Good day, everyone and welcome to Cousins Properties Second Quarter Conference Call. [Operator Instructions] And please also note that this event is being recorded. I would now like to turn the conference call over to Ms. Pam Roper, General Counsel. Ma’am please go ahead.

Good morning and welcome to Cousins Properties’ second 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 made available on the Investor Relations page of our website 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 requirements. 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 statements is available in the press release issued yesterday and a detailed discussion of some potential risks as contained in our filings with the SEC. With that, I will turn the call over to Larry Gellerstedt.

Thanks, Pam. And thanks everyone for joining us this Friday morning. As the current economic cycle extends I am very pleased to report that business conditions and real-estate fundaments in our markets remain very positive. Population and altitudes in job growth in the Sunbelt continues to outpace the broader market and the region has emerged, post recession, as an affordable business friendly environment, with vibrant urban cores and a young highly-educated workforce. With corporations migrating to the Sunbelt to chase talent, and existing businesses experiencing accelerated organic growth, we have seen office vacancies in our markets hit 15 year lows. In my opinion, this is a very impressive and important measure. However, this increased demand, while welcome, has generated a modest level of new office construction across the Sunbelt, especially in our core markets of Atlanta, Austin and Charlotte. Thankfully, a majority of the new space has already been released and delivered and with the lack of office sites available in many of our urban submarkets, we see little to no additional speculative supply breaking ground on the immediate horizon. Strong markets, healthy demand and manageable levels of new supply continue to support the positive outlook for Cousins in our Urban Class A Office portfolio. Six months into 2017, we have leased or renewed 912,000 square feet of office space. Our 15.5 million square-foot operating portfolio sits at 93.2% leased, with four of our markets, 95% leased or greater. Both, our same property portfolio and the legacy Parkway same property portfolio, continue to perform extraordinary well. When you combine the two portfolios, cash NOI for the first half of 2017 increased 10.2%, when compared to the first six months of 2016. In addition to leasing and operational success during the first half of the year, we completed $365 million in…

Thank you, Larry. I am honored to continue to serve Cousins in partnership with you, as well as Gragg, Pam and the entire Cousins team. With our urban trophy portfolio, rock solid balance sheet and talented team, I couldn’t be more confident that many great opportunities lie ahead for Cousins. Switching to this quarter's activity, I would like to begin my comments by highlighting some important headlines from the quarter. Next, I will provide some specific market updates and give color surrounding what we see at the portfolio level. Starting with leasing. Cousin's had another strong quarter. The team leased 341,000 square feet of office space during the quarter, and both GAAP and cash mark-to-market on second-generation leases and renewals, posted an impressive marks at 28.5% and 13.5% respectively. Our triple net rental rate was up 26% as compared to the same period last year, and net effect of rent, which includes TIs, commissions and free rent, increased 35% compared to the second quarter of 2016. While this quarter's velocity decreased from previous levels, this is primarily due to our portfolio being over 93% leased and expirations through 2018 account for less than 10% of leased space. As a whole, we were pleased with the quality of leases signed and the terrific economic metrics achieved. Moving on to our markets, let me start with Atlanta, our largest market. Across the metro area, we continue to see positive real estate fundamentals, fueled by steady demand and a moderate level of new supply. As the southeast's largest office market, Atlanta features three critical components for long-term growth, affordability, high educational attainment and a world-class airport. We believe these attributes have been the catalyst for attracting new companies as well as organic growth within the market. At quarter end, our six million square…

Thanks Colin. Good morning everyone. Thanks for taking the time to call this morning. Overall, we had a strong and productive quarter. FFO was $0.16 per share, driven by solid organic growth. On a cash basis, our same property NOI was up 8.6% during the second quarter over last year, led by 7.6% revenue growth. They legacy Parkway same property portfolio, saw cash basis NOI growth of 11.7% during the quarter, led by 10.2% revenue growth. These are powerful numbers that reflect the underlying quality of our urban properties, as well as the continued strength of our Sun Belt markets. As Colin discussed earlier, we also saw double-digit increase in our in rollouts during the quarter, with second-generation net rents increasing 13.5% on the cash basis. I’d like to point out that we made a change to our office leasing activity schedule, on Page 15 of the supplement of this quarter. We’ve now broken out free rent as a separate line item within leasing costs. Hopefully, you’ll find this increased detail helpful, as you analyze the economics of our leasing activity. With that, I like to begin my comments by highlighting three significant items that impacted our results this quarter. And I’ll move on to the property transactions we completed, followed by our capital markets activity. I’ll conclude by updating our 2017 earnings guidance. Starting with the significant items, we again recognized an unusually large amount of termination fees during the second quarter. In total, we recorded $3.1 million in termination fees, the vast majority of which came from six customers. Clearly there are economic benefits with these fees. But I’m also happy to also report that we’ve already executed new leases to back fill five of these spaces. The sixth space is here in Atlanta, at 3350P Street. Blue…

Ladies and gentlemen, at this time, we’ll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Michael Lewis from SunTrust. Please go ahead with your question.

