Q1 2020 Earnings Call
[music].
Good morning, and welcome to cousins properties first quarter kits out there 20 conference call all participants will be in listen only mode. So do you need assistance. Please said no what caused that [laughter] starkey followed by zebra.
After today's presentation, there will be an opportunity to ask questions.
Please note that is being recorded I would now like to turn the conference over to Pan refer General Counsel. Please go ahead.
Thank you.
Good morning, welcome to cousins properties first quarter earnings Conference call with me today, our Colin Connolly, our President and Chief Executive Officer, Richard Hickson, Our executive Vice President operations, and Gray, our Chief Financial Officer.
The press release and supplemental package were distributed yesterday afternoon, as well as furnished on form 8-K, and the supplemental package. The company's reconcile all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reggie requirements. If you did not receive a copy. These documents are available to the quarterly disclosures and supplemental actually see information like.
Any investor relations page of our website.
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.
In particular, there are significant risks and uncertainties related to the scope severity in duration of the 'cause. It 19 endemic along with the direct and indirect impacts that the pandemic and related mitigation efforts, including governmental requirements in private sector responses may have on our financial condition operating results and those of our customers 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 discussions and potential risks, including those posted by posed by the cobot 19 is contained in our filings with the SEC.
With that I'll turn the call over to call in college.
Thank you Pam and good morning, everyone.
These are undoubtedly extraordinary times.
I want to begin by thanking the break healthcare workers and first responders across this country risk. There lies everyday to help the nation battle covert 19.
We are truly indebted to their work as our industry.
Communities in country navigate unprecedented circumstances.
At cousins, the health and safety of our customers in our employees is our top priority.
In these challenging times, we have taking great care to ensure that we are staying true to our values and principles.
We've always taken the approach that if we take care of our dedicated employees, who deliver excellent service to our customers Our company will drive strong results for our shareholders.
This remains as true today as it did when cousins began over 60 years ago.
'cause it has been closely monitoring and following the CDC guidelines to help protect the health of our teams.
Customers and communities.
Importantly, we have not had a cousins employee to date test positive for coated 19.
We're thankful for that.
Our employees, who can work from home have been doing so since mid March.
We have also adjusted our operations to ensure the safety of are essential property employees as our buildings all remain open to support our customers.
As we look ahead, we will continue to follow CDC state and local guidelines to fully prepare ourselves and our customers for a new normal when business returns to the office.
We also believe we have an obligation to get back to the communities in which we live and work, especially as many of those communities currently face extreme hardships.
Communities fight totaled 19 on many fronts.
Cousins has committed $900000 from our nonprofit foundation to support organizations fighting the virus on the front lines or helping those who are economically impacted by it across our geographic footprint.
I firmly believe that crises don't build character they revealed character and I'm. So proud that cousins is handled this difficult situation with compassion.
Great. Thanks.
The coded 19 pandemic, a rise swiftly and our lives changed almost overnight.
Appropriately we're all focused on what has to come.
While dealt delve into that in a moment.
I want to quickly highlight our fantastic first quarter results.
The team delivered FFO of 76 cents per share during the first quarter.
Same property cash NOI increased by 11.4%.
Second generation.
Cash rents grew by 14.3%.
Also we closed three property dispositions would crest in New Jersey.
First tower and gateway village in Charlotte.
Gross proceeds totaled over $533 million, which reduced our net debt to adjusted EBITDA to 3.66 times at quarter end.
These underlying metrics are exceptional and highlight the strength of our portfolio coming in to this current health crisis.
And just six weeks the economy pivoted 180 degrees from robust growth.
To certain recession.
Without question, the commercial real estate sector will be adversely impacted as leasing activity slows.
Black Swan event, such as its current health crisis never provide in early warning.
Fortunately at cousins, we continuously plan, both operationally and financially for potential disruptions.
Many years ago, we crafted a compelling and resilience strategic plan.
Our core principles include the following.
First assembled the Premier Sunbelt office portfolio.
Second maintaining disciplined approach to capital allocation.
Third build the best in class balance sheet.
And lastly, create strong local operating platforms.
We strictly adhere to our principles, even during extended bull markets like the last several years.
Thus, we are well prepared for this unprecedented change in the market.
Looking forward, let me highlight the metrics that we believe will matter most.
First we have a fortress balance sheet with low leverage and liquidity of $1.1 billion.
Second.
