Earnings Call: Q2 2021

Jul 30, 2021

Quarterly report

Good morning, and welcome to Cousins Properties Second Quarter Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would like to turn the conference over to Ms. Pamela Roper, General Counsel. Please go ahead. Thank you. Good morning and welcome to Cousins Properties' 2nd quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer Richard Hixson, our Executive Vice President of Operations and Greg Adzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8 ks. In the supplemental package, the company has reconciled all non GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website, cousins.com. Please be aware that certain matters discussed today may constitute forward looking statements within the meaning of federal 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 ks and our other SEC filings. In particular, there are significant risks and uncertainties related to the severity and duration of the COVID-nineteen pandemic and the timing and strength of the recovery therefrom. The company does not undertake any duty to update any forward looking statements whether as a result of new information, future events or otherwise. The full declaration regarding forward looking statements is available in the supplemental package posted yesterday and a detailed discussion of the potential risks, including those posed by COVID-nineteen, is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly. Thank you, Pam, and good morning, everyone. As we reach the midpoint of 2021, it has been wonderful to see many of our customers bringing their teams back to the office and we anticipate seeing more post Labor Day. While we continue to monitor public health guidance around COVID-nineteen and specifically any office delays brought on by the Delta variant, I also remain optimistic about the remainder of 2021 and beyond. Our team delivered strong financial results during the Q2. Here are a few highlights. On the earnings front, the team delivered $0.69 per share in FFO. We leased over 484,000 square feet with a 12.9% increase in 2nd generation cash rents. Same property NOI on a cash basis increased 7.1% and our net debt to EBITDA at quarter end was 4.55 times and G and A expenses as a percentage of total assets were at just 0.36%. Turning to the business. Our ongoing conversations with customers provide us unique insight into their evolving long term office strategy And those plans are beginning to crystallize. 1st, most of our large growing customers are excited about their return to the office. While the delta variant could create delays, we now have conviction that a meaningful return to the office, it's not an if, it's just a when. In some instances, employees will return for part of the week, which some call hybrid. Importantly, the nature of the hybrids model, coordinated in office days, which are designed to facilitate collaboration, necessitates real estate size for peak load and likely does not have a significant impact on office demand. While it's hard to remember office life before the pandemic, this was already the reality for most technology and professional firms. 2nd, companies and people are migrating to the Sunbelt, where the business climate is more friendly, housing is more affordable and commute times are shorter. 3rd, as companies return to the office and migrate to the Sunbelt, they are trading up to be in an environment where employees are excited to come to work and collaborate. This flight to quality trend existed before COVID, but is clearly accelerating. With these themes taking shape, in addition to our great quarter, we're seeing positive signs of economic recovery in our leasing, which continues to grow. Our late stage pipeline has increased significantly and we are highly encouraged by the opportunities in front of us, both inbound growth and expansions from our existing customers. Importantly, we are seeing activity in our higher profile vacancies including 1200 Peach Street and 3,350 Peach Street as well as in our development projects like Domain 9, 10,000 Avalon and 100 Mill. As I have mentioned in quarters past, we have a simple and compelling strategy at Cousins to assemble the premier urban Sunbelt office portfolio, to be disciplined about capital allocation, so we can pursue new investments where our operating and development platform can add value and to maintain a fortress balance sheet, which provides us significant financial flexibility. At Cousins, we are positioned at the intersection of 2 powerful long term trends, the migration of the Sunbelt and the flight to quality. As these accelerate, we are responding. Let me highlight some exciting announcements from yesterday. Through our relationships, we source an off market transaction that includes the recapitalization of Newhall, an exciting development project in Nashville and the acquisition of 725 Ponce in Atlanta. Newhall is a transformative mixed use project that marks our strategic entrance into the Nashville market. It is located directly across the Cumberland River from Oracle's recently announced Nashville campus and provides a clear path for growth in this new market. Construction has already commenced on Phase 