Pam Roper - Senior Vice President and General Counsel Larry Gellerstedt - Chief Executive Officer Colin Connolly - Chief Operating Officer Gregg Adzema - Chief Financial Officer.

Michael Lewis - SunTrust Jamie Feldman - Bank of America/Merrill Lynch Tom Lesnick - Capital One Dave Rogers - Baird John Guinee - Stifel Jed Reagan - Green Street Advisors.

Good day, everyone and welcome to Cousins Properties Incorporated First Quarter 2017 Earnings Conference Call. [Operator Instructions] And please do note that 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’ first quarter earnings conference call. With me today are Larry Gellerstedt, our Chief Executive Officer; Colin Connolly, our Chief Operating Officer; and Gregg Adzema, our Chief Financial Officer.

The press release and supplemental package were made available on the Investor Relations page of our website yesterday afternoon as well as furnished on Form 8-K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements.

Please be aware that certain matters discussed today may constitute forward-looking statements within the meaning of federal securities laws and actual results may differ materially from these statements due to a variety of risks and uncertainties and other factors.

The company does not undertake any duty to update any forward-looking statements whether as a result of new information, future events or otherwise. The full declaration regarding forward-looking statements is available in the press release issued yesterday and a detailed discussion of some potential risks is contained in our filings with the SEC.

With that, I will turn the call over to Larry Gellerstedt..

Thanks, Pam. Good morning, everyone and thanks for joining us today. Cousins is off to a fantastic start in 2017. As I sit here today, I have never been more optimistic about the long-term opportunity for the company. Many factors support this belief, starting with the dynamic market fundamentals we are experiencing in the Sunbelt.

Across our 6 markets, we continue to see steady demand for urban Class A office. Rental rates and occupancy levels also continue to rise and the limited new supply delivered and underway is being absorbed at a healthy pace.

These advantageous market conditions are even more attractive when you drill down to the select urban submarkets we target, where approximately 83% of our assets are located. In these leading submarkets, we have assembled an unmatched collection of Class A office assets, which command premium rents as compared to the broader market.

For example, in Buckhead, Atlanta, where we have a 20% market share, asking rents for our portfolio are 32% higher than the Class A average. This compelling characteristic exist in other keys submarkets as well. In Tempe, where we have a 28% market share, we command a 34% premium.

And then Austin CBD, where we have a 24% market share, our assets on average command a 28% premium. Cousins is well positioned with one of the industry’s best balance sheets through a successful equity raise and debt placement, we have quickly returned the leverage to 4.5x net debt-to-EBITDA.

This disciplined approach to balance sheet management put Cousins in an excellent position last year to pursue the opportunity with Parkway, and it is my belief that it will once again prove valuable. Next, we have an extraordinary team that continues to deliver solid results quarter-after-quarter.

Specifically, during the first quarter, we saw a remarkable execution across all facets of our business. We delivered FFO of $0.16 per share or $0.17 per share before transaction costs. Both our same-property portfolio and the legacy Parkway portfolios performed exceptionally well.

On the leasing front, we signed over 570,000 square feet of new and renewal leases, including key wins with WestRock at Northpark in Atlanta, and Amgen at Corporate Center in Tampa. As a result of the team’s hard work and commitment, we have quickly repositioned the Cousins portfolio post merger/spin.

Today, we are 94% leased with 4 out of our 6 markets 95% leased or greater. We have also made great progress to right-size our market concentrations. Colin will give more detail on these positions, but I am pleased to announce that we are under contract to sell both Emory Point and American Cancer Society Center.

Once complete, we project Atlanta will represent approximately 36% of our NOI, down from 47% we projected when we announced the merger/spin.

In addition to our portfolio being stable at 94% leased, we also have a strong and diverse customer base, full of blue chip names like Bank of America, Wells Fargo, Amazon, with no single industry concentrator – concentration greater than 20% of our total annual contractual rent.

Moreover, our portfolio has 6.5 years of weighted average lease term and near-term lease term maturities are modest. Turning back to our development pipeline, we are poised to deliver continued growth with limited risk. Just this week, we further de-risked the pipeline when we executed a key lease at 8000 Avalon for 55,000 square feet.

8000 Avalon is now 65% leased with 3 additional executed LOIs, which would take us over 90% leased. Including our new project, 120 West Trinity, we now have $529 million of development well underway. This includes approximately 1.4 million square feet of office of which 92% is leased, up from 84% at year end 2016.

