Good day everyone, and welcome to Cousins Properties Incorporated Fourth Quarter 2016 Earnings Conference Call. All participants will be in a listen only mode. [Operator Instructions] Please also note that today’s event is being recorded. At this time I’d like to turn the conference call over to Pam Roper. Ma’am, please go ahead.

Good morning, and welcome to Cousins Properties fourth 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. In the 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 risks, and 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 included in our filings with the SEC. With that, I'll turn the call over to Larry Gellerstedt.

Thanks, Pam, and good morning, everybody and thanks for joining us today. Cousins opened the fourth quarter of 2016 with the completion of the historic merger and spin with Parkway Properties. These transactions marked a pivotal point in the execution of our long term strategy, and we accomplished while the team employed extraordinary effort in carrying out our ongoing business operations. I believe Cousins’ fourth quarter performance provides an excellent snapshot of the team’s tremendous work and dedication during the year. During the quarter, we delivered FFO of $0.07 per share or $0.15 per share before transaction costs. Leasing in all six of our markets was strong with a total of approximately 761,000 square feet in new and renewal leases at very attractive economics. For the second straight year the team executed over 2 million square feet of leases and I'm pleased to report we continue to experience positive momentum in 2017. Just this week we executed a key lease at Northpark Town Center in Atlanta with WestRock, one of the world's largest paper and packaging companies. WestRock signed a twelve year lease to take approximately 180,000 square feet of space for their new Atlanta office which brings Northpark to approximately 90% leased. Colin will provide more details on deal activity market by market in his remarks. Looking back to our fourth quarter performance, we completed a series of compelling transactions to further upgrade and strategically position our operating portfolio. First, we sold four office assets totaling just over 2.5 million square feet for approximately $637 million in gross proceeds. Those assets included Two Liberty Place in Philadelphia, 191 Peachtree in downtown Atlanta, The Forum in Atlanta and Lincoln in Miami. Next, we purchased Texas Teachers' equity interest in Fund II for $279 million. Fund II was comprised of the…

Thanks, Larry. And good morning everyone. I will begin my comments today by briefly highlighting some of our key operational metrics from the fourth quarter. Next, I will spend the balance of my time providing specific updates as it relates to each of our markets as well as additional details surrounding the transactions we closed in the fourth quarter. The team delivered a fantastic quarter as we leased approximately 761,000 square feet. Our second generation re-leasing spread for the quarter was up 18.7% on a GAAP basis and 14.7% on a cash basis which represents our eleventh straight quarter with a positive rent roll up. Importantly, weighted average net rents climbed 12% over our results in the third quarter, reaching $26.32 a square foot. Again to just be clear $26.32 a square foot reflects a triple net rent, not a gross rent. I emphasize this because this metric clearly drives home the quality of our urban portfolio post Parkway transaction and definitely differentiates us from our Sun Belt competitors. Before moving on to the portfolio, I would like to echo Larry’s earlier comments and thank our team. Their impressive operating performance throughout the year while completing a transformative merger spin is a testament to their unwavering commitment to our shareholders, to our customers and to each other. Starting with Atlanta. We now own approximately 6.9 million square feet across the best urban some markets including a 21% class A market share in Buckhead which has the highest rental rates across the city. Our portfolio was approximately 91% leased at year end which is 300 basis points better than the overall class A market. Our Atlanta team leased approximately 205,000 square feet during the quarter and as Larry mentioned earlier we had a huge win just last night as we executed…

Thanks, Colin. Good morning everyone. Well it was clearly a busy quarter here at Cousins and our financial statements reflect that activity. What I hope shines through is the underlying strength of our properties and of our markets. We did well where we’d like to do well. Same property NOI on a cash basis was up 7.1% during the quarter and 8.4% during the year. Second generation releasing spreads were firmly positive with double digit growth on a cash basis during both the quarter and the year. And leasing velocity was strong finishing 2016 with positive upward momentum. With that, I’d like to start my comments by pointing out a few of the accounting items that may prove helpful as you review our financial statements and our earning supplement. Then I’d like to discuss the significant items that ran through a result this quarter and finally I'd like to conclude by looking ahead at the capital markets activities we have planned for 2017 and reaffirming our previously provided earnings guidance. Let’s start with the accounting items. First, please remember that we completed our merger with Parkway on October 6. So our quarterly results do not include a full quarter of Parkway results. Inside the supplement you will specifically see this on page eight where we provide asset by asset NOI numbers and on page 10 where we provide asset by asset interest expense for those assets that have property specific debt. Included in these partial quarter Parkway results are 100% of the Texas Teachers Fund II assets. We purchased Texas Teachers interest in this fund on December 23. So we only actually owned 100% of these assets for the final week of the quarter. Texas Teachers’ portion of the results for the period of time they had ownership in the…

[Operator Instructions] Our first question today comes from Jamie Feldman from Bank of America.

