Welcome to the Cousins Properties Second Quarter 2015 Earnings Conference Call. [Operator Instructions]. 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. 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 quarterly report on Form 8-K filed on July 28, 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, and good morning, everyone. Thanks for joining us on Cousins Properties second quarter conference call. With me today are, Gregg Adzema, Cousins' Chief Financial Officer; and Colin Connolly, Cousins' Chief Investment Officer. I'm really happy to report that we had a very busy and terrificly productive second quarter here at Cousins. I'll start with a quick overview of some headlines for the quarter, and then focus my comments around three notable things. First, the strengthening fundamentals in the Atlanta office market; second, the execution of our local team to further derisk our Houston portfolio; and lastly, the great progress made in executing our current capital allocation strategy. During the second quarter, Cousins' delivered FFO of $0.21 per share for a total of $0.42 per share year-to-date, an increase of 14% compared to the first half of 2014. We also leased over 521,000 square feet of office space in the second quarter for a total of 962,000 square feet for the first half of 2015, an increase of 40% compared to the same period last year. This solid leasing performance was accomplished by positive second generation leasing spreads of 32.8% and a 5.2% increase in same property NOI, both on a cash basis. From the fall of 2011 through the summer of 2014 we purchased over $2.4 billion of trophy office assets with value added potential and our targeted Sun [ph] markets in attractive prices, well below replacement cost. And as this quarter's results prove out, our simplified yet dynamic operating platform continue to create value as strong leasing results translated into robust NOI growth. Another big headline for the quarter was the announced star of our much anticipated $123 million mixed use project Carolina square in Chapel Hill, which we will develop in a 50-50 joint venture with…

Thanks, Larry, and good morning, everyone. I will begin my comments today by briefly highlighting some of our key operational and leasing metrics, and then I'll provide more detailed updates on recent activity within the existing portfolio. The team delivered another terrific leasing quarter, signing approximately 521,000 square feet of office leases with a weighted average net effective rent of $16.96 per square foot, up from $14.31 per square foot last quarter. Our second generation releasing spread was up 43.8% on a GAAP basis and 32.8% on a cash basis, and I believe it's important to note that Houston accounted for approximately 72% of our second generation leasing which highlights the substantial roll up opportunity within our Houston portfolio despite softening market conditions. Switching gears, let me walk you through some key updates and market color within our portfolio. We continue to see strong economic growth across Atlanta, Austin, Dallas, and Charlotte, and good demand for our available space. Each of these markets posted strong positive net absorption during the second quarter with vacany rates declining between 50 basis points and 100 basis points. Atlanta is particularly well positioned because new speculative supply remains at historically low levels. Net effective rents in well located trophy buildings have increased in the range of 10% to 15% year-over-year, and we are getting there through lower concessions, as well as base rents which are now moving higher. Given the lead time required for new construction ramp up, we believe that this trend will continue for the next several years which is great news for our portfolio. Downtown Atlanta continues to make significant progress. Georgia State University is making a huge positive impact on the streets environment and we are thrilled to see Georgia Pacific, one of the anchor tenants in the CVD recommit…

Thanks, Colin. Good morning, everyone. We had another terrific quarter. FFO was $0.21 per share, up 17% over last year. Within FFO, same property cash NOI was up 5.2% during the quarter compared to last year, and is now up 10.2% through the first six months of 2015. Excluding the recent Exxon move out at Greenway, which as Colin said, we have assumed would take place ever since underwriting this purchase a couple of years ago, and it really is a discrete event, it doesn't reflect the economics of the balance of the portfolio. Same property cash NOI would have been up and even more impressive 13.4% during the first six months of 2015. No matter how you cut it, it was a clean solid quarter driven by strong internal operating metrics. With that being said, in the never ending rush, quickly pass quarterly numbers or react to the latest headlines, sometimes it's easy to lose perspective on longer term strategy and execution, the things that really moved the need of overtime. Are we in the right markets? Do we own the right assets? Is the balance sheet in good shape? Is the dividend safe? These are critical questions and if you take a step back and look at our performance over the last few years we believe the answer to all of them is an unequivocal yes. For proof let's expand our view beyond the current quarter and examine some longer term metrics. First, quarterly year-over-year same property net operating income on a cash basis has been positive for 14 straight quarters, that's 3.5 years, and has averaged a remarkable 8.1% growth over that extended period of time. Our year-over-year change in second generation rents on a cash basis has increased in six of the last seven quarters, and…

[Operator Instructions]. Our first question will come from Jamie Feldman of Bank of America Merrill Lynch. Please go ahead.

I guess just starting with Gregg Adzema, you said no other changes on the call. I think on the last call you had said 2.5% to 3.5% same store NOI growth in 2015? That’s still accurate given the first you’ve delivered?