Great, thank you. First, I want to congratulate Colin on the extended role. And also to Larry. But, Larry, I wanted to ask you, your thoughts about the pluses and minuses of having those Chairman and CEO roles, separate versus combined? And then kind of the rationale for the change? I don't know if Taylor Glover – or why he is no longer Chairman. But maybe you could talk about a little bit about that?

Yes. Really if you -- Michael, Taylor Glover is a very accomplished person in terms of investing in his career. He's Vice Chairman of the Cox Board, one of the largest private companies in the country. He manages also all of Ted Turner's business empire. He's been on our board for probably – at least 10 years, and he's been our Chair. If you look at the job description that we have for Chair, it really is not significantly different than a Lead Director position, and Taylor will move from the Chair position to the Lead Independent Director position. So it really is the Board acknowledging that we're at a point, where the company is really focused on not only running our operations but taking a look at the strategy for the next five to seven years with this company. And I want to make sure that we get ourselves structured, from a organizational standpoint, to put our strong players in the right position for the next run whenever that opportunity comes. When I think back on the last seven or eight years, I think of so many times that we have come together, Gregg and Colin, Pam and I, and the team underneath them is just as strong, come together to debate and beat up strategy and try to make the right decisions. And I just think this, from the Board's perspective, puts us all in the position. We're a bigger company now gives us all a little bit more time to focus on things that prepare us to be able to grow and take advantage of that next opportunity. We work at very flat organizational chart year. So I think when we walk out of the room up from the call and the announcement gets made, we pretty much all go back to our offices and go back to work and try to continue to generate results. So this is more of a transitioning, preparing the company for the future, looking more at the five to seven year range.

Okay. Thanks. I wanted to ask, you mentioned in your prepared remarks about Three Alliance being well committed. I don't know if you could be any more specific about that. But maybe if you could comment a little on the impact of that asset leasing that has had on your portfolio? Maybe that's hard to go away now. And are there any other specific buildings or vacancies in Buckhead that you think could also perhaps negatively impact your portfolio in Atlanta?

I'll get the high level, Michael, this is really the only project that Tishman is finishing up in terms of their Atlanta office and Three Alliance, during the several years of its construction, had very little activity in terms of lease up. And clearly, the ownership of the building, made a decision to get very aggressive in the last six to nine months in terms of the packages they were putting in front of customers to get the building leased up, and potentially be ready to take to market this year is what we've heard. So yes, it's had some impact on some specific customers that we've had. And I'll let Colin give more specifics on that.

Yes, Michael, it – we hear in the market that, that building today is roughly 80% kind of committed, whether lease signed or terms have been agreed to. And we think we'll pretty quickly get that to 90% – plus. And so as Larry mentioned, it has – had some temporary impacts on the market, as they have been quite aggressive to get the building stabilized. I think ultimately, sold. We've had some impact, as I mentioned in my prepared remarks, with CBRE is going to be relocating to Two, Three Alliance. And so, as we look across the market, there aren't any other new buildings that we think will break ground of any significance anytime soon. In terms of other large blocks, Hines would have some space at Ed Monarch. But overall, for a market the size of Buckhead, it's very limited. And given the improvements that we've made at Terminus, and we look forward to showing you that in September, we think we're going to be very well-positioned to backfill that space as we get that market – or that space back in 2019. And we think that as Three Alliance goes away, kind of the temporary pressure we might have seen over the last quarter or two will – should shift its side.

Thanks. And then just one last one for me. The decision to sell the Orlando portfolio includes a couple of assets with a little bit of a vacancy. Do you have a sense of investor demand down there? What you think market cap rates are for these assets?

Michael, I think that there will be good demand for these assets. They're high quality buildings, very institutional quality buildings. And we've seen broadly, investors, large investors and foreign investors start to migrate into secondary markets like Orlando. There has been some activity – high quality buildings that have been trading, out like in the very submarket of Orlando. And we saw very good depth in buyer interest for those assets. Similarly, over in Tampa and in Rocky point, there is a couple of buildings that are in process of trading. Again, we're seeing very good depth in interest. And so that gives us a lot of confidence in the interest we'll see on our Orlando assets. In terms of cap rates and pricing, I think we want to be a little careful at this point not to kind of skew the process as we get ready to bring those to market. We'd like to present those the right way, and let the market, hopefully, do what it does. And help us achieve really strong price for our shareholders.

