Good morning and welcome to the Cousins Properties Incorporated first quarter 2015 conference call. [Operator Instructions] I would now like to turn the conference over to Pam Roper. Please go ahead.

Good morning and welcome to Cousins Properties' first quarter earnings conference call. The press release and supplemental package were distributed last night as well as furnished on Form 8-K. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website at www.cousinsproperties.com. An audio webcast of this call will be available for 90 days through a link in the Investor Relations section on our website. At this time we would like to inform you that certain matters we will be discussing today are forward-looking statements within the meaning of Federal Securities Laws. Examples of such statements include estimates about expected ranges of FFO per share and operating income from properties, as well as certain categories of expenses and other income, along with our expectations regarding leasing activity, rental rates, including above and below market rental income, 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 risk and uncertainties that could cause actual results to differ materially from our current expectations. The company does not undertake a duty to update any forward-looking statement. Please refer to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2014, and our current report on Form 8-K filed on May 06, 2015, for information regarding certain risks and uncertainties. Also, certain items we 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 reconciliation may be found through the quarterly disclosures and supplemental SEC information links on the Investors Relations page of our website at www.cousinsproperties.com. With that, I'll turn the call over to our Chief Executive Officer, Larry Gellerstedt.

Thanks, Pam. Good morning, everyone. Thanks for joining us for the first quarter conference call of Cousins Properties. With me today are, Gregg Adzema, Chief Financial Officer; and Colin Connolly, Cousins' Chief Investment Officer. I'd like to start the call today with some terrific performance highlights for the first quarter, then I'll provide some color on Houston, which is on the forefront of everyone's mind, and then I'll closed with some exciting updates on our development pipeline and capital allocation strategy. During the first quarter of 2015 we delivered FFO of $0.21 per share compared to $0.19 per share for the first quarter of 2014. Leasing efforts remain strong, as we executed approximately 441,000 square feet of office leases during the quarter, approximately a 20% increase in volume compared to the first quarter of 2014. Our second generation re-leasing spreads also continue to trend positive, up 8% on a cash basis. Our fantastic leasing performance continues to drive bottomline results. We posted a 15.9% increase in same property NOI on a cash basis, which is our fifth consecutive quarter of double-digit growth. Before diving deeper into Houston, I'd like to highlight how strong the portfolio is performing in our other four markets. Over the last 12 months, Atlanta, Austin, Charlotte and Dallas have collectively generated over 230,000 jobs or 7.4% of total jobs created in the United States over the same period. Further, net absorption in these markets during the first quarter accounted for 2.4 million square feet or approximately 30% of the total U.S. absorption. These positive economic tailwinds are translating into great results across our assets. To highlight, our percentage leased in the portfolio outside of Houston increased to 100 basis points upto approximately 92% leased on a weighted average basis during the first quarter. Now, I'll move…

Thanks, Larry, and good morning, everyone. I will highlight some of our key operational and leasing metrics, and then provide updates on recent activity within the existing portfolio. The team delivered another terrific leasing quarter, signing approximately 441,000 square feet of office leases. Weighted average net effective rent of $14.31, was down relative to the fourth quarter. But I would not read much into this, as it was driven by the leasing mix with a disproportionate share of this quarter's leasing activity occurring in lower rent profile building. Nonetheless, leasing in these assets is equally as important as in our highest rent buildings, and this quarter's underlying economics were accretive to value. To highlight this, our second generation re-leasing spread was up 33.6% on a GAAP basis, and 8% on a cash basis. This was our fourth straight quarter with positive leasing spreads. Switching gears, I'll turn to some key updates within our portfolio and market color with a particular emphasis on Houston. First, as Larry mentioned, we had a very strong leasing quarter in Houston. We executed approximately 266,000 square feet of leases with a second generation re-leasing spread of 40% on a GAAP basis and 11% on a cash basis. Our six-year extension with Direct Energy through May 2023 for 192,000 square feet at 12 Greenway Plaza accounted for a significant portion of this leasing activity. While Direct Energy did give back approximately 36,000 square feet, this was a great transaction for us, as it significantly reduced our 2017 rollover exposure and crystallized a nice rollup in rent. As it relates to our rent rollup in Houston this quarter, I think it's important to note that Direct Energy's previous lease commenced just three years ago in 2012, as oppose to a rollup on a prior seven to 10…

