Cousins Properties Incorporated

Good day, and welcome to the Cousins Properties first quarter conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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' first 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 Azima, 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. 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 Connelly.

Thank you, Pam, and good morning, everyone. Before addressing the longer-term outlook, I want to provide a few financial highlights. As we have discussed in the past, 2022 is a transitional year for Cousins, and I'm pleased to report that we are off to a strong start. On the earnings front, the team delivered 67 cents per share in FFO. In addition, we leased 324,000 square feet with a 15% increase in second-generation cash rents. Turning to the outlook, I will share a few facts. The Sunbelt represents only 26% of the national office inventory and yet accounted for 58% of new-to-market leasing in 2021. Over the past two quarters, buildings built since 2015 accounted for 62 million square feet of national net absorption. On the flip side, buildings built before 2000 accounted for negative net absorption of over 100 million square feet. The tech industry has added 372,000 office-using jobs nationally since February 2020, leading all other industry sectors. ULI's top US markets to watch in 2022 are Nashville, the Research Triangle, Phoenix, Austin, Tampa, Charlotte, Dallas, and Atlanta. As you know, Cousins is invested in each of these cities. AFIRE's 2022 Investor Survey ranks Atlanta and Austin as number one and number two respectively for top global cities for investment. To emphasize, this is not a U.S. ranking. This is a global ranking by very sophisticated investors Collectively, these two markets account for 68% of our portfolio NOI. Why do I share this data? Because it highlights the trends driving the office market. Office demand is migrating to the Sun Belt in a significant way. It's focused on the highest quality and most interesting product and is largely being driven by the tech sector. These trends make logical sense. Select cities in the Sunbelt have meaningfully urbanized over the last decade. These markets now offer an exciting alternative to gateway cities at a much lower cost. Not surprising, employers are following the talent. The COVID-19 work-from-home era has intensified the flight to quality. Culture, collaboration, mentorship, relationships, and trust all suffer in a permanent remote setting. To attract their teams to come together in person, more companies are shifting to exciting space in highly dynamic locations. The goal is to offer a more attractive daily experience than the convenience of the dining room table. Simply put, a growing percentage of office users are focused on a narrowing percentage of high-quality inventory. Demand and rents are rising for the best properties in Midtown Atlanta, Buckhead Atlanta, Downtown Austin, the Domain, Tempe, the South End of Charlotte, the Heights in Tampa, to name just a few. Conversely, commodity or suburban product dressed up with a pickleball court just won't cut it with Amazon, Google, or Microsoft. Cousins is poised to capitalize on these tailwinds. We have been proactively assembling our Sunbelt Trophy Portfolio for over a decade. In the last two years alone, we have sold $1.2 billion of less relevant properties and reinvested the proceeds into the development and acquisition of 300 Colorado in Domain 9 in Austin, Newhoff in Nashville, 725 Ponce in Atlanta, Heights Union in Tampa, and the rail yard in Charlotte. These are all highly differentiated and amenitize properties. Others are now recognizing the powerful Sunbelt Trophy trends and trying to replicate our successful path. However, that is easier said than done, and it will require lots of buys and sells and noise. At Cousins, the heavy lifting to position our portfolio for the future is largely behind us. For this reason, I have never been more excited about the power of our platform to drive earnings and increase shareholder value. Let me share some specifics. Our 19 million square foot portfolio is the highest quality and most differentiated office product in the Sunbelt today. It was approximately 87% occupied at quarter end due to recent known expirations, creating our largest organic growth opportunity in roughly 10 years. And NOI growth has been de-risked and it's not far away. To highlight, the portfolio is approximately 91% leased as a result of recent leasing wins. In total, we have executed over 1 million square feet of new and expansion leases that will commence in earnest at year end and into 2023. In addition, our lease expirations through 2024 total just 17%, which is among the lowest in the office sector. Our current development pipeline totals $566 million, and the office component is 69% leased. And we have a strong pipeline of potential new investments, including the first phase of our Domain Central mixed-use project, which is a transformational development opportunity in the heart of the domain. There is nothing else like it in Austin. and we plan to start late this year. Looking across our footprint, we are confident that we can continue to pair strategic acquisitions with attractive new developments to generate blended value-add returns. We are mindful of potential near-term risks from inflation, rising interest rates, and geopolitical tensions. Notwithstanding, we have a tremendous opportunity in front of us at Cousins, Our unique and compelling strategy positions us at the intersection of powerful market trends. Our customers have accelerated their return to office. We own the premier Sunbelt portfolio. We have attractive organic and external growth opportunities. And we have a best-in-class balance sheet and team to capitalize on the moment. Before turning the call over to Richard, I want to thank our entire Cousins team who are the foundation of our success, providing excellent customer service, skill, and dedication to their jobs each day. Thank you. Richard?