1 of the project, which will consist of approximately 388,000 square feet of office space, 542 multifamily units and 60,000 square feet of experiential retail. Cousins' investment of $275,000,000 represents a 50 percent ownership interest and includes a Phase 2 office site that can accommodate 275,000 square feet of additional space as well as rights to future adjacent land parcels. Newhall has a unique location, a differentiated adaptive reuse component and plans for an exciting new food hall. There is simply nothing like it in Nashville. We also acquired 725 Ponds, a 372,000 square foot office asset in East Midtown Atlanta for $300,200,000 We view this property as one of the highest quality and most interesting buildings in Atlanta, located along the Beltline, one of the city's premier public spaces and directly across from Ponce City Market, one of the most highly amenitized and active areas in town. 725 Ponce is currently 100 percent leased to customers including BlackRock, McKinsey and Company and Chick Fil A. Cousins also acquired a 50 percent ownership interest in adjacent land site for an additional $4,000,000 that can accommodate 150,000 to 200,000 square feet of additional development. We also announced that we sold 1 South at the Plaza, a 891,000 Square Foot, 58% leased office property in Charlotte for a gross sale price of $271,500,000 Some might ask why sell 1 South now? First, we remain extremely bullish on Charlotte and have a best in class portfolio, a talented team and great land sites in the South End for future growth. So the simple answer is, in our view, the purchase price fully values the upside from re leasing a 1970s vintage office In summary, through these creative transactions, we have entered Nashville, an exciting new market for Cousins, acquired 725 Ponce, one of the best buildings in Atlanta with an additional pad for future development and funded these transactions in part through the sale of an older vintage property. Overall, this enhances the portfolio quality, gives us opportunities for growth and shifts speculative leasing from a 47 year old asset to brand new highly differentiated product. Interestingly, the purchase price of 1 South is approximately the same as our value from the TIER merger pre pandemic. This is a strong read through for capital interest in leading Sunbelt markets. As we look ahead and hopefully emerge from the pandemic, our conviction around our Sunbelt Trophy office strategy as strong as ever. Today, we have the leading trophy portfolio in the best Sunbelt submarkets in Atlanta, Austin, Charlotte, Dallas, Phoenix and Tampa, plus we now have room to grow in Nashville. Large growing companies recognize the value of office, migration of the Sunbelt is on the rise and companies continue to prioritize newer, amenitized, experiential office space that excites employees to come together. We are obviously watching the delta variant and any potential impact. Nonetheless, we are thrilled with the company's position. As we look ahead to 2022, the declining fees from a terrific transaction with Norfolk Southern will be behind us. We have creatively and proactively addressed a large vacant block at 1 South and are excited to pursue new opportunities with our rock solid balance sheet. In closing, the power of Sunbelt Trophy office is becoming increasingly clear. Before turning the call over to Richard, I want to thank our entire Cousins team who work hard each and every day to bring their skills and talents to the company and to serve our customers and our shareholders. They are the foundation of our company's success and I thank you. Richard? Thanks, Colin, and good morning to everyone on the call. This quarter saw an improving economic backdrop and more stable operating environment, resulting in a strong 2nd quarter operating performance. While the pandemic is certainly not over and the Delta variant persists, the demand for office space across our markets is improving. As Colin mentioned, the vast majority of our customers have either already returned to the office or have signaled they will return sometime this fall, some fully and others in a phased or hybrid format. From our perspective, post Labor Day seems to be the most common return timing cited. For now, physical customer utilization in our portfolio sits around 30%. The variation in utilization across markets that I mentioned last quarter remains with Atlanta, Dallas and Tampa all running at higher utilization rates. We still anticipate utilization to be largely back to normal portfolio wide by the end of 2021. Turning to 2nd quarter operating results, Our total office portfolio lease percentage and weighted average occupancy both came in at 89.4% this quarter. Our leased percentage declined 80 basis points this quarter, which was mainly attributable to the previously known move out of Anthem at 3,350 Peachtree in Atlanta. Given we report occupancy on a weighted average basis and Anthem expired at the quarter end of the quarter, we actually saw a modest increase in occupancy versus last quarter. For the balance of the year, we expect our weighted average occupancy to remain relatively stable. As a reminder, Norfolk Southern will vacate 