Good day, and welcome to the Cousins Properties Third Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Pam Roper, Senior Vice President and General Counsel. Please go ahead.

Good morning, and welcome to Cousins Properties third quarter earnings conference call. With me today are Larry Gellerstedt, our Chief Executive Officer; Colin Connolly, our Chief Operating Officer; and Gregg Adzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon, as well as furnished on Form 8-K, and a supplemental package the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirement. 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. Please be aware that certain matters discussed today may constitute forward-looking statements within the meaning of federal securities laws and actual results may differ materially from these statements, due to a variety of risk uncertainties and other factors. The company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise. The full declaration regarding forward-looking statement is available in the press release issued yesterday and a detailed discussion of some potential risk is contained in our filings with the SEC. With that, I'll turn the call over to Larry Gellerstedt.

Thanks, Pam, and good morning, everyone and thanks for joining us today. I'm very excited to discuss the historic transactions Cousins completed last month, as well as to go forward strategy for the company. But first, I'd like to recognize the team's terrific execution during the third quarter. It was an extraordinary quarter for cousins on almost every level. We delivered FFO of $0.22 per share or $0.23 per share before merger costs. Second generation net rent posted positive growth for the tenth consecutive quarter, and our same property portfolio performed exceptionally. We have increased our lease percentage 50 basis points and posted positive cash flow NOI growth for the 19th consecutive quarter. Our strong financial, operational and leasing results underscore the strength of our markets, the quality of our assets and the dedication of our team. I believe this quarter's performance validates our strategic thesis that owning the best assets in the best locations ultimately drives value for our shareholders. More impressively, we accomplished these results during a time when our team was also focused on executing the largest transaction in Cousins’ 58-year history. Subsequent to quarter end, on October 6th, Cousins commenced a series of transactions with Parkway Properties. We merged the operations of our two companies and spun off the operations of our combined Houston portfolios into a separately traded public REIT. I'm happy to report the integration of the two companies is progressing well. We're up and running in all six of our markets and we have successively on-boarded 106 new team members. I believe Cousins merge from the transactions is the Sun Belt office free to own. Specifically, what distinguishes us from our other Sun Belt office owners are three differentiating factors. First, we own an unmatched trouble free portfolio of Class A office assets…

Thanks Larry, and good morning, everyone. I will begin my comments today by briefly highlighting some of our key third quarter leasing and operational metrics. Next, I'll spend the remainder of my time providing updates on the operating portfolio in our recent transaction activity. 2016 continues to be a very eventful and productive year for Cousins, and as Larry mentioned, the team performed exceptionally well this quarter. We leased 971,000 sq. ft. during the quarter and increased our percentage lease by 50 points in our same property pool. In addition, second generation rents improved by 9% on a cash basis for the quarter and leasing costs after adjusting for first generation space remained favorable with the exception of the Houston market, where concessions continue to increase. Cousins’ solid third quarter performance has ideally positioned us to finish the balance of the year strong and to enter 2017 with increased momentum. Before I update you on our post-merger portfolio, I'd like to highlight the fantastic execution of our Houston team during the third quarter. Despite softening market conditions, we leased 191,000 sq. ft. of office space to customers representing a wide variety of industries, including financial services, media, health care and technology. To further emphasize the strong performance in Houston, our second generation re-leasing spread posted strong gains of 27% on a GAAP basis and 13% on a cash basis. Going forward, I believe the Parkway team will benefit from owning a well-positioned portfolio that has historically outperformed during all stages of the real estate cycle. Switching gears, let me provide some color and update on Cousins go-forward portfolio. The underlying real estate fundamentals across the Sun Belt remain very healthy. Job growth in our six markets continues to outpace the national average by a significant margin and new supply remains…