The pipeline has begun to deliver with 8000 Avalon opening this month. Future deliveries are scheduled during the remainder of 2017 through the first quarter of 2019. You can gather for what I outlined that Cousins is exceptionally positioned for strong execution in 2017 and beyond.

Today, we have an immediate opportunity to grow NAV with the addition of our maturing development pipeline, while our industry leading balance sheet and prudent investment philosophy set the company for long-term stability. We are mindful, however, that the current cycle has run long.

Although we remain optimistic and continue to take advantage of today’s tailwinds, we constantly monitor macroeconomic trends in our markets and the broader economy. Regardless, I believe Cousins is phenomenally positioned.

We will continue to provide first class service to our customers, execute our development pipeline and look for strategically located land to accommodate growth for our existing customer base as well as plan for development at the front end of the next cycle.

We also have the balance sheet capacity to grow through acquisition, if and when asset pricing becomes attractive. With that, I’ll turn it over to Colin..

Emory Point, which is our mixed use project located across Emory University and American Cancer Society Center, which is a hybrid office and data center asset in the CBD.

While both of these transactions have complexity with multiple product types and ground leases, we have been very pleased with investor interest from well capitalized institutional buyers. We are currently scheduled to close both transactions, subject to confirmatory due diligence in the second quarter.

Lastly, we expanded our development pipeline this quarter by starting 120 West Trinity, a mixed use project located in the Decatur, submarket market of Atlanta.

Cousins initially contracted to buy this land in 2013 and then subsequently contributed to a joint venture in 2016 with AMLI Residential, as multi-family emerged as the highest and best use for the site.

The approximately $85 million development will include 330 apartment units, 19,000 square feet of retail and 33,000 square feet of office and is slated to open in the first quarter of 2019. Cousins will contribute 20% of the capital to the project and AMLI will lead the day-to-day development activities.

We have great confidence in this project given the uniqueness of the site located adjacent to a MARTA station and the supply constraints in the Decatur submarket as a whole. With that, I will turn the call over to Gregg..

Thanks Colin and good morning everyone. We are happy to report our first full quarter post merger and spin results. We worked extremely hard before, during and after the Parkway transactions to tie up all loose ends so that we could begin 2017 clean.

With the goal of presenting straightforward numbers that would allow the underlying strength of our properties and our markets to shine through. I believe we have been successful. Our first quarter FFO was relatively clear-cut, with only $1.9 million of trailing transaction costs running through the numbers.

This number was right in the middle of the guidance we provided on this item and although some small amounts will continue to trickle through, I believe these transaction costs are largely behind us. Unrelated to the merger and spin transactions, we did see an unusually large amount of termination fees during the first quarter.

In total, we have recognized $6.2 million in termination fees, primarily from four different customers over the past three months. In addition to the obvious immediate economic benefits of these fees, I am happy to report that new leases have already been executed to backfill all four of those spaces in our portfolio.

As a quick reminder, termination fees are not included on our property level NOI. We include them in the other income line item on our income statement. Moving on to the office fundamentals in our markets, year-over-year same-property NOI was up 5.4% on a cash basis during the first quarter, driven by top line revenue growth of 5.2%.

That being said, at roughly one-third of total cash NOI, we have a smaller than normal same-property pool due to the Parkway transactions as well as several recent large legacy Cousins property sales.

This will self correct in 2018, when we add two legacy customers’ assets as well as all, but one of the newly acquired Parkway assets to our same-property.

In the meantime, although we didn’t own the Parkway assets in last year’s first quarter, we have included a table on Page 16 of our financial supplement that provides the year-over-year same-property performance of these assets on a cash basis. This table includes 17 Parkway assets representing 89% of the total we acquired.

As expected, the NOI growth within this pool of assets was very strong. NOI on a cash basis was up 11.6% over last year driven by revenue growth of 9%. The gains were largely driven by increased occupancy as well as the burn off of free rent at several properties.

Before discussing our capital market’s activity and updated guidance, I wanted to point out a couple of items on that you will encounter when reviewing our financial statements this quarter. First, we classified our American Cancer Society Center property as held for sale on our balance sheet, as it met the held for sale requirements.

Second, with the completion of our purchase of American Airlines’ 25.4% interest in the 111 West Rio building, formerly known as the U.S. Airways building, which was done in late February, we now own 100% of this asset and we are consolidating its operations into our financial statements.