Great. Thanks a lot.

Our next question comes from Jamie Feldman from Bank of America Merrill Lynch. Please go ahead with your question.

Great, thank you. Also congratulations to Larry and Colin on your extended roles. I guess just starting out, if we could – Gregg, your comments on GAAP same-store, probably moderating in the back half, you've had – you've hit the cover of the ball here on the cash same-store. Can you just give us some thoughts on, whether back half of the year into 2018, just like how sustainable are these big cash same-store NOI growth rates?

Well, Jamie, the guidance that we provided at the beginning of the year between 2% and 4% for GAAP NOI same property performance remain unchanged. And so year-to-date, we've put up a number of 6.5% GAAP NOI growth. So you do the math on that, and it's clear that the second half of the year has to be slower in order to have the full year fall inside of that guidance. But it's not an indication of changes of health in the market. You're going to see the revenue side of that equation continue to do well. It's just the lumpiness on the expense side primarily. And it's a function of some artificially low comps from 2016. And some function of some expense pressure in 2017. The expense pressure in 2017 is primarily on real estate taxes. As these markets continue to do well, and as the assets appreciate, we've got to expect some property tax pressures from the municipalities in which the buildings are located. And we're starting to see that. Now we'll fight those like we do every year. We were successful in 2015. Hopefully, we'll be successful in 2016. But our current guidance and our current forecasts, assume some pretty healthy property tax increases this year versus last year.

Okay. Maybe a different way of asking you, I know, Colin, walked through some of the vacancies coming, or I guess, repositioning within the portfolio, since you did have a lot of this space backfilled. Can you just walk us through how to think about your occupancy over the next couple of quarters? And then if you can, into 2018, just based on what you know is moving?

Sure. Jamie, as Gregg mentioned in his prepared remarks, we do think that over the next few quarters that we could see – or we will see occupancy tick down and primarily driven by a lot of the large customers, that we've been signaling for several quarters. As you look out at Northpark, Equifax is an August expiration. Edna, which we've talked about before, is in October of this year. We've got at -- down in Tampa at our Harborview assets, the -- we've got a 50,000 square-foot expiration there, with Laser Spine Institute. And so you'll see, as a result of those – that occupancy tick down, so in terms of our same-store, over the coming quarters, as Gregg mentioned, that could create some pressure. But again, as we get that space back, we've got the opportunity then lease that back up in 2018, to try to push same-store into a positive position again.

Okay. And then I know you walked through a bunch of them. Is there anything in 2018 that you didn't mention that is a known move-out, that sizable?

Again, Harbor View at the beginning of 2018. The other significant expiration in 2018 will be in the latter half of the year in November. And again, that's a good story of kind of Cousins value creation. The mention of fund advisors had leased two floors at Fifth Third Center. Really, it's temporary swing space, until we complete and deliver their new project in the south end. So we will get two floors back at the Fifth Third Center.

Okay. And then you guys had commented about putting capital to work. One of the ways is existing tenants in the portfolio wanted you to expand. Are you -- were you commenting may be you can expand into more markets with new tenants? Or this would all be within the same footprint?

Jamie, when I look at our sort of three to six-month window, in terms of where the tenant activity is, we have its existing customers that want to expand in the existing markets that we're with them. So we have those opportunities. And we're – I'm optimistic that one or two of those will have a good chance to plan out and we can give more color on them between now. So it's not taken in the new markets. It's us helping to accommodate their growth in the existing markets to give business with us in.

Okay. Thanks for clarifying. All right, thank you.

You bet.

Our next question comes from John Guinee from Stifel. Please go ahead with your question.

Great, great. Thank you, congratulations, Larry. Congratulations Colin. I guess this is for one of you guys. If you look at the office and also the retail world out there these days, it seems like most moves are done on a turnkey basis in terms of both tenant improvements and sometime to even moving allowances. And the norm or the quid pro quo, is increasing rental rate. Said another way, the tenant is willing to pay the rent, if they can avoid the upturn capital costs. And the landlord appears to be more and more to be financing corporate America. Is that a fair analogy of how the leasing world is evolving?

