Cousins Properties Incorporated (CUZ) Q4 2018 Earnings Report, Transcript and Summary

Good morning, and welcome to the Cousins Properties' Fourth Quarter 2018 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Pam Roper, General Counsel. Please go ahead.

[Technical Difficulty] 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 supplemental package posted 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 Colin Connolly.

Thank you, Pam, and good morning, everyone. Today, I will begin my prepared remarks by revisiting our corporate strategy. I will then summarize our 2018 achievement and highlight Cousins' 2019 priorities and future growth opportunity. Richard Hickson, our EVP of Operations will follow my comments with an update on market fundamentals and our property portfolio. Lastly, Gregg Adzema, our Chief Financial Officer will provide a summary of our financial performance and conclude with our 2019 guidance. At Cousins, we believe that we have a unique and compelling strategy. We strive to be the preeminent Sunbelt office company. It's that simple. To accomplish this goal, we execute the business based on four core principles. First, own the premier Sunbelt office portfolio with concentrations of trophy quality properties in the leading urban sub-markets across our geographic footprint. Second, maintain a disciplined approach to capital allocation with a focus on new investments where our platform can add value and generate attractive return. Third, preserve our best-in-class balance sheet to provide financial flexibility, so we can execute quickly when opportunities arise. And fourth, leverage strong local operating platforms that take an entrepreneurial approach to customer service, local market relationships and deep community involvement. If you know Cousins, this straightforward strategy I outlined should sound familiar. We've been running this place since we began repositioning the company in 2011, and we remain committed to it. Let me walk you through why. First, our strategy benefits from several macro trends that favor trophy quality office properties in the Sunbelt. I'll share a couple of interesting data points to highlight these trends. According to the U.S. Census Bureau, Texas, Florida, North Carolina, Arizona, and Georgia ranked number one through five for states with top net migration from 2005 through 2017. According to JLL, approximately 75% of U.S. net office absorption during the fourth quarter of 2018 with an urban Class A property. That differently, the U.S. population continues to migrate to the Sunbelt in search of the lower cost and pro-business environment. In an effort to compete in the war for talent, users have office space are increasingly choosing to upgrade the quality of their work environment with the particular emphasis on amenities in proximity to mass transit. At these trends take shape, our trophy Sunbelt portfolio is well positioned for where the puck is heading. Second, our strategy continues to deliver fantastic results. Let me highlight our team's achievements in 2018. We delivered $0.63 per share in FFO, which was at the top end of our original 2018 guidance. We leased 1.6 million square feet with second generation net rents of 13.2% for the year. We increased the same property pool to 94.5% lease. We increased the annual same property cash NOI by 4.7%. In addition, our development platform performed exceptionally well. The team successfully delivered Spring at 8th, NCR's new corporate headquarters with a total project cost of $332 million on time and on budget. Lastly, our strategy positions Cousins well for future growth opportunities. Within our existing portfolio, the embedded mark-to-market on our in place rents remains an 8% to 10% range, and our leases typically include annual escalators between 2% and 3%. Externally, we believe that demand driven development remains our most attractive investment opportunity at the moment, given the robust pricing environment for existing asset. Our current development pipeline totals approximately $245 million as share and included 898,000 square feet of office that is 74% pre-leased. This pipeline includes our international place project in Charlotte, which is expected to deliver later this quarter, 300 Colorado in the Austin CBD, 120 West Trinity, which is a mixed use project in Atlanta, and 10,000 Avalon also in Atlanta, which is now 40% pre-release, as we executed a full floor to a growing technology company in December. Notably, demand for the remaining space at 10000 Avalon project remains very strong and we are encouraged by our progress today. In addition to our active projects, we have a very strong shadow pipeline that includes well located sites for office development in Uptown Dallas, Westshore in Tampa, and our most recent addition, 901 West Peachtree in Midtown Atlanta and 100 Mill, which is adjacent to our existing 1.3 million square foot portfolio in Tempe. In aggregate, we could potentially build approximately 1.4 million square feet and we're very encouraged by the interest in our projects from both our existing customers needing to grow and potential new prospects. Related to our development efforts, I would like to address recent press reports regarding Norfolk Southern corporate relocation to Atlanta. I can't confirm that Cousins is in advanced discussions with Norfolk Southern to sell our recently purchased site at 3rd West Peachtree Street in Midtown to create its new headquarters. As a part of the transaction, Norfolk Southern intends to engage Cousins to manage the development. While this urban headquarters project will now be capitalized on our balance sheet, it may sound on the surface like a typical fee based development. The proposed transaction is financially compelling for Cousins and will highlight our local sharpshooter capability. I do want to point out that we are under confidentiality agreement, so we are not able to comment further at this time. However, we look forward to sharing additional details upon closing of the transaction, which we currently anticipate to occur during the first quarter. In closing, we are excited about the opportunity for Cousins' properties in 2019, despite volatility in public markets, fundamentals and our Sunbelt markets remain healthy with solid demand and rising rental rates. I want to thank my teammates across the company for their tireless work and dedication to each other, our customers and our shareholders. With that, I'll turn the call over to Richard.