Thanks, Colin, and good morning, everyone. From a reporting perspective, it's a challenging quarter. Since the merger and spin-off closed after quarter end, the third quarter financial statements are Cousins only, they do not reflect the Parkway transactions. But here we sit talking to you after the transactions have actually closed and you're naturally interested in post-merger posts spin-off Cousins. What is 2017 FFO guidance? What are assumptions behind it? What is the new balance sheet look like? If you know anything about us, you know we're transparent. Our numbers are clean, our supplements are robust and our conference calls are thorough. It's our natural inclination to want to answer all of your questions. In that spirit, please know that we are committed to getting you the numbers as soon as practical. First, let's talk about FFO guidance. Similar to many of our peers, we typically provide FFO guidance when we report fourth quarter earnings. We understand this is still quite a ways off and present a near term challenge to many analysts and investors. We will do our best to provide FFO guidance by the end of the year. Concerning the balance sheet, I believe we’ll be able to provide a little clarity much sooner. For a stockholders agreement executed in connection with the merger, we are required to file an S-3 registration statement on behalf of TPG, previously Parkway’s largest shareholder soon after the merger closes. The current schedule anticipates us filing this document sometime in mid-to-late November although that could slip. This S-3 will have pro forma 9-30 2016 financial statements, including the balance sheet, which will reflect the balance sheet of Cousins as if the merger occurred on September 30th, 2016. It will also include all estimated merger adjustments, including the costs incurred to close the…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Jamie Feldman from Bank of America Merrill Lynch. Please go ahead.

Great, thank you and good morning. So I appreciate the thoughts on the combined company numbers going forward. In terms of same store or some of the portfolio metrics, can you provide some color of how the blended portfolio would have been in the third quarter versus just standalone Cousins?

Hey, Jamie, it’s Greg, good morning. We’re only reporting Cousins’ data for the third quarter. It wasn’t our company, Parkway assets weren’t our assets prior to September 30th.

Okay. Alright, so I guess drilling down a little bit and some of your commentary, the Equifax and URS move outs, can you provide some exact color on timing for those, and then, the mark to market and some of those leases?

Sure, Jamie. It’s Colin. The URS move out will be at year end 2016, and then the Equifax move out at North Park as well will be at the end of August, 2017. As a whole, as we look at North Park, one of the compelling reasons we bought the project is we did view there to be a meaningful mark to market in that particular project, and we would hope to take advantage of that with these particular opportunities.

Okay. So, where would you say rents are versus those leases?

In general, in Atlanta, Jamie, we view our mark to market to be approximately 10% or so, and I would say that would hold - that's probably a pretty good metric across the company, the new combined company as a whole and it certainly varies market by market just by way of example Orlando and Tampa are probably slightly above market, and so as we report our quarterly leasing metrics going forward, it is always lumpy, and it will depend on their particular markets in which we execute leases. But in Atlanta, we do view there to be very strong opportunity.

Okay. And then a similar question on US Air, the timing of that move out and backfill?

Sure. And I’m glad that you mentioned that Jamie, because the USA Air termination was affected as of October 31st, and so we will incur down time in that particular project over the course of 2016 and the first quarter of 2017. So, you should factor that into your models, the new lease with our Double A credit customer is projected to start in early April.

Okay, and what's the mark to market on that?

It’s significant. It's a 20% plus mark to market.

Alright. Then I guess just bigger picture, now you had even more time to digest the combined portfolio, I guess Larry, any latest thoughts on markets you like or markets you're more concerned about or if we fast forward a year from now, how might this portfolio look other than may be shrinking Atlanta as you've discussed?

Well, Jamie, we are - certainly the Atlanta market, the Austin market and the Charlotte market, we know well and as we stated in the calls, just the concentrations we have in uptown Charlotte, Buckhead, Atlanta, CBD of Austin, and quite frankly Tempe that we spent a lot of time at pre-merger just understanding the dynamics of Tempe and Phoenix as a whole and what's going on at Arizona State, we feel very good about those markets. We are less familiar with Orlando and Tampa, but we feel confident in where we are. One, we like the assets concentrations and b, there have been well run REITs in these markets for a long time, and so we can certainly understand and look at the history of the markets as well as the various sub markets, but I would say we're still in more of the learning curve roll part in Tampa and Orlando, but obviously had confidence in those markets or we wouldn't have done the transaction.

Okay, that's helpful. Thank you.

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

Thank you. My first question how well do you think 191 Peachtree sale serves as a price point for the rest of your Atlanta portfolio, looks like it was a mid-six cap? And then, along those lines, is there anything you learned through the process in terms of the types of buyers that are out there in the depth of the investor market in Atlanta?

