Good day and welcome to the Cousins Property First Quarter Conference Call. All participants will be in a listen-only mode. 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 Gregg Adzema, our Chief Financial Officer.

Thank you, Pam and good morning everyone. Over a year ago, COVID-19 emerged swiftly and our entire world changed nearly overnight. As we mark a year later, I'm sure I share with many of you a feeling of hope that while the pandemic is not yet over, there is optimism on the horizon with the accessibility of vaccinations. I'm hopeful that 2021 will be a healthier, happier, more productive year for everyone. Cousins was well prepared to weather the challenging year with our simple compelling strategy that enabled us to operate effectively. The core principles of our strategy include first to build the premier urban Sunbelt office portfolio we have focused on building concentrations in existing and potential new Sunbelt markets with the best long-term growth characteristics. Second, to be disciplined about capital allocation and pursue new investments where our operating and/or development platforms can add value; third and importantly to have a best-in-class balance sheet; and finally to leverage our strong local operating platforms with a focus on an entrepreneurial approach, local market relationships, and community involvement in our high-growth markets. Today, we have the leading trophy portfolio in the best Sunbelt submarkets of Atlanta, Austin, Charlotte, Dallas, Phoenix, and Tampa.

Thanks Colin, and good morning, everyone. Like all of you, the Cousins team was excited to leave 2020 behind and focus on executing in a new and hopefully more positive year. Our strong first quarter operating results reflect that excitement and focus, and we are very pleased with how this New Year has kicked off. As I've done since the pandemic started I will begin with general business conditions. First, physical customer utilization continues to track at an average of about 20% across the company. With that said, utilization is not consistent across markets or even among buildings within each market. For instance, our Atlanta, Dallas and Tampa portfolios are all running at about a 30% or higher average utilization rate. I also want to point out that activity and energy at many of our buildings even in the markets that still have lower overall utilization are building momentum with each passing month. Whether within our portfolio or generally speaking, we are hearing of more and more companies planning to return to the office at some capacity during 2021. We continue to believe the back half of the year should usher in more broad-based increases in utilization, however, with the full effects potentially not being felt until 2022. With regard to rent collections, they remain strong. Similar to last quarter, we collected 98.8% of rent from all customers and 99.1% of rent from office customers in the first quarter. Now let's turn to first quarter operating results. Recall that in February, we said, 2021 would be transitional for Cousins including occupancy. As expected, our total office portfolio leased percentage and weighted average occupancy declined to 90.2% and 89.3% this quarter, respectively. The biggest driver of occupancy by a wide margin was Bank of America's final phase of exploration at One South in Charlotte, which took occupancy at this 891,000 square-foot project to 57.3%. A second driver, albeit much smaller, was the addition of our 10,000 Avalon new development in Atlanta to the operating portfolio, adding about 50,000 square feet of highly desirable first-generation office vacancy. I would note that leasing interest at 10000 Avalon is very encouraging. Looking to the balance of 2021, our occupancy will continue to trend down into the second half of the year, largely due to the long-anticipated 200,000 square-foot move-out of Anthem at 3350 Peachtree at the end of June.