Our trophy portfolio of 19.4 million square feet is 93% leased as of quarter end.
With 6.6 years of average lease term.
And we have a diverse and financially strong customer base, who as of this morning has now paid 95% of total rent in April.
Importantly, our portfolio is among the newest vintage in the office sector and located in the best sub markets across the sunbelt.
Third our 566 million dollar development pipeline remains on time and on budget as construction continues across our markets.
Fortunately the office development pipeline is 82% committed to leading companies like Amazon and Facebook in will add 70 million of NOI by year end 2022.
Fourth.
Isn't entered this period as a lean organization.
With GSK as a percentage of enterprise value at 42 basis points for the year ended 2019, which is one of the lowest in the office sector. According to Green Street advisors.
Lastly, our dividend is well protected with an essay the payout ratio of 67% for the year ended 2019.
Cousins is extremely well positioned to weather the impacts of this pandemic.
Naturally many are speculating about the long term impacts of cobot 19 on the office sector.
On one end of the spectrum.
Work from home is undergoing a nationwide test and is proving viable, albeit not efficient we're optimal for most.
On the other end.
Density and office basis will clearly be reduced to protect employees health.
These two competing forces will play out over time. So it is far too early to project. The net result.
We do believe that the pandemic will accelerate other trends that have already been influencing the office market.
The health and wellness of employees, both physical and mental will likely increase in importance to corporate America as it should.
As a result, we believe that newer higher quality and better Amenitized office properties should fare disproportionately well.
Also migration to the leading cities in the sunbelt could potentially increase overtime.
Markets like Atlanta, Austin in Charlotte.
Offer dynamic environments, while also providing greater personal space.
Cousins is well positioned at the intersection of these two powerful long term tailwinds.
While the post coded 19 environment and what eventually becomes our new normal it's still very fluid.
We feel confident that we're in the right markets.
With the REIT portfolio in the right customer mix.
This combined with an exceptionally strong balance sheet position.
Positions us for future growth opportunities and long term success.
We continue to believe that our strategy and building the preeminent Sunbelt office read is unique and compelling even in the most challenging environment.
As a final point.
I would like to provide color on our decision to withdraw 2020 earnings guidance.
Our approach should not be interpreted as a lack of confidence in the resiliency of our portfolio.
Rather our decision is an acknowledgment that coated 19 has an unknown duration and has created unprecedented economic uncertainty.
At cousins, we pride ourselves on our transparent relationship with the Investor community.
To that end, we provided detailed information in our supplemental on the potential impact of co that 19 on our business based on what we know today.
As you will note our strong start to the year.
In conduct conjunction with potential cost savings and long term incentive compensation and interest expense.
Helps mitigate a meaningful component of the potential negative impacts in 2020 relating to the health crisis.
Before turning the call over to Richard.
I want to thank the cousins team, which continues to work tirelessly and all of our markets.
I, particularly want to recognize our property management and engineering teams, who are central to our building operations.
They have continued continued to calmly provide outstanding service to customers under difficult circumstances I.
I appreciate your talents and dedication to the company.
I have never been proud to be part of cousins Richard.
Thanks, Colin good morning, everyone.
I'll begin with a quick review of our first quarter performance similar to prior quarters. Our portfolio is performing extraordinarily well is the pandemic arrives our team completed over 475000 square feet of leasing in the first quarter, 73% of which were new and expansion leases.
Rent growth was notice we strong was second generation net rents increasing 14.3% on a cash basis.
Net effective rents for the quarter came in at $25, a one cents per square foot the level surpassed in only two other quarters. Since 2017. We also ended the quarter and 93.3% leased with employees gross rents at a record $39 in 29 cents per square foot.
Our same property portfolio increased to 94.8% leased as of quarter end.
However, as we all know the favorable market backdrop present for much of the first quarter is now at backdrop of distinct uncertainty with the arrival of cobot 19 market activity substantially cooled and our senses. The majority of our current leasing activity is mission critical in nature.
Despite the new market backdrop. It is interesting to note the 28% of our first quarter leasing activity was signed in March amid the onset of the pandemic.
Additionally, we signed a 133000 square feet of leases in April, including a 74000 square foot new lease with a leading global law firm at Colorado Tower in Austin.
This new customer will occupy space currently leased by parsley energy with planned phase commitments starting in early 2021.
This new long term lease represents a significant rent roll up while at the same time, reducing our energy exposure, which I will talk about later.
