Pamela Roper - General Counsel Lawrence Gellerstedt - President and Chief Executive Officer Gregg Adzema - Executive Vice President and Chief Financial Officer Colin Connolly - Senior Vice President and Chief Investment Officer.

Jamie Feldman - Bank of America Michael Lewis - SunTrust Jed Reagan - Green Street Advisors Dave Rodgers - Baird Tom Lesnick - Capital One Securities Kyle Mcgrady - Stifel Young Ku - Wells Fargo.

Good morning and welcome to the Cousins Properties Incorporated first quarter 2015 conference call. [Operator Instructions] I would now like to turn the conference over to Pam Roper. Please go ahead..

Good morning and welcome to Cousins Properties' first quarter earnings conference call. The press release and supplemental package were distributed last night as well as furnished on Form 8-K.

If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website at www.cousinsproperties.com. An audio webcast of this call will be available for 90 days through a link in the Investor Relations section on our website.

At this time we would like to inform you that certain matters we will be discussing today are forward-looking statements within the meaning of Federal Securities Laws.

Examples of such statements include estimates about expected ranges of FFO per share and operating income from properties, as well as certain categories of expenses and other income, along with our expectations regarding leasing activity, rental rates, including above and below market rental income, leasing expenses, development, acquisition, financing and disposition opportunities and expectations regarding the demographic and economic trends in markets in which the company is active.

Such forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from our current expectations. The company does not undertake a duty to update any forward-looking statement.

Please refer to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2014, and our current report on Form 8-K filed on May 06, 2015, for information regarding certain risks and uncertainties.

Also, certain items we may refer to today are considered non-GAAP financial measures within the meaning of Regulation G as promulgated by the SEC.

For these items, the comparable GAAP measures and related reconciliation may be found through the quarterly disclosures and supplemental SEC information links on the Investors Relations page of our website at www.cousinsproperties.com. With that, I'll turn the call over to our Chief Executive Officer, Larry Gellerstedt..

Thanks, Pam. Good morning, everyone. Thanks for joining us for the first quarter conference call of Cousins Properties. With me today are, Gregg Adzema, Chief Financial Officer; and Colin Connolly, Cousins' Chief Investment Officer.

I'd like to start the call today with some terrific performance highlights for the first quarter, then I'll provide some color on Houston, which is on the forefront of everyone's mind, and then I'll closed with some exciting updates on our development pipeline and capital allocation strategy.

During the first quarter of 2015 we delivered FFO of $0.21 per share compared to $0.19 per share for the first quarter of 2014. Leasing efforts remain strong, as we executed approximately 441,000 square feet of office leases during the quarter, approximately a 20% increase in volume compared to the first quarter of 2014.

Our second generation re-leasing spreads also continue to trend positive, up 8% on a cash basis. Our fantastic leasing performance continues to drive bottomline results. We posted a 15.9% increase in same property NOI on a cash basis, which is our fifth consecutive quarter of double-digit growth.

Before diving deeper into Houston, I'd like to highlight how strong the portfolio is performing in our other four markets. Over the last 12 months, Atlanta, Austin, Charlotte and Dallas have collectively generated over 230,000 jobs or 7.4% of total jobs created in the United States over the same period.

Further, net absorption in these markets during the first quarter accounted for 2.4 million square feet or approximately 30% of the total U.S. absorption. These positive economic tailwinds are translating into great results across our assets.

To highlight, our percentage leased in the portfolio outside of Houston increased to 100 basis points upto approximately 92% leased on a weighted average basis during the first quarter. Now, I'll move on to Houston. As a general statement, I would say we see a disconnect between what's currently happening in our portfolio versus market perceptions.

Despite the fall in oil prices, our leasing momentum at Greenway Plaza and Post Oak Central continued during the first quarter. I'll let Colin get into more of the specifics in a moment. But at a high level, we executed 266,000 square feet of leases in Houston during the quarter at economics that continue to be very attractive.

As a point of comparison, we averaged approximately 150,000 square feet of leasing per quarter in Houston during 2014. So we meaningfully outpaced activity from prior quarters, when headline oil prices were much higher.

Nonetheless, we certainly recognize that market conditions will likely soften across the city in the short-term, as the energy industry recalibrates. However, we are optimistic that our portfolio will continue to perform well. Why? Three reasons. First, we own a high quality well-located properties at very attractive basis.

There is no question that Houston has a healthy development pipeline, but all submarkets were not created equal and high barrier to entry locations, like Greenway Plaza and the Galleria account for a disproportionately small share of that new construction. Second, we have had great success over the last couple of years, solidifying our rent role.

Examples of this include early renewals with large customers like Gulf South Pipeline, Stewart Title and Direct Energy, as well as a 100,000 square foot expansion with Occidental. At all, we have leased about 1 million squarer feet in our Houston properties during our relatively short period of ownership.

And third, we have very little market exposure over the next two years, when conditions are projected to be soft. Let me highlight. In 2015, our Houston expirations totaled only 171,000 square feet, which is approximately 3% of our total Houston portfolio. In 2016, expirations total only 254,000 square feet or about 5% of that total.