Thanks, Richard and good morning, everyone. I'll begin my remarks by providing a brief overview of our quarterly financial results, including some detail on our same-property performance, our development pipeline and our transaction activity followed by a quick discussion of our balance sheet and dividend before closing my remarks with updated information on our outlook for 2021. Overall, first quarter numbers were solid and held up well since the onset of the pandemic. FFO was $0.69 per share. Same-property cash NOI declined 2.7% year-over-year. And as Richard said earlier, cash rents on expiring leases rose by a very healthy 10.5%. Before moving on, I did want to highlight that we have increased cash rents on expiring leases every single quarter since the onset of COVID last spring with a weighted average increase of 12.4% over that period. Focusing on same-property performance, first quarter results represent a positive change in trend and are an improvement over the previous two quarters, which averaged year-over-year cash NOI declines of 3.1%. This improvement took place despite Bank of America's departure from our One South property that was discussed earlier. If we pull One South out of our same-property pool to get a better sense of performance for the balance of the portfolio, same-property cash NOI adjusting for COVID-related parking losses increased 2.7% compared to the first quarter of 2020. Turning to our development efforts. One asset 10000 Avalon was moved off of our development pipeline schedule and into our portfolio statistics schedule during the first quarter. The remaining development pipeline represents a total Cousins investment of $363 million across 1.3 million square feet for assets. Our remaining funding commitment for this pipeline is approximately $94 million which is more than covered by our existing liquidity and future retained earnings. On the transaction front, we closed one land acquisition during the first quarter and one property disposition subsequent to quarter end. We also refinanced the maturing construction loan during the first quarter. I'll start with the land purchase. In mid-March, a land parcel was acquired in Buckhead, next to our 3350 Peachtree operating asset for $8 million. This transaction was completed through an existing 95/5 joint venture partnership with Cousins investing $7.6 million. The partnership already owned an adjacent parcel and with this acquisition it now controls the entirety of what is the last surface parking lot located in the core of the Buckhead submarket often referred to as the Buckhead Loop. Subsequent to quarter end, we sold Burnett Plaza in Fort Worth for a gross sales price of $137.5 million. Built in 1983, Burnett Plaza was 80% leased at the time of sale. We acquired it through the TIER merger in 2019 and it was identified as a noncore asset from the very beginning. Proceeds from the sale were used to help fund the prior acquisition of The RailYard in the South End submarket of Charlotte. Finally, we refinanced the outstanding construction loan on our Carolina Square mixed-use property in Chapel Hill during the first quarter. A new $135.7 million nonrecourse loan was obtained replacing the original $77 million construction loan. The proceeds from this refinance exceeded the partnership's original equity contribution and are clear third-party validation of the value that we created there. As a quick reminder Carolina Square is held in a 50-50 joint venture partnership. Looking at the balance sheet. We entered this period of volatility with outstanding financial strength among the very best among our office peers. Our debt maturity schedule is balanced. Our liquidity position is strong. And our leverage is low. At the end of the first quarter our net debt-to-EBITDA was 4.87x. Proceeds from the Burnett Plaza sale are not reflected in this number since it happened after quarter end. Incorporating the Burnett Plaza sale as well as the potential Dimensional Place sale which I'll discuss in a moment will reduce this ratio to approximately 4.5x. We also increased the dividend during the first quarter by 3.3%. This follows a similar increase last year. Our underlying cash flow growth has allowed us to deliver consistent dividend increases even through the COVID pandemic. Our dividend policy is set by our Board and is based on an FAD payout ratio between 70% and 75%. Last year our FAD dividend payout ratio was 68%. Needless to say our dividend is well covered by cash flow. I'll close by updating our 2021 earnings guidance. We currently anticipate full year 2021 FFO between $2.68 and $2.78 per share. This is down $0.08 at the midpoint from our previous guidance of $2.76 to $2.86 per share. The change is entirely driven by the completed sale of Burnett Plaza and the assumed sale of our Dimensional Place investment this summer. As we've stated before our joint venture partner Dimensional Place has a one-time purchase option. And while they have not provided formal notice, we have received strong indications that they will exercise their option in the near future, hence our inclusion of the sale in our guidance. The start of Domain 9 during the second quarter has no material impact on our guidance and there are no other dispositions, acquisitions or development starts included in our guidance. With that, I'll turn the call back over to the operator for your questions.

Our first question comes from Blaine Heck with Wells Fargo. Please go ahead.

All right. Great. Thanks. Good morning. So you guys talked about proposals up 68%, tours up 89%. Maybe for Colin or Richard, I know you guys signed leases in every market during the quarter. But were there any standouts? Were there any markets or properties where you saw particularly strong activity?

Well Blaine, good morning. And as Richard mentioned, activity has picked up quite significantly across all of our markets and we are seeing success both in signed leases and growing pipelines across the portfolio. I would highlight a couple of markets that we're seeing some outperformance. I would say notably Austin continues to benefit from the in-migration into Austin that's been widely publicized and several large announcements of tech companies. Another market where we're seeing really strong progress is here in Atlanta. For some of the same reasons large announcements from Microsoft and Google and there are others that are behind that. And I would say, similarly you're seeing these large growing tech companies look to really strong technology talent here in Atlanta, but also very diverse talent. And we think that's a trend that's going to continue and we're seeing some of the early positive signs from that.

This is Richard. The only thing I would add is we saw some really encouraging new activity and overall activity at our Buckhead Plaza project in Atlanta. We've decided to make an investment in repositioning that asset a couple of quarters ago and it's really paying dividends. So it's encouraging to see the market responding to reinvestment in that property.