Our signed April activity excludes any lease amendments precipitated by the pandemic.
And saw second generation net rents increased 16.8% on a cash basis.
With regard to ongoing leasing activity our lease in negotiation pipeline has seen some erosion, but remains squarely in line with our latest 12 month average.
Earlier stage leasing pipeline is decidedly less active however, given the various shelter in place orders, but theres still some tour of proposal activity happening in general today, we have observed more leasing decisions being delayed rather than canceled.
The bottom line. It is still too early to tell the full extent of the impact of this demand shock.
As it relates to our development pipeline or construction activity has continued largely on interrupted in all of our markets with a small set back in Austin measured in days and our active development pipeline as well leased on time and on budget.
I also want to share some other insights beyond our leasing and construction activity in an effort to give you a more comprehensive view into our current positioning in real time business activity first some commentary on the quality of our revenue and customers.
As you might expect we estimate about 93% of our annual revenue is contractual rent for office and retail space.
Cousins has limited exposure to non contractual revenue with transient parking as our largest exposure our total parking revenue is about 7%.
Of revenue with transient parking representing about 20% of that were 1.4% of total revenue.
Our customer base as well diversified across many industries with an average office customer size of approximately 22000 square feet.
Our largest industry exposure is technology, it almost 19%, which was a leading growth sector heading into this crisis and is generally expected to be a leader coming out.
Our exposure to more economically sensitive users like retailers and flexible office providers is only 1.7% and 1.8% of annualized rent respectively.
Additionally, we have to medical office buildings, and Atlanta, the total 339000 square feet at share and represent 2% of annualized rent that share.
Some of the smaller practices and these medical assets to perform elective procedures have seen some temporary disruption, but these properties are generally anchored by large hospital customers with much deeper resources.
Our top 20 office customers, which represent nearly one third of our annualized rent or an impressive group for one the general services Administration General services administration as a top 20 customer.
Of the remaining 1916, our public or are a major subsidiary of a public company. In 13 are currently investment grade. According to S&P Moodys, we have one law firm in our top 20 customer list Mcguire Woods, which is a well regarded analog 50 from.
Given the state of the energy industry I want to dive deeper into our energy and utilities customer base.
While this segment represents 5.8% of our annualized rent from a practical perspective, we view this to be only 3.7% now for some details of our approximately 900 customers portfolio wide fewer than 30 operate directly in the energy sector of these three largest by wide margin.
And our old vintage of USA, formerly in Cana in Dallas Apache Corporation in Houston, and Parsley energy in Austin together, those 30 account for 67% of our energy exposure.
Vintage of and Apache are currently investment grade rated by either S&P or Moody's and all three are highly sophisticated have critical mass or well capitalize relative to peers and we feel are well positioned to whether this current environment.
Another critical dynamic of note is that long before this pandemic vintage of Subleased, 80% of its 319000 leased square feet at legacy Union, one in Dallas to non energy companies the inventive non energy Subleases and the pending give back of 74000 square feet by partially enter.
Gee that Colorado tower, or why we view, our true energy industry exposure to be only 3.7%.
I would also like to touch on the durability of our rent revenue, namely as of the end of the first quarter only 4.5% of our portfolio contractual rent was scheduled to expire during the balance of 2020 and only 21.4% is scheduled to expire through 2022.
We are reassured by this lower cumulative expiration schedule in the coming years and as always our team is laser focused on converting expirations to signed renewals.
I'll now turn to April rent collections I.
Im pleased to report that as of today, 95% of our customers overall have paid April rent charges.
Not surprisingly some customer segments are lagging specifically our retailer stand at 33% paid our flexible office providers at 75% paid and our medical office customers that 90% paid most importantly, though 96% of our office customers pay.
At April rent and 100% of our top 20 customers paid April rent I would also note that 99% of our energy customers paid April rent.
These numbers do not reflect the impact of any rent relief amendments completed to date or any application of security deposits. We attribute these encouraging numbers to great customers and our hard working operating team.
That said collections in the coming months could potentially be more challenging than April as the full economic impact of this health crisis comes into view.
We have not been immune to rent relief quest rents release requests, which have spanned a variety of industries as well as customer types and sizes. We have received requests from the majority of our retailer and flexible office provider population and from a much lower proportion of our traditional office customers.
Early on we intentionally and proactively began working with nearly all of our retail customers on rent relief and that effort has been successful so far.