370,000 square feet at 1200 Peachtree at the end of December, representing a fantastic value creation opportunity going forward. And looking forward to 2022, I would note that we have only 6.5% of our annual contractual rent expiring with no expirations greater than 100,000 square feet. As for leasing activity, we executed a solid 39 leases totaling 484,000 square feet this quarter, surpassing our level of reported activity in the Q1 of 2020. Leasing volume wasn't the only metric back to pre pandemic form this quarter. Leasing mix was much improved with new and expansion leases accounting for 74% of total activity. Recall that new and expansion leasing combined hit a pandemic low of just 14% of activity 2 quarters ago. Net effective rents were $23.77 this quarter, an improvement over the Q1 and only 0 point the full year of 2019. Rent growth remained remarkably strong as well with 2nd generation net rents increasing 12.9% on a cash basis. And finally, our average lease term bounced back to 6.7 years on average. These are great leasing results. We are also still seeing encouraging activity in our leasing pipeline, both for our existing portfolio and new development projects. Specifically tour volume remains on the upswing. In our Austin portfolio, 2nd quarter tour activity was up 53% versus the Q1. While not specific to our portfolio, CBRE also recently noted that in Phoenix, June 2021 tour volume was 240% greater than the average monthly volume in 2019. As we have pointed out many times, the pandemic has served as an accelerant to the migration of people and companies to the Sunbelt. Companies are being driven to reconsider where they are located primarily due to intensifying competition for talent. Companies simply need to be where the talent is or wants to be and increasingly that is in the Sunbelt. Of CBRE's 2021 development opportunity watch list, 8 out of the 10 biggest development opportunities are located in the Sunbelt region. Among the metropolitan areas with populations larger than 750,000 people, large Sunbelt cities led the way in terms of nominal population growth last year. In fact, the top 7 metropolitan areas for population growth in 2020 were all in the Greater Sunbelt region according to CoStar. The recently released Newmark Opportunity Index showed that every one of our markets included in its index has experienced meaningful job recovery since the depths of the economic downturn. Nashville, Tampa and Dallas ranked highest across the economic metrics in this index with Tampa at the very top. Tampa's employment is the closest to pre pandemic levels of all markets in Newmark's index. Not surprisingly, Austin remains near the top of the list for nominal population growth and its labor market continues to be one of the strongest nationally. Austin's population increased by more than 67,000 new residents over the past year, second to Atlanta. For JLL, overall leasing activity in Austin has increased every quarter since the pandemic began with this quarter's activity reaching 80% of pre pandemic levels. Further, according to Morgan Stanley, Austin was the only market to have a consecutive quarter improvement in sublease listings posting a decrease of 18%. JLL estimated the quarterly decline was even greater at 29%. There are promising trends in sublease listings in our other core markets as well. Atlanta, our largest market continues to see an uptick in demand, particularly from the technology sector and Midtown and Buckhead are leading the recovery so far this year. In fact, JLL's 2nd quarter office submarket report for Buckhead stated that overall leasing activity was up 200% year over year. Cousins Buckhead portfolio opportunity excuse me Cousins Buckhead portfolio participated in this demand signing 65,000 square feet of expansions with high quality publicly traded technology companies this past quarter alone. Our current leasing pipelines at both Buckhead and Midtown are equally encouraging. As we look ahead, we believe we will continue to see a noticeable flight quality. Companies are likely to increasingly view the office as critical to fostering culture, collaboration and career development, not to mention as a tool for attracting and retaining the best talent. Recent data clearly demonstrates this dynamic. For example, per CBRE, 74% of new leasing activity in Phoenix this year has been in Class A projects. By comparison over the past 5 years, this percentage hovered under 50%. Further, JLL recently noted that nationally office projects delivered after 2015 actually experienced a net occupancy gain over the past 5 quarters in the teeth of the pandemic. While the pandemic is certainly not over and we are closely monitoring the impact of the Delta variant, which could bring with it some economic fits and starts, we are optimistic about the balance of the year and a longer term recovery. Our markets and portfolio are extremely well positioned and we have numerous exciting opportunities ahead of us. Before handing off to Greg, I want to thank my Cousins teammates. They have worked tirelessly to produce strong results such as those delivered this quarter and through the entire pandemic. Thank you to each and every one of you. Greg? Thanks, Richard. 