Good day, and welcome to the Cousins Properties' third quarter 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 Eddie Jones 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 leasing activity, rental rates, leasing expenses, development, acquisition, financing and disposition opportunities and expectations regarding the demographic and economic trends in markets in which the company is active. Such forward-looking statements are subject to uncertainties and risks 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, 2013, and its current report on Form 8-K filed on October 29, 2014, for additional information regarding certain risks and uncertainties. Also, certain items that 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. Now, I'll turn the call over to Larry Gellerstedt.

Good morning, everybody, and thanks for joining us today. With me on the call are Gregg Adzema, Chief Financial Officer; and Colin Connolly, Cousins' Chief Investment Officer. 2014 continues to be a very productive year for Cousins. During the first quarter of the year we increased the annual dividend by 67% from $0.18 per share to $0.30 per share, and we issued 8.7 million shares of common stock to redeem all of our remaining preferred stock. In the second quarter, we recast our credit facility, increasing the size to $500 million as well as reducing the interest rate spread and fees. In the third quarter, we closed on the acquisition of Fifth Third Center in Charlotte and tied up the acquisition of Northpark Town Center in Atlanta, two very strategic transactions, representing over $560 million in new investments. We paid for these acquisitions in part with the issuance of an additional 18 million shares of common stock and intent to pay the remainder with the announced anticipated sale of several non-core assets. Also during the third quarter we leased 550,000 square feet of office space, our single largest quarter in many years, and reached 95% leased at Colorado Tower, our new office development in downtown Austin and over 90% leased at 191 Peachtree, our headquarters tower in downtown Atlanta. Year-to-date, same property NOI is up 12.4% on a cash basis. Second generation office rents are up 13.4% on a cash basis. We have unlocked over $5million in embedded NOI within our previously identified pool of assets with available vacancy, and we have done it all while maintaining a best-in-class balance sheet with debt to total market cap around 25%. Instrumental to the company's success is a high level of execution from our leasing management and investment teams. I just can't…

Thanks, Larry, and good morning, everyone. This was another strong and very active quarter for Cousins. I will start by highlighting some of our key operational and leasing metrics, then provide some color on activity within the existing portfolio, and wrap up with updates on our investment, development and disposition activity. We had an exceptional quarter on the leasing front. Our team executed over 550,000 square feet of leases in the office portfolio with 10 years of weighted average lease term. The leasing momentum was broad based across the entire portfolio, with particular strength in Atlanta, Huston and Austin, and we continue to capitalize on opportunities to drive rental rate. Our second generation re-leasing spread was up 36% on a GAAP basis and up 8% on a cash basis. Simply put, this was one of the best office leasing quarters in recent memory. More importantly, our leasing success is translating in strong bottomline results. Same-store NOI on a cash basis was up 13% and our same-store percentage lease ended the quarter at 91.6%, up 90 basis points from last quarter. I do think it's important to note that our same-store pool only accounts for 33% of our total portfolio, and does not yet include any of our Texas acquisition, which account for a significant percentage of the embedded growth and below market rents within Cousins overall portfolio. Moving on to some specific market and portfolio updates. As Larry mentioned, we are carefully monitoring the Huston market for any changes in customer demand, relating to the recent move in oil prices. At this point, we have not seen any impact. And our customers in the energy industry, tell us that they are unlikely to make material long-term changes to their business plans based on short-term volatility. But if the market were…

Thanks Colin. Good afternoon everyone. We had a solid third quarter. FFO was $0.20 per share. This compares to $0.11 per share for the third quarter of 2013. That's a year-over-year gain over 80%. As Larry said earlier on the call, a positive momentum we have enjoyed over the last several quarters persists, driven by outstanding internal and external growth. It was also a very clean quarter. There were no special or unusual items pushing FFO either up or down. Specifically, during the third quarter, 97.5% of our consolidated revenues came from property rent. Other income such as land gains, termination fees, interest income was the smallest percentage of our total revenues in at least 24 years. To put this in perspective, as recently as early 2010, only about 50% of our consolidated revenues came from property rent. And moving back to the early 1990s, the number hovered between only 30% and 40%. And the cleanliness and quality of our revenue stream should continue to improve. Once we sold the Watkins Retail portfolio that Colin just discussed, we will only have four joint ventures on our balance sheet, which own operating assets; Terminus with JPMorgan, Gateway Village with Bank of America, Emory Midtown Medical Office Tower with Emory and Emory Point with Gables, that's it. We own a 100% of all of our other operating properties. That's a significant change from just a few years ago. The benefits of a cleaner income statement and balance sheet are clear. It's easier for analysts and investors to understand model and to value. A couple of items to note in our performance this quarter. First, total leasing costs were $6.18 per square foot. I wouldn't read too much into this number. Its bumpy quarter-to-quarter and highly dependent on the mix of leases we…

(Operator Instructions) The first question comes from the line of Dave Rodgers with Robert W. Baird.