That’s right, Jamie, the original guidance was same property NOI growth on a GAAP basis between 2.5% and 3.5% for '15.

And you guys had mentioned potential share repurchases, it sounds like you got more development in the pipeline now. Any latest thoughts on that?

As I’ve said in the last call we just look at the math and we look at the development opportunity and the spread on that and then you know constantly run the math against share repurchase or other capital allocation strategies and when we lay out both our track record on capital allocation and these development opportunities. At this point we feel like this is the most compelling way to get shareholder return. But we don’t ever close the door on any alternatives that we think make sense for the shareholders.

And just two Texas development questions to wrap up, one on Research Park. Can you talk a little bit more about the demand pipeline, I think in the past you said 200,000 active and 500,000 for potential tenants in discussions? And then on Dallas, just any thoughts on the uptown Dallas development?

I will start with Dallas. I will let Colin give some specifics on Research Park. Dallas is -- we had said when we first started looking at this. A, along with our partner Hines we bought a terrific side, just over a $70 a square foot which is well below market and a great area and we are going to be very disciplined on the project in terms of trying to get the two preleasing hurdle. We had setup sort of internal soft hurdle of around 100,000 plus or minus square feet and I would tell you at this point just given where we’re in the cycle and some new developments that are continuing to start in the uptown market. We’re probably a little bit more conservative than that and want more preleasing but not in those that are probably fast numbers. The demand side of Dallas is still strong at this point but we don’t want to mess up a great development site by development at the wrong point of the cycle so we’re just going to continue to be very conservative and dead honest.

And Jamie on research part, the numbers that you mentioned in terms of pipeline. I think those are still consistent. So I think most of you know is still very bullish on the prospects for research part. I think it's just in a little bit of way a timing lag in the summer and we are still -- as I said very optimistic that we will have some leasing in places as we deliver the building in the fourth quarter.

And then will Dimensional [ph] take any space out of Austin when they move to -- I think you said it was a regional headquarters?

Yes, they will not, that’s an and on space not anything they will be moving out of Austin.

Our next question will come from Michael Lewis of SunTrust. Please go ahead.

At Apache, I'm curious if you’ve any insight into how big of an impact it might make on their decision for oil to dip below $50 again and perhaps stay there and then I'm also curious if you have any insight on whether they are just dead set on eventually building their own building or if maybe it's possible that they can consider that’s a better off being tenants than owners.

Well I will start on that Michael, we certainly don’t know how Apache underwrites all markets in terms of their business model but they certainly have shown and the last year so just with corporate actions we have been very disciplined in terms of right-sizing their G&A and their operating platform selling off some properties etcetera. When Apache was -- when there was the size that they had for this project and when it was announced that they have gotten a permit I think one or two quarters ago, I think Apache issued a corporate announcement saying that the receipt of the permit did not signal that they were getting ready to start construction on the project, that that was a process and had taken about you know a year and half to work through the governing things in Houston and so you know the discussions that the preliminary discussions we have had as Colin said in his comments at this point I think they are just keeping their options open and watching how their business model does but I don’t think they are committed to building, new building, I don’t think they are committed to what they are going to do based upon their public statements and our conversations with them.

And I’ve a question on the residential, I mean to these sales are kind of non-core they have bounced around quarter to quarter but I'm curious if selling the [indiscernible] county lands is that a meaningful sorts of cash potentially or are these relative small deals?

No, they are relatively small deals.

And then just last you know mentioned the 80,000 new jobs in Atlanta. So I don’t know if you saw the BLS just released a preliminary June employment data, actually right before the call started. Your number is still accurate it's about 77,000 net jobs. It looks like you stand at about 4000 jobs in June and they have actually added 56,000 since last June so that’s up 1.9% year-over-year that’s actually a little bit better than the U.S. average. I'm curious if those numbers in Houston surprise you at all one way or the other and if you have kind of an outlook or how you think about how closely you look at growth there given that your lease roll-over is pretty much end up for the next couple of years.

Yes we did actually see those numbers released at 10 and we’re watching those and you’re right Atlanta did kick down slightly but still four nationally in the ranking and so as we said we continue to see very good job growth in Atlanta so we’re very optimistic over the next several years. As it relates to Houston we have seen the last couple of months perform better as it relates to the job numbers. Obviously, right at year-end and kind of January saw some of the lay-offs hit as CapEx and G&A were cut relative to oil prices. But I think it's important to note that a lot of the job cuts that you read and the headlines you know attributed to the energy companies. A lot of those are international, many times and we have seen most of the cuts occur you know how actually in the old patches as opposed to corporate headquarter. So I think we will just have to watch. I think it's interesting and as you look at Apache as an example we have seen a lot of companies within Houston our portfolio retrenched to the core. And so Apache recently shuttered a suburban Houston office as well as their office in Tulsa and are bringing those jobs back to headquarters at [indiscernible]. I think that’s been a positive but again the energy cycle is going to playout and that’s certainly not -- we’re not experts unable to make kind of those predictions.