Between the two years, our largest customer expiration is 35,000 square feet. And in aggregate, we have less than 60,000 square feet of expirations that are tied to the energy industry. In addition, looking to 2017, Colin will update you all on positive progress on the Transocean lease renewal in his comments.

In summary, Cousins' Houston portfolio is 91% leased with rents below market, excellent credit customers and approximately 6.6 years of weighted average lease term. By any measure, our trophy assets are positioned for long-term success with a low risk profile during this part of the cycle.

Our investment in Houston was transformative for the company, and has provided tremendous growth and stability for Cousins over the last several years, and we are very confident we will continue to do so. Switching gears, let me provide some color on our current capital allocation strategy.

As we have said in recent quarters, pricing for new acquisitions has become very difficult for us to justify. While we see more upside in rents and occupancy in most of our market, capital flows to real estate have probably outpaced the underlying real estate fundamentals.

Core assets are trading at or above replacement cost and value-add acquisitions are becoming twice to perfection. While we had terrific success with acquisitions over the last several years, we believe that is in this part of the cycle that our platform really shines.

For Cousins, this environment creates an opportunity to take advantage of private market pricing by recycling capital from targeted sales of non-core assets and to new development opportunities with higher returns, and we plan to do just that in a highly disciplined manner. Let me walk you through our identified development pipeline.

As we discussed on last quarter's call, Colorado Tower our $126 million office project in the Austin CBD is now 98.5% leased, after commencing development in 2013, only 17% pre-leased. The leasing result is an outstanding win for our shareholders, more than two years earlier than originally projected and rents well above our initial underwriting.

We are now in the process of moving customers into the new project, and the initial feedback has been overwhelmingly positive, which in addition to the great financial success, is very gratifying to our entire team. The building was 41% occupied at quarter end and it is projected to reach stabilized occupancy during the first quarter of 2016.

Development work is ongoing at Research Park V, which is also located in Austin. This $44 million office project is currently on-time and on budget. Cousins previously developed Research Park I through IV were great success, and we are confident that our fifth and last project in this office park will be no different.

While we do not currently have any pre-leasing to announce, our active leasing pipeline is quite good. And we are confident that we will begin to convert prospects to customers, as we near completion during the fourth quarter. Our second phase at Emory Point is scheduled to open in June.

This $75 million project, which we are developing in a 75/25 joint venture with Gables will include 307 apartment units and 45,000 square feet of retail, which is 66% pre-leased. Residents will begin moving into the apartments during June. An Earth Fare, a specialty grosser will anchor the retail, which opens in July.

We are also thrilled to get underway on the Carolina square project and Chapel Hill, North Carolina. We have closed on the land and executed our 50/50 joint venture with our development partner Northwood Ravin last week.

This $120 million mixed use project will include 159,000 square feet of office, which is already 39% pre-lased to the University of North Carolina, 246 apartment units and 43,000 square feet of retail.

The demolition process has begun on site, developer work is schedule to start during the third quarter and delivery is projected during the first quarter of 2017. Similar to Emory Point, our location adjacent to the University of North Carolina is exceptionally unique with great demand drivers and very limited competition.

Our Decatur multi-family project is still on schedule to break ground during the fourth quarter of this year. We plan to develop this project adjacent to the Decatur, MARTA station and joint venture with [ph] AMLI. The current estimated cost is approximately $70 million and we will provide 20% to 40% of the required capital.

In addition to these activities, we have identified several new opportunities which are equally exciting. As has been widely reported in the press, we are in active discussions with a corporate user to develop their new corporate headquarters in midtown Atlanta.

Although, the lease is still in negotiation, we anticipate a build-to-suit utilizing capital from Cousin's balance sheet in a long-term lease from our potential corporate partner. The building's actual design and size of this landmark project are still evolving, but we estimate that the project could break ground in the first quarter of 2016.

We are under tight confidentiality restrictions at this point, and we will keep you updated as we are able to, while the transaction progresses. We are also deeply engaged with a longstanding Cousins customer on another build-to-suit opportunity in an existing Cousins market.

Similar to our Atlanta opportunity we would execute a long-term operating lease, but in this case and surprisingly $70 million project would be capitalized on a 50/50 joint venture with the customer. For economic incentive purposes, we are not yet in a position to disclose the customer's name or the market.

But we can say we are thrilled to have the opportunity to work with them again. In terms of process, we have assigned out the contract and hope to be in a position to provide more specifics over the next few quarters. This project would likely start in the second half of 2016.

Lastly, we continue to pursue pre-leasing to kick-off our $187 million office project in the victory area of uptown Dallas. The market in uptown continues to be strong and we are actively talking to customers in the market.

However, we will remain disciplined in our approach to starting the project and our very attractive land basis affords us the luxury of patience. To summarize, the development pipeline I just outlined, excluding the Victory project, which currently lacks the necessary pre-leasing and totals $500 million with a very attractive risk return profile.

The office component of the pipeline alone account for over $400 million and is approximately 79% pre-leased, with a weighted average stabilized yield that is approximately 200 basis point above current cap rates. Given the decline in our stock price, we continue to evaluate share repurchases as an investment alternative.

