Cousins Properties Incorporated

Good morning, ladies and gentlemen, and welcome to the Cousins Properties second quarter conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. instructions will be provided at that time for you to pick up for a question. If anyone has any difficulties hearing the conference, please press store zero for operator assistance at any time. 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 Property's second quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer, Richard Hickson, our Executive Vice President of Operations, Kennedy Hicks, our Executive Vice President and Chief Investment Officer, 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 security 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 potential risk is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly.

Thank you, Pam, and good morning, everyone. Cousins' second quarter results were strong. To summarize... We delivered 68 cents a share in FFO, which compares favorably to street consensus. We reported same-property net operating income growth of 5%. We leased 391,000 square feet with a positive cash rent roll-up of 18.2%. Our percentage leased and occupied both increased. We reduced leverage with our net debt to EBITDA of 5.12 times at quarter end, and we acquired two newly created mezzanine loans, which are secured by interest in lifestyle office properties in Nashville and Charlotte. Cousins' initial commitment is $27.2 million, with a potential total commitment of $37 million. These achievements are fantastic and continue to highlight the strength and resiliency of our leading Sunbelt lifestyle office portfolio and our best-in-class balance sheet. Before discussing our priorities at Cousins, I will start with a few observations on the market. While the commodity office sector continues to struggle, fundamentals for our lifestyle office in the Sunbelt have begun to improve. Physical utilization continues to grow. Leasing activity has meaningfully accelerated. Sub-lease availability has come down. And at the same time, existing inventory is shrinking and new construction starts are at historical lows. In simple terms, demand is increasing while supply is decreasing. This will lead to a rebalanced market. It is economics 101. The process is underway, and a shortage of lifestyle office in certain markets is not that far off. The flight to quality and the flight to capital continue to differentiate the market, and Cousins is well positioned at the intersection of these trends. We own the premier lifestyle office properties in leading markets across the Sunbelt. In fact, Bank of America recently ranked our portfolio as the highest quality across their entire office coverage universe. In addition, our balance sheet is undoubtedly best in class with the lowest leverage across the sector and a solid investment grade rating. With these powerful tailwinds, our team remains strategically focused on driving earnings growth while enhancing our geographic diversification and maintaining our strong balance sheet. To do so, we are prioritizing both internal and external growth opportunities. Our portfolio is 88.5% occupied today, up from 87.6% at the start of the year. Given the quality of our real estate and the strength of the balance sheet, we intend to grow our leasing market share and drive occupancy back to more stabilized levels. Bank of America's expiration in Charlotte next year is a modest speed bump in that process. Richard will touch more on this. However, over the immediate term, there is meaningful upside in our existing portfolio as leasing accelerates in our trophy lifestyle portfolio. Externally, we are beginning to see compelling investment opportunities. As I mentioned earlier, We have recently closed on two mezzanine loan purchases with highly attractive risk-adjusted returns. Kennedy Hicks, our Chief Investment Officer, will provide more specifics. At this point in the cycle, we are open to a wide variety of opportunities, including debt, structured transactions, joint ventures, and property acquisitions. However, our core strategy remains the same. Invest in properties that already are or can be positioned into lifestyle office in our target Sunbelt markets. Near-term accretion is also a priority. Overall, the property capital markets remain challenging. Asset-level debt and equity for office remains limited and expensive. Many private equity investors have legacy issues in their existing portfolios and remain on the sideline. Conversely, The public markets show signs of improvement. Liquidity has grown in the unsecured debt market and spreads have stabilized. Office REIT share prices have begun to rebound. This creates a compelling investment environment for Cousins. While some economic headwinds exist, we are encouraged by the improving fundamentals in the lifestyle office sector, We built Cousins to thrive during all economic cycles, and today we are in a highly advantageous position. We are in growing Sunbelt markets, we own the highest quality lifestyle portfolio, and we have a fortress balance sheet with the lowest leverage among office REITs and great access to capital. I'm excited about the opportunities ahead. Before turning the call over to Richard, I want to thank our entire Cousins team. Our employees and teammates provide excellent customer service and hard work each and every day. Their dedication, talent, and resilience continue to propel the company forward, and I thank you. Richard?