Our next question will come from Jed Reagan of Green Street Advisors. Please go ahead.

If you’re able to get sort of sufficient preleasing done at Victory Center would you feel comfortable moving forward on that project now from a funding perspective and then I guess related to that, do you feel like the bar is higher now for a new development canceling [ph] just given the big NAV discount that you guys are trading at currently?

Well we certainly take into account that when we look at any kind of capital recycling Jed, is we’re -- we try to be agonistic and just look at where the returns best are. Relative to Victory, what I was saying in the last question relative to Victory is we’re paying attention to how much the softening in the energy markets is essentially going to touch Dallas. A lot of the service providers, law firms, accountants, and consultant's etcetera come from Dallas and we’re watching that really closely we haven't seen any impact thus far. We’re also really watching new supply and the uptown area in terms of folks that new projects that have been announced that they might go, we’re really watching that too. So we’re just being very, very cautious on Victory and if we get a big customer and decide to go certainly where our capital structure is and NAV discount will be as much part of that decision as the preleasing hurdle.

But I feel like you’ve sort of the funding bandwidth currently to sort of take on additional project of that size if everything else is kind of lined up.

Yes I mean we could always fund it with additional banks we have on our pipeline in terms of asset sales but we’re really, I feel like on that particular opportunity we’re getting a little ahead of ourselves because we just haven't seen that preleasing momentum yet in Dallas. We think beside this fabulous the value proposition relative to other new buildings is fabulous but we just don’t have that in our crystal ball until we see demand and at that point we will certainly a look at where we’re on the capital side.

Sure. Okay. And I guess related to that, looking beyond the assets that you’re currently on the market with in terms of disposition, what you consider JVing some assets like a 816 Congress [indiscernible] Colorado Tower and realize some of the value you have created in those buildings and how about the medical office, just wondering if you sort of think of that core at this point?

We certainly look at all of our assets and our capital decisions on almost arm's length basis. We don’t have any emotion attached to any of them so looking at whether it's JV partners or debt structures or sales we don’t shut the door on any of that. But we try not to get ahead of ourselves in terms of trying to give much guidance on what our funding strategy might be for particular developments until those developments actually get close to take in place.

And just last one if I may on Houston, just can you give me an update I know you touched briefly on net effective rents around the market, maybe if you can just touch specifically on kind of the current look and net effective rents and your specific sub-markets, are you seeing any pressure there and maybe kind of the most recent hick-up oil prices changing activity or you’re seeing on the grounds currently?

As I mentioned in my remarks we certainly seen our urban submarkets hold up much better than the western submarkets. Out there we have been reported the net effective rents had dropped by as much as 15%, we have not seen that in our particular submarkets. We have started to see tickup in free rent or TIs but base rents haven't held both within our portfolios as well as our competitors in the galleria in Greenway, so I would characterize change in net effective rents in our markets it's been, I would say it's been less than 10% but in terms of the activity level with the recent slide in oil prices. I would say, activity is generally consistent with what we said last quarter, there was a noticeable slowdown in the fall in the early part of the year but as we have moved on we started to see very good activity in the 5000 to 25,000 square foot range and that’s continued and from the customer industry standpoint it's been very diversified. We have seen the medical and healthcare customer's kind of start to percolate financial services, insurance and even some smaller energy customer. So the activity is there, it's not the large big ticket several 100,000 square feet energy type customer but the smaller users are starting to kick tires and we have got a pretty good pipeline.

Our next question will come from Brendan Maiorana of Wells Fargo. Please go ahead.

Gregg, so you laid down a nice strategy to the balance sheet. Got about, I guess it sounds like about 3:30 million to spend on the development pipeline 250 to sales and that 330 get spent over the next 2.5 years. With the amount of redeem cash flow that Delta that $80 million delta that you probably more than make up for. As you sort of think about the current pipeline and sources of uses, is leverage actually likely to go down over the next couple of years?

The strategy is certainly not to reduce leverage, our strategy is kind to maintain leverage over the next 2 or 3 years, we like our leverage where it is right now. And all the pipeline that we have laid out for you there is a shadow to the open pipeline, there is potential developments behind that and so we hope to over the next quarter or two talk about those if they in fact the merge is real and to the extent that we have excess proceeds we would use them to fund those and if we needed more we would -- as Larry said we would look at what we had at the time where our share price was, what our assets would be worth and we would make decision how we fund the incremental then but the developed pipeline that we have laid out the numbers that you just repeated back to us is our current development pipeline. We hope to have a little bit more behind that.