However, we believe that the development pipeline I just laid out currently provides the most compelling long-term value creation opportunity for our shareholders. To be clear, we are not averse to repurchasing stock and we will reevaluate our strategy if our development pipeline does not materialize as anticipated.

With that, I'll turn it over to Colin..

Thanks, Larry, and good morning, everyone. I will highlight some of our key operational and leasing metrics, and then provide updates on recent activity within the existing portfolio. The team delivered another terrific leasing quarter, signing approximately 441,000 square feet of office leases.

Weighted average net effective rent of $14.31, was down relative to the fourth quarter. But I would not read much into this, as it was driven by the leasing mix with a disproportionate share of this quarter's leasing activity occurring in lower rent profile building.

Nonetheless, leasing in these assets is equally as important as in our highest rent buildings, and this quarter's underlying economics were accretive to value. To highlight this, our second generation re-leasing spread was up 33.6% on a GAAP basis, and 8% on a cash basis. This was our fourth straight quarter with positive leasing spreads.

Switching gears, I'll turn to some key updates within our portfolio and market color with a particular emphasis on Houston. First, as Larry mentioned, we had a very strong leasing quarter in Houston. We executed approximately 266,000 square feet of leases with a second generation re-leasing spread of 40% on a GAAP basis and 11% on a cash basis.

Our six-year extension with Direct Energy through May 2023 for 192,000 square feet at 12 Greenway Plaza accounted for a significant portion of this leasing activity.

While Direct Energy did give back approximately 36,000 square feet, this was a great transaction for us, as it significantly reduced our 2017 rollover exposure and crystallized a nice rollup in rent.

As it relates to our rent rollup in Houston this quarter, I think it's important to note that Direct Energy's previous lease commenced just three years ago in 2012, as oppose to a rollup on a prior seven to 10 year lease as we often see in our portfolio.

Looking ahead in Houston, as Larry said earlier, we have very modest expirations during 2015 and 2016, when the market is projected to be at its softest. Beyond that transition of Apache account for the majority of expirations in 2017 and 2018, close to 60% of the total during that time period.

We continue to have very constructive and active negotiations with transition, and are encouraged that a positive outcome is in near sight. Beyond that, I can't provide any more color until we have specifics to share.

On Apache, the new company fitness center and cafeteria that are being built in their expansion space are just about complete and look fantastic. These new amenities are great upgrades for Post Oak Central long-term.

Most of you have probably read Apache's recent statements about having no near-term plans to build on the land they purchased adjacent to Post Oak Central, giving current market conditions. And not surprisingly, we have recently received some initial inquires about extension possibilities.

This will be a positive for us, given we have always assumed that they would vacate in December 2018. But let's not forget that their expiration is still over three-and-a-half years away, so it is far too soon to speculate on the outcome with any certainty.

As we have been discussing since our purchase, Exxon vacated their space in Three Greenway Plaza at the end of February, which is why Greenway Plaza's percentage lease fell to 90% at the end of the quarter. Our team on the ground is working very aggressively to begin backfilling this approximately 215,000 square foot vacancy.

We don't have anything specific to report yet, but we are in discussion on several floors within this block, and are finding particular interest from some existing customers within Greenway to view this as an opportunity to consolidate or modernize their space.

While this would not be positive net absorption per se, we believe that the overall economics would be very accretive for cousins. While we were very active working on renewals during the holiday season in the first quarter, new leasing activity slowed considerably, as a result of the volatile and uncertain market in the energy industry.

However, we have seen a noticeable pickup in the leasing market over the last month, as oil prices have shown signs of stabilization and even recovering north of $60 per barrel. Not mega energy leases is in prior years, but good activity in the 10,000 to 25,000 square foot range from wide ranging industry.

And given the limited space we have available and the small amount of near-term rollover, those type of deals work well for us. We do expect to see some softening in Houston lease economics. It would be naive and unrealistic to think otherwise in this part of the cycle.

But in the urban submarkets, it's still much more anticipatory at this point than realized.

While we have heard reports of changes and net effective rents by as much as 10% to 15% in submarkets like the Energy Corridor, Greenway Plaza and the Galleria had held up far better as they are substantially less new product under construction or space available for sublease.

As an example, Greenway Plaza as a submarket in total has only 235,000 square feet available for sublease according to local brokers, and only 20,000 square feet of that space is actually vacant. To further deploying, our 5.6 million square foot Houston portfolio has less than 30,000 square feet available for sublease per CoStar.

Before I move on to other markets, I want to provide some color on the disconnect between private and public market pricing in Houston.

Since oil prices began to move last year, there have been lots of questions regarding potential changes to real estate pricing and liquidity in the Houston market, and we have finally started to get some data points from our market sources that provide some visibility.

To highlight, during March and April of this year, three Houston office transactions closed that alone totaled approximately $620 million of volume.

Included in this group are 1000 Main, which is a trophy asset in the CBD; Westgate 1 and 2, which is new construction in the Energy Corridor; and lastly, 801 Travis, which is 83% leased B-building, also located in the CBD that sold for $226 a square foot in a sub-6.5% cap rate. Let me dig into the details on a couple of these.