Well, there - I think it probably is not the right asset to look at in terms of the Atlanta portfolio. If you look at the rental rates and the vacancy rates in downtown for decades have trailed the other strong sub markets in Atlanta, although downtown is getting stronger, but it's still trails. And so, I think the buyer pool that looked at 191 Peachtree was robust, but it was not as robust - we wouldn’t have found it if we were selling one of our assets in mid-town or Buckhead or the central parameter. So, I would not look at it as a comp although - if you look at what we pay going in and the amount of square footage we’ve leased overtime and the exit, we’re extremely pleased with the outcome that we got.

Michael, I would just mention a better comp for our go-forward portfolio would be the transaction that just happened at 10-10 Peachtree, where a large German investor just purchased that asset in midtown immediately adjacent to Marta station, and that priced well north of $350 a square foot. I think that would be more representative of the type of product we have in Midtown and then certainly in Buckhead as well.

Great, thanks. Could you just remind me of what's happening with Bank of America that - this we've been talking about it for a while, right, with the option to purchase, and then if they stay in, the bump in the right rent - could you just go through that?

Are you referring to the Gateway Village?

Yeah, in Charlotte.

Yeah. So, we did a large renewal with the bank for roughly 90% of that project on a ten-year basis, and the balance of the space were in the process of converting very sub leases to direct leases, so it's a very well leased building and Bank of America continues to be very happy with their 50% ownership and the joint venture with Cousins. It's a mission-critical facility for them from a data-center perspective and various other back of the house departments that support their corporate headquarters. And so, we continue to view that today as a steady state. With the lease that we commenced there - that we executed earlier this year, that building will convert - the structure will convert from that 11% preferred arrangement to a true 50-50 split of cash flow, and that will take effect at right around year end here.

Okay. So you’ll get a full year of that next year?

Yes

And then just - my last one, I guess is a question for Gregg, about the debt maturities in 2017, you have a couple of mortgages, you’ll have a couple that come along with the legacy Parkway portfolio, I'm curious what your plans are for repaying some - what the refinancing rates might look like for any you want to repay?

Sure. So, on our side, we only have one significant debt maturity in 2017, that’s American Cancer Society. As Larry talked about it earlier, we're likely to pursue a disposition of that property coinciding with the maturity of the CBS debt, so no refinancing risk anticipated there. In terms of what we're inheriting from Parkway, they've got about - depending upon how you look at it around $475 million, $485 million worth of debt that matures in 2017, which we will refinance, and the good news is the coupons on that debt are significantly higher than current market rates. So, there's an opportunity there to lower the stated coupon on that debt with that refinancing. In terms of what that refinancing looks like, whether it's a secured refinancing or non-secured refinancing, we’ll take a look at the market when the time comes, but we have an opportunity to prepay those - some of them in the spring and the balance of them in the summer.

Great, thank you.

Our next question will come from Dave Rogers of Baird. Please go ahead.

Good morning, guys. Colin, maybe just a quick follow up, URS how large is that leased square footage?

Yeah, they’re roughly 48,000 sq. ft.

Okay, great, thanks. Maybe for Gregg or for Larry on the 4.5 times of debt-to-EBITDA target, obviously we [indiscernible] that is today, and if you're unable to provide that, at least can you give kind of the time frame that you're thinking that you'd like to get back to that number?

Yes. Good morning, it's Gregg. The number post-merger can be a little over five, which we disclosed and provided in the investor package that we gave you back in April and nothing material is really changed from that. And then, in terms of getting it back in terms of 4.5 times from around five, it's an intermediate term goal. I think it won't take one quarter or two quarters, but it won’t take any longer than a year or two, so I would call an intermediate term goal.

And then, I guess with your target of 40% Atlanta or no more than 40% in any particular market, I guess maybe a similar question to that is, it’s how long do you want to get down to that? And does that include the two big developments - for NCR that you're doing as well in that number or should we expect future sales to continue to kind of mitigate that exposure?

That does not include the developments that are in process right now, and we will continue to look at ways to take it down either by growing in other markets or asset sales which is where it was part in the cycle that that's the most compelling way to get there right now. We’re pretty optimistic about that. The largest development that we have coming on board in Atlanta is the two development phases of NCR, and the great thing about that is we have no partners, we have no debt on it, and so we've got tremendous optionality as we get closer to finishing the construction phase of that development in terms of what we do with it. And so, just know we look upon that one in specific as well as some optionality in regards to your question as those delivery dates get closer.

