Good morning, and welcome to the Cousins Properties Fourth Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Pam Roper. Please go ahead.

Good morning, and welcome to Cousins Properties’ fourth quarter earnings conference call. With me today are Larry Gellerstedt, our Chairman and Chief Executive Officer; Colin Connolly, our President and 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 requirement. 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 is contained in our filings with the SEC. With that, I’ll turn the call over to Larry Gellerstedt.

Thanks, Pam, and good morning, everybody. 2017 marked another milestone year for Cousins. After completing the most transformative transaction in Cousins’ history just 16 months ago, the team performed exceptionally on all fronts resulting in strong earnings of $0.61 per share, for the year. At the same time, we made significant progress on the ambitious business plan we outlined for ourselves post Parkway. First, we set out to refine our operating portfolio and optimize our geographic footprint in the markets and submarkets that we believe are best positioned for long-term growth. Since closing the merger, we completed $1.2 billion in dispositions, exiting Philadelphia, Orlando, Miami and Downtown Atlanta. We also purchased the remaining equity interest in two joint ventures, which grew our Tempe and Buckhead Atlanta portfolios. Cousins now operates in five core markets with a focus on building concentrations in the best-located and most highly amenitized submarkets. Effectively, we have created a dominant presence in some of the most attractive office markets, where is the number one landlord of Class A office space in Downtown Austin, Buckhead Atlanta, Uptown Charlotte, the Tempe submarket of Phoenix and Tampa’s Westshore. Next, we focused on unlocking embedded growth in the portfolio to the lease up of vacant space enrolling rents to market. Collectively, the team has completed approximately 3 million square feet of new and renewal leases since closing the merger. Today, our office portfolio is 94% leased, inflation rents have increased more than 8% and near-term explorations account for less than 7% of our portfolio. To highlight, the Tampa team began in 2017 with a 1.7 million square foot portfolio at 88% leased. Today, that same portfolio is now 96% leased. In Tempe, the team completed more than 0.5 million square feet of leasing activity since the merger. At the same…

Thanks, Larry, and good morning, everyone. The Cousins team delivered another exceptional quarter of strong performance, including notable wins in each of our Sunbelt markets. Before I elaborate on each of the market’s quarterly highlights and give an update on recent activity, I’ll start by recognizing the company’s collective achievements. During the fourth quarter, the team executed 943,000 square feet of new and renewal leases, which marks Cousins’ third best quarter of leasing performance this cycle. In addition to the new lease with Parsley Energy at 300 Colorado and Austin, we feel vacancies across the portfolio, while completing some key renewals and expansions. Second generation net rents posted positive growth for the 15 straight quarter up 19.7% on a GAAP basis and 6.3% on a cash basis. Equally important, our weighted average net effective rent in the fourth quarter was $32.73, which was a 24% increase over the same period in 2016. Our 302,000 square foot lease with Parsley Energy and Austin was a key contributor to this impressive growth. Even excluding the Parsley lease, our weighted average net effective rent was still up over 5% relative to the fourth quarter of 2016. With that, let me switch gears to our markets. At Atlanta, we see no immediate signs of softening market conditions. The citied outside population and job growth, business-friendly environment and affordable talented workforce fuels the demand for premium office space. Class A asking rents climbed at the highest rate on record in the fourth quarter, increasing 26% since hitting bottom in 2012. In the highly amenitized submarkets we target, we have experienced even larger rental increases this cycle. For example, Class A gross asking rents for trophy office products in Buckhead are now in the low to mid 40%, or $25 square foot and over 25% premium…