Thank you, Colin. Good morning, everyone. We had another solid quarter. FFO was $0.21 per share, up 10% from $0.19 per share last year. This was driven by strong internal operating metrics across the board. Leasing velocity, second generation rents and same property NOI were all significantly higher than last year. Really the only item that was unusual was our G&A expense during the first quarter. On our last earnings call, I provided an annual range of $21 million to $23 million for net G&A expenses for all of 2015, which equates to a quarterly run rate of about $5.5 million. We reported actual net G&A expenses of $3.5 million this quarter. The sole reason for this better than anticipated number was a reduction in our long-term incentive compensation accrual, driven by our share price performance during the quarter. During periods of share price volatility like we are experiencing right now, this compensation accrual can be very jumpy. As a result, we're not going to adjust our annual G&A guidance for 2015 at this time. One other item, I'd like to highlight before moving on to the balance sheet is the composition of our same property portfolio. For the last couple of years our aggressive portfolio repositioning activities have caused this portfolio to be relatively small portion of our total portfolio. Last year it was only about 30% of total net operating income. In 2015, this has changed materially, as we have now owned many of our larger recent acquisitions for over a year, which allows us to provide a meaningful year-over-year comparison. Today, our same property portfolio comprises about 75% of our total portfolio. It's a significant percentage. And this portfolio now provides important insight into the operating performance of our assets. For the first quarter, our largest property…

[Operator Instructions] The first question comes from Jamie Feldman with Bank of America.

I guess, just starting out the development projects that you guys mentioned, the potential build-to-suits, are those tenants that would be incremental of the portfolio or would they be coming from the portfolio?

They are both additive to the portfolio. This is not moving any tenants around within our portfolio. It's all additive.

And are they new to the market?

One of them is new to the market it's in. And one of them is a relocation within the market.

And then turning to Greenway Plaza and Galleria I know fundamentals are holding up better there than the rest of Houston. Can you just talk about what markets rents in those submarkets specifically have done and concessions have done?

As I said earlier, logic would tell you that you would start to see some softening in the leasing economics. At this point, it's still a little bit more anticipatory than realized. We've actually gone back here over the last few weeks and looked at our leasing pipeline within both Greenway Plaza and Post Oak Central comparing it to actual completed yields from last year prior to October. And we haven't seen any material change yet. That being said, I think our view would be that you'd start to see some tickup in, whether it'd be a little extra free rent or TIs over time before you see any changes in fixed rent, but we just haven't really seen anything material at this point.

So it just sounds like asking rents are pretty much flat?

That's right.

And then turning to Austin and Research Park, where do you think the hold up. Why is it still -- why you're still not having a lot of luck at least getting leases signed?

Jamie, we're actually right where we want to be on Research Park. Once you get into these smaller buildings, you really have to be within six months or so of completion to have serious discussions with most of the customer. Our prospect list demands remains extraordinarily strong in Austin. Our prospect list would be over 500,000 square feet of which 200,000 are pretty active. So we really are not surprised or disappointed where we are at this stage, six months out for completion, and feel confident that things will solidify on some of these prospects over the next year or so.

And, Jamie, I would just add to that in terms of that Research Park V, some of the other similar projects under development are behaving the exact same. There is three or four other 100,000 and 200,000 square foot development projects in the Northwest really with our primary competition, that's expected to deliver a little bit ahead of us. And we've seen a vast majority of those now become a 100% leased with recent announcements as they were nearing completion here in the next quarter.

And are you seeing hiccups in Austin, just whether it's tech concerns with LinkedIn's earnings or oil that might slowdown the leasing market?

No, we really haven't. We certainly track that, but I would tell you that Austin seems to be totally disconnected to the oil discussions. I mean, Austin is really technology, and we follow that sector very closely and read the same things everyone else does, but we haven't seen any slowdown in Austin, any hiccups. As a matter of fact, we've seen Apple recently bought a building right near Research Park to expand their presence to the campus they're already building. You're just continuing to see positive things. We've actually looked a little closer to see if there might be a link with oil to Dallas just because of some of the services firms in the Dallas that serves the oil industry, lawyers, accountants and things. And once again, we have not seen anything there. As Colin described in his comments, Dallas has just become a much more diversified services based economy, but we're watching it closely and that's why we're being as disciplined as we are on Victory and we'll continue to be so.

