Cousins Properties Incorporated (CUZ) Earnings Call Transcript & Summary

Good morning. I'm Colin Connolly, President and Chief Executive Officer of our company, Cousins Properties. Welcome to the 2021 Annual Meeting of Stockholders, and thank you very much for attending virtually today. This marks our second virtual annual meeting, and we are pleased to use the technology to conduct our business, while adhering the social distancing guidelines in the time of COVID-19. The agenda for today's meeting is comprised of the formal business portion of our annual meeting, where we will review the proposals in our proxy statement, which consists of the election of directors, an advisory vote on executive compensation and the ratification of the selection of the company's auditor. We will also answer questions related to these proposals before formally closing the polls to further voting and announcing preliminary results of the voting. I will then provide a brief update on our business and key strategic initiatives underway at the company. First, let me introduce the other members of our Board of Directors who have joined us virtually for this meeting as well. Our Chairman of the Board, Bob Chapman; the Chair of our Audit Committee, Donna Hyland; the Chair of our Compensation Succession, Nominating and Governance Committee, Kent Griffin, Jr.; Charles Cannada, Scott Fordham, Lillian Giornelli and Dary Stone. With that, I will now call our 2021 annual stockholders' meeting to order. And I would like to introduce Pam Roper, our Executive Vice President, General Counsel and Corporate Secretary, who will conduct the formal portion of today's meeting. Pam?

Thank you, Colin. And let me echo our appreciation for the shareholders and guests in virtual attendance today. We will now conduct the formal business as set forth in the notice of meeting and proxy statement, which was mailed to all stockholders of record as of February 26, 2021. Cousins shareholders as of the record date were sent notice of the annual meeting on or about March 17, 2021, along with requests for proxy by the Board of Directors and instructions on how to access this year's proxy statement. The notice of annual meeting also stated the date, time and meeting purpose. Our inspector of elections has certified that a majority of the company's shares are represented by proxy at this meeting. And therefore, we have a quorum to conduct business, and this meeting has been duly called to order. For all stockholders who have entered the virtual meeting with your control number, you may have previously submitted your proxy or you might have elected to vote today. To vote or submit questions, please log in as a stockholder by entering the 16-digit control number you received with your proxy materials. If you have voted your shares prior to the start of the annual meeting, your votes have been received by the company's inspector of election, and there is no need to vote those shares during the annual meeting, unless you wish to revoke or change your vote. To vote now, please click on the vote here button on your screen. As outlined in our rules of conduct, which are posted in the web portal, we will answer questions at this time only on the proxy proposals. If you had entered the meeting using your control number, you may now submit questions through the web portal. While we permit time for shareholders who haven't already done so to complete their voting, I'd like to remind you that some of the statements made at this meeting may be considered forward-looking as defined in the federal securities laws. These include statements about beliefs and expectations or predictions of our future results. Please keep in mind that these forward-looking statements are subjected to risks and uncertainties that may cause our actual results to be different. We refer you to the information contained in our 10-K, 10-Q, 8-K reports and their amendments and exhibits, which have been filed with the Securities and Exchange Commission and to our website, www.cousins.com, where you can find supplemental information, including reconciliations to GAAP. In the proxy statement for this meeting, the Board of Directors propose that the shareholders vote on 3 formal business matters. First, the election of 8 directors who are identified in our proxy statement, and all of whom are present at this meeting via telephone or via the web. Second, an advisory vote on executive compensation. And third, the ratification of the selection of Deloitte & Touche LLP as the company's independent registered public accountants for the fiscal year ending December 31, 2021. A representative from Deloitte & Touche has also joined this meeting. No questions having been submitted through the web portal related to the proposals. We now close the polls for voting officially. Based on the preliminary voting results, our inspector of elections has indicated that a majority of votes cast has been voted in favor of each proposal. So each of the nominated directors has been elected and the other proposals have been adopted. As noted earlier, the voting results announced today are preliminary. The final voting results will be included in our filings with the SEC later this week. This concludes the formal portion of our 2021 Annual Shareholder Meeting, which is now formally adjourned. Now I'd like to turn the meeting back over to Colin Connolly, our President and CEO, to provide you with an overview of 2021 and beyond.