Moving on to our capital markets activity, we had a very productive start for the year. During the first quarter, we completed an offering of 63.6 million shares of common equity, 25 million of these shares were primary stock, and 38.6 million shares were secondary stock held by TPG.

TPG assumed this large position in us through our merger with Parkway. In total, we have raised approximately $541 million of proceeds from this offering, with Cousins receiving $213 million and TPG receiving $328 million. With this offering, TPG has now completely exited their position in Cousins and their representative has resigned from our Board.

As we said in many occasions, one of our strategic objectives for 2017 was to return our leverage to the pre-Parkway level we had on for several years for approximately 4.5x net debt to EBITDA. Our 2017 budget included approximately $200 million of future asset sales.

Beyond the Emory Point and American Cancer Society Center sales we have discussed with the specific purpose of reducing our leverage. Proceeds from our equity issuance essentially replaced those asset sales and we have adjusted our 2017 asset sales guidance down accordingly. We won’t worry about selling those additional assets later in ‘17.

It is always preferable to eliminate execution risk whenever possible, which is exactly what we did. As a result of this issuance, our net debt to EBITDA is back to 4.5x and we intend to keep it in that range through 2017 and beyond. Another 2017 goal was to successfully retire or refinance the $560 million of debt that matures this year.

$200 million of this total is associated with the two legacy Cousins assets, Emory Point and the American Cancer Society Center. The net debt will be retired upon the sale of those assets. The remaining $360 million is associated with mortgages on the legacy Parkway assets.

Our objective from the earliest phase of underwriting the Parkway merger has been to refinance those mortgages with unsecured debt, and I’m pleased to announce this has been successfully completed. Last week, we closed our inaugural private placement transaction for $350 million in senior unsecured notes.

These new notes are divided into two tranches to fill specific holes in our debt maturities schedule. Tranche A is an 8-year, $250 million note at a 3.91% fixed rate. We will draw on this tranche on July 6. Tranche B is a 10-year, $100 million note at a 4.09% fixed rate, which was drawn in closing on April 19.

The weighted average interest rate on these notes is 3.96%, which is 188 basis points lower than the weighted average interest rate on the mortgages they replace. Earlier this month, we paid off approximately half of those legacy Parkway mortgages and we will pay off the other half over the next couple of months.

Once these payoffs are complete, we will have no debt in excess of $25 million coming due other than our unsecured credit facility until December 2021. That’s over 4.5 years from now. The balance sheet is locked down both in terms of leverage and maturities. I will wrap up by providing some details in our updated guidance.

I will start with the guidance itself and then I will move on to discuss each of the assumptions that we have changed from the original guidance we provided in early January. Overall, we have raised and narrowed our FFO guidance to a range of $0.58 per share to $0.63 per share from the previous range of $0.56 to $0.62 per share.

We’ve also begun providing a reconciliation of FFO to net income in the body of the earnings release. The increase in our FFO guidance is primarily driven by the $6 million in termination fees we recognized during the first quarter.

As a result of these fees, we’ve raised our fee and other income assumption, which includes termination fees to between $15 million and $17 million from a previous range of $9 million to $11 million. No additional termination fees from the remainder of the year are included in this new range.

In addition, we have reduced our disposition assumption from between $450 million and $550 million to now between $300 million and $325 million before transaction costs and debt payments.

As I said earlier, our first quarter common equity issuance replaced approximately $200 million in planned asset sales and it’s the driving factor behind this lower assumption. As Colin discussed, we commence construction on our 120 West Trinity project during the first quarter, so that’s now included in our development assumptions.

And finally, we increased our straight line to rent assumption reflecting increased leasing activity and the reduction in asset sales. All of the other assumptions behind our FFO guidance remain unchanged. I would like to close this morning by inviting everyone to our Atlanta Property Tour on September 27 to 28.

We have circled the dates and we will provide more details as we get closer. It will be a terrific opportunity to meet with our senior management team and to experience firsthand the quality of our assets and the benefits of our submarket concentrations. With that, I will turn the call back over to the operator..

Thank you. [Operator Instructions] And it looks like the first questioner today is Michael Lewis with SunTrust. Please go ahead with your question..

Good morning. Thank you.

As far as the lease termination fees, I was hoping you could give a little more detail on those kind of where they are, the term remaining and maybe re-leasing spreads and capital you have to put in?.

Well, I will tell you what I’ll do Mike. I will provide you – there are in total 8 termination fees but only 4 that comprised about 95% of total. So I will give you some quick color on those four. So, the largest was a termination fee down at Hayden Ferry 3, company called Zenefits.