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 leverage position before closing my remarks with updated information on our outlook for the balance of 2021. As you could tell from Colin and Richard's remarks, we've been extremely busy. However, we don't want all of that external activity to take attention away from our very solid internal performance during the quarter. At $0.69 per share, FFO was up almost 5% compared to last year and the important operating metrics that we all focus on were very strong. Leasing velocity returned to pre COVID levels, 2nd generation cash leasing spreads were up double digits and same property NOI on a cash basis increased 7.1% over last year. Focusing on same property performance, 2nd quarter results represent a significant and a constructive change in trend. Numbers were driven by improving revenue, which increased 6.6% on a cash basis. This is the 1st year over year increase in same property revenue since the Q1 of 2020. The largest variable within our same property performance remains parking revenues, which are in large part driven by the fiscal occupancy in our buildings. After bottoming during the Q4 of 2020, same property parking revenues are up 14%, but they still remain 23% below pre COVID levels. Turning to our development efforts. 1 asset, 120 West Trinity, a mixed use property in the Decatur submarket of Atlanta that we developed in a 2080 joint venture was moved off our development pipeline schedule and into our portfolio statistics, while another asset Domain 9, an office property in the Domain submarket of Austin commenced development during the Q2 and was added to our schedule. The current development pipeline represents a total Cousins investment of $492,000,000 across 1,300,000 square feet in 4 assets. Our remaining funding commitment for this pipeline is approximately $210,000,000 which is more than covered by our existing liquidity and future retained earnings. On the transaction front, as Colin laid out at the top of the call, we've been very active. In total, the sales of Burnett Plaza and One South combined with the purchase of 7 25 Ponce, the investment in Newhall and the development commencement of Domain 9 represent over $1,100,000,000 in transaction activity year to date. In addition, our joint venture partner at Dimensional Place in Charlotte has exercised their option to purchase our 50% interest in the property with the closing expected at the end of the Q3. As this series of transactions unfold, we intend to maintain our net debt to EBITDA around 4.5 times, as we've done with very few exceptions since 2014. We believe this leverage profile provides both defensive support during challenging times as well as offensive firepower to execute compelling transactions when the opportunity presents itself. In addition, it's a small transaction, but we do want to call your attention to the sale of the land parcel adjacent to our 100 Mill development in Tempe subsequent to quarter end. The site was sold for $6,400,000 earlier in July and will be developed into a Hyatt branded hotel. It's a testament to the quality of that location that this sale held through the COVID pandemic. This new hotel will be an important amenity for our 100 Mill customers as well as the customers in the other 5 buildings we own within 2 blocks of that site. On the capital markets front, we closed on a $350,000,000 unsecured term loan during the 2nd quarter, replacing a $250,000,000 term loan that was scheduled to mature later this year. The new loan matures in 2024 and the applicable LIBOR spread was reduced by 15 basis points. The covenant package remains unchanged. It was a very solid execution beginning to end. I'll close by updating our 2021 earnings guidance. We currently anticipate full year 2021 FFO between $2.70 $2.78 per share. This is up $0.01 at the midpoint from our previous guidance. This guidance includes all of the transactions that we have discussed on this call. There are no other dispositions, acquisitions or development starts included in our guidance. The most significant variable behind our guidance remains our parking revenues. As Colin discussed earlier, our customers have begun returning to the office and we anticipate this trend accelerating after Labor Day. Our current parking revenue assumptions reflect this outlook. However, the Delta variant could delay timing, but it's too early to know for sure. With that, let me turn the call back over to the operator for your questions. First question comes from Blaine Heck of Wells Fargo. Please go ahead. Great. Thanks. Good morning. I thought it was interesting you guys kept the garage adjacent to 1 South. Can you talk about that decision? What impact that might have had on pricing had you included it in the sale? And then your future plans for that piece of the property? Good morning, Blaine. Yes, as it relates to the garage, we did purchase that last year and it was a terrific transaction for us to mitigate what could have been a parking challenge for One South going forward. And so it's very positive to add that parking immediately adjacent to 1 South. We did have conversations with our buyer as to whether to include that