While 1000 Main was repriced to the tune of 3%, after the fall in oil prices, the property still traded for $436 million for $520 a square foot in a sub-6% cap rate. This was a record setting multi-tenant per square foot price in the CBD and a 31% increase over its prior sale just three years ago.

Westgate 1 and 2 sold for $134 million or $325 a square foot. To put this in context, the property is located in the most challenged Houston submarket, 100% leased to an energy services company and sold for a sub-6.5% cap rate and a huge dollar per square foot price.

By way of comparison, we have seen some of our sell-side analyst coverage indicate the implied cap rate for our Houston portfolio has moved 200 basis points to 300 basis points in the last few months and is now north of 8%.

To further dissect this valuation in a fairly simplistic manner, we have four customers in our top 10 list alone that had A-minus or better credit.

Collectively this group, which includes Oxy, Invesco, Direct Energy and GDF Suez, account for approximately 30% of our overall Houston portfolio and have approximately 10 years of weighted average lease term.

We believe well located assets with this type of outstanding credit and term will generate significant investor interest in comparable cap rate pricing, whether the property was located in Houston, Atlanta or Charlotte.

So throwing at a conservative 6% cap rate on this piece of the portfolio would imply that the residual 70% of the portfolio, which has approximately five years of weighted average term and very strong credit as well, has a public market cap rate just under 9%.

As more data points emerge on both the leasing and investment sales front, we would hope that this wide gap in public market pricing would once again converge with the private market.

Moving on to the remainder of our portfolio, we continue to see strong economic growth across Atlanta, Austin, Dallas and Charlotte, and good demand for our available space. In Atlanta, our office portfolio increased from 91.5% at yearend to 92.5% leased at the end of Q1.

We made good progress at Terminus, including a full floor deal with Amazon and a low-rise bank at Terminus 200. Northpark Town Center is now 93.5% leased, up from 87% when we purchased it just last fall. As I said last quarter, we do expect Oracle to vacate 70,000 square feet in June, which will pull our occupancy 4% to 5.5% lower.

But we believe that this will prove to be temporary, as we have a very active pipeline. Promenade is now 94% leased, which is a great milestone for us, given it was 57% leased, when we purchased the property for $175 a square foot in November 2011.

Our leasing team in the CBD is as busy as ever, as they ever have been on 191 Peachtree and American Cancer Society. We are experiencing a nice change in the downtown environment.

Much of it is a result of the rapid growth of Georgia State and the students on the street as well as a significant private and public investment in and around Centennial Park. We have raised 191 Peachtree back to 91% leased after a dip last quarter, and we believe we can continue moving this upwards.

While ACSC has been relatively slower over the last few years, we are seeing renewed incredible interest from additional datacenter users, who value the large floor plates and main fiber line that runs through downtown Atlanta. This level of stabilization has put us in a position to push rental rates across our trophy Atlanta portfolio.

By way of comparison, I would say that we are now achieving on average net effective rents that are at least 10% above, where we were at this time last year. And we are getting there through both higher face rents and lower concessions.

With only one speculated development project underway, we believe market conditions to remain very favorable in Atlanta over the next several years. We have seen no signs of headwinds in Austin, despite recent reports of slowing job growth. Post quarter end, we signed four small leases at rents well north of $30 triple net.

And Colorado Tower, as Larry mentioned, is now 98.5% leased. We are in active discussions on the final remaining seat this week and see a path to 100% occupancy.

Over at 816 Congress, Atlassian's move out to Colorado Tower was delayed this quarter, so we could see a pullback in occupancy at the end of the second quarter, as we get their 22,000 square feet back.

Nonetheless, our leasing pipeline at 816 is also robust, and we are confident that we can backfill this attractive space over the next several quarters. Like Austin, Dallas has not yet seen any slowdown in office leasing, as a result of the pullback in the energy industry, as net absorption totaled 1.5 million square feet during the quarter.

The Dallas Fort Worth Metro has evolved into a very diverse economy today that tracks general corporate America much more closely than the oil and gas business. We had a relatively quite quarter at 2100 Ross, but overall momentum at the asset and in the Arts District as a whole remains very strong.

We did make significant progress at The Points at Waterview, and have now stabilized this asset at 92% leased. Lastly, we made some incremental progress in Charlotte during the quarter. And the market remains very healthy, with sub-10% vacancy, but deal volume was a bit sluggish to start the year.

We did sign two small leases during the quarter, which brings Fifth Third Center to 85% leased. And we are in discussions with some larger customers, which we think can make a much more material impact, but the timing to be a quarter or two out.

We have had very constructive conversations with Bank of America, regarding their 1.1 million square feet lease at Gateway Village that expires in December 2016. I don't have specifics this year at this point, but we believe that they will likely keep a vast majority of this space, which they view as mission-critical to their back office operations.

With that, I will turn it over to Gregg..

Thank you, Colin. Good morning, everyone. We had another solid quarter. FFO was $0.21 per share, up 10% from $0.19 per share last year. This was driven by strong internal operating metrics across the board. Leasing velocity, second generation rents and same property NOI were all significantly higher than last year.