Thank you, Colin, and good morning. As Colin mentioned, 2018 was a year characterized by strong leasing volume at impressive economics. At the portfolio level, this past quarter, our team completed over 450,000 square feet of leasing at an average lease term of eight years. In terms of mix, 61% of our activity was new and expansion leasing. Rent growth remained strong with second generation net rents increasing 36% on a GAAP basis and 13.1% on a cash basis. With our solid leasing performance, our operating portfolio ended the year at 94.9% leased. Looking forward, only 5.6% of our leases are set to expire during 2019. Turning to our markets. Fourth quarter leasing activity in Atlanta was robust, despite sluggish headline office employment statistics. According to JLL, Atlanta Class A rental rates have hit historic highs for eight quarter straight. Importantly, Class A rental rates in urban sub-markets have risen three times faster than in the suburbs, a material tailwind for our largely urban portfolio. Our Atlanta team executed 258,000 square feet of leasing in the quarter with sizable activity in each of our sub-markets, taking the portfolio to 93.4% leased. Notable leases included a 92,000 square foot early renewal of Frazier & Deeter, an accounting firm at Promenade and a full floor expansion of WeWork at Terminus and Buckhead. WeWork success at Terminus and their desire to expand is an encouraging sign regarding the vibrancy of Buckhead. And in particular, an interesting concentration of technology companies building along the Piedmont Road Corridor. While 2018 leasing activity in Buckhead started slowly, we saw a meaningful uptick in activity as the year progressed, including important commitments to the sub-market by established tech companies such as Salesforce and Workday. You will remember that Workday recently leased 40,000 square feet that are 3350 Peachtree asset. In total, we executed 70,000 square feet of leases across our Buckhead portfolio last quarter. And I'm pleased to report that we are far along in lease negotiations with a potential customer to take the 46,000 square foot Bain space at Terminus expiring at the end of March. In Austin, meaningful commitments from large cap tech companies such as Google and Apple continue to drive impressive demand for office space. Since 2013, the office market has grown by more than 8 million square feet and full service rental rates have increased 52%. According to CoStar, Class A vacancy in the CBD is only 5% after more than 446,000 square feet of net absorption in the fourth quarter. Our primarily CBD portfolio stood at 95.1% leased at year end. Today, absorption has outpaced new deliveries, although we will keep a close eye on future construction activity. There are more than 1 million square feet of new office projects underway in the CBD that stand at 60% pre-leased. This includes our 87% pre-leased 300 Colorado project. Our team was busy signing renewals and expansions last quarter, including 34,000 square feet of leases at 111 Congress. In addition, just last week, we signed an important 40,000 square foot long term renewal with Wells Fargo at that property. Charlotte it also experiencing solid rental growth. According to CoStar, market LIBOR rents have grown 6.1% over the past year and rent growth hit 8% in both 2017 and 2018 in the markets premium assets. New supply has certainly increased, but the market is steadily absorbing the deliveries. Of the 2 million square feet of Class A construction in Uptown, 69% is pre-leased. As Colin touched on, Dimensional Place, our development for Dimensional Fund Advisors in South End is expected to be operational by the end of the first quarter, at which point, DFA will vacate two floors at Fifth Third Center. This remains one of the best large block availabilities from near term occupancy in all of Uptown and we feel good about our ability to release it soon. Excluding DFA, only 3.7% of our Charlotte leases expire over the next two years and our properties are nearly 99% leased. With that in mind, we are closely tracking new supply and focusing on executing important renewals. Moving on to Phoenix. According to CBRE, 2018 marked the eight straight year of positive net absorption for this market, pushing vacancy to its lowest level in a decade. From November of 2017 to November of 2018, Phoenix has been a top four market for office employment growth, driven by a 12.1% increase in information services jobs. In Tempe, where our entire portfolio is located, Class A vacancy is significantly lower than any other sub-market currently at 3.8%. Our portfolio ended the year at 96.2% leased. During the fourth quarter, our Phoenix team signed its first lease with flexible office provider Industrious for 144 to the Gateway. With the commencement of this new lease, and our expansion of WeWork at Terminus, flexible office providers will comprise about 1.5% of our total portfolio on a square footage basis. Wrapping up with Tampa, while CoStar had full year 2018 net absorption at only 1.1% of total inventory, leasing results in our Westshore your portfolio tell a more powerful story. The fourth quarter was our second strongest quarter of 2018 in terms of both leasing volume and economics. Our team signed 120,000 square feet of new and renewal leases at corporate center, including the backfill of substantially all of the 71,000 square foot T. Rowe Price space set to expire in January of 2020. At Harborview, our previously announced new full floor customer is expected to commence early in the second quarter of this year and we are optimistic about our activity for the remainder of the available space at this asset. Again, overall, our market team is continuing to deliver solid results and we are very encouraged by our strong position as we look toward the balance of the year. With that, I'll turn it over to Greg.