On the office side, we're being very selective and entertaining requests appropriately scrutinizing each customer's financial situation.
And crafting our approach based on our determination of need credit risk and existing lease terms. This is not a one size fits all game and we are approaching each request based on its merits outcomes will range from a near term bridge abatement and in exchange for either one a medium term paper.
Back to an extension of term three removal of customer lease rights or options or for a combination of any of these as Colin said our senses. The current environment is also likely to provide compelling opportunities to create long term value by proactively.
Renewing select customers early however by doing so we may pull forward renewal related rent abatement and further impact near term cash operating income.
Finally, I would like to discuss our property level operations throughout this pandemic all of our property properties have remained open with prudent adjustments to our security access visitor and cleaning protocols. Our operations team has performed at the highest level adjusting staffing to reflect distancing guidance.
Lines and daily priorities to meet the demands of each day, all the while keeping states throughout this crisis, we have sought to reduce energy consumption given our low physical occupancy and in addition, with low occupancy we have seized on the opportunity to perform preventive and other critical maintenance in a time when it will have.
Minimal disruption to our customers, while we know we are using less energy for the time being and we expect the property tax environment should be more favorable than in prior years. We feel there are still too many unknowns to reasonably quantify the potential operating expense savings for the full year.
Our operations team has also been intently focused on finalizing a comprehensive operational plan for the anticipated returned to full occupancy at our buildings and finally, depending on how economic conditions evolve we have charting the course for how we may delay or reduce building capital expenditures without it.
Packing leasing the quality of our properties or our customer service.
Before I hand off to Greg I want to say, how proud I am of the cousins team and the way our teammates across the entire company have responded to this pandemic they have more than risen to the occasion and demonstrated great points competence ingenuity and an unwavering focus on providing great.
Support and service to our customers and to each other I'm inspired by the fact that our team will emerge from this pandemic stronger closer more resilient and with invaluable perspective.
Greg.
Thanks, Richard Good morning, everyone.
I'll begin my remarks, this morning by providing an overview of our quarterly financial results and activities followed by a discussion of our balance sheet for closing my remarks with information that we believe will help you assess our outlook for the balance of 2020.
As you could tell from counted Richard's earlier comments, our first quarter results were outstanding on several fronts leasing velocity with solid second generation leasing spreads were positive.
And same property year over year cash NOI increased by double digits bottom line. These were among our strongest organic growth numbers over the past decade and are clearly indicative of the positive momentum we had heading into the cobot 19 disruption.
Despite the volatility of the past few weeks, our first quarter results were very clean with little if any unusual noise running through the that.
That being said, our general and administrative expenses were significantly below prior quarters as well as the run rate we provided in our previous earnings guidance.
As has been the case many times over the past few years. This variance was driven by our long term incentive compensation accrual.
Like most Reits our share price fell precipitously during the second half of March and our compensation accrual reflects this decline.
The variance would have been larger but for our board's recent decision to begin settling our performance based LTI in stock instead of cash beginning with the LCR issued in 2020.
The other components of Gionee were generally in line with our forecast.
In addition to the first quarter property dispositions that we've previously disclosed in the talent discussed the beginning of the call. We also sold the remaining land and our Wildwood development in Atlanta during the first quarter generating a gain of a little over $1.3 million.
This sale was included in the assumptions, we provided in our prior earnings guidance.
Subsequent to quarter end, we also completed a one year extension of the existing alone on our Carolina Square asset North Carolina.
With this extension we have no further debt maturities during the remainder of 2020.
Turning to the balance sheet.
We've entered this period of volatility with exceptional financial strength and outstanding liquidity among the very best of our office peers, and perhaps the strongest financial position in the history of cousins.
Not only do we have low leverage our liquidity position of over $1.1 billion at the end of the first quarter.
Comprised of a $1 billion undrawn credit facility and over $100 million and cash is more than enough to fund the remaining $200 million necessary to complete our current development pipeline.
In addition, we have no debt maturities until a small maturity of less than $40 million in may of 2021, and beyond that a well balanced debt maturity schedule with no single year, representing more than 14% of our total debt outstanding.
In conclusion as you could see from our press release last night, we have withdrawn 2020 earnings guidance I don't need to repeat with common said earlier, but I do believe it merits reiterating that this withdrawal does not reflect the lack of confidence.