or not. We ultimately settled on a long term leasing opportunity for them with the garage. And I think as we've said in the past, it's a terrifically located garage, or really the best located garage in the city of Charlotte. And we actually think it could be a well not a typical investment for Cousins given its location and the long term leases on it. We think it could be a pretty attractive investment for us. We'll just continue to evaluate it and monitor it over time as to do we continue to hold that or sell it at some point in the future. Okay. Got it. That makes sense. And then I just wanted to ask about Domain 9. Obviously, you guys are just starting there and have a bunch of time to lease that space up. But given the strong demand in that submarket, I wanted to ask about leasing prospects you guys might have there and how you're thinking about the balance between maybe getting some solid pre leasing on that project versus maybe waiting it out to take advantage of potentially higher rents in the future? Yeah. Great question Blaine and certainly don't want people with these new exciting transactions to forget what we think is a was a really exciting announcement back in June to start Domain 9. We are extraordinarily bullish about Austin in general and I'd say the domain in particular. And I think as I said in some previous conversations, we really felt like our customers were pushing us to start Domain 9. And that's both from kind of existing customers in the area as well as the migration into Austin. And we've got a really terrific pipeline of activity in that building ranging from some small, to medium sized and candidly some very large opportunities that could potentially take big chunks or all of that space. So we're actively working through those discussions, but we wouldn't have started it if we didn't feel really good about our prospects to lease that up. Okay, great. That's helpful. And then related to that, when you think about the development pipeline, you now have the Main-nine and Newhall that are both speculative developments. Clearly, you guys see good demand in those markets and you're confident in leasing progress there. But looking forward, do you think having those speculative projects sets the bar a little higher for pre leasing to start any other developments in the future? Well, I think as you look at the announcements we made yesterday and look at those in their totality, we actually reduced our kind of our net speculative vacancy if you will. As I mentioned in my remarks, we effectively traded 350,000 square foot of speculative space in an older vintage asset at 1 South and shifted that to Newhall, which will be again I think one of the most differentiated products in all of Nashville. So we haven't actually increased our speculative kind of development exposure. We've just we've shifted into what we think is better products. But as we start any new project that has got some speculative component to it, we certainly are looking at our existing portfolio and in vacancy that we have as well as how much additional spec space to add and are certainly trying to balance and manage our overall risk profile. But I think in the case of where we stand today, as I said, we're very bullish on our prospects and our opportunities at Domain 9 and feel good about how we have shifted the vacancy between One South and Newhall. And again, we have a really terrific land bank within the company that could support over 5,500,000 square feet. And so as we continue to see the demand and the in migration into the Sunbelt and again some of our existing customers looking to expand, we're evaluating that land bank and are trying to think about what could be the next opportunity to meet our customers where they want to be. Got it. Thanks, Collin. Yes. Thanks, Blaine. Thank you. And the next question comes from Jamie Feldman of Bank of America. Please go ahead. Great. Thank you and good morning. I was hoping you could talk a little bit more about pricing on both the acquisitions and the 1 South sale. Maybe just give us some more color on what gave you comfort on the returns and the prices you paid and accepted? Yes, terrific. Good morning, Jamie. The so let me start as I on 1 South, which I mentioned in our call. We feel like that pricing was very attractive for us at Cousins as we look at whether we continue to rebuy 1 South or sell it at that price. And I think from our view and perspective that pricing fully reflected the upside from kind of the value add re leasing nature of that asset and particularly when you look at the vintage of it. And I think again if you look at what we put it on our books when we did the TIER merger, we're effectively selling it at just about the same price. And we've obviously gone through a pandemic and still in the midst, hopefully at the tail end of this pandemic. And but the asset down at 58 percent leased, we think it was a very attractive price for us to execute for shareholders. Pivoting over to the new acquisitions at 725 Ponds, it we were as disclosed yesterday, that's a 5.3% cap rate and about a 6.1% GAAP return, which reflects the below market rents. And I think it's interesting as you compare that to