The next question is from Michael Lewis with SunTrust.

My first question is for Gregg about the G&A guidance. So your stock price was about $12 at the end of 3Q '14. It was $10.60 at the end of the first quarter and now it's around $9.75. So can I assume that if the stock price stays around where it is, you might be looking at only about $7 million of G&A through the first half of the year versus $21 million to $23 million full year guidance?

Michael, it's actually a function of two things: it's absolute share price and its relative performance to our peers. And so it's a mix of both. So our share price declining by another dollar, since the last time you looked at it. On an absolute basis, for that portion of our LTI could move it down, but if we're doing better relative to our peers, we'll move up, so it's a little bit more dynamic than just looking at our absolute share price and its movements.

And on guidance, can I assume that the land sale gains for the full year are about a $0.01. I'm not sure, if you said that specifically. I just want to make sure?

That's what our wording implies that the $0.01 increase in our guidance is attributable to land gains, both what we recognized in the first quarter and the balance of the year.

And then my last question, I'm not sure if I missed it, but is there anything you could talk about as for as the BofA expiration at the end of 2016, I know they have a lot of options, right, I think they can stay, they can move out, they can actually exercise a buy/sell?

As I mentioned, I did mentioned in my remarks, certainly we are in active discussions with Bank of America about a renewal there. We would expect that they would renew an overwhelming majority of that space. It is absolutely mission-critical back house use for Bank of America. So I think we're optimistic and over the next few quarters we should hopefully have something to share.

Michael, I mean generally, it's about 1 million square foot building. There's about 100,000 feet that's subleased to other customers currently. And so I think that the indications are the bank's going to want the balance of the space that they already have, but those discussions obviously are still in process.

Next question is from Jed Reagan with Green Street Advisors.

So it sounds like you guys are specifically seeing rents moving down in your buildings in Houston, but do you sense that landlords in your submarkets are cutting rents to get deals done? And then, I guess, just to drill out on the Exxon space, in particular. I mean, are you guys really just kind of holding firm on asking rents from where you were say several months ago on that type of space?

Jed, I would say, across our particular submarkets, I think it's important to really look at who are our competitive owners are. And if a extraordinarily well capitalized group of owners with folks like MetLife and Invesco, who have made long-term investments and have very low leverage, and I think are seeing similar dynamics to us starting at a very much position of strength with our submarket being call it 98% leased. So we haven't seen our competition really cutting rents or offering up large concessions either. We do hear about some of that out in the Energy Corridor, which is really kind of more the eye of storm, but within the urban submarkets, we're just not seeing it yet, and this is more anticipatory than realized. As it relates to the Exxon space, as I mentioned in my remarks, we are in active conversions on several floors, and I would characterize this as continuing to hold rent and feel like we can be successful there.

You talked about ramping up dispositions from new developments. Can you elaborate on which assets or markets are, sort of, primary candidates there? Is 191 Peach Street back on the radar? And then, I guess, related to that, would you consider selling a stake in a Houston asset or reduced exposure there? And maybe facilitate some price discovery?

I think on the asset sales side, our strategy is pretty clear. And so if you look at our asset mix on the office side, you certainly have more suburban quality assets that you see, that we now have well-leased up. It would probably be the first thing that we look to harvest as we move forward. And we've made a lot of progress on several of those assets, and have them in good position in the market pricing is indicated there is a strong demand for that. Also, on 191 Peach Street, as we said, when we decided not to bring a partner, it was because we really when we saw the leasing demand growing in downtown and the tightness of space, we really raised our pricing expectations. And you've seen that reflected in the lease percentage. And we think that there is more opportunity there to take that further. So currently, we have no plans to take another look at 191. Relative to your question about venture asset, and doing something like that in Houston, we just don't want it -- I don't want to take a short-term reaction on a long-term asset view and market view that we have of Houston. And we like our position. We've done some fantastic renewables to solidify, the way the portfolio looks in for the next few years. And we're still big believers in the Houston market. So that would not be a source that we're looking for in this current plan in terms of funding our development pipeline.