Really the only item that was unusual was our G&A expense during the first quarter. On our last earnings call, I provided an annual range of $21 million to $23 million for net G&A expenses for all of 2015, which equates to a quarterly run rate of about $5.5 million. We reported actual net G&A expenses of $3.5 million this quarter.

The sole reason for this better than anticipated number was a reduction in our long-term incentive compensation accrual, driven by our share price performance during the quarter. During periods of share price volatility like we are experiencing right now, this compensation accrual can be very jumpy.

As a result, we're not going to adjust our annual G&A guidance for 2015 at this time. One other item, I'd like to highlight before moving on to the balance sheet is the composition of our same property portfolio.

For the last couple of years our aggressive portfolio repositioning activities have caused this portfolio to be relatively small portion of our total portfolio. Last year it was only about 30% of total net operating income.

In 2015, this has changed materially, as we have now owned many of our larger recent acquisitions for over a year, which allows us to provide a meaningful year-over-year comparison. Today, our same property portfolio comprises about 75% of our total portfolio. It's a significant percentage.

And this portfolio now provides important insight into the operating performance of our assets. For the first quarter, our largest property portfolio generated year-over-year NOI growth of 15.9% on a cash basis, and 5.2% on a GAAP basis. Operating fundamentals remain solid.

However, we are not changing our full year same property NOI guidance of between 2.5% to 3.5% growth at this time. This isn't driven by an anticipation of declining fundamentals over the balance of the year, rather it's driven by a large move out at Greenway Plaza, in Houston, as Colin discussed.

Exxon moved out of 215,000 square feet at Greenway Three at the end of February, so large lease and it adds a material impact on our same property performance. All else being equal, excluding the Exxon move-out, we anticipate same property NOI growth for the balance of 2015 would look very much like NOI growth during the first quarter.

Balance sheet remains rock solid, and we like it right where it is. We have no intention of either materially increasing or decreasing the leverage in the immediate future. All of those development projects that Larry laid out will be funded with non-core asset sales on a leverage neutral basis.

As Colin said earlier, this is the part of the cycle where our development expertise really pays off. It's also a terrific part of the cycle to fund our development with asset sales.

Multitude of office trades in our markets over the last few months confirms that demand for our assets is robust, and we intend to take advantage of this, and sell into this demand. In terms of timing, we anticipate erring on the conservative side, showing assets earlier rather than later to fund our development spending.

Moving on, as Larry discussed, Colorado Tower has been placed in service and tenants are moving in. As a result, we have moved Colorado Tower from our development pipeline schedule to our portfolio schedule in the earnings supplement.

Subsequent to quarter end, we finalized the Carolina Square development project and demolition was started by the university. Once they complete demolition in the fall and turn the site over to us, we'll begin construction, and then we'll formerly add Carolina Square to our development pipeline schedule.

As you probably noticed by now, we have completed a soup to nuts overhaul of our earnings supplement this quarter. We know how important this document is to the investment community, and so we spend a lot of time trying to make it as helpful as possible.

We strive to provide everything that you need, but we want to intelligently curate the data, not just to dump it out there and force you to swift through pages of raw numbers. I'd like to take a minute to highlight some of the major improvements.

First, we pulled out, what I believe are the most important performance metrics and provided three years of historical data on each and an two page executive summary at the very front of this supplemental. We also provided information on our tenant mix by industry.

And duck tailing on Larry and Colin's earlier comments on Houston, our pie chart on this topic in this supplement shows that the energy industry comprises about 23% of our total tenant roster. It's followed very closely by the financial industry, which comprises about 21%.

Finally, we also provided multiyear details on all of our acquisitions, developments and dispositions, including timing, size and price. We've been very active in these areas, acquiring and developing over $2.6 billion since 2011, which has been primarily funded with $1.8 billion in non-core property dispositions.

So we thought some historical data might be helpful. Hopefully, you like this enhanced disclosure, but as always don't hesitate to give us a call, if you see an opportunity for improvement. I'll wrap up my portion of the conference call by updating our FFO guidance.

As you can see in the earnings release, we've increased our guidance range from $0.81 to $0.85 per share to between $0.82 and $0.86 per share. This increase in our guidance is driven by gains on land sales both realized during the first quarter and projected for the balance of 2015.

During the first quarter, we saw the parcel of land to Genuine Parts for the new headquarters building here in Atlanta. We are the key developer on this project, and anticipate a total fee of approximately $1 million over the course of construction. This number is already in our FFO guidance.

The land sale generated a gain of $810,000, which also ran through FFO. This was not previously included in our guidance. In addition to the Genuine Parts land sale gain we anticipate a few more non-core land sales during 2015, which in total will likely generate additional gains. It is these land sale gains that lead us to increase our FFO guidance.

All of the other previously provided components of our 2015 FFO guidance remain unchanged, including our G&A range. As always, unless there is material event to a change, we anticipate updating our annual FFO guidance only in our quarterly earnings release. With that, let me turn the call back over to the operator for your questions..

[Operator Instructions] The first question comes from Jamie Feldman with Bank of America..