the transaction we did at the rail yard in Charlotte in December, it's actually kind of side by side very similar yields, very similar transactions. And I'd say importantly in both cases, we were able to acquire an adjacent piece of land that gives us some future upside to develop those additional parcels and achieve some value add development returns to really complement the acquisitions. Okay. That's helpful. And then, I guess just thinking about Nashville, I mean what do you envision there in terms of your ability to grow over time? And I guess for both sites, how soon do you think you would actually put some of that land to work? Well, in terms of Nashville, I mean, one, we've been evaluating that market. I think we've talked very publicly in the past about Nashville and our interest in it. And it's just got so many of the same characteristics that are in other Sunbelt markets like Atlanta and Charlotte Tampa and Dallas and others have and continue to see very similar in migration in Oracle and Amazon's recent announcements, I think certainly solidified our views on Nashville. I think what's so exciting about Newhall is, as I mentioned, it's we think will be the most differentiated and unique project in Nashville. But importantly for us, it does have a path and room to grow. As a part of our transaction, we acquired a Phase 2 site and we'll actually build some of the infrastructure in the parking during the Phase 1 construction period. And then beyond Phase 2, we do have additional rights to some adjacent land that could create a Phase 3 or more. But certainly now that we're there, our goal over time is to scale a really attractive and highly desirable portfolio and that could be a combination of additional development, land purchases and certainly some property acquisitions. So we're excited to grow and build a platform, a Cousins platform in Nashville. And then what's your team going to look like there? And what do you think it's going to look like over time? Well, so as we build the portfolio and grow it to a size that we think justifies economically justifies having boots on the ground, We'll do that. I think at the moment, we feel again very we're very excited about Newhall as it does have a development partner that we can leverage in Newcity who does have a team on the ground. And I think that's a great way for us to start and enter Nashville in a strategic way. But at the same time for us here in Atlanta and our team Kennedy Hicks, who's our Executive Vice President of Investments, Nashville's just a short drive away. And so we're able to be there and have some of our team on the ground on a regular basis as well. Okay. Thank you. And then shifting gears, it sounds like you guys are a little more optimistic around 3,351,1200 Peachtree. Can you just talk about the leasing pipeline for those projects for those spaces? Yeah. Hey, Jamie, this is Richard. The pipeline is in good shape much like it was last quarter for both those assets and the activity kind of ranges the full gamut from a size perspective. So we're really encouraged by what we're seeing and the demand for both those locations. And I feel like pretty confident we'll have something good to report here soon with regard to forward progress on the lease up. Okay. I assume there's nothing in guidance on $33.50 for this year? No. There's nothing in guidance. Okay. All right. Thank you. Thanks, Jamie. Thank you. Next question comes from Dave Rodgers of Baird. Please go ahead. Yes. Good morning, everybody. Colin, I wanted to ask about the flip side, I guess, of the argument of expanding into some of the new markets, newer product, and maybe more amenitized locations. And then how that impacts your view on selling assets going forward? Maybe undifferentiated CBD assets or fringe oriented kind of large glass boxes that maybe don't what you've been trying to do in the last 5 or 6 years and your thoughts around how that's changed since COVID? Well, I think that for us, again, I think what's exciting as you look across our portfolio, by and large the overwhelming majority of it, I think do reflect these highly amenitized well located experiential type assets. And so as I look around what we own here in Buckhead and Midtown certainly representative of that as well as what we're doing out at The Domain in Downtown Austin and Tempe, Charlotte. So we have been at this strategy for now about 10 years and I think have really made terrific progress. And we're going to continue that progress when we identify and see those opportunities to either acquire and or build and we'll fund that appropriately with some of the call it older vintage higher CapEx properties. But I think in our case that's actually a pretty small percentage at this point. Maybe with respect specifically Charlotte, obviously a number of one off and unique situations where you reduced exposure to the market maybe where you've been a year and a half ago. Any broader read through on Charlotte, and particularly on Uptown with regard to the assets you have, NASCAR, 5th 3rd that remain there relative to kind of where you've been trying to grow there, which has been ex Uptown? Yes. And so again to be very clear, we are have a high