CUZ - Earnings call transcript Q3 2017 | Cousins Properties Incorporated

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Operator

Good morning, and welcome to the Cousins Properties Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference call over to Pam Roper. Please go ahead.

Pam Roper

Good morning and welcome to Cousins Properties' third quarter earnings conference call. Larry and Chief Gregg Chief Chief Officer. are Connolly, Officer; Adzema, today Financial President our Operating me Gellerstedt, Executive our Colin our With Officer; and the supplemental afternoon yesterday well as X-K. made The our Form as package on release page of and available press on Investor furnished Relations website were directly Company requirements. in measures accordance Reg G package, In all financial GAAP the the supplemental measures comparable non-GAAP reconciled has to the most with meaning to constitute Please federal be materially matters certain and statements results securities uncertainties of aware of the actual discussed today laws and forward-looking from within may other these a that may risks factors. and differ statements variety due or does as otherwise. forward-looking The undertake to duty statements not a update new whether of any events company result any future information, is as contained our SEC. regarding the a The in and yesterday the statements press in risks discussion issued full of potential detailed declaration available filings with some release forward-looking over turn With call that, will to I Larry Gellerstedt. the

Larry Gellerstedt

The joining Good morning of in Pam. Thanks, across XXXX. all strong our today. everybody. continues areas business thanks for to drive performance us Cousins And team

generating is office and financial results XXth Our leased straight quarter. XX% the for portfolio positive

NOI leased during development third We coming portfolios combined new same period in also Cousins Square of legacy year quarter. XXXX. the feet when and growth online cash office million in X.X% X.X produced second Parkway with when a successfully Year-to-date Carolina this project XXX million square delivered our compared same we to of over delivered the space developments the property and

consecutive to Austin, urban This markets. ongoing net cycle our on performances X Sun activity space, for the encouraged ground Tampa the Phoenix and in market of economic Atlanta, and X of Class Charlotte, as support Accelerated submarkets. markets by strong positive growth. targeted portfolios premium demand years In consecutive growth Belt in has absorption I'm our office A job well forward evident experienced seeing office the especially years and is net we the the operate. steady where in expansion continue in Looking our we're

Another is X.X% during important Belt cycle our evaluating total into been consider averaging constrained today health inventory the previous Surprisingly in new supply. Sun well cycle per new estate total its this our inventory supply markets to more this real of in when markets averaged our year. measure of to is perspective X.X% has Putting robust markets year. create in the per in new value supply environment. Cousins positioned of

well if no where cycle While roadmap. in signs strategic of and fundamental conditions, to quickly we our prepared change. softening seen adapt Regardless should will with remain consistent have the capitalized early of we market remain we are we

office First and to foremost in the own Belt. premier portfolio is continue to our strategy urban Sun

leaders submarkets be in confident the assets of that economic outperformed located expansion in trophy are best will and We times in economic downturns. our

Our Sun to increases emerged with strategy of have diminishing result of land. the leverages demographic in barriers Belt submarkets entry tailwinds a urban across ready levels as development the that

urban Atlanta, living like rapid lower a for best talent at and living. have new alternatives Austin CBD Charlotte underway the addition, In Uptown shown places Midtown of the created brighter transformation and in cost the much

cycle value selection as in A allocation development Ross Atlanta on and each at and Second, we current new consummated in Class add in decision. the invested maintain like intentional Dallas. the cycle were over We billion disciplined in well we the $X we and Parkway of strategy, in additional a course the will creatively acquisitions an transaction Promenade with investments acquisitions. capital focused investment XXXX Early the timing as

and like and we're Austin. expected Park and successful were we at Colorado Tower cycle mid in what Next deployed Research development projects capital V our is