I guess, just starting out the development projects that you guys mentioned, the potential build-to-suits, are those tenants that would be incremental of the portfolio or would they be coming from the portfolio?.

They are both additive to the portfolio. This is not moving any tenants around within our portfolio. It's all additive..

And are they new to the market?.

One of them is new to the market it's in. And one of them is a relocation within the market..

And then turning to Greenway Plaza and Galleria I know fundamentals are holding up better there than the rest of Houston.

Can you just talk about what markets rents in those submarkets specifically have done and concessions have done?.

As I said earlier, logic would tell you that you would start to see some softening in the leasing economics. At this point, it's still a little bit more anticipatory than realized.

We've actually gone back here over the last few weeks and looked at our leasing pipeline within both Greenway Plaza and Post Oak Central comparing it to actual completed yields from last year prior to October. And we haven't seen any material change yet.

That being said, I think our view would be that you'd start to see some tickup in, whether it'd be a little extra free rent or TIs over time before you see any changes in fixed rent, but we just haven't really seen anything material at this point..

So it just sounds like asking rents are pretty much flat?.

That's right..

And then turning to Austin and Research Park, where do you think the hold up.

Why is it still -- why you're still not having a lot of luck at least getting leases signed?.

Jamie, we're actually right where we want to be on Research Park. Once you get into these smaller buildings, you really have to be within six months or so of completion to have serious discussions with most of the customer. Our prospect list demands remains extraordinarily strong in Austin.

Our prospect list would be over 500,000 square feet of which 200,000 are pretty active. So we really are not surprised or disappointed where we are at this stage, six months out for completion, and feel confident that things will solidify on some of these prospects over the next year or so..

And, Jamie, I would just add to that in terms of that Research Park V, some of the other similar projects under development are behaving the exact same. There is three or four other 100,000 and 200,000 square foot development projects in the Northwest really with our primary competition, that's expected to deliver a little bit ahead of us.

And we've seen a vast majority of those now become a 100% leased with recent announcements as they were nearing completion here in the next quarter..

And are you seeing hiccups in Austin, just whether it's tech concerns with LinkedIn's earnings or oil that might slowdown the leasing market?.

No, we really haven't. We certainly track that, but I would tell you that Austin seems to be totally disconnected to the oil discussions. I mean, Austin is really technology, and we follow that sector very closely and read the same things everyone else does, but we haven't seen any slowdown in Austin, any hiccups.

As a matter of fact, we've seen Apple recently bought a building right near Research Park to expand their presence to the campus they're already building. You're just continuing to see positive things.

We've actually looked a little closer to see if there might be a link with oil to Dallas just because of some of the services firms in the Dallas that serves the oil industry, lawyers, accountants and things. And once again, we have not seen anything there.

As Colin described in his comments, Dallas has just become a much more diversified services based economy, but we're watching it closely and that's why we're being as disciplined as we are on Victory and we'll continue to be so..

The next question is from Michael Lewis with SunTrust..

My first question is for Gregg about the G&A guidance. So your stock price was about $12 at the end of 3Q '14. It was $10.60 at the end of the first quarter and now it's around $9.75.

So can I assume that if the stock price stays around where it is, you might be looking at only about $7 million of G&A through the first half of the year versus $21 million to $23 million full year guidance?.

it's absolute share price and its relative performance to our peers. And so it's a mix of both. So our share price declining by another dollar, since the last time you looked at it.

On an absolute basis, for that portion of our LTI could move it down, but if we're doing better relative to our peers, we'll move up, so it's a little bit more dynamic than just looking at our absolute share price and its movements..

And on guidance, can I assume that the land sale gains for the full year are about a $0.01. I'm not sure, if you said that specifically.

I just want to make sure?.

That's what our wording implies that the $0.01 increase in our guidance is attributable to land gains, both what we recognized in the first quarter and the balance of the year..

And then my last question, I'm not sure if I missed it, but is there anything you could talk about as for as the BofA expiration at the end of 2016, I know they have a lot of options, right, I think they can stay, they can move out, they can actually exercise a buy/sell?.

As I mentioned, I did mentioned in my remarks, certainly we are in active discussions with Bank of America about a renewal there. We would expect that they would renew an overwhelming majority of that space. It is absolutely mission-critical back house use for Bank of America.

So I think we're optimistic and over the next few quarters we should hopefully have something to share..

Michael, I mean generally, it's about 1 million square foot building. There's about 100,000 feet that's subleased to other customers currently. And so I think that the indications are the bank's going to want the balance of the space that they already have, but those discussions obviously are still in process..

Next question is from Jed Reagan with Green Street Advisors..

So it sounds like you guys are specifically seeing rents moving down in your buildings in Houston, but do you sense that landlords in your submarkets are cutting rents to get deals done? And then, I guess, just to drill out on the Exxon space, in particular.

I mean, are you guys really just kind of holding firm on asking rents from where you were say several months ago on that type of space?.

Jed, I would say, across our particular submarkets, I think it's important to really look at who are our competitive owners are.

And if a extraordinarily well capitalized group of owners with folks like MetLife and Invesco, who have made long-term investments and have very low leverage, and I think are seeing similar dynamics to us starting at a very much position of strength with our submarket being call it 98% leased.