I would say that we have seen some pressure on tenant improvement allowances kind of upwards. I don't know that I would – I think if you look at what's kind of driving that. I don't know if it's totally landlord financing corporate Americas. A big part of it is just construction cost continue to rise. And so as those increase that has certainly for some pressure on our TIs. As I look back over our last four to six quarters. It held relatively steady in certain quarters like this one. It's a tick higher then probably the last couple of quarters. But we also had some pretty healthy activity leasing-wise at our Avalon project, where it's shell condition versus second-generation space. And that typically comes at a higher cost. But we'll continue to look hard at this. And as costs have gone up, as we've mentioned in our prepared remarks, we have started to see some real meaningful rent growth in the Sunbelt markets. In Atlanta and Austin, that had taken a hold several years ago, but we're pretty encouraged to now see that playing out in markets like Tampa as well.

Great. And then second question, regarding the build-to-suit environment. One, are these build-to-suits on Cousin's own land or other land? And then, besides Highwoods and Hines, who are your major competitors when you're bidding a build-to-suit opportunity?

John, it’s really – let me take the first one on sites. We really have both. We have some customers that we have identified sites already in our control that we're pitching, but we also have a couple of that have come to us and it's very similar to what we do with dimensional fund deposits where they came to us and said, let’s go collectively as a team, go, and pick a site, and then we want you to do it. So we have a sort of a combination of those things. I think when you look at the competitors, it is very different market to market. But generally, on these build-to-suits somewhere in the capital stack there has to be an institutional partner, whether it's a insurance company or REIT or some other version of it, and I don't know, but we have a predominant type that we are competing against. Oftentimes – and I think it goes for this whole thing of urban a new talent, oftentimes is more the location of the site and how that works with their recruitment view within the company. I think one of the most interesting changes we're talking about at our board meeting this week, that you used to get 10 years ago, when you had a corporate relocation or major expansion in the market, you knew the ultimate decision was really being driven by the CEO. And today, you really see HR is – the Head of HR being the one driving those decisions. One of the build-to-suits that we’re looking at decision got delayed because the HR director had a medical leave that had to take place. So I think it's a very interesting thing and it plays well to the markets and submarkets we are situated in.

Great. Thank you.

Thanks, John.

Our next question comes from Jed Reagan from Green Street Advisors. Please go ahead with your question.

Hey. Good morning, guys, and congrats Larry and Colin. In terms of the Orlando sales, are there material taxable gains that you need to be mindful of protecting the 1031 or special dividend? And maybe just some general, can you talk about the supply demand characteristics of that market that made you feel like it wasn't a long-term hold for Cousins?

Jed, good morning, it’s Gregg. I will tackle the tax issue and then I will turn it over for the others. We are still kind of zeroing. And we think ultimate pricing will be clearly we had a range and we’ve done our tax work around that range. We will be able to absorb that gain without a 1031 nor with special distribution. So I don't think you'll see any tax repercussions or distribution repercussions as a result of our sales in Orlando.

And I think that Jed, in terms of the market, Orlando's shows strong job growth. That job growth we haven't seen at transform into strong office growth for the type of assets that we have. It’s not – I mean, Orlando is a good market and it does seem to be picking up some speed. We don't know of any – there's one building rumored to be started – yet ready to start at the next six months in downtown, that’s a couple of thousand square feet. We don't know if that is – will happen or not. But unlike other thing when we look at Orlando is the – the assets we have, probably the two of them aren't located in the part of downtown that drives the strongest rents in terms of customer decisions. Their grade assets and I think they'll lease up, but they just don't really fit our profile as well as we would like. So it's really a combination of sort of the slow growth, plus the asset locations, versus what we would like to see in our portfolio.

Okay. That's all helpful. And you mentioned you’re acquiring another site at the Avalon location. Can you give a sense of the scale and cost and potential timing there?

Sure, Jed. So we have closed on the second site. And as Larry mentioned, it's the last – second and last office site within Avalon, in fact it's the last site as a wholly within the Avalon. It's will be completely built out when – if and when the second building goes. We're targeting about a, call it, 225,000 square foot to 250,000 square foot building, very similar to what we’ve just completed at 8000 Avalon. And we're excited about opportunity in front of us. As you look at the customer base that will occupy, the first building, its name is like Microsoft and Crown Castle. And so we think that there is going to be very, very solid interest in the second building with large corporate customers like that. We are going to be very thoughtful and disciplined though as to kind of when we start that. And as Larry mentioned earlier, we’ll look for very significant pre-leasing on that project before we move forward. So don't have a good target for you, it's ultimately going to be driven by customer interest. And so our leasing team in conjunction with Hines is already a work of that. We’re going through that process now, fully designing the building. So when that customer interest comes, we will be in a position to move very quickly.

And Jed, it’s Gregg. That piece of land and that building will be developed under the same joint venture structure with Hines as the first phase of Avalon was built.