Good morning. So I guess the first question, the same store guidance of 2% to 4%, is that the entire portfolio or is that just the seven Cousins assets that you quote in the supplemental?

Hey Jamie, it’s Gregg. Good morning. So we will add two additional assets to the same property pool that was there in the fourth quarter, those assets are Northpark in Atlanta, Fifth Third Center in Charlotte. Those are two big assets, which will increase the same property portion of our total NOI from about 18% to about 31% during 2017, assuming we don't sell or buy anything else. So it's bigger in ’17 than it was in ’16. There's a couple additional assets.

Okay, but -- so you're giving us the internal growth guidance of 2% to 4% but that's really not, it's only still a third of the portfolio, do you have a sense of what that number looks like for the entire portfolio?

Jamie as I said in the prepared remarks, we're going to take a look at providing incremental information in 2017. I think it will give you a little more transparency into the performance of the whole portfolio in ‘17 relative to ’16. But that will be in addition to our consistently provided same property performance that will definitely provide, the 2% to 4% that we talked about refers to that 9 property portfolio I talked about, that represents 31% of the total portfolio.

So maybe just your gut feel of what do you think internal growth is for the whole business?

Jamie, there is -- as we look forward to 2017 and on, I think the growth trajectory of the company looks very attractive. The rents across our portfolio continue to be below market, roughly 10%, I think, is the number that I've provided in the past, as we look forward to 2017 I think it’s important to look at -- we do have a portfolio that continues to in-shop from a percentage lease standpoint and we do not have a whole lot of expirations over the course of the next couple years and if you look at our supplement relative to our peers our rollover profile in 2017-18 and ’19 is relatively low and that’s a testament to the fantastic job the team has done getting in front of some of those expirations. But again I think as highlighted by the quarter that we just had in the leasing activity in the continued roll up in our rents, I think you'll continue to see that translate into ’17 and beyond.

And then any latest thoughts on market concentration and if you tell maybe some of the Florida markets.

Jamie, when we look at the Florida markets we're excited because it's sort of piggybacking on what Colin just said, we do have vacancy there. And we're very focused in Tampa in particular as the pipeline has picked up and we think we'll have some positive things to announce during the balance of the year. So our focus on the Florida markets is continue to get to go, to know them better but take advantage of this vacancy and get it leased up to create value for the shareholders. As we look to the balance of the company, the thing that we will absolutely do is stay disciplined with urban assets in the best sub markets and we will look for opportunities for those within all of our existing cities but we also continue to look at other cities in the sunbelt, where we can get that dynamic that has led to the success that we've had with our current strategy which is trying to get best urban markets near transit, best buildings and in an environment where we think our operating approach to doing business will be successful. And so we'll look both with our existing portfolio as well as continue to look for other opportunities outside that portfolio.

And Jamie, just to add on to Larry's comments, in addition to looking for new opportunities whether being some of our existing markets or potential new markets is your question regarding growth. Again we do have organic growth through below market rents but to kind of echo our earlier comments from our scripts, we've got a fantastic development pipeline of about $500 million. That today we think pro-forma could be in the high 80s on a percentage lease basis. So you'll start to see that that pipeline begin to deliver in the later part of this year and 2018. So that's going to be a fantastic growth opportunity for the company and we'll continue to look for new opportunities certainly in a disciplined manner.

And then just last question for me, thinking about the CapEx needs for the year, what are your thoughts based on the guidance of where you might end up on the FFO and is there room about the distribution in 2017?

Jamie, it’s Gregg. We don't provide AFFO guidance, we just provide FFO guidance. So I'm going to comment pass on that comment in terms of providing AFFO guidance. In terms distributions we do drive our distribution decisions off of AFFO, it’s decision made by the board every quarter. But when we right sized the dividend to reflect the Parkway distribution in the fourth quarter we right-sized it with an eye towards ’17. And so I think you should probably expect very little if any change to our dividend distributions in ’17 versus what we just did for the fourth quarter ‘16.

Our next question comes from Tom Lesnick from Capital One.

Hi guys good morning. My first question on the investment sales environment in Atlanta, particularly for multifamily assets, we've heard some comments from players in the apartment industry about fewer bids out there for assets right now and cap rate is potentially taking a little higher. How are you guys thinking about the environment for your Emory asset?

A great question and we have seen an overall, I’d characterize spinning bidder pool in the multifamily space, and perhaps a slight pullback from some of the institutional -- larger institutional investors and that could lead to a creep in cap rates. I think some of that's a function in the multifamily space of the supply that's out there which is certainly a bit different profile than what we see in the office space today. But I think as we look at Emory Point it's important to point out that the incredible infill location that we have there adjacent to the CDC and Emory University and if there's one area in Atlanta that is then under supplied and supply constrained at that particular sub-market.