Thanks, Richard, and good morning, everyone. I'll begin my remarks by providing an overview of our financial results. Then I'll move on to our balance sheet before closing my remarks with our 2019 earnings guidance. As you can tell from Colin and Richard remarks, it was a solid quarter on many fronts, at $0.17 per share, FFO was up over 11% over last year. In the important operating metrics that both you and we focus on were strong. Leasing velocity remained brisk, second generation leasing spreads were again up double digits and same property year-every-year cash NOI growth was positive for the 28th consecutive quarter. It was also very quarter. The only unusual line item was inside our general and administrative expenses, which remained below trend for the second consecutive quarter. Again, driven by reduction in our long term incentive compensation accrual. Within our same property portfolio, year-over-year cash NOI was up 1.2% during the fourth quarter, driven by 3.4% revenue growth. For the year, cash NOI grew at a very healthy 4.7%, despite a 12% increase in property taxes. Excluding property taxes, same property cash NOI growth would have exceeded 5% during 2018. That being said, we're certainly not complaining about large tax increases in our portfolio. It's a high class problem and indicative of the significant appreciation in the property values that we're seeing. Turning to our balance sheet. Most investors often focus on the strength of a company's credit profile and ours would certainly qualify strong. Our net debt to EBITDA is 3.7 times and our net debt to unappreciated assets is 24%. However, equally important is a company's liquidity position. When times get tough, liquidity usually dries up and the companies with committed access to cash have an important competitive advantage. We have this covered as well with a $1 billion undrawn credit facility. This combination of strength and liquidity is powerful and we're convinced it will allow us to create significant value for our shareholders at the economic cycle unfolds. As discussed last quarter, we launched the sale process for our Meridian Mark asset in early January with the closing anticipated during the second quarter of 2019. This is 160,000 square foot medical office property located in the Pill Hill submarket of Atlanta adjacent to Northside Hospital. Although this building is non-core for us, it's a very attractive asset for many different types of buyers and we're seeing outstanding demand. Proceeds from this sale will be used to fund our development efforts. And with the closing of this sale, our current development pipeline is fully funded and leverage neutral basis. We've consistently pre-funded all of our development projects through this entire cycle. A conservative approach to funding our development activities has been and will continue to be a core tenants of our strategy. Finally, post quarter end, we closed on a non-recourse construction loan on a 300 Colorado office development in Downtown Austin. It's a $126 million facility with a three year initial term price to 225 basis points over LIBOR, declining to 200 basis points once the building is occupied. I'll wrap up my comments today by providing the details behind our 2019 FFO guidance. As we outlined in our earnings release, we expect 2019 FFO in the range of $0.61 to $0.65 per share. This guidance range is driven by the following assumptions. First, we anticipate positive year-over-year same property NOI growth of between 2% and 4% on a cash basis. This assumption includes a 10% increase in property tax expense. In general, our quarterly same property performance will be a lower in the first half of the year and higher in the second half, driven by free rent burning off on some large recently occupied space, as well as the commencement of already signed leases as the year progresses. Moving on, we anticipate fee and other income will be between $7 million and $9 million. And for clarity, termination fees are included in this line item. They're not in property level NOI. We anticipate general and administrative expenses between $27 million and $29 million net of capitalized salaries. This number includes internal leasing costs that were previously capitalized and must now be expensed for the new FASB leasing standard that came effective January 1. We anticipate interest and other expenses of between $48.5 million and $50.5 million net of capitalized interest and depreciation and amortization of non-real estate assets between $1.5 million and $2.5 million. We anticipate GAAP straight line rental revenues of between $22.5 million and $24.5 million and above below market rental revenues of between $5.5 and $7.5 million. Our 2019 guides includes one disposition, the Meridian Mark sale I discussed earlier. And please note, there's a mortgage on Meridian Mark that matures in August 2020 that will need to be assumed to prepay. Our guidance assumes it is prepaid upon closing and $1 million prepayment penalties incurred by us. Our 2019 guidance also does not include any speculative leasing or acquisition - I'm sorry - speculative development for acquisitions. In his early remarks, Colin mentioned our strong shadow development pipeline and if any of these projects commence, we'll disclose it to you and update our guidance if necessary. Before turning the call over to the operator, I wanted to provide one more data point. While we anticipate our same property performance, we solidly positive in 2019. In isolation, it does not capture our full NOI growth story. To do that we think it's important to look at both the same property pool and our five most recent development projects, all of which are not in our same property pool. These projects include both phases of NCR here in Atlanta, Dimensional Place in Charlotte, 8000 Avalon and Carolina Square. When both of these groups of properties are combined, we anticipate cash NOI to increase between 6.5% and 8.5% in 2009. This higher range does a much better job of reflecting the full cash flow potential of our platform. The organic growth embedded in our same property portfolio as well as the incremental growth generated by our development efforts. We are not going to provide ongoing updates to this metric, but I thought it was important to have it. With that, I'll turn it back over to the operator.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Dave Rodgers with Baird. Please go ahead.