Great, that's helpful. And maybe last Colin, coming back to you, maybe just talk a little bit more about what you're seeing out there in the leasing market? I know kind of mid-year it [indiscernible] or so, you talked about kind of slower decision et cetera, leasing activity was much better in the quarter this quarter, are you seeing any reversal in that or does that continue to be sluggish but things just kind of hit well in this quarter?

Yeah, overall fundamentals across Sun Belt and certainly in our particular sub markets that we’ve said in the past continue to be very, very favorable. There's, I'd say, steady demand, not extraordinarily strong demand, but very steady demand with the backdrop of very little new supply creating a very friendly landlord environment. As we got through the summer into the fall, we have seen a pick-up in activity and that just attributed to a summer kind of slowdown, but our pipeline certainly has picked up across all of our markets. In terms of our leasing velocity going forward, if there's an area where we're challenged, it's markets like Charlotte, Austin and Tempe are essentially full, but where we do have vacancy at North Park and Orlando and Tampa, there is very healthy pipelines of activity in general, though we continue to see Corporate America just taking a little bit longer than they have in the past to make decisions, and that can be frustrating, but overall demand remains very solid.

Great, thanks guys.

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

Great. Thank you very much and a hearty congratulations to all, I'm sure it was a lot of work. Three questions, first, can you discuss American Cancer Society and $127 million of debt that I think matures sometime in 2017? Second, Larry, your timing for acquisitions has been exquisite, you haven’t been in the acquisition market except for this merger in a long time, how far do you think pricing has to correct for you to be back in the acquisition game? And then, three, maybe Gregg, you probably have some significant gains on LinkedIn, maybe Forum, maybe Peachtree, can you shelter those gains or do you need to shelter those gains as you seem to redeploy the capital to either develop or pay down debt?

John, it’s Colin Connolly, I'll start with your first question. You mention American Cancer Society that does have approximately $127 million of debt and as Larry and Greg alluded to you earlier as that loan expires in the September of next year. It's certainly a very good candidate for a disposition. The team has done a fantastic job over the last few quarters pushing that building's occupancy to upwards of the 87%. And so, we have incoming inquiries about that building we thing, we think there will be demand. In addition to be an office building, a significant portion of it is leased to data-center users that have data-center type red Senate, so we're optimistic that when the time comes that will demand in a disposition for that particular project.

And John, good morning, and thanks for the congratulations. It was a phenomenal amount of work on the teams of both companies, but the question about acquisitions, we certainly don't see the acquisition window in any of our markets right now. This opportunity just in terms of the concentrations that allowed us to get in these hard barrier sub markets was very compelling, but in terms of sort of the one-off market, in terms of what things are trade net that we see were still - as I outlined in the call sort of a net - more of a net seller, and I don't see that window really opening until we see some significant adjustments in the overall economy and the amount of money related to real estate. On the development front, we also think we're probably near the end of the cycle in terms of what we're looking at, but there's - you're always open to opportunistic stuff, we were delighted when NCR decided to do the second phase. We had not anticipated that they would do this quickly, but their company has really got some great momentum behind it. We're virtually down to just one floor at North Carolina with the leases we have and some LOIs that we have and analog continues to do great, but we think that the next six to twelve months at Cousins are going to be concentrating on what we outlined in the call, the balance sheet, the Atlanta concentration, making sure our new team members in new markets are well integrated and that we execute really well on that, and Greg I'll let you take the last one.

Sure. Good morning, John. So I think the question is we're selling a bunch of stuff, does that mean - and we're not buying anything, does that mean we’re going to have to pay a special dividend or something like - and the answer to that question - the short version to the answer that question is no. We've done a terrific job in tax planning here at Cousins. For example, as you pointed out, we haven't bought anything since 2014, but we sold almost a quarter billion dollars’ worth of the assets in 2015 with no 10-31 like kind of exchanges, and we're able to do that and absorb the gain and not pay any type special dividend. We anticipate being able to do that again in 2016 and in 2017. The plan that we've laid out for you here today on this call and we do not anticipate driving a special dividend in the near term.

Are you able - Gregg, just curiosity, are you able to do a 10-31 exchange into any of your development deals or is it just all tax planning?

Once in a while, we might buy the land through a 10-31, but we have not - 10-31 into - any of the development spending itself. It's been tax planning, and I think we’ve done a good job of it.

Great, all right, thank you very much.

Thanks, John.

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

Good morning, guys. How is the supply pipeline looking in Atlanta these days? Overall, are you seeing anything kind of ramping across the market that might raise a concern levels at all?