They vacated approximately 81,000 square feet at Hayden Ferry 3 and there is really no downtime, because we have re-leased that space and the new tenants are moving in very quickly. Second largest termination fee we had during the quarter was up at Northpark, here in Atlanta, a tenant called Axial.

They vacated about 34,000 square feet, and they will leave on June 30 of this year. So we recognized the fee associated that that will have some downtime. That space, that was a proactive move on our part, to work with Axial, they weren’t occupying the space and we needed to free that space up for WestRock.

So, WestRock is currently scheduled to move in early ‘18. So that space has been re-leased, but we will have some downtime in the second half of the year from that space in Northpark and Axial. The third largest component of it was the American Airlines’ termination in Tempe.

We recognized 75% of that termination fee in the fourth quarter, because we own 75% of the building when we bought the remaining 25% of the building. We recognized the remaining 25% of the termination fee. There will be some downtime there. There has been some downtime there. But the new tenant, ADP, is in. They started paying rent as of April 1.

So, the downtime that we experienced was in the first quarter. You can’t see that run through our same-property numbers, because that building was not in either same-property pool, neither ours, nor in Parkways. And then finally, the smallest component of the top four was in Charlotte at the NASCAR Building with Chiquita.

Chiquita executed the termination agreement and vacated about 70,000 square feet of space. We assumed a good portion of that with the Cardinal Innovations Healthcare lease. There is no downtime there, so you won’t see an impact on NOI going forward. I hope that was helpful..

Yes, it’s good detail. Thank you. For my second question, Colin gave some detail on the markets. I wanted to dig a little deeper into Atlanta, which obviously is still your largest market and kind of whatever color you could provide there as far as companies still moving from outside Atlanta.

In other words, real net new demand there and how you see that market trending? And then related to that kind of your comfort in starting the 120 West Trinity mixed use project?.

Mike, I will start off and then Colin, if you want to add some things..

Sure..

Atlanta, between the interstate bridge collapsing and Coca-Cola announcing some job reductions has gotten some attention this quarter.

But there are bumpy quarters and I don’t think the first quarter is anything, but just a bump in terms of statistics and large corporate moves, whether it’s Coke’s move out of the Northwest market or whether it’s State Farm’s move in the Central Perimeter. So, we see the pipeline continuing to be strong. The job growth is strong.

I think the best testimony to that, just as an example, is what we have done at 8000 Avalon. That project is in a mixed use development with hotels and retail and apartments, all of which are getting Buckhead rates even though it’s out on Alpharetta.

But we basically, in that project, are at $8 to $10 a square foot over anything else in that submarket of North Fulton. And as we said in the speech, we’ve got line of sight to be in over 90%. And that demand is almost exclusively large corporate demands.

We announced the Microsoft and as we’re able to announce the other customers, you’ll see names of that type of caliber. So the implode at Atlanta – in terms of pipeline of prospects, remains good and you haven’t seen any new development start or appear to be on the horizon other than the ones that we’ve talked about before.

So we still feel good in Atlanta, we’re seeing that strengthen our re-leasing and then the rollups that Colin talked about..

Yes, I would just add that across the market, again, we feel very confident. As Larry mentioned, as you look at the market statistics as a whole, it would show little bit of a bump, as Larry described, I think as you drill down into really the details of the quarter, it was a few specific things that have been well known and well telegraphed.

As an example, Coca-Cola moved out of the 350,000 square footage block of space that they had, up in the far Northwest submarket really not competitive to anything that we did and consolidated that back into their urban campus, which I think is consistent with our strategy.

So putting that move, taking that move out, the net absorption for the quarter actually would have been positive and as you drill down into Buckhead, Midtown, the Central Perimeter again positive net absorption in those submarkets for the quarter. And we are seeing very good activity.

There are some several very large RFPs that are out there, multiple hundreds of thousands of square feet that are folks from the outside coming in. And so we continue to see the high quality of life affordability, Georgia Tech, etcetera that continue to be very strong draws for corporate America.

I think that the second part of your question as it relates to 120 West Trinity, that’s a piece of land, as I mentioned we have had under contract since 2013, it’s a fantastic piece of property.

As we went through our analysis and ultimately decided that the lead for the project would really be multifamily and like we did with Emory Point and Carolina Square, we brought in what we think is one of the best multifamily developers out there, being AMLI.