Thanks, Colin. Good morning, everyone. I’ll begin my remarks by providing an overview of our financial results, including same property performance. Then I’ll move on to our capital markets activity and its impact on our balance sheet, before closing my remarks with our introductory 2018 earnings guidance. As you could tell from Larry and Colin’s remarks, we had a terrific fourth quarter. It was clean, it was simple and it was strong. Net income was $0.07 per share and FFO was $0.15 per share. We continue to do well, where we like to do well. Property NOI on a same property basis, the year-over-year cash NOI was up 4.2% for the Cousins portfolio and 5.7% for the Legacy Parkway portfolio. These are solid numbers that reflects the underlying quality of our urban properties as well as the continued strength of our Sunbelt markets. You may have noticed that Cousins same property occupancy declined by 2.7% year-over-year. This was solely driven by our Northpark asset, which on a square-foot basis comprised about a third of our same property portfolio. Occupancy in Northpark declined by 10% over the past year as several tenants moved out, some of them proactively moved out by us to make way for the WestRock lease that Colin discussed earlier. Once WestRock finishes relocating to Northpark this spring, we anticipate Northpark’s occupancy to return to approximately 85%. Over the past year, in-placed rents increased 7.4% in Northpark and 5.4% for our entire same property portfolio. This strong rent growth more than absorbed the occupancy decline in our same property portfolio and led to a 1.2% increase in year-over-year revenues in the fourth quarter. This will be the last quarter we breakout reporting for these two same property portfolios. Going forward, the Legacy Parkway properties will be included in…

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

Great. Thank you and good morning. I hope you guys can give more rent growth across the markets? Just where do you whether you are looking year-over-year to the end of 2017 or even a year ahead? What are you expecting across your major markets?

Jamie, it’s Colin. Rent growth continues to be solid across really all of our Sunbelt markets. If I want to look across and just dive into some of the specifics, I would say, we have seen that range anywhere from, call it, 3.5% to over 8%. Charlotte has really led the way, kind of, year-over-year at the upper end of that range. Austin, the rent growth has moderated a bit. As we’ve gotten kind of a higher and normal trends, but it’s still then call it 3.5% year-over-year. And our other three markets today Atlanta, Tampa and Phoenix have all been kind of right around 5%. As we look forward to this coming year, we do continue to see the opportunity to push rental rates, and that’s really driven by – we continue to see a good solid steady demand, and as we mentioned in our prepared remarks, very little speculative construction.

Okay. And then what about on the concession front? Is there any increase or decrease there? Or it’s pretty – fairly consistent?

It stayed pretty steady, Jamie, we do look at that’s kind of every quarter what the trends have been and I would say, as a general statement, they’ve kind of flat to actually, continuing to slightly decrease of whether that be TIs just coming down in touch or free rents come down in touch we have seen this whole order and in some cases our ability to kind of push from the landlord perspective.

Okay. And then finally from me. Behind leases with WeWork in Atlantic – can you just talk about your thoughts on co-working, WeWork and maybe how much they’re changing the dynamics in your market? And how we should expect to see Cousins react to that?

Sure. Jamie, this is Larry. We are pleased to do our first deal with WeWork and we think that the Terminus location is perfect for that type of opportunity to come to Terminus. And we are doing co-working spaces as our lot of other folks, with various other operators across our portfolio. We spent a lot of time thinking as a company, and we had our board meeting this week and talking about co-working and how we view it. And I would say our house view is that co-working in the right building at the right location is an important amenity to our portfolios and our customers, potential customers to go in. We don’t think it works everywhere. And we’ll approach it really on a building by building, submarket by submarket basis. But the fact to the matter is that – there is a significant amount of the – growing amount is not huge on a percentage basis, but it’s a growing amount of workers that are looking for more flexible office space or more flexible terms of corporations that are looking to have some component of that in their overall portfolio. And we think it’s the right level. It’s an additive thing to have in our portfolio. The other thing, we had a lot of fun doing is pushing us the concentration we have on in or at least in key submarket is allowing us to push ourselves to show additional benefits to our customers other than just the space we leased and the way we manage that space, whether that’s being able to have flexible parking spaces between different buildings if one customer needs more spaces it want or whether it’s allowing folks to use our amenity base or marketing centers or meeting comp insurance in all of our buildings and a number of things like that. So we certainly, it’s an active part of our ongoing discussions. And Colin, I don’t know if you – you may have some color of what have been – how much of that we have to.