XXXX like Atlanta and opportunities focus current on extended, build-to-suit as highly the our efforts acquisition projects place strategic in and in cycle pre-leased Avalon dimensional Charlotte. we As our

this time, Parkway. with During transaction also a strategic highly completed we

All investments time, time. timing basis At using leverage type the or I set of of the neutral the Phase the deliver January XXXX. on most at we $XXX a pipeline funded were executing capital our and million regardless current the at available with late schedule are XXXX development present of in Cousins in our to NCR compelling through deliver source early balance to

translate a from one We customers are by the especially limited existing fully needs position I'm existing a that also premature fielding available is still roadmap our announcement this future. a to and with in an to or new provide Circling I'm be make more options whether in it projects two larger leased build-to-suit highly and multi-tenant this customers, by building expansion will specifics progress for or with made into optimistic one hope space. cycle our to request today; back strategic we've encouraged of year-end. more development. the for to however, it's pre-leased, we

to flexible XXXX quarter we've net low X.X sheet. to balance to simple from and times continue From will maintain debt We levered a today, X.X EBITDA times. reduced to fourth

given spend. conservative opportunity to opportunities transformative like investment balance sheet to management the pursue the Our us approach has Parkway merger

success operations This our will the forward, well our will operating with leverage allocation identifying local when shooter shareholders. Charlotte, Tampa. strong strong can in proven leasing a a is And the service our we local that company Many the to local focus during capital strategy and to The believe ultimate the visiting who past short seen with in market of and long-term investment led in deep month. platform approach entrepreneurial the witness of each helps having served sheet platform on you conservative be new pair approach local Austin, the this Day in fronts. operating with we in vital our us approach and responsibility positioned of ongoing providing relationships Going the both value our managing lastly, last director, the well by Today, build the for Cousins to with platforms. the operating balance continue us to We to provides power of company. addition involvement on customer market has teams are and we Investor opportunities. Atlanta the same Phoenix competitive the also investment hedge on community ground with

Before reiterate once balance our current where execute secured we it the to runway, we my confidence a Colin, over turn on is team continue see Sun to of we to grow Cousins I see sheet the like that opportunity. again our portfolio markets great in would assembled, to well urban strategy certainly and I positioned Belt we and build. runway

opportunities Sun to we urban scale, to we on Nonetheless patient value, by expansion a any Colin. core, are well city a that, we where we and educated additional turn over focused will addition, continue disciplined. to and and believe create remain throbbing identifying study it I'll to Belt markets In driven will With our specifically workforce. to be compelling platform

Colin Connolly

and part It's to shareholders. we time be an positioned value the well Thank for are morning you, everyone. our organization exciting Cousins Larry of as good to create

office portfolio market solid some and would We equally then that have delivered team. term and and highlighting I'll with market committed before focused comments details to by operational metrics as roll more approximately disposition lease leases Starting a a begin activity. by our X% executed average a years. sheet team and trophy closing important, the on up X feet rent and briefly additional balance with rock strong today with leasing, XXX,XXX we my of weighted another I a like key quarter and With update as cash our leasing to of an square provide backdrop, than

activity this our accounted leasing which of XX%. approximately was up roll quarter, XX% for Orlando Excluding rent cash our

steady and our to and As new low a whole, favorable levels by conditions in our fourth fundamentals Switching very healthy remain historical of looks remain supply. quarter across strong. Atlanta fueled pipeline leasing our markets office markets, demand gears

market team leased feet the is XXX,XXX at attractive approximately as Our square active in economics. we

the at square Our the square foot its August leased did as give previously million XX.X% in Equifax square XX,XXX is disclosed of remained feet vacated Aetna foot October. XX,XXX in quarter, we back at X said to Northpark, suit at and portfolio end

WestRock company, feet Northpark, this the and the Phases square in an On growing space and as of November the expansion, $XX during square this to positive year. packaging will May of now billion a which their With in at thrilled quarter. in WestRock side year and property starting at ending additional XX,XXX feet is occupy were lease XXX,XXX paper to we next

at In large will Crown be and Avalon leasing During XXXX companies SAP. the project demand progress great customer to XX% technology our oriented MuleSoft the well SAP. been Castle seen square Microsoft, feet quite in of to made The addition at Avalon by we've we building aggregate approximately occupied quarter, including XX,XXX success in capitalized has remarkable.