In fact, as you could tell from our strong first quarter results. We entered the covert 19 disruption with tremendous positive momentum.
Rather it reflects a lack of visibility.
Despite no specific earnings guidance, we have provided will be hope is valuable information that will assist you in assessing our performance over the balance of 2020.
The actual numbers within this information were included in our press release. So there's no need for me to rebound back to you. However, I believe that can add value on this call by providing some context, where appropriate first our prior earnings guidance assumed approximately one and a half million dollars of revenue generated from new speculative leasing.
For the remainder of 2020.
To assume 100% of that doesn't materialize may prove to be too conservative, especially in light of what Richard said earlier about our ongoing leasing discussions with new customers. However, the certainty and the timing of these discussions remains very fluid right now and we believe a conservative approach is merited.
Next we have taken our actual experiences with rent deferral and parking over the past six weeks and Weve used this to generate forecasts on both items over the remainder of 2020.
As you can see the forecasted ranges for these items are fairly wide.
This reflects the highly uncertain nature of the duration of the cobot 19 pandemic and the economic impact on office owners.
Turning to Gina expenses, the largest driver for the remainder of 2020 will be our performance based long term incentive compensation as I stated earlier, we're not selling this compensation stock, which will reduce volatility. However, we did leave previously issued LTI unchanged. So the volatility will take a couple years to wind down.
Moving on floating rate debt comprised 15% of our total debt at quarter end.
We continue to use the forward to fiber curve as our tool to forecast our floating rate debt expense. This curve as move down significantly since the beginning of the year and as a result, so as our interest expense forecast.
Next we have executed a termination agreement with partially energy at Colorado Tower as Richard discussed earlier.
The associated termination fee is $2.8 million.
With $2.1 million of that running through FFO and $700000 of straight line rent being written off.
This agreement was completed after quarter end and therefore these numbers are not and our first quarter results, but will be realized between the second and fourth quarter. This year.
This transaction included a releasing the three of partially sponsored half floors in the building to a global off firm with a significant rent roll up in a lease maturity extension from 2025 to 2033, partially will remain in the other two and half horse to building.
Finally.
Actually the largest cobot 19 variable driving our performance for the remainder of 2020.
Tenant defaults is the hardest to qualify I'm sorry to quantify.
As noted earlier total April recollections were 95% as of this morning.
And we've received 100% from a top 20 customers. So we start from a very strong position.
However collections in May and beyond are difficult to forecast with any conviction and we believe it's prudent to hold off on making predictions at this time.
With that I'll turn the call back over to the operator for your questions.
Thank you.
We will now begin the question and answer session ask the question in a press Star then one on your tax downtown for using a speakerphone. Please pick up your handset expressing Nikki Keith.
Relative to your question. Please press Star then too.
The first questions today comes from Blaine Heck with Wells Fargo. Please go ahead.
Mr. Heck your line is open.
Sorry about that can you hear me.
We can area.
Great. Thanks, Good morning, Kolon or Richard just wanted to get your updated thoughts on on the Midtown Atlanta market specifically.
As we know we've seen a pretty significant an uptick in construction, which seemed like it was going to be met with really strong demand pre cobot.
Given that the music and stop here a little bit how are you guys thinking about the risk in that sub market in particular in do you think we could see some meaningful downward pressure on rents if some of those projects don't get leased up.
Hello, Good morning, Blaine and.
The good to hear your voice the.
Midtown has been an exceptionally dynamic market in in Atlanta, and and that's primarily been driven by the technology community and its adjacent see too to Georgia Tech so over the long term we.
We believe those trends will continue in as Richard outlined we do expect the technology sector to help lead the country out of this this current market environment and that being said on on the supply side. If you. If you look at the overall statistics on the construction pipeline in Midtown.
Stands a little over 4 million square feet now from from our vantage point.
About 1 million of that square footage is on the other side of the connector and we felt has really never competed.
With the core of the Midtown.
Submarket, so an aggregate, it's about 3.4 million square feet that stands at 67% Preleased.
But from our intelligence on the ground, we do feel like there are several very large leases that have either been signed recently, but yet to be announced as well as some others that we think we'll get signed relatively soon with very very large organizations. So in aggregate, we think that will put the.
Pre leasing in the core of Midtown right about 80%. So we do think there is some.
Some cushion to the the supply and demand that might not be.
Obvious in the overall statistics.
Okay, great. So some of those leases still are going through that but that's good.