And then with respect to guidance, so I gather it's included in the guidance is kind of no impact from the sale of 2100 Ross or North Point or is there may be some modest impact in there but it's just expected to hit so late in the year that it actually wouldn’t have a real impact on reported FFO for '15.

We can't determine the date of sale exactly but the current anticipate is that we would sell 2100 Ross and North Point center some time in the fourth quarter, so they would have some but very limited impact of 2015 FFO. They would have a much larger impact on 2016 FFO clearly.

Sure and then the Transocean lease I forget when the execution date on that was but was the impact, how does the impact flow through from the GAAP on a cash NOI perspective to Cousins and was there an impact in Q2 that showed up from that lease renewal?

I will answer both the cash and GAAP, so you know it's also done as an amendment and extension and so from a cash perspective that will not kick-in until the original exploration in '17. From a GAAP perspective we’re really not seeing anything flow through yet and really we’re striving that is previously was a gross lease and now it's switching to a net lease and those gross and net lease numbers base rates were relatively similar and you actually don’t GAAP -- GAAP about a straight line the operating expense pass through. So we don’t really see any uptick in our numbers until 2017 on a GAAP or a cash basis.

And then Colin, last one probably for you. You mentioned Charlotte activity is better than -- you guys got the nice lease with Dimensional Fund to fit into Fifth Third. How are rents Fifth Third trending versus what you guys originally had to roll when you bought the building?

We have been outperforming what we originally laid out and Charlotte feels very similar in many respects to what we said about Atlanta in terms of demand and job growth are starting to kick-in and there has been just relatively little new supplier in the last several year. So that market today in the CBD uptown Charlotte is -- they can see this as sub-10% with no new supply projected and delivered for at least a couple of years and so we’re finding it, it will be pretty good time to be an owner of trophy asset in uptown.

And I guess you guys have maybe 50,000 square feet or so if anybody can see at Fifth Third, did you have a -- prospect was to for that remaining space.

We always have a pipeline.

The next question will come from John Guinee of Stifel. Please go ahead.

First, Larry correct me or me stop but did you ever mention your new Board member?

I did not job but I appreciate your bringing that. Bob Chapman who many of you all know wo was with Duke Realty for a number of years and today is CEO of CenterPoint in Chicago joined our Board last quarter and he is just a great addition, and we’re delighted to have him.

And if you look at Board members they run anywhere from really sharp real estate guys don’t need the money, great fiduciaries all the way to perhaps not great real estate people, perhaps need to pay check, where would Bob fit in that continuum?

He would be a not great real estate guy that’s desperate for a pay check. I hope he is listening to this transcript. Bob would obviously check all the boxes just a tremendous real estate mind and a guy that’s doing it to trying to help us be a better company.

I applaud you for that decision. Second is, if I look at the three asset sales, Colin or Larry, it looks to me like about 1.6 million square feet, [Technical Difficulty] quick map I'm getting is a about $155 or a $160 a foot which surprises me, is a little light. Is there one or two assets that’s really dragging down your per square foot if I’ve got that number correct?

John, I would say, it would be three, the Points at Waterview would -- is a suburban asset in Dallas that would bring down the average of the three. But I think we’re excited about where we think volumes will be at all three but particularly 2100 Ross and North Point I think are very well-positioned for kind of great monetization in this environment.

Our next question will come from Tom Lesnick of Capital One. Please go ahead.

Most of my questions have already been answered so I will keep it brief, but just looking at page seven on this supplemental. I was just curious what is the end of quarter run-rate for consolidated and unconsolidated NOI? I see about 54.78 million for 2Q on the consolidated line and about 4.5 million on the unconsolidated line, just given kind of the timing lease commencements and what not, what was at quarter end?

As much as I would like to guide you on this specific metrics it's just not guidance that we provide. We used to provide asset by asset NOI guidance and we have transitioned over the last couple of quarters to a much industry standard FFO guidance with the supporting assumptions and this is not one of those assumptions that these [ph] were FFOs. So I think we do a great job of giving you historical run-rate for every assets and you can sum them all and take the same property guides we provide and come-up with something.

On Colorado Tower, I was wondering could you provide maybe a better sense of the timing of the lease commencements as that ramps up?

Yes, we would expect that majority of those leases to really kick in as we move through 2016 where we have already moved in some of the initial customers and that the vast majority of that will kick in next year.

The largest tenant to Colorado Towers is partially NRG and they had a staggered move in schedule with the last move-in, I think they have been placed in the second half of '16.

And this will conclude our question and answer session. I would like to hand the conference back over to Larry Gellerstedt for any closing remarks.

We certainly appreciate everybody's continued interest in the company. It was a terrific quarter and we will look forward to more great results for the balance of 2015. Thanks for everybody's interest.

Ladies and gentlemen the conference has now concluded. We thank you for attending today's presentation. You may now disconnect.