Thank you, Pam, and many thanks to everyone for joining us today, which marks our second virtual annual shareholder meeting. Across all areas of our business and in each of our markets, 2020 was an extraordinary year. While we are starting to see early signs of hope with the promise that vaccines offer, the COVID-19 pandemic arrived swiftly and transformed our industry, communities and countries. At Cousins, the health and safety of our customers and our employees are always our top priority. And I've been so proud of our dedicated team that ably navigated the pandemic while consistently providing our customers with the same excellent service they expect from us every day. As I often say to our team, crises don't build character, they reveal character. Our employees are the foundation of our success and we are committed to fostering an inclusive culture that embraces diversity. We prioritize having a workforce that reflects the diversity of the qualified talent in the markets in which we operate. Additionally, we believe strong financial returns are driven by creating a positive impact in the communities in which we operate, and that will always be a critical part of our success. Cousins committed $900,000 from our nonprofit foundation to support organizations focused on COVID-19 relief and important social justice causes. Last year, the company also issued its second environmental, social and governance report. Our ESG initiatives are at the foundation of what we do and how we operate our business. Cousins is committed to developing and acquiring high-quality assets, operating them responsibly and seizing innovative improvements wherever possible. We are proud that approximately 72% of our portfolio is LEAD certified. Approximately 76% are energy certified. And in 2020, Cousins earned its sixth consecutive Green Star recognition from the global real estate sustainability benchmark assessment. Our commitment to thoughtful and responsible management and operation of our portfolio is a key component of our DNA. This approach not only encourages office users to select us for their corporate operations, but also enhances the communities where our buildings are located. Turning to our financial performance, we were well prepared to weather challenging times with a simple, yet compelling strategy that enabled us to operate effectively throughout the year and into the start of 2021. Cousins creates values for our shareholders through the ownership of the premier office portfolio in the leading Sun Belt markets of Atlanta, Austin, Charlotte, Dallas, Phoenix and Tampa. The core principles of our strategy include: first, to build the premier urban Sun Belt office portfolio. Second, to be disciplined about our capital allocation and focus on new investments where our platform can add value. Third, and importantly, to have a best-in-class balance sheet. And finally, to leverage our strong operating platforms that take an entrepreneurial approach in our high-growth markets. We have made significant strides in progressing this strategy. Let me highlight a few financial metrics that illustrate our 2020 performance. First, our balance sheet is exceptionally strong, with net-debt-to-EBITDA of 4.8x and liquidity of approximately $772 million. Second, we have a terrific development pipeline of $449 million, that is 77% pre-leased and attractive land sites where we can build an additional 5 million square feet. Third, we entered this period as a LEAN organization. With G&A as a percentage of our enterprise value at 0.37% for the year ended 2020, which is one of the lowest in the entire public office REIT sector. Despite the challenges of COVID, our team continued to execute at a high level and produced strong financial results for 2020. Some highlights from the year include increased second-generation net rent per square foot by 27.2% on a straight-line basis and 13.1% on a cash basis. We delivered FFO of $2.78 per share for all of 2020. We acquired 3.4 acres of land in the south end submarket of Charlotte for a gross purchase price of $28.1 million to be used for future development to be called south end station. We also acquired another 2.4 acres of land in the south end for a gross purchase price of $18.8 million to be used for a future development called 303 Tremont. We acquired The RailYard, a 329,000 square foot creative office asset, also in the south end submarket of Charlotte for a gross purchase price of $201 million. And we commenced development of $100 million, a 287,000 square foot office building in Phoenix. This project is being developed in a joint venture, in which we hold a 90% interest and is expected to begin operations in early 2022. As we approach the other side of the health crisis, our conviction around our Sun Belt trophy office strategy has only grown. Our strategy positioned Cousins at the intersection of two powerful trends driving the office sector, the migration of the Sun Belt and a flight to trophy-quality properties. While these trends were underway before COVID, they are likely to accelerate. For example, the top 5 migration cities in 2020 were Phoenix, Dallas, Orlando, Tampa and Austin, while the bottom 5 cities were New York, Los Angeles, Chicago, San Francisco and Detroit. We've also seen announcements of relocations and large expansions in our markets from companies, including Oracle, Microsoft, Google and Amazon. In fact, 2020 was a record year for corporate relocations and expansions at Austin, with 39 companies that announced plans to add nearly 9,900 jobs in the greater Austin area. I am confident we will see additional large relocation and expansion announcements later this year. These moves will further validate the importance of the office to companies in the power of our Sun Belt footprint. As we look ahead, I am optimistic about our future. I'm confident we will weather the current economic disruption with our differentiated strategy and a trophy portfolio in the best Sun Belt markets. We have taken steps over the years to create one of the strongest balance sheets in the office sector and combined with our existing and future development pipeline, Cousins is uniquely positioned to deliver long-term growth for our shareholders. Importantly, we have the right balance sheet with low leverage and ample liquidity to capitalize on the opportunities. I want to thank our hardworking, talented and flexible teams for their dedication and excellent work under the toughest circumstances over the past year. I would also like to take a moment and recognize our senior leadership team on the call with us today. Gregg Adzema, our Chief Financial Officer; Pam Roper, our General Counsel; John McColl, our Executive Vice President of Development; Richard Hickson, our Executive Vice President of Operations; and Kennedy Hicks, our Executive Vice President of Investments and Managing Director of our Atlanta market. Before closing my remarks, I would also like to thank our shareholders. We appreciate your continued support and loyalty. On behalf of the entire team at Cousins, it is an honor to work for you. Subject to the limitations outlined and the rules of conduct referenced by Pam, I will now entertain any general questions from stockholders.

At this time, we have no questions that have been posted.

With no further questions, I'd like to thank you all again for your interest in Cousins.