This is Matt here with Dave. Maybe for Gregg, leverage has stayed low to this point. How should we think about your leverage metrics in 2015, as you start these two new development projects leverages move higher or will it be more a transitional period during the development?

We intend to keep leverage approximately where it is today, kind of between 25% and 30%. We'll fund the new developments with retained cash flow, as you know our dividend is relatively low as well as non-core asset sales.

And then, maybe moving over to Larry. You said acquisitions reached replacement cost. Do you expect to see some new purchases and then maybe also by major submarket for you guys, how much further do rents need to move in order to make spec development pencil? And how long might that take?

When we look at our markets, the Texas markets, you've seen Huston be in a position to support spec development and Austin be in a position to support some spec development as well as is Dallas. And it's really very submarket specific, as to where those dynamics are. In Austin, when we started Colorado Tower, you already had existing rents at or above replacement cost in that market. And you're begging to see that in some other submarkets in Texas as well. In Atlanta, in Charlotte, you really are still behind that. In Buckhead, for instance, where we're seeing rent growth in our existing portfolio in the 5% to 6% range, those rents are still, the new tower that's started is going to have to get around $30 a square foot and our rents are still over 20% below that number. Charlotte would be similar to that. So you've got any spec development, you see, go in those markets, whoever does those projects is going to have to believe that you're going to continue to see significant rent growth in the two years or three years, while they're underdevelopment. I would foresee us being with pricing where it is on acquired and existing assets. Although, you never want to close the door on that, because there maybe a special opportunity that comes up that we see, where we feel like we can create value. But in our business model it's really set up to deliver the kind of returns that we want to deliver by buying core-ish asset at or above replacement cost in our market. So we are much more in a development mode. As Gregg said, keeping the balance sheet conservative, but looking for some select development opportunities. And as I said in my remarks, I am optimistic, we're going to have at least one opportunity hopefully more to talk about between now and the end of the year in that capacity.

And maybe last question for me. Gregg, do you have updated numbers, just given that you're expecting to sell 777 Main in the fourth quarter for the $19 million of potential NOI?

We don't break that out by an asset. But if we're successful selling 777 Main, I don't think that number down by about $4 million. 777 Main represents approximately $4 million to that $19.7 million number. 191 I think as Colin said, we're going to be really patient with that. So let's get a little further along in the process, before we talk about pulling 191 out of there.

Our next question comes from the line of Jed Reagan from Green Street Advisors.

You talked about Houston, doesn't sound like you see any noticeable impact from the recent drop in oil prices. And I'm just wondering if you have a sense for what that price level would be for oil, where you'd see an inflection point where that could start to affect job growth or oil prices, the number that sort of you guys are tracking there?

Jed, first of all, I want to make clear, I probably don't need to, but we're not energy experts, and there is a tremendous amount of press that we read and reports we look. And I'm sure you all do as well about where global energy markets are and pricing, et cetera. But we have paid attention and it might be a good reference point to just look at some of the large energy companies in their earnings call this quarter. And what we've seen from those calls is a pretty consistent message that at $70 or $80 a barrel, which is sort of the range of what see forecasting to be, that they are still making money, profits are just not as high. And you've seen in these quarters calls, a lot of the companies reiterate their offensive measures in terms of new drilling opportunities and the capital required to do that. So we're not at all flipping about the oil prices. But also if you look back at oil pricing in the last five to eight years in Houston, even at $70 or $80 a barrel, it's a relatively healthy oil price, relative to the Houston economy. And Houston has continued to flourish in the last decade, when oil has been even another $20 lower. The more important thing, Jed, I think in terms of, as Colin sort of outlined our lease role and our customer discussions, I think it's important to watch is that we've had Occidental Petroleum, which is the strongest credit in the energy market, taking additional space for us at Greenway. We also have had Apache at Post Oak in the last two quarters, taking down additional spaces, although small on a percentage basis compared to those their overall. They're taking down additional space which is interesting. The main thing they are doing with that is investing in things like fitness centers and cafeterias for their employees. So the short-term actions we're seeing of our customers out in Houston are very consistent with the view we're hearing on earnings calls, which is people aren't pausing, they are just continuing to move forward with their strategies.

I guess also on 191 Peachtree, can you just talk a little bit of how you're thinking about approaching that recap as far as partial minority stake or selling off a majority interest? And then is even a 100% sale on the table, if pricing were to come in well ahead of your expectations or if someone made you a great bid?