We ultimately decided to participate in a more limited role at 20% because we think the site is very special, next to MARTA in a particular submarket that’s got high barriers. So we think it’s ultimately opportunity for us to deliver value creation for our shareholders, partnered with a best in class developer..

Thank you..

And our next questioner today is Jamie Feldman with Bank of America/Merrill Lynch. Please go ahead with your question..

Great. Thank you.

So it sounds like you will be, I think you said 36% Atlanta, post the sales, what are your latest thoughts on other markets you might want to exit or ways that that might change going forward that composition?.

Good morning Jamie, the company strategy remains the same, which is we want to within our existing markets, we want to fully maximize our growth opportunities with assets of submarkets that meet our criteria.

And obviously, we want to also constantly be on the look for other submarkets and other cities on a longer term basis that have urban submarkets that meet our criteria and that we think that we can establish a platform consistent with our values. So if we look, the markets that we are in are pretty strong. Orlando is slow.

We have got some important renewal leasing to do in Orlando. And the downtown market has tightened and although our assets have not benefited tremendously from that tightening. We think that they will from what we are seeing in the pipeline. So we feel like there is a lot of opportunity in our existing markets.

We certainly are doing work always to look at other markets where we might see opportunities as well. One of the things that you also heard in the speech was land. And we do want to, in these urban submarkets look more landholding.

At this time in the cycle, it might be for build-to-suit or it might be for first building or second building out of the ground in the next cycle. So you have seen our land portfolio that was, when we started this strategy in 2012, was largely comprised of residential land pieces and industrial land pieces and suburban land pieces.

It’s now well under 1%. And I hope we are successful in the next 12 months to 24 months, finding some opportunities for land in some of these key submarkets. And so you may see us, I would hope you see us spend a little bit of capital on that. We sort of said 2% or 3% is where we think the right spot is, in terms of landholdings.

So maybe we are not going to rush it, we got to find the right tracks in the right submarkets, but maybe a portfolio of concentration of $100 million to $150 million, something like that would be a longer term thing within those characteristics..

Okay.

And then given the exposure to Atlanta still, I mean is that, even if you found opportunities, are you kind of hesitant to grow more there or if you found the right project in the right site, you would move forward even in Atlanta?.

Jamie, I think the thing that we have a feel good about Atlanta and our other markets, is that we find a good opportunity, we have always got the opportunity to upgrade our portfolio as a whole, it doesn’t have to be net add. We may look at a return opportunity on a long-term basis and decide that we want to recycle capital into that.

And you would, could pay for that by upgrading your portfolio perhaps on one of your less strong assets in there. I think it’s not clear cut with what’s going on in the economy these days or exactly where we are, we are certainly aren’t smart enough at Cousins to guess.

But anything we would do at this point in the cycle of any significance from an office standpoint would have a significant amount of pre-leasing in it before you see us go..

Okay. And then just finally, on Buckhead specifically, I mean it looks like you had a little bit of occupancy loss there in a couple of different assets, I know we have got a development project going on there.

Just what’s the bigger picture on Buckhead right now in terms of your ability to push rents, win tenants and maybe just more color on that submarket specifically?.

Yes. We continue to feel very good about Buckhead. As you noted, there were a couple of small moves within our portfolio, probably the largest was at 3344 Peachtree, where Spanx vacated two floors and we had telegraphed that. That was actually announced prior to the Parkway merger.

We have backfilled one of those floors, Cousins will be relocating to 3344 in June. So we have backfilled roughly half of that obviously, internal. We have got very good activity on the other floor there, the 17th floor. It’s one of the best floors you could find in Buckhead. So we are very optimistic about our opportunity there.

As you mentioned, there is a development project coming out of the ground today at Three Alliance. That building continues to gain a little bit of traction. It’s from our understanding now roughly 50% pre-leased, but we think actually committed with LIs it could be upwards of 75%.

So again, as you look across the Atlanta metro and the overall statistics for the market, it would tell you pre-leasing is in high-50s to 60% range. We think that it’s actually, a little bit higher than that. We referenced our activity at 8000 Avalon.

We think we are potentially north of 90% committed and so with Three Alliance again continuing to fill up, we think the supply demand fundamentals in Buckhead will be very attractive for the next few years. There is really not another project that we could see actually kicking off and breaking ground over the next 6 months to 12 months..

Okay, great. Thank you..

Our next questioner today is going to be Tom Lesnick with Capital One. Please go ahead with your question..

Thanks guys. Good morning.