degree of conviction in Charlotte as a whole and are excited to grow our presence there. As I mentioned, we have a fantastic team and we've got some really terrific land sites in South End. But we continue to like Uptown as well. And it really is, if you kind of look back over the last year as you mentioned they were all very unique situations where we monetize assets there, not as driven by our view on the market. But in the case of Hurst Tower, right, a massive headquarters lease with Truist, a large financial institution who absolutely had to own their corporate headquarters that a strategic transaction that we felt like made sense. Gateway Village in Charlotte, our partner of 15 plus years in Bank of America had a purchase option and they decided to they elected to exercise that. Very similar with Dimensional Place, just a fantastic execution for Cousins and a great win for shareholders. But as a part of that original lease, they had a purchase option. And then I think more recently with One South, again, it's an asset that we acquired via the TIER merger and knew of the vacancy coming with Bank of America. And as I said, ultimately somebody offered us a price that we felt like reflected kind of the entirety of the upside and we're able to recycle that into kind of newer vintage properties. So that again was a unique situation. But Charlotte as a whole is going to continue to do well. It's going to continue to benefit from the migration. At Cousins, we fully plan on participating in that growth. I appreciate the clarification on that. Thanks. Richard, maybe on leasing more broadly, it sounds like for both the vacancies that you've got either currently or pending in Atlanta, the larger ones you've got various size ranges. But I guess across the board, can you talk about activity from different industries? What's there? What's missing? Have the terms and the leases changed around termination options and out those types of things and then maybe net effective rents where those are settling in. It's good base rents, but curious on kind of where the concessions are settling in. Sure, sure. So let me start with just the pipeline in general. I mean, again, it's positive across the board, both in terms of markets and then in terms of early stage versus late stage. And so we're seeing encouraging interest and continued demand. I would say that from an industry perspective, it's certainly I think it certainly holds true and we positive very early on that technology would highly likely be the industry that leads us out of the downturn and probably has the most demand and certainly pent up demand. And so we're seeing that for sure, but we're seeing demand from a lot of different segments. And I really can't say that I have one industry or one segment that is just completely absent in terms of kind of waking back up and deciding to restart their planning and look at taking more space or addressing kind of near term decisions. So I think it generally it's broad based, but certainly the leader is technology. And we all know that the co workingflexoffice players were really driving a lot of volume going into COVID and before the market turned down and they are not driving demand at this point. So with that said, they are all looking to grow again, but they are not a big driver at this point. So a very healthy dynamic there as well. In terms of concessions, it's just net effective rents. It I'd say largely just starting at the top face rents have held in through this downturn and now recovery and really have been kind of flat to slightly down in places depending on the market. But concessions have been where the a lot of the action has been. And I'd say the largest pressure point has been free rent. Another pressure point has been TI, but not quite as much as in the free rent. But fortunately, in terms of our signed activity, we've been able to continue to improve our net rents and offset those increases in concessions. So while we are a little bit elevated, say if you just look at this quarter in isolation, it's certainly if you look at TI and free rent combined, we've seen these levels on a per square foot per year basis in the past. So we're not way out of line, but we are what I consider to be slightly elevated. But it's hard to really hang your hat on 1 quarter. So I think we'll continue to feel that pressure on concessions, but at the same time we're having pockets of activity in all of our markets where we're feeling like we can begin to kind of get on offense a little bit and start to press rents in our favor. So we feel good about where we are. We're hitting what feels like an inflection point across the board on leasing activity and feel very optimistic going forward. Not sure if I hit all of your different questions. So let me know if I missed something. No, that's good to hear. And you hit them all. Sorry, I threw a lot at you, but I appreciate it. Last one, Greg, a quick question for you, Greg, on the 1200. Does that go into redevelopment? Does that stay in the same store pool? And do you have a kind of a value add redevelopment budget for that asset yet? Dave, we'll move that asset once Norfolk Southern vacates it out of the same property