We really aren’t, Jed. Buckhead has the one half million square foot tower the Tishman’s doing, that we think has some prospects that they're getting pretty close with, with probably between 150,000 and 200,000 sq. ft. of that. There is some activity, Howards has a project that started with significant pre-leasing in the northwest, which is not a sub market that we're in, and then there a couple of smaller buildings in various little pocket areas of Atlanta, but there really has not been anything significant that is started that we're competing against or see ourselves competing against in the next couple of years in Atlanta. Outside, we’ll build the suit or a significant corporate relocation that’s not announced at this point.

Okay, that's helpful. And then, for Gregg maybe, how much of the remaining merger expense could we expect to see attributed to Cousins in the fourth quarter or is that - really to draw line and to stand on that?

Jed, so what we provided back in April in our investor package was see an estimate of $85 million in total merger costs. We incurred a few million dollars of that, which we've disclosed in our earnings each quarter prior to the actual transaction taking place. Yes, transaction took place in the fourth quarter and that's where the vast majority of that eighty five will hit. Now remember, some of it was incurred by Parkway prior to the transaction, some of it was incurred by us prior to the transaction, some of it is incurred by both of us at the transaction. So it's going to be located in several different spots, but the number in the fourth quarter will be significant and it will primarily run through Cousins’ income statement. There will be some trailing expenses though that trickle into the first half of ‘17 as well.

Should we think of that split between Cousins and New Parkway is sort of pro rata based on size of the companies or…?

No, their portion is significant, but our portion will be a larger than our pro rata ownership.

Okay, that's helpful, thank you.

[Operator Instructions] Our next question will come from Tom Lesnick of Capital One. Please go ahead.

Hey, guys, good morning. I guess first, looking at Colorado Center and the financing you put on that, the 120 million - you guys developed the entire asset I believe for roughly 126 million just a year or two ago, what was the assumed loan-to-value ratio on that mortgage?

Tom, it's Gregg. I don't think that’s something that I'm comfortable disclosing. It would imply kind of what we believe our NAV to be on that asset, which as you know, we don't talk about, but you're right. The property is worth a lot more than what it cost us to fit in the ground. And so, the financing is a terrific financing, it’s 10-year financing, it has low three coupon, it's going to be good on our balance sheet for an extended period of time.

And it seems like a very healthy profit margin, so congrats on that.

This is Larry, let me just say that, another way to look at it is the similar comps in the Austin CBD, and that's not the basis by wishes loan we’ve done would be 585, somewhere $585 a square foot, $580 a foot, so that might be helpful.

That's very helpful. Thank you. And then, turning back to the investor presentation from the merger back in April, on page 33, the sources and uses, just curious, with respect to the new Cousins’ mortgages, was that fulfilled of that $135 million that was outlined or was that fulfilled by the Fifth Third mortgage?

Yeah, it was fulfilled by both of those mortgages. I got more mortgages than I really needed, and that was just - it was an insurance policy. Just in case there are a lot of asset sales for example that were tied to merger, some of them did close, some of them are not closing in the fourth quarter. So I’ve got one more mortgage that I needed is an insurance policy to make sure that we could [indiscernible] with the funds that were required, and everything worked out just fine.

That makes sense. And then, just lastly, the $300 million Parkway cash balance at closing inclusive of the plan Jacksonville sales proceeds, given that the Jacksonville assets closed just prior to merger, how did those prices compared to your expectations going into the merger?

I’ll let Colin Connolly.

As we went in, and ultimately execution, it was a little bit disappointing in terms of where Jacksonville shook out relative to I think Parkway’s expectations, and therefore our expectations. We continue to see a bifurcation in the investment market in terms of urban asset and suburban assets, and the type of interest that is Garner, and then I think additionally just Jacksonville is a secondary tertiary market. The number of buyers for those type of assets was less than we would have hoped.

I appreciate that color. Well, listen guys, congrats on the quarter and completing the merger, and look forward to seeing S3 here in a couple of weeks.

Thanks, Tom.

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Larry Gellerstedt for any closing remarks.

Well, we are extraordinarily excited at Cousins about the opportunities that we have and our investors have for the future of this company. I don't think the future is ever looked brighter and we appreciate your interest and look forward to our continuing discussions over the next few quarters. Thank you.

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