I guess first congratulations on the start of the Decatur project, it’s obviously been in predevelopment for a while now, I just wondered if you could offer some context and talk a little bit about how the project has evolved to the current plan you have now?.

Tom, it’s Larry. We had done in previous lots some development work in Decatur. It’s a wonderful small tight knit community and actually, the city and the Mayor had asked us to come in 2013 to help them secure a piece of property in downtown Decatur that they were concerned.

It might end up in the wrong hands and end up in the wrong kind of development. So we did it at a time that the land price was extraordinarily attractive without any immediate determination on what the use would be. And that’s really worked in our favor and then our contribution had a significant gain.

And it just from where we had bought the land or tied the land after where we closed on it, we were able to contribute into the venture. But what we had to do, one of the reasons people liked Decatur so much is it’s a very demanding, little community in terms of zoning and permitting and use.

And so we looked at demand and then a variety of uses and we came to this current mix, through that negotiation and once we saw it was primarily retail, although I think the office component of it will be – I mean, multi-family, excuse me, I think the office component will be a fabulous little product for the 30,000 feet.

Just like we have done at Emory Point and Carolina Square, that’s when we decided to bring a partner in and keep our capital investment relatively small as a percentage of the overall..

That’s helpful. Thank you. And also topically in Atlanta right now, obviously, the I-85 bridge collapse is a pretty big deal.

Do you guys have any anecdotal evidence you can talk about? Some of the leasing conversations you have had, whether there has been a demonstrative shift in the market towards public transit or perhaps towards certain submarkets over others in the last few weeks just in the wake of that incident?.

Tom, excuse me, I think it’s a little hard to tell, but we certainly can see the current response to it. Our MARTA, our rapid rail system is up in ridership over 2x. People are having to get to the rail stations at 5:30 and 6 in the morning in order to get a secure parking spot if they are driving to the facilities.

You’re seeing, whether it’s the uber, express buses, other type things.

I think my guess is that, some percentage of those customers will elect to stay on the transit or the bus system, but it’s also very telling that, as Colin highlighted with WestRock and we can name others that even before the bridge collapsed, there was a significant amount of concern about being able to move around really in any of our metro areas and that really has been a positive for our strategy that we have been doing and trying to make most of our assets near a transit station.

The other thing I would highlight is I think it’s an interesting time when the bridge has collapsed, but it will be back open in the middle of June, but this comes at the heels of last November.

The taxpayers here in the City of Atlanta, by a 75% margin voted a sales tax increase that will generate over $2.5 billion, which will get some federal match to it is totally dedicated to transit with inside the city.

So, I think this will be a relatively short-lived phenomenon in Atlanta, but I think it continues to make people realize that they need to think of alternatives, in particularly the employers have to think about that as they make their decisions for the future..

Got it. That’s helpful. Thanks, guys. Nice quarter..

And our next questioner today is Dave Rogers from Baird. Please go ahead with your questions..

Hey, guys.

Maybe from a high-level perspective, can you talk about what you are seeing in terms of kind of build-to-suit activity and maybe pre-leased demand for developments out there? The discussion level you are having, how that maybe has increased or decreased and what the tenor of those discussions are, especially how the things have settled out from the election?.

I would say demand has been pretty good. And if I went across our different markets, we are certainly seeing, as I mentioned here in Atlanta some large RFPs out for people looking at Atlanta and other Sunbelt markets for large relocations. And so that’s certainly kind of one source of opportunity that we have seen an uptick in activity.

The other component that we continue to see is some potential growth opportunities within our own portfolio, where customers are coming to us and needing some meaningful expansion options and with the portfolio that’s 94% leased, has us, as Larry alluded to, looking at some potential land options and alternatives to accommodate that growth.

So we are seeing it externally and we are seeing it internally and feel pretty pleased with the level of interest across our various markets. There is a couple of specific examples, today as we said, within our Austin portfolio again which is over 95% leased.

We have a few particular customers that have the need to grow and so we are working hard to identify some land opportunities there. As we have said in the past, identifying land in the urban quarters in the submarkets that we choose is difficult. And so we think that will continue to create some constraints.

But when we have got internal demand like that, there is a couple of situations in Tempe as well, with some of the customer base at Hayden Ferry, who need expansion opportunities.

And so again when we do look in and around those markets and think that if we can identify those right-size – could accommodate those growth opportunities, but regardless long-term for the next cycle, those would be terrific holdings to have..

Thanks for the detail, Colin.