So we haven't seen our competition really cutting rents or offering up large concessions either. We do hear about some of that out in the Energy Corridor, which is really kind of more the eye of storm, but within the urban submarkets, we're just not seeing it yet, and this is more anticipatory than realized.

As it relates to the Exxon space, as I mentioned in my remarks, we are in active conversions on several floors, and I would characterize this as continuing to hold rent and feel like we can be successful there..

You talked about ramping up dispositions from new developments.

Can you elaborate on which assets or markets are, sort of, primary candidates there? Is 191 Peach Street back on the radar? And then, I guess, related to that, would you consider selling a stake in a Houston asset or reduced exposure there? And maybe facilitate some price discovery?.

I think on the asset sales side, our strategy is pretty clear. And so if you look at our asset mix on the office side, you certainly have more suburban quality assets that you see, that we now have well-leased up. It would probably be the first thing that we look to harvest as we move forward.

And we've made a lot of progress on several of those assets, and have them in good position in the market pricing is indicated there is a strong demand for that.

Also, on 191 Peach Street, as we said, when we decided not to bring a partner, it was because we really when we saw the leasing demand growing in downtown and the tightness of space, we really raised our pricing expectations. And you've seen that reflected in the lease percentage. And we think that there is more opportunity there to take that further.

So currently, we have no plans to take another look at 191. Relative to your question about venture asset, and doing something like that in Houston, we just don't want it -- I don't want to take a short-term reaction on a long-term asset view and market view that we have of Houston. And we like our position.

We've done some fantastic renewables to solidify, the way the portfolio looks in for the next few years. And we're still big believers in the Houston market. So that would not be a source that we're looking for in this current plan in terms of funding our development pipeline..

And then just last one from me.

On the share repurchases, just wonder, if you've got a specific share price, or let's say, discount net asset value in mind where that strategic option does pencil in your mind and maybe you to start pull the trigger on that?.

Well, Jed, for us the math behind the share repurchase program, it's not theoretical. We know our NAV, we update that what we believe our NAV to be on a monthly basis. We have an actual development pipeline, of which we can look at the relative returns of it.

And taking everything into account, using real world numbers, we are very confident that our development pipeline brought superior return. But we monitor this in real-time, and if the math changes, then we'll adjust. But it's a very disciplined way in which we try to always look at our capital and we'll continue to do so..

And I guess just related to that. You mentioned that Colorado Tower kind of finishing better than other initial underwriting.

Do you have a stabilized yield where that things ends up landing?.

Jed, it will certainly pencil out north of 9%..

The next question is from Dave Rodgers with Baird..

Maybe a combination for Larry and Gregg. With regard to asset sale and capital recycling that you talked about, you talked about being conservative and selling in front of potentially the development. It sounds like you got a number of announcements that could come this year, but the development start sounded like they would be 2016 weighted.

So should we expect any impact this year in terms of asset sales, would you time that with the announcements or more the commencements to the projects? And then second part, a little unrelated, the $500 million number that you gave, does that include Colorado Tower and is that your share of 100%?.

I'll answer the funding question first. I'll let Larry tackle with the other question, second. You can't predict down to the month, exactly when you are going to sell something, but we anticipate selling the assets to fund our development pipeline in advance of or commensurate with the start of development.

So that means that some of them may be in '15, absolutely. There'll be in the late '15. So there will be no meaningful impact, if any at all, on '15 guidance. But yes, you could see some sales that occur in '15 in advance of construction commencing in early '16..

And Dave, on your second question, the $500 million does include Colorado Tower. The number would be about $380 million without it..

And Larry, was that your share or was that the total development share?.

Our share..

Maybe I'll go to Colin, real quick on Austin space. You went through a lot of the leasing numbers quick and there was a lot of good detail in there, Colin, and so we can check later on some of the numbers.

But one of things I thought I remember was that you had some temporary space in Austin that was waiting to move into Colorado Tower when it completed.

If that was right, did you see that move out in relocation, I should say in the first quarter? Do we see that in the second quarter? And how large was that, if I'm remembering right?.

Dave, we previously thought that we would have 22,000 square feet that would vacate during the first quarter and move to Colorado Tower, that get delayed to this quarter. So we would expect to get that space back here this month, which would take the occupancy rate '16, down probably 4.5% or so.

But as I mentioned in my remarks, the pipeline of activity behind that is very strong. And so we would anticipate in the next quarter or two being able to backfill that space pretty quickly..

Last question, Larry, on the development side, do you have a changed appetite for land, given that it seems like acquisitions are going to be kind of done for the cycle for the most part.

Do you want to bring some more land on board, as you start to look at these projects and prepare for the next wave or you're pretty comfortable where you are today?.

Dave, that's a great question. And we've said all along that sort of a 3% to 5% of number in terms of land as percentage of the portfolio would be an appropriate amount. If you take our residential out, which we're continuing to sell as the result show, it would be below that.

So we are and have been looking for some key sites, whether it's this cycle or the next cycle. The multi-family business has made those tough to come by. But we remain very active in looking at them.