We don't ever want to close the door on anything, but our intention is to bring in a partner, and whether that's a 50% partner or a 70%, 80% partner, really it's going to depend upon the partner and the economics. And then management decisions, because it's very important to us that we can continue to manage this asset. Just like JPMorgan's been a great partner at Terminus. We want to make sure we bring a partner in here that not only gives us great value going in, but will operate it in a way that we're consistent in terms of how we trade our customers, and where we invest our capital. And so we're just going to be a lot more deliberate in that process. And I think it will probably play out over a couple of quarters versus a couple of months in terms of where we end up. We have had some people say that they would like to do a total purchase of the building. And we're open to considering that as we should be, but that's not our game plan in terms of the strategy in which we started out this process.

And then just I guess related to that, a quick one for Gregg. Sorry if I missed this, but on 191 Peachtree, it looks like the quarterly NOI dipped a fair bit. I'm just wondering what was driving that or if that a fair run rate to think about going forward for that building?

Jed, you said that the NOI?

Yes.

The big difference this quarter versus last at 191, there was a termination payment that we received from Il Mulino, which was a restaurant in the ground floor. So that was in the second quarter as a one-time item.

That's right. The guidance we give you at the beginning of the year, the properties actually run right in line with that, kind of low 4s, it's been the low 4s. Other than that payment, all the first three quarters and we anticipate it will remain there in the fourth quarter.

The next question comes from the line of Jamie Feldman with Bank of America Merrill Lynch.

I guess just starting out with the Austin development. Can you talk a little bit about competitive supply there in the northwest?

They are a handful of other projects in the northwest submarket. When you look at the statistics the northwest submarket by geography is very large. And so as we look at we think kind of the competitive supply to this market, to the Research Park, it's really in an around the domain if you're familiar, which is a large mixed-use project, that Endeavor does, it's really the fortress mall. They've got two projects under construction today, one of those is a 100% pre-leased, the other one is stack. But we see very healthy leasing pipeline behind it to lease up both these buildings.

And then you had mentioned the Decatur asset as a mixed-use. Will that include office? And if so, do you expect any pre-leasing there?

That project will be roughly 350 apartment units, and it will be a retail component and probably 30,000 square feet to 40,000 square feet of retail, but no office.

And you said it's a JV? It would be a JV with a residential developer?

It is. We've been in active discussion and negotiations with various multifamily developers. It's a terrific site and indicator, which is extraordinarily supply constraint market here in Atlanta sitting on top of MARTA station. So we've had very broad based interest from potential partners, and we're hopeful to announce something here in the very near future.

I guess with these mixed-use in some of the residential and retail. I mean, what does this say about your strategy? You look at, when you went through the simplification process to get more to just core office. Is this a one-off, just because you own the land or are you just more interested in some of these that are property types at this point?

I've always said we're opportunistic. And Emory has been a very opportunistic play. The Decatur which is extraordinarily supply constraint jurisdiction, we had a great relationship that gave us access to a site there. Same with Chapel Hill, it takes about four years to get something zoned in Chapel Hill, and this is just an extraordinary opportunity. And we certainly feel great about all those. So they're just opportunistic plays. Most of them have been in the pipeline for several years to get to the point that they are today. I think a key part of our strategy though is because they're not office; we do bring in partners that specialize in the main product type, which is multi-family for multiple reasons. One, is we look for them. Two, do a lot of the development execution, but we also want to make sure that we're getting the benefit of their insights on where we are in the cycle and how we underwrite the product type that is not core to what we do. The main opportunities that we are looking for and hope to be able to have some more opportunities to give more color on in the next few quarters will be pure office plays that we think will be very compelling at this point in the cycle. So these have been in the pipeline a good while. We are not out actively looking at mixed-used sites with multi-family or some other product type is the predominant part of the development.

And then can you talk about your largest expirations in 2015, and maybe a view towards where you think rents are versus market for expiration?

The biggest expiration in 2015 is obviously Exxon. It's about 215,000 square feet at Three Greenway Plaza. As we look at what that rent is relative to market today, I would say it's roughly 20% below market. So as we purchase Greenway Plaza back in 2013, we always see that as a terrific opportunity to roll up rent. So we're very focused on that and eager to get that space back in early 2015. Outside of that, now that we have taken, put the put the MedAssets, renewal that we had which was our second largest expiration in 2013, there really aren't any other significant customers, certainly nothing over 100,000 square feet. We've got an expiration with Oracle at Northpark. It's about 70,000 square feet. And we're in conversations with them. But that is the only other customer north of 50,000 square feet. Moving forward to 2016, Bank of America, obviously about a 1.1 million. We've had a lot of conversations in past calls. There, they're obviously also a 50-50 joint venture partner in that investment at Gateway Village. We anticipate some time in early 2015, probably that conversation starting to pick up. I think our view is that that is mission-critical space to the BofA platform, but we'll start that conversation. And then, of course, next in 2016 Stewart Title is that 230,000 square feet at Post Oak Central, nothing to announce at this point, but I'd say that conversation with them continues to be directionally very positive.