That's helpful. And then on ACS, I believe you guys have historically talked about that side being potential demand from the data center community, what are you guys seeing there?

Yeah, I think it's -- that is an asset that -- as Larry mentioned will likely bring to the market in the relatively near future. I think it's going to be a very attractive opportunity for a wide ranging group of investors. As you mentioned there is a data center component, it's a bit of a hybrid given the network and fiber that runs underneath Atlanta. Today I'd say that it's roughly 25% or so of the square footage comprises of data center customers with 75% of the office side. So as we bring that out we hope to see good interest from not only office investors but potentially some of the technology oriented real estate investors as well.

And I guess shifting gears, Gregg, other companies have undergone reverse splits in the last couple of years with some success. And just given that you guys are kind of going along here at $0.15 to $0.16 and consensus appears to remain that way for the foreseeable future. Is there any inclination on your part to pursue that and potentially increase the share price and per share metrics?

Well, clearly we're trading below $10 which kind of puts that on the table. We're not at $2 or $3 or $4 which we’d absolutely put at front of the stable. But that’s the best decision for the board, we talk about it, if that's something we decide to pursue, we will be transparent with you all going forward.

Appreciate that and then last one for me. I'm sorry if I missed it but were there any residual costs from the merger that are expected to be expensed in 2017 from a timing perspective?

Tom, included in our 2017 guidance is a range of between $1 million and $3 million of additional lingering transaction costs that will run through 2017 numbers.

Our next question comes from Michael Lewis from Sun Trust.

You mentioned a big lease, and you signed that Northpark, that just happens that their next lease overall 100,000 square feet, it’s not calling every 29 theme but it's also at Northpark. So I was just wondering if there's visibility into that and if that mark-to-market you kind is kind of consistent with the roughly 10%, that caller spoke to pretty overall credit.

Michael, it's Colin and you're right. Our next large exploration at Northpark aside from the Equifax moveout which we've mentioned in August of this year, is AIG in 2019. It's a bit too early to project but we have had a great relationship with those folks, the dialogue continues. I think it's just a bit premature for them but that is certainly something that we will be very focused. In terms of the specific mark to market, again I don't want to provide guidance on a specific lease upcoming rollover like that from a competitive standpoint. But we do see really good opportunity at Northpark across the board to continue to roll rents to market. And that particular lease wouldn't be any different. I just want to shy away from the specifics as we begin this conversation.

Understand, particularly in terms of the development portfolio obviously a lot of wealth-ish projects and build to suite, Carolina Square lease-up, it looks like there's some leasing to do it at 8000 Avalon. I think Colin may have mentioned a lease there. But is there any color you could provide kind of under-demand [ph] there and then also more broadly Atlanta's been a strong market. Are there any signs of a slowdown in activity or kind of demand?

I would say Atlanta continues to have strong demand. We haven't seen any dip, in terms of leased volume, I mean the total square footage lease in the city of ’16 is a little lower than it was in fifteen but we -- just like the police, we just executed WestRock, we continue to see good opportunities in the best buildings near transit to drive good results. In terms of Avalon, usually when we do a building like this. Our goal is to be sort of in the 40% to 55% leased range when the building opens because particularly in a mixed use environment like Avalon, a lot of it is less people see. So they can understand the true value offering that we have there and I'm confident we'll be in that range by the time we open it. The pipeline looks really strong and we're feeling confident about where 8000 Avalon sits.

Our next question comes from Jed Reagan with Green Street Advisors.

Good morning guys. Can you talk about the expected timing for somebody lumpier ’17, dispositions, are there any taxable games, you may need to protect your payout with ACSC or Emory Point.

It’s Colin. I will tackle the first half of that from a timing perspective. Our goal with those Emory Point and ACSC, is to be in the market here very shortly and would like to try to get this done in the first half of the year or they could create creep over a month or two depending on the specific timeline of the deal. But we're focused on moving this forward this process is now.

Jed, good morning. It's Gregg. In terms of the taxability of those two asset sales whether they require a special distribution on our part, the answer is currently no. We don't anticipate either of those sales generating the requirement for special distribution.

And you mentioned a little bit earlier just, you know, potential external growth opportunities. Just wondered if you could offer any more on and kind of how you're thinking about the acquisition environment today and if there are any build to suite opportunities you're pursuing that might hit in ’17?

Jed, this is Larry. We continue to see some build to suite opportunities not anything that we can see on the very short term horizon. But those things pop up. Usually where you a quarter or two in advance and you're pursuing and you have a little bit better things we don't have any visibility on anything in our portfolio that I would put in that sort of short timeframe.