in during a the second and purchased office we second reminder, with a the venture Hines. quarter joint padded As Avalon last

portion forward move to we'll are commitments are by the of secure preliminary project a on and interest customer when We that significant we able encouraged building. with

optimistic the additional and feel at leased XXX,XXX to we up from to three the model outs this we and down I square Moving began back no Bain. get in a XXXX With Terminus a about CBRE the underway alliance Buckhead, activity, feet see quarter Buckhead, a the line new construction XX% noticeable move of now of tick change will in bit previously in after disclosed welcome summer. in approximately third

In in has where lease space a Austin, XX% With claim million our rents already for foot base, and of foot Cousins new as Class dynamic XX negotiations vacancy to A and to team remain square market, Class surprise lead the the office to-date. the million believe has continue fantastic that location posted amenity for A year well up sounds it existing here tier feet gross should $XX the several and are product. square positioned CVD, against rushing office come floors. no two wide market at the office I X.X% on Measure is approximately X.X strong. top time, positive square in of absorption fundamentals net Over limited a a back as we

of X solid feet XXX,XXX vacancy only over ramped and located up XX%. square Charlotte. at where underway Fundamentals remain portfolio XXX,XXX to continues across metro in similar square Charlotte our The has pre-released. is just reportedly across city foot very square of While We shine. construction XX% see absorbed activity very stand supplies CBD X square is feet new scenes the feet and million the sub-market the uptown million to which in has year-to-date

dimensional until Center portfolio Third exposure Charlotte see fund end of no our plus advisors XX% with lease material into Fifth from the project moves at built Our to remains XXXX.

this be XX,XXX backfilled preliminary quickly on block will foot that of square confident based interest. are space floor We two

has product another our occupancy asking Moving quarter rents real down this upon square previously are where in new leased ago XXXX. took end. points grew February A especially at West foot XX,XXX cycle. the remaining estate sub-market And ground this Amgen square third vacancy was basis quarter we X.X% million year located. to as dropped will to shore X.X through and to have vacate a square portfolio no month space Harborview X% of Class of of disclosed broken speculative face XXXX. is in fundamentals into XXX the to Tampa, improving rapidly the The June expiration and XX,XXX at foot square earlier XX.X% feet XX,XXX will in Institute feet Spine Laser portfolio at compared

of and some space all release minimize we several groups optimistic quickly can the However, it or we downtime. have future are interest thus and that in we from this

immediately the quarter Phoenix took with feet for significantly square rent Notably an leases Our ups. rental this termination roll back fee rate. well. higher we as XX,XXX additional a foot of terrific another signed floor double-digit and ZipRecruiter team Genesis and XX,XXX in square with space posted along backfilled from We

of resulted floor The also the able from quarter to while the respond creating of our XX.X% few was XX.X% a needs end customer this the value. of lease months full portfolio down a down quarter as move result team time, a While did out. in to drop to transaction last long-term of growing at a

executed a However, released January end, ago, foot the of commence have space square to this will Phoenix XX,XXX the we post of new XXX,XXX and approximately we quarter year Symantec leases. in assets lease renewal feet XXXX. and square acquiring Since

Symantec process, size remarkable higher Bank, reducing risk approach companies creative stabilizing team's able when I'm we quite upgrading like with improving grow were of and the Genesis. the is rent profile stream. compared While equally pleased the Amazon, and to ZipRecruiter to to Valley this Silicon role rent customers volume the this total exposure our portfolio, In like while while the to

on you would I Lastly, to disposition a take activity. to like update moment our current

XX% in contract subject are We in Miami consensus. Courvoisier standard under to to sell interest lender our

which million are hopeful our X we foot square In the disclosed to few We complete in are portfolio the in this transaction last next CBD, Orlando, weeks. actively marketing we quarter.

or are depth complete I received the end interested first call anticipate Once quality that, bidding a Gregg. round With due buyer buyers. pleased after XXXX the and standard XXXX we of the of have very select offers process the early or over the we We closing and year will with turn and diligence. to a buyers, completion