Yes. Jamie, I would just add in terms of co-working, we do continue to spend a lot of time with WeWork – spaces, industrialist and really getting to know them I think as we look at the deal specific to Terminus I think there hope is that transaction with WeWork is going to allow a broader universe of underlying customers to access Terminus. We typically aren’t in the business of leasing, 500 feet or 1000 feet to some individuals or small organizations. So I think we work to build it at aggregate some – potential space takers who otherwise – can’t be in office building, like trophy office building of Terminus is stature and rent profile, we think it’s going to be a positive. And as we continue to look around the portfolio as Larry mentioned, we are looking at other opportunities to add co-working and view it as that could be positive for those particular assets. As we sit today, kind of co-working our traditional executive suites, would account for about 250,000 square feet of our portfolio, a little bit under 2% of the total. So still really a relatively modest amount, but one that we think would grow and marginally overtime.

Okay. Thank you. I appreciate color.

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

Great, thank you. Larry, I guess, in the build-to-suit world, it appears to me that the tenants come from either your existing portfolio, they are already in the market, but not in your portfolio where they are coming from out of town. For example, AllianceBernstein probably moving about half of their New York City employees into one of your Sunbelt cities fairly soon, and I’m looking at Page 27, your land inventory you guys have little down significantly. You have any land now, which is appropriate for the kind of build-to-suit you expect to build or do you need to have more land on inventory?

John, I’ll take that. It’s a great question. And I would same yes, to both. We do have land in our existing portfolio. For instance, the victory said, we have in Dallas that we own with Hines, certainly gets a lot of interest on those types of inquiries. We get a lot of inquiries of that type or not Avalon 10,000 project, the second building that we have got going through predevelopment right now in Avalon and North Atlanta. But you highlight the right thing and it’s reason, I mentioned it in my remarks is, we are very focused on making sure that in these key submarket that we do have a site available, build-to-suit or whether it’s for the building out in the next cycle. And so we said, we want to keep the overall land inventory sort of the 2% to 3% level, but we are well below that and some of the land we have, we don’t consider core land is we move forward. So we are focused on, have been focused on acquiring some sites and I anticipate we’ll do that, in 2018 and given the discussions that we have been having. We have seen a little bit let out in land prices, as the apartment cycles has began to take out just a bit. And that’s the big and to open up some opportunities for us at some of these key submarkets and it’s a major focus. And I’m optimistic that you will see us make some progress there in the next couple of quarters or so.

Great. Thank you.

The next question will come from Dave Rodgers of Baird. Please go ahead.

Good morning. Colin, wanted to ask you two questions. May be one any additional details on AIG, which I noticed the suburb January 2019 exploration? As well as just in general in Atlanta, it’s kind of a little bit of slowdown in office and employment trends just over the last six months or eight months or so in Atlanta? Are you feeling any of that on the ground? And is that reflected in the recent absorption or leasing side?

Taking your first question as it relates to AIG, they are out in the market. And as you mentioned they are in early 2019 exploration little over 100,000 square feet with us at Northpark. They are continuing to look at the Central Perimeter. They are also looking at the Buckhead submarket. So we are actively engaged in that conversation with AIG. It’s a little bit premature to get a sense of where their ultimate direction will be. But as we think about kind of again our overall portfolio having a critical mass that we do in Atlanta, we see – we’re excited about the flexibility that we have in terms of offering them a trophy auction in the Central Perimeter and Northpark adjacent to MARTA. We’ve got various options in Buckhead as well that we think they will find attractive. So we’re going to keep after that. We’re focused on it. It will be a competitive process, but we would like to quality of the assets that we have to compete with that. Stepping back and just looking at Atlanta is a whole. We are encouraged as we look forward to the 2018 and with our leasing team yesterday, there is busy and active as they have been in years. And really that interest kind of customer interest is widespread across Central Perimeter Buckhead, Midtown continues to perform very, very well. So we’re enthusiastic. And as I mentioned, it’s all with – at a high level without any really speculative construction for that will deliver for the foreseeable future. We think the market is continuing to – is positioned very well.