Great. Very helpful. Colin, we've talked about whether you guys would expand to any different markets before. And typically, I think Nashville comes up in the conversation as the most likely new market. And I think you actually mentioned it in your prepared remarks. But I wanted to also see whether you guys have a view on Raleigh, especially in light of the recent Apple announcement?

We currently have a presence in the Raleigh-Durham market with our Carolina Square mixed-use project in Chapel Hill, which includes an office building, multifamily residences, and retail space. This market is one we monitor closely. If we find the right opportunities and entry points, we are open to exploring all markets in the Sunbelt that have the necessary scale and a strong urban core. We are looking for assets that can compete on factors beyond just price, as well as structural advantages like excellent university systems and infrastructure such as mass transit. We evaluate opportunities throughout the Sunbelt that meet these criteria.

That’s helpful. Thanks guys.

Thanks, Blaine.

Thank you.

Our next question comes from Dave Rodgers with Baird. Please go ahead.

Yeah. Good morning everybody. Colin, I wanted to follow up just on the Nashville and Dallas comments. I think it definitely comes up in conversation. This time you started that conversation in the prepared comments. So I'm kind of curious maybe to talk a little bit more about development opportunities that you're seeing as well as given the strong balance sheet acquisition pipeline that you're looking at today given the fact that you did mention those two cities in particular?

We definitely don't feel limited by opportunities in our current markets. At the same time, we are closely monitoring promising investment prospects, whether through acquisitions or developments in new areas, particularly throughout the Sunbelt, including Nashville. We already have a solid presence in Dallas, and as we observe some migration from the West Coast and Midwest to Dallas, we believe this market has potential for growth over time. Looking ahead to the rest of 2021, it's encouraging to see capital markets starting to open up, not just for core acquisition opportunities but in a broader sense. Investors are beginning to take on more risk as they anticipate a return to office settings. I mentioned last year that many would be surprised to see new development opportunities arise sooner than expected. This trend is largely driven by our customers prioritizing newer, higher-quality buildings with amenities that can attract their employees back to the office. We're particularly excited about the Domain 9 project in Austin and are hopeful to encounter similar situations later this year and into next year.

Great. I think maybe for Richard you guys have obviously talked about the demand in the pipeline for quality amenitized space. I guess, maybe to dive a little further in terms of the size ranges, the activity that you're seeing between small and large tenants, and kind of the tone of those discussions as they're unfolding?

Sure. Now, that's a great question. I would say that, the demand in our pipeline is really broad-based. We have a lot of conversations and activity happening at every size within our portfolio. I think we've always trended or been a kind of a larger-user tenant base. But yeah, we're seeing it at every level in terms of size.

I guess, last is could you give us an update on the three kind of known or expected vacates in the portfolio and kind of the specific activity that you're seeing at each one of those?

Sure, sure. And again, the activity is up overall. And those three opportunities are no exception. So I would say that, like we've indicated in the last couple of quarters, the activity on the two Atlanta opportunities 1200 Peachtree and 3350 Peachtree are pretty robust. And I'm looking at a pipeline report for 1200 Peachtree and we're – we've got prospects at various stages totaling over 500,000 square feet. At 3350 Peachtree, we're over 200,000 square feet. And then at One South, we continue to be a little quieter there but Charlotte broadly speaking is starting to wake up as well. So we're seeing inquiries and market activity perk up there as well.

And just keep in mind, Dave in terms of looking at as an example 1200 Peachtree we don't get that space back until really the end of the year. And so where we are with the early-stage pipeline, I think we're very encouraged about that. But again, we won't get that space back until the end of 2021.

All right. Got you. I appreciate the color guys. Thank you.

Our next question comes from Jamie Feldman with Bank of America. Please go ahead.

Thank you. Gregg, are you able to provide some more guidance on occupancy? I know you guys said the trajectory will be down in the second quarter, and then start to increase. But can you maybe provide some thoughts on like magnitude, or I don't know, if you provided a year-end occupancy target.

Jamie, we – even pre-COVID occupancy was not a metric that we provided guidance on. So it's not something that we're holding back. We're not being coy. We're not trying to not provide guidance that we've provided in the past. But the trend that Richard described earlier in the call is intact. And we've got these couple of large move-outs that Richard just tackled, and we'll need to backfill them. So I think in the short term, you'll see occupancy reflect that. But we do have some good stuff happening in Austin, particularly in The Domain, which will offset a lot of it from both an occupancy perspective and a cash flow perspective.