Gregg Adzema

highlighting everyone. our and impacted fees. good earnings Then, share begin I and our four capital updating move morning, and we had by XXXX activity during quarter. $X.XX per Thanks to the my Colin, that per comments with by year-to-date. our Overall guidance. quarter items start will to I FFO I remain third results. termination and our like will quarter will would markets conclude a was markets $X.XX stands at I share solid healthy

of ranged low high $X.X from For perspective, XXXX $XXX,XXX a a and little million. fees annual termination to of a between XXXX

so million $XX.X unusual. is in termination the far received we XXXX So, fees in

update XX totals make real At properties. to a don't Atlanta, huge have WestRock. spaces building come Zenefits to fully [indiscernible] -- wins the just with full that project Later ZipRecruiter. Ferry these we for the our At moved moved termination from guidance at lease but are but All short-term termination had generate out that XXXX proactively And for only create comprised Although, XX% property in with fee Tempe, our XXXX level three value backfilled. out way Areas our U.S. three not Real project our in included of move our been are fees long-term fees These at Building customers, way I to fees Amazon NOI. customers. worked Northpark a will of which us to in section termination and also them make Hayden of our We as in in in I include remainder, allowed out income the sign quick call, other not ADP. the almost West supplement. Tempe,

by elevated the an quarter, accrual. our third our during incentive driven again, Second, in general and compensation expenses administrative long-term remained increase

are relative been has shareholders, return this at order of the aligned performance with As to the determined based total for in compensation incentive performance interests Cousins out management's index. long-term SNL by years, here many is case our vast majority ensure our the office

call. quarter, third guidance was the total positive compared X.X% in will the our G&A index. later During office update in negative return X.X% I to the Cousins also

no we interest This mortgage expense. of Third, an were had the quarter. XXXX the gain of during amortization above There the on over market on from rate is a Peachtree debt and FFO and on we accelerating This Mortgage gain recognizing the we impact of later months that Parkway we This forward a from the amortizing extinguishment gain life all debt recognized without the assumed issue. reducing to to pull scheduled was the timing premium third interest extinguishment. was amortization $XXX,XXX to on majority We only XXXX, expense it debt is created result premium the a was mature year three interest in so numbers. prior this thereby that in the merger. extinguishment. prepaying moved mortgage GAAP premium did of amortization the prepaid perspective full remaining a penalty mortgage

Finally, we the associated up the continued clean with Parkway to accruals transactions.

transactions, the quarter attention. but $XXX,XXX. call statement. led the these size our not in we It $XXX third note tranche million notes $XXX years. of on transaction reduced to just included other funded our on This about XXXX during it This big I adjustment It's a have is the to not number senior and rate effects at July to fixed locked up With balance is second complexity X. that In several income costs drew of funding, quarter. private expenses an that that we eight-year inaugural the number wanted your This considering for guidance. tranche down our clean this by markets, again capital an X.XX% million the unsecured our of placement now we next sheet

of no have credit no outstanding and our on balance $XXX debt unsecured until maturing any XXXX We million consequence facility.

performance. rate average to tenant a has and development and rock to it seven share stress. I some we as my section Low on provides sheet X.X% almost narrowing XXXX. share. to our and driven assumptions. on our approximately weighted $X.XX around by debt our wrap updates X.Xx, guidance average property be where has maturity as is three earnings years change our solid have our and between at a supports interest FFO since during XXXX been to of up We per previously weighted raising between continues of hover EBITDA company. $X.XX same net-to-debt call by economic updated and powder guidance well will $X.XX been efforts the providing per are core detail A balance of $X.XX This continue will leverage Overall, to color our times of and dry from of of

million other to fees. our and an raised due termination assumption to we range million increase fee $XX.X $XX.X primarily between First, in to and million million from previous income of a $XX $XX anticipated

raised Second, $XX in an to range we million long-term our million and assumption million to compensation from and administrative a between the previous expense. expense due $XX million of increase to general primarily $XX $XX

transaction interest other previous a between to million and range million our rate of Finally, primarily variances. assumption million $XX $XX we expense timing million $XX from and $XX due to to interest lowered and

our like property minute we would talk NOI a same Although, are not it. assumption, to take to changing I about

growth we X%. of year it. remains hitting a we provided year-over-year and reminder, range and basis between full unchanged originally XXXX anticipate on As NOI still That GAAP a same-property X%