And then you know Collin I guess bigger picture do you think theres going to be much of an opportunity to buy buildings or land distressed values or even just put money to work through acquisitions that pricing that that might be accretive for you guys in DC more opportunity for those sorts of investment than any specific markets that you.
Guys operate over the others.
Well Blayne, we bigger picture has set up cousins properties to find compelling investment opportunities regardless of the cycle.
Whether it be development as we've been able to accretively view over over the last several years or who are from an acquisition perspective, clearly with the the dislocation in the market I think you'll see our buying a shift from development to acquisitions and as Greg outlined we have an exceptionally strong balance sheet.
And over $1 billion of liquidity, so as attractive investment opportunities emerge and they likely will in the coming months, we'll be positioned to to look at those opportunities and.
And we'll do so at the time, but but I do think were.
You know theres likely some time that that will need to passes is is the bid ask between buyers and sellers I think will remain a little bit wide until we get further into the year.
In any specific markets, you expect to see maybe a little bit more distressed than others.
No I don't if you look at the again the underlying fundamentals across all of our markets today. They entered this period.
In very strong position, both from a supply and demand equilibrium and so so they're all.
Strong today, obviously, the dislocation will result in some weakening of all of the markets, but but we don't see any of the markets that were in as better or worse position header entering this phase.
Got it thanks.
The next question comes from Jamie Feldman with Bank of America Merrill Lynch. Please go ahead.
Okay.
Thank you and good morning.
I was hoping to get.
Again, a little bit more color just on Austin in general.
Obviously, the the news of.
He will bring in a law firm on and.
Partially shrinking it sounds like it said net positive for the portfolio, but just generally.
Compared to some of the other markets around the country. How would you say tenants are reacting.
Got to.
The crisis, and then I guess, just any longer term change in their space needs.
Well that Jamie its Collin and good morning and.
Again, often entered this period.
As strong as it.
It really is if it's ever been in and that that growth in Austin was primarily driven by.
Extraordinarily large technology companies that.
That that had been growing and I think in this environment that we're seeing many of those companies can continue to to grow so that gives us again, a lot of confidence in the long term.
Fundamentals for Austin again, there will be I'm sure some.
Near term disruption in the fundamentals there, but as it relates to the the underlying customers and their usage of space in many of the technology companies had adopted in a highly dense work environments and whether that be hoteling concepts or events seating and in our early.
Conversations with with those customers I think they're likely to.
Adapt there.
Workplace environments to.
To to reduce the density and.
In focused on the health and wellness their employees. So that's the early feedback and that will obviously take a little bit of time to to play itself out.
Okay.
And so as you think about the change I mean.
Yeah thinking about your.
You May recent big acquisition there.
Anything that you would have done differently or any any property types, you think are better or worse suited for what's to come.
In Jimmy referencing the tier transaction tracked yet.
Yes, again as we look back that we think the timing of the tier transaction.
Last year is only position the company better and made a stronger both from an overall enterprise value, but also increased our concentration again to the technology sector, which which continues to grow and will likely be a leader for.
For the long term and so.
We think that that is only enhanced our positioning as a company and importantly, as we Kane.
Out of that transaction, we had articulated earlier that while leverage ticked up as a part of that transaction that we were going to in a very disciplined manner bring our leverage down to our long term targets and so we're we're thrilled that we were able to close the transactions in the first quarter.
Sure.
Hearst tower Gateway and.
And would crest in New Jersey, So we had we had a plan.
Both with the transaction and post closing and we feel.
This terrific that the team discipline in a disciplined manner executed on that.
Okay. Thank you and then just.
Last from me just thinking about 10000, Avalon 300, Colorado and 100 mill can you just talk about the leasing pipelines are interest pipelines for those projects.
Sure change, though that hit each one of those and here in Atlanta at 10000, Avalon, We just announced that as we signed a couple of leases during the fourth first quarter and have increased the the occupancy the percent leased in that building to 75%. So.
So really just two floors left to go and that is a differentiated product.
In.
The Alpharetta Submarket highly amenitized.
And importantly, a lot of open space. So we think that we'll continue to do well. The other projects you referenced that 300, Colorado Theres Theres just two floors speculative nature, we had some activity on on that space I think it it will likely.
Paul This as we work through the pandemic, but there is customer interest in that space that we don't think will go away I think it will likely just slow as we work through that and then out at 100 mill.