Yeah. Good morning, everybody. Maybe I'll start with Richard. I just wanted to talk about to the markets in particular maybe some leases that you mentioned both in Buckhead and Tampa, you said you had some replacement tenants for Bain and for T. Rowe, can you give a little color maybe on the downtime associated with those leases and just kind of the broader activity that you mentioned in each of those market?

Sure, happy to do that. For Buckhead, in terms of the Bain space again that expires at the end of March of this year. And we expect downtime to be roughly couple of quarters. Pretty typical for dealing with that size in Atlanta. And to your question on T. Rowe, again I probably tell you about that as well for a customer of that size, roughly 70,000 feet, we'd expect construction time, down time around six months or so.

Great, that's helpful. Maybe for Colin. I know you have a confidentiality agreement but since you mentioned them by name, and it sounded like it was going to be some sort of land sale. Can you talk about kind of whether that was your option or there's to for you not to own that out, was that a kind of NOI strategy for you or purely on their part and just kind of maybe discuss how you got there?

Yeah, Dave, I would love to elaborate further. Unfortunately, we will have to wait until we're able to get that transaction close. But as I've mentioned in my prepared remarks, we do think as we're able to disclose more, you'll see that it's a very financially compelling opportunity for Cousins. And I think just kind of stepping back as well, I think overall this is a very positive kind of testament to what's happening in Atlanta. A large fortune 500 company relocating to Atlanta and not just Atlanta into Midtown. And as I mentioned I think speaks to our deep relationships and structure shooter ability is to be able to work with somebody like Norfolk Southern on a direct basis. So as we get the transaction further along, we'll look forward providing all those details.

Great. And then maybe last question, you mentioned 1.5% or so of revenues likely they have come from that office business, industrial WeWork, the industry as we were considering, any thoughts they have an upper bound that you're comfortable with, you have plenty of runway there, do you anticipate doing more?

Yeah, we look at it, building by building. But again I think at a high level, we've been very pleased and encouraged with our experience with some of the larger coworkers. We've got [indiscernible] spaces, lease at our 8000 Avalon project, and we, as Richard mentioned, just expanded. We work at Terminus and we're excited to do our first lease with industrious out in Tempe. And we've had lots of communication with our underlying customers and they viewed it very favorably in terms of - really the flexibility, the accordion feature that it's provided to many of our customers. And we're actually starting to see some opportunities where we've seen companies, I'd say graduate perhaps out of flexible, more short-term space and then look to perhaps a larger long term more traditional lease with us on a direct basis. So, it's been a positive experience. Certainly will be mindful of credit and we look at that really no different than we would kind of any other industry. But we're mindful of credit and so we continue to watch that carefully. So we'll keep that - the overall amount of that in context with the portfolio. But I wouldn't say there's a specific number, we just we want to be thoughtful and balanced about it.