expenses was In in but during to the the big quarter lumpy. In an a unusual Parkway were this pool as same-property third XX.X% year-over-year start driven our the pool driven unusual will a year basis, third can taxes. up be last the XX.X% primarily the year. quarter. call, quarter, year. by expenses. the number, previous on by quarter, move is same-property discussed up combined fourth This property previous On earnings several Cousins were will lumpiness I expenses quarter-to-quarter comparison same-property comp driven large and an the XX.X% in outs. it's I over lumpiness When prior for this by with be primarily results However, expense the

tax in Parkway created which for performance. This XXXX. unusually I in quarter both Cousins third XXXX and tax As of large third a in reduction an discussed call the successful resulted prior XXXX in that very our quarter our low rolled last were appeals quarter through our expense comp

Excluding property both taxes consistent portfolios during X.X% the in with previous is which both expenses same-property for periods. years combined more third increased quarter,

quarter, driven the positive revenues several we have by at that trend. move primarily but will we large fourth remain anticipate Northpark. be to Looking to outs temporary the recent same-property below This the

However, next a at as its quickly previous Northpark our WestRock quarters. occupancy guidance. moves original to lumpiness the same results, property half in few will as return our of change in no level Bottom but the during XXXX over soon to line, little second

Finally, around or mentioned as Orlando year-end. dispositions closing Miami we at the anticipate Colin earlier and

XXXX these earnings, numbers. will impact in will projected Although, they you as won't and include sales impact should them XXXX earnings we

has from point up, wrapping an Before supplement financial that like I out last been would quarter's to corrected. item

incurred call back should we million have respectively. project operator. These will numbers reported share our in turn the development for the With our million over and at to costs been that, XXX $X.X million $XX pipeline Trinity and page, Project. West $X.X $XX the On total million I

Operator

you. Thank

We will question-and-answer begin [Operator Instructions] now Okay. the session.

of The ask from you. Thank Rodgers question. Please Dave first your question comes Baird.

Dave Rodgers

your that are that about lately talk out are follow addition think guys. provided you resurge one statistics, that is active comments obviously want market Colin, don't point you to in about seeing first Yes. going Good tenants Tampa I to you to the in morning, are the and going what Tampa, to you are some up Amgen? on I to

Colin Connolly

Good question, Dave.

And a of has year the pleased the with I so the no Tampa speculative mentioned Orlando life different we talent. real portfolio since there pick and little Tampa really up got I can is international of see find entirety national, as market ago. attractive corporations do seen waterfront a have quality Tampa. in characterize from we obviously been that of we quality attract would in been bit standpoint a And closed of large have have to very or prepared demand a that in they and adjacent Tampa We really development than where our across activity to a Parkway in they remarks kind my high some view kind on

So, space for that like scale large a large seen looking office in the in it's lot their sectors, back like and some use Amgen of Amgen, see another certainly but it's of a for you different space services healthcare that of also we have corporations operations. financial lot

so type see users. to of I said, And as those activity we're continuing good from

Dave Rodgers

where, you'd some the work any or leasing comfortable submarkets speculative with. in to And comments the kind or equations, that for about discussions is amount bit today Southeast little or there with had you your the less obviously but are of you just Colin in Avalon on be pre-leasing on you'd some side strong again, maybe going supply? risk sounds good potential in having some space the like of of give development a and on how Larry giving limited about markets think yourself build-to-suit, success taking at Are

Larry Gellerstedt

even it building that got see. but we pre-leasing, visibility behind I a about Microsoft project it interest with is strong we a the on pipeline roaster remember we'll particular a customer if But second take Avalon This was on up. we of with and project really, A that If some to measured speculative pre-leasing Dave. some Yes, really Larry. risk significant the of is going pre-leasing we're started Avalon in you amount strong. correctly, want the XX% see, leasing had

the positioned have owning at what's good Avalon it where do the We about we requirement, interest the get really meaningful customer. ever short the design be with new a process the that in strong to that the in just cycle. feel of through can the want and behind We it development looking get it to But do building we is that been And of of in good, X see to. level how combination at we of it's to pre-leasing product opportunity so we look a pre-leasing a don't are And we think also of percentage and some into of the we've demand see leases go can demand. have ready a amount we it so how we second we at we start. that much and far, so converted getting when just see actual time to before in looks