And I would anticipate as whenever that market cools a little bit that you would see us in the next two years take two or three land positions that are key in these submarkets we play in..

The next question is from Tom Lesnick with Capital One Securities..

Just a couple of quick housekeeping ones. Fee income net of reimbursements is down a bit from the run rate of 2014, even when accounted for one-time items like the seller note payment in 4Q. I guess I would have expected to see that number tick up a little bit considering the genuine parts development.

Can you shed some light on what you expect for fee income going forward and maybe what's driving the reimbursement line?.

There's a lot of questions in there. I'll try to tackle them one at a time. Inside of the fee and other income line items is the reimbursable expenses, and it's been deducted in the reimburse expense line item. So if you wanted to look at kind of true fees and other income, you would take it net of reimbursed expenses, first question.

Second question, in terms of general direction of fee and other income, it is actually generally trending downward and it will continue to generally trend downward. I mean, we've done a lot of fee work over the years and we're moving away from that trying to kind of improve the quality of our NOI and improve the quality of our FFO.

So yes, we did start Genuine Parts this year, but there were three projects that actually kind of completed that were in the numbers in '14, the College Football Hall of Fame, the Center for Civil and Human Rights and the Cox Headquarters. And so we've kind of replaced three big projects that we're generating fees with one project going forward.

And so the general direction will be down over the next few years. In terms of guidance and what the range is, included in our guidance for 2015 is a range for fee and other income of between $7 million and $8 million for the year, which gives you a run rate of right around $2 million and we reported $2 million for the first quarter.

So we are right in line with our guidance..

My second question just on same-store revenue. Obviously, there was ExxonMobil move-out, which was about 2% of NOI and incurred in February. So it wasn't a full period impact, but sequentially same-store revenue was down about 6% on a GAAP basis and 8% on a cash basis.

So I'm just wondering, is there anything accounting-wise in there that's driving that perhaps tenant expense reimbursements or something like that?.

The other I'd say big component in addition to Exxon is the Direct Energy renewal, did have some free rent associated with it. And on a GAAP basis, the operating expense passed through a portion of that free rent, does not get GAAP-ified effectively. That's kind of the other component of the change..

The next question is from Kyle Mcgrady with Stifel..

I'm here with John Guinee.

How should we value Gateway Village? It looks like the loan is fully amortizing and maturing in the fourth quarter of '16, and we're assuming the BofA lease is expiring about that same time?.

As we look at the future on that deal, as we've described before, the bank has a opportunity if they wanted to buy us out at the end of the lease term and the amortization of the loan. And so that would be one alternative in which we've shown you the math as to what that buyout would look like, which would be very attractive to Cousins.

We developed this asset with Bank of America, and we like the asset and manage all the mission-critical features of it for the bank.

And so as we look to the future and the bank appearing to want to retain occupancy of the vast majority of the space in the building, they have indicated that they would like to continue the venture with us, which we'd be delighted to do. And that venture would then be termed in coordination with the lease extension..

Your next question is from Young Ku with Wells Fargo..

You guys have given some great comments regarding new development projects, prospective projects. I don't think you mentioned Georgia Tech cut down in Atlanta.

Is there an update on that project?.

Yes. We were not successful in getting that project. The Georgia Tech is moving ahead with Fortman properties is our understanding, but we're thrilled to have the project that we do have..

And then just in terms of the Exxon space at Greenway Plaza. You guys talked about being a good activity to potentially backfill that space.

How big is the prospect list that that you are tracking right now? And when you think that you can potentially backfill all of the 215,000 square feet?.

You want a specific date or kind of --.

No, just kind of a rough timeline, Colin, one to two years..

As I mentioned earlier there is some good activity on that space for, call it, several floors that the most advanced discussions are actually within existing customers within Greenway, who have interest in either consolidating or modernizing their space.

The new leasing activity did slow towards the end of 2014 in the first quarter, but we are trying to see some activity again. I don't see a 100,000 square foot necessarily on horizon, but there is good activity with some new names that would be positive absorption that are in that 15,000 to 20,000 square foot range.

That will ultimately take us some quarters to work through..

Gregg, just last question. I know you guys don't provide specific occupancy guidance, but looking slowed for the rest of the year.

Outside of the 70,000 square feet Oracle move out in Q2, should we kind of assume that occupancy should be stepping up kind of on a steady basis for the rest of the year?.

You're referring to the Northpark specifically or you're talking about the entire portfolio?.

The entire portfolio..

Well, I mean that's guidance that we don't typically provide. I hate to be evasive, but we don't provide occupancy guidance..

Outside of the 70,000 square foot Oracle leaves, is there anything else that we should be aware of in terms of potential lease terminations or move outs that could happen?.

Not that we know of it at this time..

Other than Atlassian move out at 816 that I referred to, that the only material move out..

This concludes our question-and-answer session. I would like to turn the conference back over to Larry Gellerstedt for closing comments. End of Q&A.

We appreciate everybody being on the call today and your interest in Cousins. If there is anything that we didn't address, as always, we are available and happy to talk. And we look forward to talking to you next quarter. Thanks..

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