Great, thank you.

Sure.

The next question is from Jamie Feldman with Bank of America ML. Please go ahead.

Great. Thanks and good morning. Good. I appreciate the color at Bain and T. Rowe. Can you talk about some of the other large blocks you're looking to backfill CBRE, AIG and then DFA?

Sure, Jamie, I'll - it's Colin and I'll just kind of walk you through that…

And I'm sorry, you can just add what's in your guidance for any of these spaces that would be helpful?

So it will - Jamie, let me just kind of break it down, your maybe over the course of 2019 and 2020. As we've talked about and Richard walked through, I'd say that the large material explorations in '19 AIG, he is now expired at NorthPark. That was about 105,000 feet. We've got the DFA space in Charlotte, Bain, CBRE. Those are really the large material one this year. We're making really good progress. If you'll recall from last quarter, we signed a long term lease with a company, technology company by the name of OneTrust that really will backfill the vast majority of the AIG space. And that will come online over the course of 2019, as we will have a little bit of downtime to refit that space. Bain, again, we're making really good progress. We're hopeful in the not too distant future, we'll have good news to share there. And then we still have a little bit of work to do on the CBRE space. But again, I think as we've said in the past, it's important to get closer to those explorations to really be a viable opportunity for customers in the market. So the success that we have at Bain is their exploration comes along in March, I think those well for the opportunity on the CBRE space. Looking forward to the 2020, again the two material explorations that we've got, it's the T. Rowe space and it was the Well space at 111 Congress. And again we're making really good progress here and really backfilled almost the entirety of that T. Rowe space and then just did a recent renewal with Well. So the team and all our markets continues to do a great job before we're thinking with our customers and we're trying to attack that day-by-day and have add some good success.

Great. Thank you. That's helpful. And then I guess just the Charlotte space, I think the comments for that you had good interest. Is this something you've included in your 2019 guidance, is getting backfilled or not yet?

It is - we have with the Dimensional Place spaces. As Richard touched on, it really have some of the best space, existing space in the entirety of Uptown. It has been you know tied to our Dimensional Place project which will commence in the end of this quarter. So it's been a little bit of a moving target as we've continued to finish our work on that Dimensional Fund Advisors has had some change orders et cetera. We're confident we'll get it done this quarter. But it's been a little bit of a moving target in terms of when we could promise that space to a customer. So now that we've got some definition. I think we'll - teams got some activity and we'll keep working through that. But any leasing on or occupancy on that space would be towards the back half of the year in our guidance and not have a real material impact on our 2019 numbers.

Okay. Great. Thank you. I know you can't give a lot of color about Norfolk Southern, but just as you think about that parcel in Midtown and what you own around it, and how that when we just keep hearing more and more interest in that part of town. Can you maybe just give a big picture of what you think Midtown is shaping up to be and what you think the longer term opportunities are for you there and what it means for your portfolio there?

Absolutely. Midtown continues to be very robust and interest from large customers. And I would say if you look back five plus years ago, Midtown was really known as the legal hub of Atlanta. And it's evolved from there quite significantly and certainly began to pick the interest of certainly technology companies. And a lot of other large companies who are looking to tap into really the research and development and the talent over at Georgia Tech. And I'd say that really has been a key driver. That was certainly our experience with NCR. They wanted to be in Midtown close to mass transit, which Midtown offers and close to the talent and opportunity over Georgia Tech. So we think that that will be a consistent theme. We've been positioning ourselves over the last several years to try to take advantage of those opportunities. And I think again in short order, hopefully, we'll be able to highlight that with Norfolk Southern. We also own a terrific site at 901 West Peachtree. And there's a lot of big customers in the market. So I know you would think of this traditional technology companies but also some other large corporate and financial services oriented companies who think of the technology and operations aspects of their business is really what's going to differentiate them going forward. And so we're very bullish on Midtown and certainly an area that will continue to focus on.