And maybe following up on a comment that Larry made earlier about renewals in Orlando and I don’t remember if you talked this in the last call, but can you kind of detail maybe the largest there that you are focused on to try to lock down here in the near-term?.

Yes. In Orlando, we do have a couple of renewals. Again, the overall size of our – the portfolio and the project is not as large as some of the others. So wouldn’t show in our supplement, but we’ve got 1 expiration in Orlando, greater than 50,000 square feet in the near term, that’s TLC Engineering.

It’s just over 50,000 feet, that’s in September of ‘18. The rest of those would fall in the 25 and typically under range..

Okay, that’s helpful. And then maybe last question, Colin, just on Terminus and the activity there and kind of what’s happening with Three Alliance, obviously, some discussion in the market about larger tenants kind of moving into Three Alliance and maybe impacting Terminus.

I don’t know how much you can talk about a deal like a CBRE, but the activity that you’re seeing at Terminus to maybe backfill some of that space? How do you feel about that and what are the opportunities that you see there?.

Yes. As you mentioned, we do believe that CB will be moving – CBRE, who is a roughly 100,000 square-foot customer at Terminus will move to Three Alliance in 2019. Bain will vacate two floors in 2019 as a part of the relocation to Midtown, where you see a large number of the national consulting firms. So, we will have a block of space there.

We are very encouraged though about what our prospects are there. Terminus is a fantastic project. We have just completed some significant upgrades to the amenity base that we think are well received. And we have had really, really good results with a lot of our other customers.

We have signed recent renewables with Morgan Stanley, Wells Fargo, UBS and others. And so ultimately, naturally due to accommodate some of the growth needs within our existing customer base, we did need some space to free up. But ultimately, as we get down to 2019, as I mentioned, we think Three Alliance will be very well leased.

At that point, certainly we think by year end should be stabilized. And so if you look at the supply demand fundamentals kind of forecast that out. The 2019, we think will likely be the only large block of space in an otherwise tight market. So, that’s very encouraging to us..

Alright, great. Thank you..

The next questioner today is going to be John Guinee with Stifel. Please go ahead with your question..

Okay. John Guinee here. Thank you. It seems throughout the country what you are seeing is it’s relatively easy to fill a space and tenants are not quite as price sensitive as people think maybe because they put more people in with an open floor plan.

But at the same time what’s happening is people are spending a lot of money in terms of full TI, full turnkey tenant improvement packages, moving allowances.

When you are leasing up these buildings, for the most part, is it a turnkey TI package for the tenant or the tenant’s contributing hard capital to fill up this A product, which attains A rents?.

John, it’s – excuse me, I have got a cough today, but it’s the latter. We have actually were discussing this at our board meeting this week.

When you are talking to a large corporate user, it’s interesting it used to be the CFO or Director of Real Estate you talk to, now it’s usually the Head of HR as sort of who is in that initial leadership team of what locations are going to be considered.

So you are right, it’s not as price sensitive on the rate and there is certainly to get the build-out environment that they are wanting for their employees. They are having to put a fair amount of capital of their own on top of the landlords concentration..

Second question is will you relocate from 191 Peachtree to Midtown or Buckhead and what’s your thought process there?.

The first answer is yes, we will move. And we plan on moving in the middle of June. We will be moving to 3344 in Buckhead into one of the floors that most recently was occupied by Spanx.

And one of the things, I really look forward to and I hope a lot of folks can make it to the investor tour in September is not only just showing the buildings that we have in Buckhead, but showing some of the operational efficiencies and improvements we can make when we have concentrations in markets like that.

And it’s the biggest concentration we have today. And customers is in Buckhead, I think the best place to be is in there amongst them, so that you see them on a daily basis and get to know them, so we look forward to that move in the middle of June..

Then the third question is Decatur, West Trinity, I have a wonderful aunt who lives in Decatur and it seems to me that if you really like a deal, you do it 70%, 80%, 100% ownership interest and if you are pretty lukewarm you do it 20 or so, you are really only going to have a $17 million investment in this deal, why bother for only 20% of the economics?.

Absolutely, the right question to ask and we had that debate amongst ourselves. I will tell you that, a couple of things weighed into the decision. But primarily it is that, there is multi-family. There is a lot of discussion about where multi-family is in the sector. We are comforted by someone of AMLI’s stature.

I am feeling very confident in terms of how this site will compete within the supply constrained Decatur market, but we are just not multi-family people. And so, but we also – this was very much a relationship transaction in terms of the city reaching out to just Cousins to help them in 2013 to secure a piece of land.