In terms of the acquisition market as we look both within our own portfolio and cities as well as future cities we look at is the importance of a our balance sheet strategy if when we start to see, markets that meet our standards in terms of where we want to be. We also want to be patient and make sure we buy assets at the right time to get the kind of results that our portfolio demands and that's the reason we're, as Gregg said keeping our powder dry.

Can you just run through quickly maybe Colin, how the rent growth environment is looking across some of your markets, maybe just the range for the kind of rent growth if any that you guys are observing currently?

Yeah, as I mentioned in my prepared remarks and we've seen very very significant growth in Austin, double digit type growth. Certainly there's been fantastic opportunities for us to drive rental growth in Tempe. We're also seeing that here in Atlanta, kind of order of magnitude, Jed, over the last year or two it's ranged anywhere from 5% to 10%. Florida has been a little bit slower too than some of our other markets in Tampa and Orlando. It's been a little bit more moderate probably closer to inflation type ranges 2% to 3%. But as both of those markets have now tightened, we're optimistic that we will see a catch up in both of those.

Okay, 5% to 10% also applies to Atlanta.

Yeah, we’ve seen that. I would say that the Tempe’s and Austins have been at the higher end of that range and I'd say that the Atlanta and Charlotte have been closer to that kind of five percent range with Tampa and Orlando closer to inflation like levels.

And then just last one for me, I think you guys had originally outlined about $85 million of expected merger costs and I think you recorded what 30% million or so far, a couple more couple million more program in ‘17. Were you able to just execute lower cost than expected or did Parkway end up shouldering a little more of the burden or how did that play out?

Hey Ted, it’s Gregg. Lot of the transaction costs went on Parkway’s books at or before the time of the merger. So you won't see the full 85 show through our numbers because it's a combination of our expenses and theirs. But when you combine the two together we believe that the total transaction costs are going to come in right around $85 million and then we're going to hit that line.

[Operator Instructions] Our next question comes from John Guinee from Stifel.

Thank you. So good morning. Just a few quick ones. Colin, do you think you can exceed the outstanding debt on the sale of the ACSC building?

We do, we're very confident of that.

Second, just to clarify the dividend has been reset at about $0.06 per quarter.

Yet exactly $0.06 sure.

Third, 191 Peachtree sale, Cousins re-up there or are you going to relocate into a Cousins owned building.

We will relocate this summer to a Cousins zone building.

Which one?

3344 in Buckhead.

And then I guess Colin or maybe -- NCR, if I'm doing the math right looks like it's going to cost about $445 a square foot, Avalon looks like it's going to cost about 3.25, and the Dimension building in Charlotte about 2.50 a square foot. First if those numbers are accurate, let me know and then can you talk a little bit about the difference in what you're delivering for those widely different prices --

First, those are our GAAP numbers which does incrementally increase those costs a bit relative to a cash number. And so the key differentiator is as you kind of go across those particular assets that you mentioned, the NCR deal was ultimately done on a return on cost basis, let’s say, the amount of TI, that went in there was maybe a little bit higher given the build to suite nature of that and some of their tech requirements. And so that pushed that project costs up a bit. The Avalon, it’s a little over 300,000 a square foot and I think it’s representative of a kind of mid rise suburban project with a structured parking. The Dimensional funded by your projects you referenced what's missing there from a project cost standpoint is dimensional decided to fund their tenant improvements outside of our transaction. And so you would have to add a market TI to that to get to a kind of a more normalized market level development costs.

And have you quoted any expected yield on cost for these development deals?

We have not provided specifics per project in the past, we have referenced on a GAAP basis that the return on costs is in the mid eighty's on the projects on a blended basis.

And our final question for today is a follow up from Jed Reagan from Green Street Advisors. Mr Reagan, is it possible that your phone is on mute?

Yes, thank you. Just on kind of market selection you've got the Carolina Square project, which obviously is delivering in the Raleigh Durham area. Is that a market you'd like to expand in or is that likely to be more kind of a one off there?

Raleigh Durham market is one that we have looked at. I wouldn't say it's on the top of our list going forward. Various reasons, so I would look at the Carolina Square is more of a one-off opportunity although that always can change, as cities change and demographics change but it would not be on the top of our list. End of Q&A

And ladies and gentlemen at this time I'd like to turn the conference call back over to management for any closing remarks.

We as always appreciate your interest in our company. 2016 was obviously a fantastic year and we are optimistic as we look forward to ‘17 and appreciate your continued interest. If you have any questions, as always the management team is available and just feel free to reach out. Thanks so much.

Ladies and gentlemen that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.