And then I just have one follow-up question for Gregg just to make sure I heard you right. So the fee income I think you said you'd have $4.5 million that would run through fee income, but then you also said there'd be $4 million higher leasing costs, but the net impact would be $3.1 million higher fee. I think that just didn't -- the math didn't seem like it made sense to me. Am I missing something?

So the note that was repaid in the fourth quarter early October, the total payment is $4.5 million and that's an FFO item. That will run through fee income. So you'll see fee income, the $4.5 million higher, and it would be otherwise. And I assume nobody on this call has got that in their estimates, but we had -- there was cost to getting that $4.5 million. That was approximately $1.4 million in commissions and fees that were all already baked before we acquired the note when we bought the Faison-Stone entity back in the late 90s. So the net result will be $3.1 million in incremental FFO during the fourth quarter.

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

Just to help us a little bit on 2015, Gregg, refresh my memory on the Publix JV. I think you had the capital source with the developer. Have you been booking a 5%, 6% on that or have you been booking a 16% to 18% look back IRR? And when should that income terminate?

Per GAAP, we've been booking 16% on both of those joint ventures the whole time. The larger of the two actually has an 18% look back IRR. We've only been booking 16%. As Colin said, we think it's highly likely we'll get the full 18%. So that extra 2% of flow-through upon sale as a gain on sale. It will never flow through upon gain on sale. And that's going to happen sometime in the fourth quarter as Colin said.

And then is it safe to say that 2015 will be a little lumpy, just as the Fort Worth deal burns off. You would likely sell a piece of Peachtree Center offset by some development coming in?

Well, 777 Main will be sold we hope prior to year-end or at the very beginning of '15, so there won't be any lumpiness during calendar year '15 from that, because it'll already be gone by the beginning of the year. Really the only uncertainty on the sources of proceeds side of the sources and uses equation is what you pointed out, which is the timing and amount of 191. And that could prove to be a little bit lumpy. But other than that, I think actually, as I've said early in the call, other than that, the timing of that JV, actually kind of the quality and predictability of our cash flow stream has actually improved materially over the last few years. So you're not going to have a whole lot of other kind of fee income or gains on sale or interest income or the other stuff flowing through there.

And John, one thing I just would add to on 191 Peachtree is if we don't find the right partner, we're absolutely fine with that too, meaning that we're not going to force something that we don't get the right price and the right partner. If we didn't sell 191 Peachtree and just left the leverage on the balance sheet, we're still less than 30% leverage. So we're going to be very deliberate about that process. And the good news is, we're in the strongest leasing environment right now in downtown that I've seen in the last two or three years.

And then the last question is like so many of your peers, the acquisitions appear difficult, ramping up development and also continuing to recycle assets. When you do your two or three year sources and uses, does this result in a growth in the company or sort of the same sort of total enterprise values we have right now?

Yes. I would tell you, John, that just as with '15, kind of our longer-term plans beyond '15 for the next couple years would again keep leverage relatively constant and pay for any incremental investments, whether that's development and/or acquisitions, with really retained cash flow and non-core asset sales. And so the net result of that is a company that's kind of generally the same size as it is now.

The next question comes from the line of Tom Lesnick with Capital One Securities.

I just wanted to clarify what was driving the sequential operating expense growth in the same-store portfolio? Was that mostly attributable to the higher than expected real estate taxes you alluded to earlier?

It is. I'd say real estate taxes are a primary driver and then we always see in third quarter versus second quarter, you typically see higher utility costs as you get into the summer month. But I think kind of there is two line items generate the bulk of that increase.

And then just turning back to Greenway again, I know several of the lobbies have already been redeveloped, and with Exxon moving out, there's a pretty strong positive potential rent bumps there. But could you possibly quantify what the repositioning CapEx would be to achieve that?

It's a multi-million project that my sense is that budget will ultimately be $3 million to $4 million of total project cost, and actually a little bit higher than what you would traditionally see from a lobby. If you remember, if you've toured Greenway, there are several below-grade levels there leading into the food court and a below-grade parking level that will also be included in this project, but the bunch it will be in that $3 million to $4 million range.