And Dave, this is Larry. I will just add relative to Atlanta. When I look at the pipeline sort of at the Metro level, just my activities with the Metro chamber and others. The sort of the pipeline of prospects incoming from other cities or countries to Atlanta is actually longer today than it was 12 or 24 months ago. And it’s been strong for those two years as well. So I think we’re seeing those numbers reflected in the employment trends. We are not feeling that in terms of the quality of our leasing pipeline or the quality of prospects at this point.

Great. Thanks for that color. And then maybe just a follow-up, if I could on fund asset sales. You clearly performed in Orlando and Miami of lay, do you still view kind of bottom 10% annually that you want to kind of call out of the portfolio? Or given kind of the aggressive nature where you had over the last couple of years? And do you feel like this position is probably something just not really on the radar all at this point in time?

Well, we are always grading our portfolio, but we have been aggressive with the $1 billion of sales we’ve done vis-a-vis Parkway. We like our hand right now. We had a great market in order to make those sales into the last year just because the amount built up capital sitting on the sidelines that’s been done. But I don’t want to anticipate us having any dispositions this year of any note, unless we find the unique opportunity that makes sense. But we really – we couldn’t be more optimistic and bullish on portfolio we have in the markets that are sitting there right now.

Great. Thank you.

The next question will come from Jed Regan of Green Street Advisors. Please go ahead.

Good morning. I know – I’m just curious how your pipeline for potential new development is looking and I know, in recent quarters, you said you likely maybe one or two more developments kind of given the advanced age of the cycle? Is that still your mind frame? Given recent tax reform and better economic signals, are you expecting to maybe deal a little more active right now?

Jed, I’ll start with that one. We certainly have been – and I think we will remain primarily focused on build-to-suits that either give us a significant amount of preleasing. We certainly will be open to do some on top of preleasing or where we just – there is a market where there is just clearly such a pipeline with existing customers that we feel like with the existing customers and our discussions with those customers, they might be ready to make some commitments right out of the gate to get that going. I don’t see that our portfolio having something right now that we would just be compelled to the start – on a spec basis at this point in the cycle. We really want to – I think, our very disciplined strategy on development has delivered just fine and great value to shareholders, and we look to remain discipline. Having said that, we do see build-to-suit opportunities coming in, as we talked in previous calls and we do have some conversations with existing customers, where we see the potential of those needs maybe being able to do something of a similar nature that we’ve been able to grow with other existing customers.

Okay. That’s helpful. I appreciate it. Can you give us a sense of yield expectations for your new Austin build-to-suit? Or maybe what’s your projected cash yield for the entire active development pipeline at this point?

Jed, it’s Colin. As we’ve said in the past, our across the – we want to be careful any specific deals to certainly don’t want to put ourselves kind of a competitive disadvantage as we chase the next one. But as you look across the entirety of our development pipeline today, including 300 Colorado – we are certainly targeting GAAP yields Northern eight.

Okay. That’s helpful. And I guess, related to that, when is Parsley’s lease expiring Colorado Tower and do you have an indication that could end up being a sublease situation there?

We don’t. Their current space at Colorado Tower doesn’t expire until 2020 to – but we have a very close relationship with the company. And I think they are looking at this truly expansion space. They have already been in the market in Austin and some adjacent addition building taking some space on a short-term basis to kind of bridge them to the 300 Colorado project delivering. So it’s a company that’s experienced very rapid growth. As they came into the Colorado Tower project, their equity market cap was about $1 billion. Today, it stands over $7 billion and so in a very kind of low leveraged balance sheet. So it is a company that needs a space. And I think long-term is excited to have this facing Colorado Tower and then have this new expansion space directly across the street.

Jed, I would just say one quick thing on that. We continue to talk about the power of our local strong operating teams. And this is another example, where Parsley has options in the Austin market with post-speculative developments to go fulfill this space requirement. And they had enjoyed doing business with Cousins, enjoyed doing business with our local team, basically pause their decisions for six months to allow us to go find a mutually acceptable site to do this building. And so sometimes excitement of the numbers on the buildings we miss the most important part, which is not just providing space, but showing value to the customer they see beyond just the built environment and Parsley is a great example of that.