And then just last one from me. On the share repurchases, just wonder, if you've got a specific share price, or let's say, discount net asset value in mind where that strategic option does pencil in your mind and maybe you to start pull the trigger on that?

Well, Jed, for us the math behind the share repurchase program, it's not theoretical. We know our NAV, we update that what we believe our NAV to be on a monthly basis. We have an actual development pipeline, of which we can look at the relative returns of it. And taking everything into account, using real world numbers, we are very confident that our development pipeline brought superior return. But we monitor this in real-time, and if the math changes, then we'll adjust. But it's a very disciplined way in which we try to always look at our capital and we'll continue to do so.

And I guess just related to that. You mentioned that Colorado Tower kind of finishing better than other initial underwriting. Do you have a stabilized yield where that things ends up landing?

Jed, it will certainly pencil out north of 9%.

The next question is from Dave Rodgers with Baird.

Maybe a combination for Larry and Gregg. With regard to asset sale and capital recycling that you talked about, you talked about being conservative and selling in front of potentially the development. It sounds like you got a number of announcements that could come this year, but the development start sounded like they would be 2016 weighted. So should we expect any impact this year in terms of asset sales, would you time that with the announcements or more the commencements to the projects? And then second part, a little unrelated, the $500 million number that you gave, does that include Colorado Tower and is that your share of 100%?

I'll answer the funding question first. I'll let Larry tackle with the other question, second. You can't predict down to the month, exactly when you are going to sell something, but we anticipate selling the assets to fund our development pipeline in advance of or commensurate with the start of development. So that means that some of them may be in '15, absolutely. There'll be in the late '15. So there will be no meaningful impact, if any at all, on '15 guidance. But yes, you could see some sales that occur in '15 in advance of construction commencing in early '16.

And Dave, on your second question, the $500 million does include Colorado Tower. The number would be about $380 million without it.

And Larry, was that your share or was that the total development share?

Our share.

Maybe I'll go to Colin, real quick on Austin space. You went through a lot of the leasing numbers quick and there was a lot of good detail in there, Colin, and so we can check later on some of the numbers. But one of things I thought I remember was that you had some temporary space in Austin that was waiting to move into Colorado Tower when it completed. If that was right, did you see that move out in relocation, I should say in the first quarter? Do we see that in the second quarter? And how large was that, if I'm remembering right?

Dave, we previously thought that we would have 22,000 square feet that would vacate during the first quarter and move to Colorado Tower, that get delayed to this quarter. So we would expect to get that space back here this month, which would take the occupancy rate '16, down probably 4.5% or so. But as I mentioned in my remarks, the pipeline of activity behind that is very strong. And so we would anticipate in the next quarter or two being able to backfill that space pretty quickly.

Last question, Larry, on the development side, do you have a changed appetite for land, given that it seems like acquisitions are going to be kind of done for the cycle for the most part. Do you want to bring some more land on board, as you start to look at these projects and prepare for the next wave or you're pretty comfortable where you are today?

Dave, that's a great question. And we've said all along that sort of a 3% to 5% of number in terms of land as percentage of the portfolio would be an appropriate amount. If you take our residential out, which we're continuing to sell as the result show, it would be below that. So we are and have been looking for some key sites, whether it's this cycle or the next cycle. The multi-family business has made those tough to come by. But we remain very active in looking at them. And I would anticipate as whenever that market cools a little bit that you would see us in the next two years take two or three land positions that are key in these submarkets we play in.

The next question is from Tom Lesnick with Capital One Securities.

Just a couple of quick housekeeping ones. Fee income net of reimbursements is down a bit from the run rate of 2014, even when accounted for one-time items like the seller note payment in 4Q. I guess I would have expected to see that number tick up a little bit considering the genuine parts development. Can you shed some light on what you expect for fee income going forward and maybe what's driving the reimbursement line?

