Cousins Properties Incorporated

Good morning and welcome to the Cousins Properties third quarter 2021 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Pamela Roper, General Counsel. Please go ahead.

Thank you. Good morning, and welcome to Cousins Properties' third quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer, Richard Hickson, our Executive Vice President of Operations, and Greg Adzima, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon, as well as furnished on Form 8K. 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. 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, cousins.com. 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, including the risk factors set forth in our annual report on Form 10-K and our other SEC filings. In particular, there are significant risks and uncertainties related to the severity and duration of the COVID-19 pandemic and the timing and strength of the recovery therefrom. The company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events, or otherwise. The full declaration regarding forward-looking statements is available in the supplemental package posted yesterday, and a detailed discussion of some potential risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Colley.

Thank you, Pam, and good morning, everyone. We began this third quarter with the expectation that our customers would begin bringing their teams back to the office post-Labor Day. Since then, the Delta variant hit the Sunbelt hard and created delays. However, as cases have now significantly declined, we're increasingly hearing from our customers that they plan to return toward the end of this year or early next year. We are encouraged. Our team delivered strong financial results during the third quarter. Here are a few highlights. On the earnings front, the team delivered 69 cents per share in FFO. Same property NOI on a cash basis increased 3.6%. And importantly, we leased over 597,000 square feet, including over 500,000 square feet of new and expansion leases with 7.7 years of weighted average lease term and a net effective rent of $24.06 per square foot, which is higher than our 2019 average. Second-generation cash rents increased 23.1%. our strongest roll-up since 2015. And we ended the quarter with net debt to EBITDA of 4.54 times. While the macro narrative around office remains ambiguous, our leasing performance highlights three office sector trends that are becoming quite clear. First, innovative and growing companies recognize that they are stronger in person, at least most of the time. In this persistent, remote environment, employee attrition is at an all-time high. Contrary to many of the media headlines, forward-thinking business leaders are connecting the dots between the great resignation and eroding corporate cultures. Thus, companies are firming up plans for their return strategy and making long-term real estate decisions that they were not prepared to make just a few quarters ago. Second, The migration of the Sun Belt has accelerated. Cisco, Visa, ARK Invest, and Tesla are just the latest examples. There are more in the pipeline. The rapid urbanization of places like downtown Austin, midtown Atlanta, and the south end of Charlotte have changed the equation for companies previously located in more dense, larger cities in the northeast and west coast. Sunbelt cities now offer a dynamic urban experience in addition to an attractive climate and a lower cost of living and doing business. It's the best of both worlds. Lastly, the flight to quality is intensifying. Earlier this week, I toured our recently completed Norfolk Southern Headquarters project with a local business leader. His feedback? Much better than working at home, he said. It was simple and spot on. The development includes innovative collaboration space, neighborhoods for private working, state-of-the-art technology, and countless amenities, all in the heart of Midtown Atlanta. Our customers recognize that interesting and inspiring space will be a competitive advantage in retaining and recruiting talent, as well as rebuilding culture and connectivity. At Cousins, we have a unique and compelling strategy that positions us at the intersection of these trends. As the market moves faster, we are responding. Most recently, we acquired Heights Union, a 294,000 square foot office property in Tampa, for a gross price of $144.8 million. The Heights neighborhood has emerged as one of Tampa's signature gathering spots providing a unique live, work, play experience. The two six-story buildings, which were completed in 2020, are highly amenitized, authentic, and efficient. Including Heights Union, we have invested approximately $1.1 billion in new acquisitions and development since the start of the COVID-19 pandemic. We are excited about the rail yard in Charlotte, 725 Ponce in Atlanta, Domain 9 in Austin, and Newhoff in Nashville. They are representative of the office of the future and are all differentiated product in their respective markets. During the same period, we have sold approximately 1 billion of non-core properties, including Hearst Tower in One South in Charlotte and Burnett Plaza in Fort Worth. The net results of these strategic transactions are value-add returns on a blended basis and a trophy portfolio positioned to capture outsized customer demand in a reduced CapEx profile. As I mentioned earlier, we have completed the Norfolk Southern Headquarters project. The development was a highly profitable development for Cousins and a great outcome for our customer, a true win-win. Nonetheless, We are excited to transition to the other side of this unconventional transaction. The declining development fee stream has created challenging year-over-year earnings comps, and the 370,000 square foot lease expiration on December 31st at 1200 Peachtree created uncertainty. Looking forward to 2022 and beyond, our story simplifies. And we are already making great early progress on our releasing efforts at 1200 Peachtree, as we are approximately 40% committed, including LOIs. Richard will touch on this more in a moment. In closing, Cousins is well positioned for the future. We have assembled a trophy portfolio in fast-growing Sunbelt markets. We have organic growth opportunities within the portfolio. as we drive occupancy gains and rental rate increases. We have external growth opportunities in our $663 million development pipeline. In addition, we have a well-located land bank that can support another $2.6 billion in development, including over 3 million square feet of trophy office and over 1,500 multifamily units. Importantly, we have a rock-solid balance sheet that provides financial flexibility and a highly capable team to execute on the strategy. Before turning the call over to Richard, I want to thank our entire dedicated Cousins team who work hard every day to bring outstanding service to our customers and their talents to our company. They are the cornerstone of the company's success. Thank you. Turn it over to Richard.