helpful. And then I wanted to follow up on Temco and CL. For a venture that's profitable and for a venture that has most of its assets in Texas, which is your better market, to take a haircut by 50% seems like a lot. Does that suggest that then Atlanta markets are significantly higher than that on the revenue [ph] side? It just seems like it's a big slight to that venture?

Well, I think the first of all, when you looked at that transaction, the Georgia component of the assets took a much more significant mark in the appraisal process. And there are certain developments in the Georgia part of the venture, The Georgian for instance, where with that development, which I can't remember how many lots it has, but I think it's about 1,000, ultimately, I think it sold fewer than 5 lots in the last 3 years. So as you can imagine, as the appraisers looked at some of this and Forestar and ourselves did our evaluations, the Georgia side of it took a much more significant mark. The Texas part of it is more healthy, but that was taken into account as well. And at the end of the day, I think if you look in our 2011 sales, lot sales, 90% of them were from Texas. Most of that land in Texas also was bought since 2000. So it reflected more of the current market. It wasn't long held land in terms of its basis. And when you looked at that, with the 400 plus lots we sold this year, we had million -- on the Cousins side of ledger, we had $1.5 million of profit and $2 million of carrying cost. So, in reality it wasn't profitable for us when we flow through the operating cost and carrying cost as well. And then when you look at the future capital cost to it, I think you'll find overtime, that this is a very compelling transaction for Cousins.

Brendan, just to clarify one point, we keep saying carrying cost. We said it several times. It excludes interest expense. So, we're not assigning any interest expense to those carrying costs. It's homeowners fees, property taxes, maintenance.

Yes, okay, that's helpful. And then Gregg, just one more for you, the $2 million run rate at Prom 2 (sic) [Promenade II] by the end of the year, what does that indicate for occupancy for that property?

Brendan, I don't have that in front of me. We'll get back to you with that.

Our next question comes from the line of John Guinee with Stifel.

Just a couple of questions, I think you mentioned at the Investor Day that you're going to sell -- your retail is about $400 million and that will serve as a source of capital. And then Aaron just told me that he thinks you can probably borrow $130 million or $140 million on 191 Peachtree. Does this imply that you don't -- but at the same time your debt plus preferred is in excess of 50%. How does that all come together in terms of going back to the equity markets?

Yes. The plan does not anticipate, John, going back to the equity markets. As you just laid out, we've got ample sources of liquidity on a leverage neutral basis for future cash flow -- I'm sorry, for future investment needs. So, nowhere in our numbers as I sit here today…

And it's all leverage neutral.

Do we anticipate going back to the capital markets. And our strategic plan is absolutely leverage neutral.

Okay. But you still seem to be a little bit high when you look at debt plus preferred to EBITDA and if you peel off some of the stabilized retail assets, does that put you under any pressure for a different source of debt metrics?

No. We are in complete compliance with all of our line covenants. We're in compliance with our future line covenants. And debt plus preferred to total un-depreciated assets, which carves out our share price movements, is 45%, 46%. And debt excluding preferred to total un-depreciated is 37%.

Our next question comes from the line of Sloan Bohlen with Goldman Sachs.

Maybe I'll ask John's question just a little bit differently. From a sources and uses perspective going forward, can you lay out maybe what your CapEx requirements are over the course of this year as it relates to leasing of Promenade, as it relates to some of the development projects that you're working on? And are we to understand that none of the proceeds from selling other land or other non-core assets would go towards, I guess, matching those funds needed?

We don't provide CapEx guidance, but we have signed as we just outlined in the prepared remarks almost 2 million square feet of leases in 2011, and we have to move those people in. So you can obviously project that forward. In terms of uses and sources of capital, the cash flow that our properties will generate post CapEx, so FAD or AFFO, if you want to call it, are adequate to service our dividend. And so any proceeds that we'll receive from the disposition of properties will go toward new investments.

Okay. So just to make sure I'm hearing that correctly, then the proceeds from what you sell, we can expect that the vast majority of that goes towards new acquisitions as opposed to gets pumped into existing CapEx requirements?

You can assume all of it.

All of it, okay, that's helpful. And then just quickly on Promenade, can you give us a sense of where market rents are in Midtown and what your expectations are for occupancy sort of hurdles over the course of the next year or 2?

Well, when we completed our acquisition, the basis that which we were able to buy the building and where the market is we clearly did the transaction feeling like with our sponsorship it put us in a very attractive spot. I think, just being able to show 32,000 feet in the first 30 days is a testimony to that. We think that the -- well, the actual market in Midtown today is not a lot different than Buckhead. The office rents would be about the same so that would put the office rents in the high-teens on a net basis and a little bit higher than that for brand new space. And our prospect list in terms of Promenade, we had done a lot of research on the depth of the market, and in terms of prospects, we feel very good about where we are. We think we'll have some nice announcements to make in terms of additional leasing demand there in the next couple of quarters. And we're going to be aggressive about filling that building up in the next 2 to th3ree years. And we feel very good about our ability to do that. And all-in, when we do that, our basis will -- all-in basis will still be well below $250 a foot and that building would cost every bit of $350 a foot to put up today. So we feel very good about Promenade.