There's a lot of questions in there. I'll try to tackle them one at a time. Inside of the fee and other income line items is the reimbursable expenses, and it's been deducted in the reimburse expense line item. So if you wanted to look at kind of true fees and other income, you would take it net of reimbursed expenses, first question. Second question, in terms of general direction of fee and other income, it is actually generally trending downward and it will continue to generally trend downward. I mean, we've done a lot of fee work over the years and we're moving away from that trying to kind of improve the quality of our NOI and improve the quality of our FFO. So yes, we did start Genuine Parts this year, but there were three projects that actually kind of completed that were in the numbers in '14, the College Football Hall of Fame, the Center for Civil and Human Rights and the Cox Headquarters. And so we've kind of replaced three big projects that we're generating fees with one project going forward. And so the general direction will be down over the next few years. In terms of guidance and what the range is, included in our guidance for 2015 is a range for fee and other income of between $7 million and $8 million for the year, which gives you a run rate of right around $2 million and we reported $2 million for the first quarter. So we are right in line with our guidance.

My second question just on same-store revenue. Obviously, there was ExxonMobil move-out, which was about 2% of NOI and incurred in February. So it wasn't a full period impact, but sequentially same-store revenue was down about 6% on a GAAP basis and 8% on a cash basis. So I'm just wondering, is there anything accounting-wise in there that's driving that perhaps tenant expense reimbursements or something like that?

The other I'd say big component in addition to Exxon is the Direct Energy renewal, did have some free rent associated with it. And on a GAAP basis, the operating expense passed through a portion of that free rent, does not get GAAP-ified effectively. That's kind of the other component of the change.

The next question is from Kyle Mcgrady with Stifel.

I'm here with John Guinee. How should we value Gateway Village? It looks like the loan is fully amortizing and maturing in the fourth quarter of '16, and we're assuming the BofA lease is expiring about that same time?

As we look at the future on that deal, as we've described before, the bank has a opportunity if they wanted to buy us out at the end of the lease term and the amortization of the loan. And so that would be one alternative in which we've shown you the math as to what that buyout would look like, which would be very attractive to Cousins. We developed this asset with Bank of America, and we like the asset and manage all the mission-critical features of it for the bank. And so as we look to the future and the bank appearing to want to retain occupancy of the vast majority of the space in the building, they have indicated that they would like to continue the venture with us, which we'd be delighted to do. And that venture would then be termed in coordination with the lease extension.

Your next question is from Young Ku with Wells Fargo.

You guys have given some great comments regarding new development projects, prospective projects. I don't think you mentioned Georgia Tech cut down in Atlanta. Is there an update on that project?

Yes. We were not successful in getting that project. The Georgia Tech is moving ahead with Fortman properties is our understanding, but we're thrilled to have the project that we do have.

And then just in terms of the Exxon space at Greenway Plaza. You guys talked about being a good activity to potentially backfill that space. How big is the prospect list that that you are tracking right now? And when you think that you can potentially backfill all of the 215,000 square feet?

You want a specific date or kind of --

No, just kind of a rough timeline, Colin, one to two years.

As I mentioned earlier there is some good activity on that space for, call it, several floors that the most advanced discussions are actually within existing customers within Greenway, who have interest in either consolidating or modernizing their space. The new leasing activity did slow towards the end of 2014 in the first quarter, but we are trying to see some activity again. I don't see a 100,000 square foot necessarily on horizon, but there is good activity with some new names that would be positive absorption that are in that 15,000 to 20,000 square foot range. That will ultimately take us some quarters to work through.

Gregg, just last question. I know you guys don't provide specific occupancy guidance, but looking slowed for the rest of the year. Outside of the 70,000 square feet Oracle move out in Q2, should we kind of assume that occupancy should be stepping up kind of on a steady basis for the rest of the year?

You're referring to the Northpark specifically or you're talking about the entire portfolio?

The entire portfolio.

Well, I mean that's guidance that we don't typically provide. I hate to be evasive, but we don't provide occupancy guidance.

Outside of the 70,000 square foot Oracle leaves, is there anything else that we should be aware of in terms of potential lease terminations or move outs that could happen?

Not that we know of it at this time.

Other than Atlassian move out at 816 that I referred to, that the only material move out.

This concludes our question-and-answer session. I would like to turn the conference back over to Larry Gellerstedt for closing comments. End of Q&A

We appreciate everybody being on the call today and your interest in Cousins. If there is anything that we didn't address, as always, we are available and happy to talk. And we look forward to talking to you next quarter. Thanks.

The conference has now concluded. Thank you for attending today's presentation. You may disconnect.