Okay. Then final question for me. Can you just talk about your outlook for rent growth across your markets? I know you talked about your mark-to-market in your red box, but what do you make this year looks like for rent growth?

Yeah, again, we're - actually we're very constructive on it. Demand is solid and supply is certainly speculative. Supply has remained generally in check. And so we think that the 2019 will look very similar to 2018 from that standpoint. And say we look over the last 12 months, our markets have ranged anywhere from 3% to 8%, was really kind of an average of 5%. Phoenix over the last few months, it's probably been a little bit slower. I don't know if that's nothing particularly that we've seen on the ground, but that's what the data would show. And Charlotte's that on the upper end of that range at 8%. With - the others kind of in and around that 5%. But I think that that would be kind of a safe assumption looking forward to 2019.

Okay, Great. Thank you.

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

Great. Very impressive, guys. Thank you. Two questions. I'm not 100% sure, but my recollection is maybe SunTrust is located in Atlanta and BB&T is located or headquartered in Winston Salem, anything you could comment on that would be interesting. And then the second comment is for the tone of someone's voice, I can't remember whose, you were - it appears if you're not really happy about having co-working in your buildings but you've got to be in that game. Could you comment on either of those?

Sure, John, it's Colin. I'll be happy to touch on both of those. So we were - we woke up like everybody else do the news with SunTrust and BB&T and obviously SunTrust is headquartered here in Atlanta. It was interesting as a merger of Eagles they've announced that that Charlotte will in fact be their new corporate headquarters but they did make very specific comments that Atlanta would continue to be their corporate and investment banking hub, their wholesale banking is as they call that. So here within the city, they've got, called a 1.5 square feet as a vast majority of that is in downtown Atlanta. But we would not expect to probably see a material change there. But just stepping back at a high level, a couple of points that I would make. I think it speaks very favorably towards Charlotte and potentially the long term opportunity there. We've got great relationships with those banks, so we'll see in time. And then the other interesting point I'd want to make is really if you look at what's happening between those two banks, they are doubling down on the Sunbelt, which is very consistent with our strategy. And as I looked at their deck this morning, one of the things that they were highlighting was that their geographic footprint which is very complimentary to ours ranks number one in their peer set for the population growth and GDP growth. And so again, I think it really supports, it shows two large companies making a bet on the Sunbelt. So to answer your second question on co-working, I think he might have misinterpreted our tone. I think that as we look forward, co-working has been a very positive experience for us. And it is just 1.5%. It has got a lot of attention and headlines. But from our standpoint today, right our customers have in the buildings where we've got that exposure have liked it right, they like the flexibility and the new project comes along having that accordion feature. And we continue to see some interest from their underlying customers looking to graduate up into some of our space. So the data has been very positive. As I mentioned, from a credit perspective, it's something that we'll have to continue to watch. And just like any kind of below investment grade credit right, we want to have kind of limit our exposure to that for the long term.

Great. Thank you very much.

[Operator Instructions] The next question comes from Michael Lewis with SunTrust. Please go ahead.

Good morning. This is Alexie [ph] throwing in for Michael this morning. I was wondering if you could share some thoughts on related group's planned multifamily developments in Phoenix? I believe a number of news article suggested that they plan to invest something to the tune of 500 million in Phoenix and the surrounding areas?

Could you repeat your question? We couldn't quite hear the audio.

Sorry. Can you hear me right now? Little better?

Yeah, much better.

Okay. Yeah, I'll repeat it again. I was wondering if you could share your thoughts on related group's plant multifamily developments in Phoenix and the surrounding areas which could total about 500 million according to some news articles.

Well that related is clearly a very reputable group with a long and a proven track record that throughout the U.S. and certainly typically speaking and high barrier markets with growth. And I think there are interest in Phoenix have something of that size and scale. Speaks very favorably to the long term trends and prospects for Phoenix. In terms of kind of where they are, their process right, I don't want to allow them to kind of speak for themselves overtime. But again we look at that as somebody making a big bet in Phoenix and clearly shares our view that there's really positive demographics and growth opportunities in the market.

Okay, thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Colin Connolly for any closing remarks.

Thank you all for spending the time with us today. We appreciate your interest in Cousins Properties. We are always available for additional questions. Feel free to reach out. If we don't talk to you before, we'll look forward to our next conference call to discuss our first quarter results. Have a great day.