Our team here led all the negotiations with the city in terms of the zoning. And so we felt like A, we like the product, particularly this is going to be sort of some loft funky office space that we look forward to leasing up.

But we just don’t like, we also had a commitment to stay in the deal because of the relationship with Decatur and as you say, it’s a small investment, but it’s a very high quality investment and will keep a relationship with the City of Decatur..

Great. Thank you..

You bet..

And our next questioner today is going to be Jed Reagan with Green Street Advisors. Please go ahead with your question..

Good morning guys.

Just following-up on John’s first question there, I mean I guess are you seeing upward pressure on concessions in your markets at this point?.

No, we are not. We also, with the tightness of the market, we haven’t seen the TI component of concessions back off much, so it’s – I think what John is talking about has led to that remaining a key component of the transaction consideration with the customer. But no, we have not seen that pressure..

Jed, I would just add that we have seen pressure on overall TI cost going up. But we haven’t, we ultimately haven’t seen pressure in terms of our contribution having to go up.

But I think it’s – while some of our markets are very, very tight, I think the increasing pressure on costs has prevented us from pushing those down further as the customers are just having to absorb more..

Then maybe as a percent of first year rents might be just kind of steady, would that be fair to say?.

That’s right..

Okay.

Maybe just kind of a housekeeping item for Gregg, I think for the four move outs, you mentioned resulting in the term fees, can you provide the aggregate impact on ‘17 FFO associated with just the downtime on those leases?.

Jed, we really didn’t adjust our same-property forecast nor our FFO forecast for cash flow. The adjustment to our guidance as you know was driven by the term fees.

That’s because the little downtime that we have and it’s really that one, the one impact that it will have is material to the second half of the year for the Axial lease up in Northpark has been made up by positives at other properties.

So overall, we don’t see an impact on our NOI performance nor FFO performance as a result of these term fees reducing NOI in the future..

Okay, I appreciate that.

Can you guys discuss the pricing you got at American Cancer and Emory Point sales?.

We can’t right now Jed, because we are still – we haven’t closed the contracts yet. But you probably noticed that we took a little longer on Emory from when we told you all we were looking at selling it in terms of time.

And that was really because as the interest, which was very strong, showed there were people that wanted to condominiumize it, buy the apartments, somebody else buy the retail. Buy half the apartments and somebody else buy the other half and look at them.

And so there was a fair amount of complexity in terms of the buyer profile that ended up looking at it. I can’t tell you that in Emory Point’s case, where we ended up was one buyer that’s buying the whole project.

And I am hopeful you will be able to see some clarity on the Emory Point in the next two week to three weeks and Colin, as Colin said by June, we can share the clarity on ACSC pricing..

Okay, great.

And just in terms of the dispositions that you opted not to execute this year, should we still think that those buildings as non-core and perhaps potential sales candidates for next year?.

That was our – absolutely our strategy is we say we force shrank all of our assets from top to bottom and these are assets that we targeted for one, where they were ranked with us. And B, assets that are less sensitive to the cycle in terms of how they price when you sell because of either long-term leases or other components.

So yes, we consider that and if that’s the best source of capital for something down the road, we see powerful to do then that would be a source of capital..

Okay, I appreciate that.

And maybe just last one for me, related to that, are you guys seeing any changes overall in the cap rate environment or sort of level of investor demand from – in your markets, thinking especially about it in kind of overseas buyers, have you seen that coming at all?.

Yes. Jed, I would tell you that we have seen cap rates particularly in our urban submarkets hold pretty steady. We see the overall buyer pools shrinking a little bit, but pricing holding. And we are seeing some new foreign capital into our markets, which I think has helped to support pricing.

As you think about the last couple of dispositions that we have announced here at 191 Peachtree, ultimately, the buyer, the Oaktree was Asian capital. So we sold the form in Buckhead, earlier this year at the end of ‘16 that was a German buyer. And so we are seeing that foreign capital move to markets like Atlanta and Austin, Charlotte, etcetera..

Great. Thanks..

This will conclude the question-and-answer session. I would now like to turn the conference back over to Larry Gellerstedt for any closing remarks..

Well, as always, if you all have any further questions, don’t hesitate to call any of us. We would be happy to walk through the information with you and we greatly appreciate your interest in joining us today..

The conference is now concluded. Thank you all for attending today’s presentation. And you may now disconnect your lines..