We have started that project at 44% pre leased with Deloitte, having one floor in a fortune 50 technology company with the balance in that space and we do look forward hopefully in the coming weeks and months to share the identity that customer, but I think when the market appreciates.
That company is they'll they'll have confidence in the potential growth opportunity with that particular customer.
Okay got you actually keeping space off the market for that goes right.
Not at this time.
Okay.
Alright, thank you.
Thanks, Jamie.
The next question comes from Michael Lewis with Suntrust. Please go ahead.
Great. Thank you.
I wanted to follow up on the question about a one bedroom now.
Theres going to.
Go ahead and commence construction I was just wondering if that decision was made in January earmarks kind of pre corporate 19 or or products.
And if any of your underwriting or our expectations there have changed from.
The beginning of the quarter yen.
Okay.
Michael its Collin in we.
Started that project really prior to the onset.
Pandemic that being said.
With the pre leasing that we have in the underlying customer base that that is in place and I think over time will become known to the market.
Gives us a lot of confidence in that project and candidly the decision wouldn't have been different if it was the groundbreaking was post.
The onset of the pandemic.
Okay great.
And then.
Again with the pandemic.
Slowing down below economy.
I was wondering how that impacts.
That anthem has coming up about 200000 square feet, and then Norfolk, Southern obviously, we know when they move out at their coding are there longer timelines or or other their challenges now.
Business.
This is Richard.
Yeah, we view when there is activity on on all of our kind of larger expirations, we've been talking about last few quarters.
Whether be of a plaza in Charlotte or like you referenced the anthem space here in Atlanta, and Norfolk, Southern coming up, but but we still have activity on all those those opportunities and we're so excited about about getting those released and I think thats. That's right. The characterize just a bit of a pause here.
Kind of consistent with the rest of our pipeline, but but we still feel good about the activity.
Thanks, and then.
Lastly, permitting.
Summary, it's where we're repurchasing the shares when the when the share price was 50% or 100% iron than it is today and.
And now they're not buying so that they can focus on leverage and liquidity you prepared your balance sheet when times were good.
And now your stocks down about 30% year to date, you're at 3.7 times.
With all this liquidity.
You mentioned kind of thinking through maybe shifting toward acquisitions versus development.
How do you consider the attractiveness of potentially repurchasing the shares.
As part of those options.
Michael the its kolon the.
Certainly the the purchase of our own stock is always one of the investment opportunities in front of us that that we as a team in conjunction with our board evaluate.
All the time I think is we sit here today, obviously with the dislocation in the market and and really.
No no true market visibility as to.
Asset values, and where appropriate cap rates are.
We feel like we can be prudent.
In continued to be patient and thoughtful as this plays out further and as we get to those points and we've got more visibility.
It will always consider share buybacks, along with acquisitions and other environments development.
Okay. Thank you.
The next question comes from Dave Rodgers with Baird. Please go ahead.
Good morning, everybody wanted to follow up on a couple the development question 300, Colorado I think Thats also parsley.
In bulk at least in so have you guys had any discussions do you and your partners think theres an opportunity to maybe recapture some of that they just given the transaction.
Quarter and kind of move forward in a higher rent there I know, it's a little on certain at this time and then maybe a brief comment on 121 entity office I think that 33000 square feet is mostly.
Kind of timing and any discussions there.
Well good morning, Dave the.
As it relates a 300, Colorado, we havent had any.
Specific conversations with with partially to to recapture space over time, if they decide.
The they'd like to become more efficient.
Those are conversations we could have benefit or they can always evaluate sublease options, but but we feel again from our perspective that that will be a project that will deliver the here at the end of the year and it's a it's a very well capitalized company that will begin paying rent at the during the first part.
Next year.
At very attractive rental rates. So from our perspective, there is no urgency to try to recapture space from them that being said overtime I think there again with some of the larger technology companies there could be an opportunity for partially to do that that that will largely be driven by.
Hi, partially not not cousins.
It relates to 120 West Trinity There is a small office component there that that is 100% pre lease but I'd just keep in mind that thats a project that we own just 20% of so from the overall impact to the again the portfolio. It's it's relatively minor.
Right Thats helpful. Collin and then maybe just broader conversation on that that co working space and you gave some good deed prepared comment but in terms of kind of the request for relief and and how that business looks going forward. Your continued comfort with that I mean have you had some mando in discussions about not only deferments, but taking space back what are those.