pool. Clearly, it will be empty. It will go into a redevelopment bucket. We haven't we're very far along in the redevelopment plans, but we haven't disclosed the redevelopment budget yet. Okay. Thank you. Thanks, Dave. Thank you. Next question is from Daniel Ismail, GreenTree Advisors. Please go ahead. Great. Thank you. So office pricing in the Sunbelt appears to be improving recently. I mean, I think the one file disposition proved that. But I'm curious what you're seeing in terms of land values across your footprints. How much do you think prices have changed for good office development sites across your footprint year over year? Yes, Danny, it and good morning. The you're certainly starting to see interest in land in kind of high quality urban Sunbelt markets. You're seeing that interest grow. And again, I think it's in part due to kind of resurgence of office demand and this flight to quality that is continuing to accelerate. And I think an appreciation for the underlying customer base for kind of newer and cooler and again more amenitized. At the same time, you're starting to see the multifamily space become very active again. I think we've all seen particularly this quarter, our multifamily peers really started to demonstrate strong activity and leasing numbers and improvements in rental rates. I think there's competition from those folks once again. And so, yes, land values are well relatively dormant last year, you're starting to see that activity pick up and land prices are moving again. Hard to put a specific percentage on it. I think so many situations are unique and different markets are unique, but there's definitely upward pressure. Great. And then just a question on the differences between older vintage and newer products as well as Class A and Class B. I'm curious if you're noticing any distinction in rent growth or concessions or tenant demand between older and newer product in the Sunbelt? Or is just this just a situation of a rising tide is lifting all boats and thus everything in the Sunbelt is doing well? Or is there a meaningful distinction between those two property types? Yes. Danny, you are seeing a I'd say a continued bifurcation even in the Sunbelt between kind of rental rates and rental rate growth and net absorption between call it the Class A plus trophy space and kind of newer vintage space versus kind of older commodity and suburban space. And I think you drill down into each of our markets and you looked at the most recent quarterly statistics and looked at kind of absorption by quality or age vintage, you'd see in many cases the vast majority or kind of call it disproportionate share of the leasing activity would be in those kind of higher quality assets. One thing I would just kind of point out as it relates to kind of cousins in our portfolio and what we have found that certain buildings that are of older vintage have can sometimes be terrific opportunities to reinvest and bring an asset up to kind of today's standards. If they're in the right locations, going to have the right bones to them, perhaps have the kind of the right outdoor space, etcetera. And I just I'd point to a project that we're doing right now here in Atlanta, down at Buckhead Plaza 12 which are older vintage assets but sit right at Peachtree and West Pacis Ferry have terrific outdoor spaces, some of the best restaurants in Atlanta. And we're in the midst of a nice repositioning of the ground floor kind of plain and outdoor space. And the underlying customer base in Atlanta is responding very favorably to that type of reinvestment and we're seeing very strong activity in that space. So again, I think as we kind of taking an asset that had probably fallen from that tier and are putting it back, it's possible to do that even with older vintage assets if it's got the right characteristics. And then are you noticing any of your tenants or leasing that you signed recently or in your leasing pipeline a migration of tenants from Class B to Class A buildings? No question. You're seeing that. And as I mentioned in my prepared remarks, absolutely you're seeing companies trade up. I think you typically see that kind of in any downturn. But I think that that trading up has been and the flight to quality has been a trend that was already underway prior to the pandemic. And again, I think it's I think large growing companies kind of recognizing what the future of Office is and its collaboration and its culture. So they are trying to prioritize and they are prioritizing that new cooler interesting space that their employees are excited to come back and be together and that was before the pandemic and I think it's absolutely will be after the pandemic. Great. Thanks, Alan. Thank you. This concludes our question and answer session. Now I'd like to turn the call back over to Mr. Colin Collin. Please go ahead. I want to thank you all for your time this morning and continued interest in Cousins Properties. If you've got any always feel free to reach out to us directly, myself, Greg Adzema or Ronnie Imbo, we're always here to help and answer any questions that we can. I hope everybody has a great weekend. Thank you. Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.