Dave Rodgers

be this And what call me that Colin, last older the some is for to the transition from Gregg of this of will point move what from terms tenants as kind and in your one higher the number or you've we work low NOI is kind in low leases, of you maybe of of fourth start you quarter of you to of given some as and into point kind XXXX? said the these transitional

Gregg Adzema

you'll a mean in in as quickly. quarter, mean in mentioned his same pipeline dip in you behind XXXX, rather up our look I see property fourth the think remarks, recover I Colin performance property prepared if same to occupancy. that prepared fills it in a I dip remarks as in But the at pointed my so I quickly and revenues

point. will quarter the of be same of property fourth low terms in So, first that kind quarter, occupancy,

Dave Rodgers

All right, great. guys. Thanks

Operator

The of [Operator Advisors. ahead. Instructions] next from Belosic go Mr. Chris Green Belosic, question Street please comes

Chris Belosic

Hey good guys. morning

you those still Tampa could where that change interest are is last of possibly quarter? where that Tempe, I about, you build-to-suit the the that happen that from guys expanding tenants quarter Austin and same that is So last you talking or question are another said any mix has is on potentially believe seeing just

Larry Gellerstedt

at Tempe, markets those as well. type that in other think that, we're that but We at looking our have certainly of I are opportunities as we along opportunities in and still looking are three have Austin that also far we

to is where customer So, terms so. terms of right quarter and have the next moving I'm the hopefully and the we as we way. optimistic really we've then encouraging, behind once again in that about submarkets them and a and as just feel And in it's it's got And be new have to right then just we'll that's of we it's that, be disciplined the point a see, to added portfolio have sure should under of just in we're the And that the making should, of but talk that want that well. it it's said or to limited in want one and positive I couple ready it very speculative cities and these a markets the customers be where about then we being markets. in that we're amount the our supply we been in faction

a So, or cycle. time NCR, big is one it's build-to-suit expansion customer the a viable that wants whether to significant at advisors option do a dimensional fund an this in the

Chris Belosic

be thoughts of acquire there and that grow to looking is Okay, primarily are that whether into operations there? you Square you so great. few cycle are And kind Raleigh then long-term and what somewhere or this putting delivery that can your on of are next you going again that guys remind kind me developments to with Carolina it's to the, is going

Larry Gellerstedt

right terms is now. right to one primarily that submarket. city, but scanned And is Raleigh urban are, a really opportunistic level not each space, city really there primary drilling and in submarket market, is Raleigh true our We're then focus - as strong is urban down look space it we we we we prioritized a it a ours an truly urban say a does the overlap wouldn't would and the own. our always at terrific now. looking very I then of size fits looking major said, our by here. combination Belt Sun strategy in the look cities a of within small be assets in that relatively go the sample I stain that as core job a is Raleigh the And at we but at a great of and player that terms forward as that of the CBD And model really, to qualifies We amount type at just in of of reach highest there in the

Chris Belosic

be just XQ And reimbursement on year something year-over-year of XQ similar year-over-year one tax difference I sure then and is about hike for one there just increase one-time that's Thanks Larry. of understand XQ? me, XQ from make kind that the tax it the last more kind want some last of something will kind effective not just in of to is a

Gregg Adzema

Chris. Hey Gregg. It's

expenses line as the more in don't should see should You property with during to provide expenses, recent expect, property trends expect on guidance fourth well same quarterly our drop we as you same quarter. Parkway the

Chris Belosic

it Okay, guys. great. That's from me

Operator

Okay.

As not further questioners, any over to session I Gellerstedt the this Larry will question-and-answer we for closing conference turn conclude back our today. now remarks. like any for would showing are to

Larry Gellerstedt

We being the call. on everybody appreciate

we're Thanks company calls always or interest And seeing for appreciate any you much. all in have. questions next our a lot very you to As of your look and we that available follow-up month. at NAREIT we forward

Operator

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

You disconnect. may now

Cousins Properties (CUZ) 26 Oct 172017 Q3 Earnings call transcript