Sure. Congratulations on the deal. Maybe last one quickly from me. Have you seen any changes in asset pricing environment across your markets recently either on plus or minus side.

Jed, we have in and we’re obviously coming half of the sale in Orlando in the fourth quarter. And as we mentioned, that process was robust. The level was – interest was deep from kind of a wide variety of institutional capital, sources of domestic and foreign. And so that pricing has remained in a very firm and steady. I think the recent events over the last week or two is far too early to speculate that will have any impact on kind of private asset prices. But I would note there is still a whole lot of private capital on the sidelines looking to – looking for the right projects to invest. So I wouldn’t anticipate any meaningful short-term changes in pricing.

That make sense. All right. Thank you so much.

[Operator Instructions] The next question will come from Chris Lucas of Capital One Securities. Please go ahead.

Good morning, everybody. Just a quick question for me. As you guys look to build your land bank and allocate capital into your different markets. I was just curious as to whether the feedback that Amazon provided to the markets that made the cut list to 20 or to those markets that didn’t make it as well, whether that has an impact on how you’re thinking about your capital allocation in different markets? And the other item would be sort of how you are thinking about how state and local tax limitations from the recent tax form bill may impact Tower migration? And sort of how those things factor your allocation decisions related to building your land bank?

Chris, this is Larry Gellerstedt. On the Amazon, I have to be careful because helping leave the Atlanta effort, and I do have a confidentiality agreement in terms of what I’m allowed to say. But I do think that Amazon is representative early of the Colorado market. And then if you look at the cities that are under consideration, we are going at the three cities that we were act core markets for us or on that list. You see the common themes of higher education talent is really the key in addition to having a quality level of life and focus on these urban highly amortized submarkets we see that is to be consistent with that. We think it’s very complementary to our strategy. Certainly, the cost of living and tax advantage of the Sunbelt markets has been an additional driver to future growth. Where that is in terms of the prioritization, in terms of Amazon’s decision that we – I don’t have a name color on that.

The second piece of your question in terms of the tax reform and state and local taxes, there is certainly any trend underway nationally for some time of kind of the north to south migration and kind of the west to Southwest Texas migration. And we think this will continue to help and from the standpoint of the Sunbelt markets. And as we look at our markets, I think, that certainly Phoenix, Dallas and Austin will continue to be beneficiaries from migration out of California. And I expect to see Atlanta and Charlotte continue to do quite well from that migration coming out of the Northeast and Midwest.

Great. Thank you.

The next question is a follow-up from Jed Regan of Green Street Advisors. Please go ahead.

Just a quick follow for either Gregg or Colin. Can you give any color on how portfolio occupancy can trend during the year? And where you expect to finish the year? And also would you say you are releasing spreads in 2017 representative where you think you would be for 2018?

Sure. Jed, it’s Colin. I will answer that. I think real-time feedback from our team, I will correct my earlier comment, the Parsley exploration is 2025 it’s in Colorado Tower. So it’s a whole team effort here. As we look forward to kind of occupancy in 2018, how we are projecting that, I do think that the first quarter will – we are targeting to be the low point for the years. We had some of these recent move outs that we talked about. And then as – really WestRock takes the rest of their space over the course of the year and Amgen down at Corporate Center in Tampa that is a phase move into over the course of the year. So we would expect the first quarter to be the low point and then continue to trend upwards through the remainder of the year. As it relates to the mark-to-market, I would say that across the portfolio, we have said in the past that, that range is roughly 8% or so below market. We still believe that to be the case today. And therefore, as we go through the coming quarters, I would expect the team to deliver results that would be kind of centered around that number. I think any given quarter could be higher or lower depending on the specific mix of leases during that quarter. But I think overtime, we would hope to see this would average around that 8% current market conditions persist.

Perfect. Thanks so much.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Larry Gellerstedt for any closing remarks.

We appreciate everybody’s continued interest in Cousins. We are looking forward to 2018. And as always, we will be available for any follow-up questions that people may have after the call or during this next quarter. Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines. Have a great day.