The next question comes from the line of Michael Lewis from SunTrust.

I realize you're not giving 2015 guidance yet, but when I think about the G&A run rate, are there expenses still in there that are really supportive of the development platform that could potentially be capitalized, or is that kind of already baked in?

Well, as we've said probably before we think our development efforts generally costs us in the ballpark of $4 million-ish give or take. And then the question is just how much of that can you capitalize. And the amount that we capitalized is based upon how much development we have underway. And so as that spools and spools down, and ebbs and flows, the capitalization goes up and down. You've seen it go up this year. And if we actually start the projects, we hope to start in '15 I think you'll see it remain elevated next year. So I think you can look at kind of our gross G&A and our net G&A, taking out the capitalization of salaries based upon development efforts. And it's a pretty good run rate for '15 going forward.

And then just one other question. You've given a lot of good detail, I think on oil prices and what's happening at Greenway. Just to kind of crystallize this for me, the lobby renovations, I'm wondering how disruptive that is to your re-leasing plans. Can you bring tenants through there? Could you move somebody in while that work's going on? And how does that kind of relate to downtime you might expect after Exxon moves out?

We've got a very detailed development plan that phases that project over the course of the next year to minimize as much disruption as we can. There will obviously be some, but our hopes, again is to have that completed that project sometime in probably the third quarter of next year. So we think as we're going through the leasing process next year that the timing will set up quite well. But we've got an experienced development team that is laser focused on minimizing as much disruption as possible.

But a customer won't have to wait upon that. There are other customers in the building, and so the reason that that redevelopment is phased is so we can keep the other customers in great position. So if somebody needed the space, we don't have to hold it off the market until the lobby development is done.

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

Colin, is there Transocean at Greenway? I think there was maybe some discussion or some consideration that they were thinking about new construction versus to satisfy some growth. Does Exxon, and the vacancy that you've got there, does that maybe make it more likely that they would stay at Greenway?

Well, we've always viewed the Exxon space over three years and there's a potential opportunity with Transocean. They have been out in the market looking at all their various alternatives and options, redevelopment; it's certainly one of those. They do plan to, with their next lease consolidate workers from a couple of other facilities that they have. So I think for us having that additional space at Three Greenway to give them that opportunity for growth and consolidation will be a big plus.

Any sense of when they'd sort of need to make a decision by? I know their expiration isn't for a few years, but if they were doing new construction, they'd obviously have to move a lot sooner than within a short window of their expiration.

Yes, their expiration is January of '17. So if they were going to make the decision to go to new construction, that window is getting pretty tight for them. And again, we continue to have conversations with them and remain optimistic.

And then I know we talked about this when you guys did your tour in February about Apache. I mean I think you mentioned maybe by the end of this year they would need to make a decision about whether or not their new tower was an option they were going to pursue. Have discussions with them increased anymore or is it still something more likely by yearend or early next year?

Their expiration is December of 2018. And so I think in our mind, if you thought about somebody making a decision to move to a new tower and that kind of construction, that's probably a couple of years. In advanced they need to make that decision. So I would say that we're going to make the move as probably a late '15 decision kind of line in the sand for them to make that call to have the time to get the tower build. I think it's interesting over the last quarter or so, as Larry mentioned, they have been taking additional space. So they've leased about 24,000 square feet during the quarter, and bulk of that space they are using to build out their own dedicated cafeteria and fitness and center, for example. But that conversation I think will pick up sometime next year.

And just so last one. You guys kind of hinted at additional development, and maybe some of that it's just kind of the Chapel Hill and Decatur sites. You also have a site with a partner in Central Perimeter in Atlanta where I think you were hopeful maybe to find an anchor tenant that could kick start a development. Is that one of the projects that could happen? And any color you can share on prospective tenants that maybe interested?

The one that you're referring to in the Central Perimeter, that's going to -- we're very much in the discussion with prospects that are looking for large chunks space at the Central Perimeter, but I don't see anything on the horizon that would say that that's going to happen in the next couple of quarters. So really we're continuing to look aggressively there, but the other opportunities; we've got some other opportunities that just aren't quite far enough along to give you some details. But I think that will be in the next, hopefully, weeks or months.

Thank you, Mr. Gellerstedt. At this time, I'll turn the conference back over to you.

We appreciate everybody being on the call today. And we look forward to seeing you in Atlanta next week. We hope that a lot of you will be able to joining us on our property tour and the reception that we're going to do at the new Center for Civil and Human Rights that afternoon, and that we'll obviously look forward to seeing you at our individual meetings. So thanks for joining us today. And you see you next week.

Thank you, ladies and gentlemen. That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you and have a good day.