Our next question comes from the line of Michael Knott with Green Street Advisors.

It's Jed Reagan here with Michael. Wondering if you can talk a little bit about how you're seeing fundamentals trending in your core markets and, with respect to Atlanta specifically, what's the job growth picture looking like?

Well, there's no question. As we talked when you guys were here that Atlanta's been through a tough stretch. The unemployment numbers, which were in the 10.5% a year ago, are down to between 9% and 9.5%, but 9% to 9.5% are still very high unemployment numbers. Job growth in terms of last year was flat. And the good news is if we looked at the various forecasters in terms of job growth coming up and we spread that over our markets, our markets that we track every day being Atlanta, and Austin, Houston, Dallas, Charlotte, Raleigh-Durham, the forecast in terms of job growth from 12% to 16%, Atlanta's at the upper end of that in terms of forecast. Most of the folks had it in the 3.8% job growth range. So that would be right up there with Austin and others. So the local forecasters here are predicting that next year, whereas job growth was flat this year, would be more in that 30,000 to 40,000 jobs, but some other folks have it at a little bit more aggressive than that. So Atlanta still continues to lag. What we're seeing just in terms of our daily activity in the market with leasing, it has picked up and we're beginning to see both new companies to the market as well as some of the expansions. But it's still a very competitive market. Just as we look at it in terms of the next few quarters, it will continue to be a tough market. Although with our assets, we obviously like where we sit.

And then of the remaining markets, where would you say fundamentals are strongest or weakest?

Well, if you just look, obviously Texas just remains very, very strong. Austin is -- job growth numbers are strong. Overall vacancy in Austin today is in the 11% kind of range, Houston 12%, 13% vacancy. Both of those have over 3% job growth projections. Dallas-Fort Worth, which has higher job growth -- which has high growth, job growth continues to have sort of mid-teen vacancy. Raleigh-Durham continues to be a strong market with relatively low vacancy and over 3% job growth. Charlotte certainly is a laggard in the crowd and we're not as focused on Charlotte as we are those other markets.

Okay, thanks. And could you just talk a little bit about your outlook for investment deal flow in your core markets? Are you seeing any pickup in opportunities there?

That's a good question. In reality, the first is, we expect December and January are traditionally slow in terms of folks in December are getting the stuff closed and January, folks are reloading. So it's been a little bit slow so far this year, but actually the pipeline of opportunities that we'll be looking at in the next quarter or 2 is pretty encouraging. And so, we'll have to see how everything prices out and we'll remain very disciplined in our pricing and focused on the right assets and the right geographies. But there'll be ample opportunities in terms of deal flow.

Our next question comes from the line of Anthony Paolone with J.P. Morgan.

Gregg, thanks for the color on the interest savings not being in that carry cost on the land item. But I was wondering if you could just point us to, or detail a little bit more those carry costs, where they show up on the income statements so we can understand where they're coming out or are those all being capitalized, how does that all work?

No, they're not being capitalized. They're running primarily through the income statement. Let me pull up the income statement, Tony, and point you some of the directions. I'm looking at our consolidated statement of operations in our earnings supplement right now, Tony, and they flow through -- a lot of them flow through in the other expense category. It was $2.1 million this year. That takes care of -- property taxes flow through there, pre-development costs flow through there. So a lot of that would flow through there as well. Some of them are capitalized. I think some of the -- some of the planning in the longer term strategic stuff is capitalized. Beyond that, Tony, I'd have to get back to you.

Okay. But so when we think about these land sales occurring over the course of this year and next, do we assume that the bulk of that line item really goes away or there's some other stuff in there that probably stays and then the interest savings are obviously on top of that?

Yes, that's good. Both of what you just said is correct.

Okay, thanks. And then my last question is on Emory Point, can you kind of outlined Phase II. Just refresh us on the potential total size of the project and is there anything beyond that?

Well, the Phase II is about of $60 million phase if we -- and on Phase I, and we would suspect doing this on Phase II as well, we did put a construction loan on it. We were able to get about -- we were able to get 65% loan to cost on that phase. On Phase I, we had Gables as our partner. We have not finalized whether they would be our partner on Phase II, although there's some logic to having that continuity. They were 75%-25%. So if you sort of assume the same thing, you could back in to what the equity contribution would be in terms of Cousins on Phase II. There actually is a Phase III as well and the Phase III is in the $80 million range. So, that would be the next 2 phases of Emory.

And do you -- it seems like the demand for the apartments is quite strong. Do you have the ability to accelerate that piece of it, given the demand or does it, does the way it just physically lay out, has to go in that sequence?

We actually can accelerate the phases to meet the demand and the main thing that we want to do on Phase II, the apartment demand is clearly there and we actually have had just phenomenal success on the retail leasing side. We're just under 50% signed leases now and 80% of the space is committed. But we'd like to get a little bit of operations up and running on the retail side, so that we make sure to tenant the second phase with the appropriate retail orders based upon our experience on the retail on Phase I.

Our next question comes from the line of Dave AuBuchon with Baird.