Okay. That’s helpful. Thank you. And just one more from me. There's been some media reports that you're looking at a land site in Midtown, Atlanta. Can you comment on that? And maybe how much density that can support? And just maybe in general how the hunt for other potential land sites is going?

I would say that the one in particular that was mentioned in the paper just demonstrates that news gets slow during the summertime, and so that was an extraordinary speculative of report that I wouldn't spend much time thinking about relative to us. It is an attractive site, but I don't sense if there’s any immediate transition or sale plan by the current owner who's had it long time. But on the larger scale, as we had said, we’ve been looking for sites in all of our key markets. But Jed, we are being disciplined because I think as the cycle matures the multifamily cycle slows a bit, we'll start to see some wider opportunity and some prize softening on the site. And we are actively working on many sites, but we're doing it with a lot of thought and not a sense of urgency and to trust overpay or pick a site that’s six months later there is a better one available across the street or something.

Great. Thanks for the color guys.

[Operator Instructions] Our next questions comes from Dave Rodgers from Baird. Please go ahead with your question.

Yes. Good morning guys. You addressed a lot so far. But I think, Larry, one thing you said early on was the 8000 Avalon was garnering rents maybe that were somewhat comparable to Buckhead. And I think in recent tours and Midtown also achieving rents, at least in some places comparable to Buckhead. Again, Colin or Larry, just curious on kind of your thoughts on what's happening in the Buckhead market? Is it purely a function of three alliance? Is there just a shift in Atlanta in terms of how space is being used and larger tenants meeting to kind of lead that submarket that’s just kind of creating a little more traditional vacancy? So just thoughts overall.

Well, I think overall you have to look at Buckhead, and it's a 17 million square foot market, and there has been one new building at 500,000 feet delivered in the cycle. And so I think the three alliance is a couple of quarter sort of very specific, but relatively minor impact on the overall market. I do think we're seeing firms that are looking – you've got one of the larger firms that’s going to the three alliance building as the Central Perimeter firm, that’s moving to Buckhead. One of the customers is moving out of Terminus, Bain is moving to Midtown. And so you're seeing sort of certain industries starting to select areas to be in – the Midtown traditionally been a law market, but now you're seeing it be in technology and sort of creative services market. Buckhead has always been a very strong financial services, product wealth management market, and that is continuing to play out. And you're seeing some larger firms as we say come from suburbs. And I wouldn't read a whole lot in to the current trending. Although, as we look to the future and the company grows, we certainly would like to continue to increase things we are able to own both in Buckhead, but as well as in Midtown to grow it as a percentage of our land, our holdings in Atlanta.

Thanks. And then Larry, one of thing you had mentioned in the beginning, it sounds like – and maybe three alliances is the perfect example of it is that you're seeing or experience spec construction at this point in the cycle. But if I read in your comments, you don't really expect to see of this, is that just because of what’s in the pipeline? Do you feel that other developers like yourselves are becoming more disciplined maybe in terms of built-to-suits start? Just what's in pipeline out there gives you more confidence? Anymore color on that would be helpful.

Well, it's interesting. We were talking before the call. If you look at more markets, Orlando, Tampa and Tempe have nothing been built, in terms of new product. Austin – Downtown Austin, which is just under a 9 million square foot market has three projects being under construction. One that just delivered, but they're 90% preleased. As we talk about Buckhead, Midtown Atlanta 17 million square foot market has one building just coming out of the ground, 750,000 feet, that's 60% preleased. Charlotte has three projects, one just delivered a 17 million square foot market, it’s 1.8 million feet, they’re 60% preleased. So we do have some supply coming, but it's so small compared to the overall market, and we don't sense that there is the 400,000 and 500,000 square foot spec of deals that have any type of short-term expectation on our part that will get started in any of the markets that we're in.

Dave, I would just add in terms of development today. It's hard in these urban submarkets relative to suburban markets. Finding suitable land sites is become more and more challenging, especially with multifamily developers taking lot of that existing land inventory. And so, as you're trying to grow and expand some of our existing customers, finding that available land site is very, very difficult. And in the financing side is still can be challenging. And as we look across our submarkets, a lot of our competitions are private developers. And so as Larry mentioned, any defined institutional capital and they also need to find a construction loan, which comes with guarantees and the like. So that's mated more challenging to kind of put those together in the urban core.

All right. Great. And great, thanks for all the color on the leasing. Thanks guys.

Thanks Dave.

And ladies and gentlemen, at this time I'm showing no additional questions. I would like to turn the conference call back over to Mr. Gellerstedt for any closing remarks.

We appreciate everybody being on the call today. We hope that a lot of you will be able to come to Atlanta for our September property tour. And we hope everyone is enjoying the rest of their summer. Thanks very much.

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