Yes, Jamie, I think again that our comments reflect, as Gregg said, a couple of the larger known kind of move-outs. So, we don't anticipate other kind of surprises out there with other move-outs that we haven't discussed. But with Anthem moving out in the middle part of this year and with new leasing being a little bit slower during the pandemic, I think the combination of those two has the trend a little bit lower over the course of the year. But again, we're very optimistic with the ramp-up in the pipeline that we can backfill that and kind of create positive leasing momentum as we get into the second half of the year.

Okay. That's helpful. And then maybe if you could just provide more discussion or more thoughts on starting Domain 9's spec, just what are the conversations like for that space specifically? And then, we see the stats on Austin with sublease up and vacancy up. But how do you think that market plays out that gives you more confidence to start that project?

Well, we never make a decision to move forward on a speculative development project lightly. But I would share with you we made the decision on Domain 9 with a lot of confidence and a lot of conviction, and I would say specifically about the supply and demand fundamentals out of The Domain, and then broad-based about the activity in the in-migration into Austin. And so, as we look holistically at the market fundamentals, limited to really no new supply in the core of The Domain and the preliminary inquiries from customers, both small, medium and large, we had a lot of confidence. And again, there's always risk in starting a new project speculatively. We looked at this and viewed though that there was risk to not starting this project with the way things were kind of shaping up in the market. So we're excited to get it started and continue the momentum out of The Domain.

Okay. How do you envision the large anchor? What size are you targeting? Is it meant for an anchor, or do you see it being more suitable for smaller tenants?

Jamie, I think it could be any of those or a combination thereof. As I mentioned, there is potential interest from some very large customers. There is certainly interest in the kind of midsize, I would say, those folks looking for a floor or two floors, three floors. So, there's kind of broad-based interest. And over time our team will work through it and try to piece that together the best way. But we obviously like one big large customer, and we've had success out in The Domain doing that, but we'll piece it together over time.

Okay. And then, what are your thoughts on Downtown, and how things are shaping up there?

We continue to have a lot of confidence, as I said, in Austin as a whole. Downtown, we've got a great portfolio of trophy assets and we're seeing activity pick up quite nicely in Downtown Austin. There's been a lot of discussion about sublease activity in Downtown Austin ticking up over the course of the pandemic that was not entirely surprising to us. As you saw, certain companies that had probably prospectively banked some square footage in real estate in anticipation of hiring new talent. And when those efforts were put on pause to hire talent last year, I think you saw some response on the sublease side. But as we moved into this year, the activity, the inbound activity into Austin, we think will, over the next 12 months, certainly bring that market back to stabilization. And we've already started to see some signs of customers who put space on the sublease market when they were ultimately forced to make a decision with other customers willing to take the space, so in some instances has been pulling that back off the market.

Okay. Great. Thank you.

Thanks, Jamie.

Our next question comes from Daniel Ismail with Green Street. Please go ahead.

Great. Thank you. Maybe one for Richard. Relating to Jamie's question, can you speak to the desire of these large tech companies coming into the Sunbelt to locate in the Downtown versus maybe a more suburban area? I'm thinking of say Downtown Austin versus The Domain?

Sure. Well I think broadly speaking what the large tech users are looking for are one critical mass in one location oftentimes, but then that location being in an area, which is highly amenitized, whether it be within the building, but even more importantly in the neighborhood. So you're seeing these companies announce whether it's relocations or expansion and consolidation within a market they're already operating in, wanting these more urban locations frankly than they are wanting to put an isolated campus out in the suburbs. And so that trend frankly, we were seeing that really before COVID and I think it's only continuing.

Yes. I would just add, Daniel, that if you look at Austin as an example, The Domain is only 15 to 20 minutes from Downtown. Both The Domain and Downtown are highly amenitized with a mix of uses and attractive environments. In many cases, it depends on the company, and sometimes it is about the specific use. For instance, Facebook has a large presence Downtown as well as a significant presence in The Domain. Therefore, you often need to examine the specific company, group, and use, as they can influence where they choose to establish that particular use.

Got it. And then pre-COVID, I believe development yields in aggregate on the development pipeline was around 7% to 8%. Can you provide an update on where development yields sit today? And then are there any Sunbelt markets where development just doesn't pencil or might be too risky at this point?