Just a few questions left. Timing on the sales to Temco, is that a Q1 event?

We would hope that it closes late Q1, early Q2 or sooner.

Okay.

We have a firm contract on that, Dave.

Yes, it's under contract.

Okay. And they've gone hard with the deposit and all that or….

There is not a deposit but it's a binding contract.

Okay. Related to Promenade, Gregg, you said a $1.75 million NOI, was that a Q1 number?

That's correct.

Okay. And that primarily is comprised, I'm assuming, of the space that was already leased when you bought the building plus the 32,000 square feet or so that you've leased subsequent to your purchase?

It's actually -- I think it's just existing space because the 32,000 doesn't kick in till mid summer.

And they start to move in, which I believe is late spring, mid-summer.

Okay. So, that the increase from Q4 is just purely related to the timing of your purchase?

Most of it has to do proration. Yes, we didn't own it for the first -- for the full quarter and the fourth quarter.

Right, okay. And then I know, Gregg, you said to sort of look for the 8-Ks on some of the financings you're doing, but just can you provide at least some guideposts sort of which you're looking for in terms of size and term potentially on Peachtree and then with the facility?

On the facility, our current facility is a $350 million facility. You should anticipate something right around there. And then in terms of pricing, you'll see pricing come in. Depending upon what you think is significant, I see it as a significant improvement in pricing. And then in terms of term, the standard out in the market right now is a 4-year term with a 1-year extension option. So we're going to be right in that ballpark. We've gone down kind of the center of the fairway as we as best we can, considering our strategy on that and I think our price proves that up. I'm really encouraged and excited about closing that new facility for us.

And what about Peachtree?

And then in Peachtree, we've locked rate, Dave. We locked rate a couple weeks ago. I think we've got a terrific deal, but we've got a lot of stuff to do between now and closing. I'd prefer to hold off on that until we actually close the deal.

Our next question is a follow-up from Brendan Maiorana with Wells Fargo.

Thanks. I just had a quick follow-up. Does Forestar have any right of first offer or right of first refusal on additional land parcels that you guys have or is this agreement just in and of itself an [indiscernible] agreement?

This is the agreement. There's no tail. Now, it does -- I don't want to get too deep into the details, it does tweak the joint venture agreements on the remaining assets and the remaining 2 joint ventures that we have, Temco and CL Realty, where it starts to tweak kind of the buy/sell or the ability to unwind those quicker than we currently have which is a net positive for us. But in terms of it providing any type of purchase option for them, it does not.

Okay. And then I think you gave this in your response to Dave's question, but I noticed that Forestar put a shelf -- filed a shelf today, but there's no financing that is contingent upon this transaction, this agreement is a binding contract?

No. There is no contingent financing and basically, Brendan, at the end of the day the only assets that we have after this transaction closes with Forestar are 3 assets, 2 of which are just land holdings and 1 is a golf course that's leased to a third party. There's a not a lot of assets left once this transaction takes place.

Sure, great.

Plus we maintain the mineral rights in the venture.

Okay. And how much does that give you guys a year, kind of rough ballpark?

I think last year the mineral rights were somewhere around $1.5 million.

Our next question is a follow-up from the line of Jamie Feldman with Bank of America Merrill Lynch.

Can you just talk a little bit more about the investment landscape in North Carolina and Texas? I know you said you want to kind of shrink your Atlanta exposure and grow in those markets. I'm just curious what's out there.

Well, we're obviously -- and the reason we picked those is we have offices there. So, we like the Raleigh-Durham market. We're doing this deal with Chapel Hill. And then once again, our focus is, in terms of acquisitions, is not on suburban products, so we're primarily looking in downtown Raleigh and we certainly consider downtown Durham to be a positive market. It's bankruptcy rate is actually in the single digits. And so there's some activity there. In Houston, Dallas and Austin, once again Dallas and Austin, we have a presence. We've been spending a lot of time in Houston the last 2 years. There was a fair amount of activity in 2011. We got close on a couple of deals but we didn't get there on them due to pricing. But we think there are some really good prospects and our primary focus is on Austin and Houston, a little bit secondarily in Dallas although we are looking there. But there are a fair number of assets that are in the pipeline that are supposed to be trading in the next couple of quarters.

And these are also CBD type assets, CBD office?

However, you define CBD but they are the urban type of deals versus the suburban. So these would be mid high-rise to high-rise, similar to what we own in Atlanta where we think that we can buy that type of asset at a discount to replacement cost and then use just our expertise on managing and leasing those things up to create value. That's where we are focused.

But this is on the office side you're talking, not retail?

Yes. This is office.

Okay, all right.

Most of our acquisition -- 95% of our activity in terms of acquiring existing product is on office, will be on office.

Mr. Gellerstedt, there are no further questions at this time. I will now turn the call back to you.

Well, we appreciate everybody's interest. We consider this a great year for Cousins. The quarter and the year were fantastic. And I think if you look at the progress of the company in terms of our strategy, the land is a very significant milestone for us in terms of taking the next step in that strategy. And we'll be available as always for questions and look forward to them when you have them. Hope everybody has a good day. Thanks.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.