Operator, I want to do today.
Yes. This is Richard I'd say, one we haven't had any conversations with any of our or co working operators are flex office operators about recapturing space.
And the conversations we've had today to been been very constructive.
Looking through their business, how it's been impacted I mean, there, they're clearly seeing an impact.
And but it's still early to tell how it's all going to play out structurally for their business models and the timing.
But we feel good with our position it's like I said in my remarks still.
Less than 2% of our aggregate annualized rent. So our exposure is at a really healthy level and we have 11 different locations across our portfolio between four different operators right. Now. So we're we're also diversified pretty well. So we feel good about where we stand with co working the only other thing I'd add Dave is that again.
The vast majority of our co worker co working customers pay their rent.
In in April and we'll obviously is this plays out I am sure have some conversations with those folks about.
Some deferrals, but I'd make a broader point as it relates to.
Co working.
Which we think as a is a complimentary offering our buildings is likely here to stay in if you really think back over decades shared office space has it has been around that is in its worked its way through cycles. As we look forward kind of the current form of it as it evolved into a highly dense.
Shared environment, I think you'll likely see that adjust overtime, but we think the overall concept of shared office space.
In some small percentage will continue and some of our customers. The larger customers. Appreciate the accordion feature and I think some of the smaller.
Customers like the flexibility. So I don't think it's going to go away I just think it will adapt as it's done over many cycles.
Great and then last question you've been asked maybe in a different way earlier, so just make a quick but on the land inventory overall.
It's pretty small keep it seems like now if you start to see more tenants want to kind of leave some of the major markets continue to migrate toward the south and given your balance sheet that you guys would be in a REIT positioned to pick up quite a bit of land here. What's your view I mean your is your view changed at all I think you've given that the pass on where you want to be.
Now if I'm going to bulk up just even on the land component more.
Yes, David it's an excellent point and.
And we do take a very again, a long term view as a company and land ultimately.
Well, perhaps not in this near term environment, but in the medium long term environment will be a differentiator and when the market returns oftentimes it's hard to find.
The appropriate piece of land. So if those opportunities come along we certainly have the balance sheet and a very overall low physician inland and we'll be prepared.
For the appropriate strategic pieces at the appropriate prices.
To to make investments if they present themselves.
All right great. Thank you.
Again, if you have a question. Please press Star then one next question comes from John dining with Stifel. Please go ahead.
Great. Thank you too.
Questions, one more curiosity than anything else.
Talk a little bit of that parameter versus mid pound versus buckhead, and where people want to be understand age in Atlanta, and then second.
The partially space cracking the come on with him I imagine it's in pretty good shape. When you brought in that law firm for 74000 square feet because that law firm want to.
Hey, good as is where is it because they want to get down to the studs and starting again or something in between.
Well good morning, John its Kolon Arnie.
On energy as you look at it and Atlanta and in that three different submarkets, the central perimeter Buckhead in Midtown.
They're they're all slightly different in terms of the type of customers that they had historically and I'd say currently attract and so.
Central perimeter continues to be really a fortune 500.
Have you hear in in Buckhead is typically driven by the financial services and insurance and real estate companies and then clearly over the last five years or so mid town has evolved from really the legal capital, the Atlanta, which which it still is but it's also.
So.
Really benefited from the growth of the technology sector in Atlanta, So I would say as we look forward you'll continue to see those various customer profiles be attractive to to those submarkets.
But interestingly enough I think as.
The technology companies in Midtown had become pretty full you've started to see some of those companies look to to the different submarkets and be focused on.
Opportunities in the right buildings and.
Even in this environment.
Buildings that have got close proximity to to mass transit.
The touch on your other question in Austin and the.
The law firm lease at and Colorado Tower, No that is not it's not as is whereas deal and really what was the driver of that is partially was was really a dense environment.
And as you would imagine a leading law firm has got an entirely different.
Approach to two states use in so that will be much less dense environment and so there will be a pretty big overhaul of that space.
Great. Thank you end up though.
Stay safe.
Thanks, John.
This concludes our question and answer session I would now like to turn the conference back over to conduit to Colin Connolly for any closing.
Well I want to first again, thank the entire cousins team for your continued hard work youre flexibility to commitment in your resiliency.
And finally to our investors. We certainly thank you for your continued interest in support of cousins properties. Thank you.
This conference has now concluded. Thank you for attending today's presentation you may now.
[music].