We have not observed a significant change in development yields overall. The range you mentioned seems like a reasonable estimation, influenced by market conditions and the project's risk profile. As we emerge from COVID, we are monitoring potential impacts on development returns, particularly any shifts in cap rates. For prime assets, cap rates have remained fairly stable. However, there is a notable influx of new capital into the Sunbelt region from major institutional investors who seem to recognize the trends we discuss, such as the migration to the Sunbelt and the focus on quality. If cap rates were to decrease, it could put pressure on development yields. In terms of markets we would not consider for development, we evaluate each opportunity on an individual basis. For instance, when assessing The Domain opportunity, we look into market dynamics, fundamentals, current vacancy rates, incoming demand, and the existence of new supply, and we approach this evaluation on a case-by-case basis.

And then just last one for me. Given all the strength of the demand you've been discussing and where the stock is trading today, how are you thinking about using public equity to fund growth?

Hey Dan, it's Gregg. Good morning. So as compelling uses emerge for capital, we'll look at our options at that point in time and make a decision. And we're going to use the most efficient capital available to us at the time if the need arises. And sometimes that's property sales and it's been property sales for quite a while, but at points in the cycle it can be equity as well. So it's a case-by-case decision that we'll make. There's no kind of blanket answer for you. But I would say that there are some strategic reasons sometimes to sell an asset that might be taken into consideration as well as the cost of capital. It might be an asset with a core risk reward profile. It might be an asset with some significant CapEx requirements that we don't think we'll get paid back for. And there's a lot of other reasons as well. So, yeah, numbers are important for sure, but sometimes there are other considerations that we look at as well.

Great. Thanks everyone.

Thanks, Daniel.

Our next question comes from Joab Dempsey with Truist. Please go ahead.

Hi. Good morning everyone. Just one for me, I'm wondering if you took a look at the Preferred Apartments portfolio that Highwoods ultimately bought, particularly the Charlotte assets? Thanks.

Hi. Good morning. We have looked at the various properties and assets included in that transaction before, and we are familiar with them. While we have not specifically targeted those assets for purchase in the past, we have examined them previously.

Great. It seems to have been addressed earlier in the question, but if a high-quality portfolio in the Charlotte market were to become available again, would you consider looking at it?

Yeah. We look at all opportunities across the Sunbelt and in the markets that we target and are core to us. And whether those be single-asset acquisition, portfolio acquisition, new development opportunities where we try to at Cousins look at all of the different opportunities that are out there. And then, try to allocate our capital in a disciplined yet compelling manner. And so we're open to all sorts of transactions. And I think have demonstrated that in the past.

Our next question is a follow-up from Jamie Feldman with Bank of America. Please go ahead.

Thank you for taking my question. I wanted to hear your latest thoughts on capital sources in the markets. With the recent improvements and your mention of increased tenant activity, do you see a shift in the demand for assets or a change in the amount of capital that’s willing to invest at different levels or more aggressively in underwriting? I'm curious about the latest update.

It's still relatively early post-COVID, and the volume of closed transactions hasn't significantly increased yet. However, we expect to see an uptick in activity over the remainder of this year and into next year. We're observing a growing interest from new investors in the Sunbelt markets, including large institutional investors who previously concentrated on Gateway markets, as well as international capital. More investors are now focusing on cities like Atlanta, Charlotte, Austin, and Dallas. This shift is driven by where people and companies are moving, and it seems that capital is taking notice. We anticipate that more investors will engage in the market moving forward.

Do you have any appetite to do larger JVs or funds, with more capital flowing into the region?

As Gregg mentioned earlier, when we see uses of capital, kind of compelling new investment opportunities, we look at all of our sources of capital, whether that's dispositions or JV capital. And try to make the best decision for a specific opportunity. But at Cousins, we don't feel capital-constrained today. And we do like the simplicity of our balance sheet. And that allows us in many cases to move forward. But if there were a strategic reason for a joint venture or bringing in a partner, we absolutely will consider those, if they've got strategic merit.

Okay. Great. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Colin Connolly for any closing remarks.

That's okay. It is a bit of a tongue-twister. I want to thank everybody for your interest in Cousins Properties and participating in today's Investor Call. We'll look forward to seeing hopefully many of you at the NAREIT conference in June. If you've got any questions for us, please don't ever hesitate to reach out to Gregg or Roni. Thank you all. And have a great weekend.

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