Earnings Call: Q4 2018

Feb 7, 2019

Made available on the Investor Relations page of our website 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. 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. 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 some potential risks is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connells. Thank you, Pam, and good morning, everyone. Today, I will begin my prepared remarks by revisiting our corporate strategy. I will then summarize our 2018 achievements and highlight Cousins' 2019 priorities and future growth opportunities. Richard Hixson, our EVP of Operations will follow my comments with an update on market fundamentals in our property portfolio. Lastly, Greg Rizema, our Chief Financial Officer, will provide a summary of our financial performance and conclude with our 2019 guidance. At Cousins, we believe that we have a unique and compelling strategy. We strive to be the preeminent Sunbelt office company. It's that simple. To accomplish this goal, we execute the business based on 4 core principles. First, own the premier Sunbelt office portfolio with concentrations of trophy quality properties in the leading urban submarkets across our geographic footprint. 2nd, maintain a disciplined approach to capital allocation with a focus on new investments where our platform can add value and generate attractive return. 3rd, preserve our best in class balance sheet to provide financial flexibility, so we can execute quickly when opportunities arise. And 4th, leverage strong local operating platforms that take an entrepreneurial approach to customer service, local market relationships and deep community involvement. If you know Cousins, this straightforward strategy I outlined should sound familiar. We've been running this play since we began repositioning the company in 2011 and we remain committed to it. Let me walk you through why. First, our strategy benefits from several macro trends that favor trophy quality office properties in the Sunbelt. I'll share a couple of interesting data points to highlight these trends. According to the U. S. Census Bureau, Texas, Florida, North Carolina, Arizona and Georgia ranked number 1 through 5 for states with top net migration from 2,005 through 2017. According to JLL, approximately 75% of U. S. Net office absorption during the Q4 of 2018 was an urban Class A property. Said differently, the U. S. Population continues to migrate to the Sunbelt in search of a lower cost and pro business environment. In an effort to compete in the war for talent, users of office space are increasingly choosing to upgrade the quality of their work environment with a particular emphasis on amenities and proximity to mass transit. As these trends take shape, our Trophy Sunbelt portfolio is well positioned for where the puck is heading. 2nd, our strategy continues to deliver fantastic results. Let me highlight our team's achievements in 2018. We delivered $0.63 per share in FFO, which was at the top end of our original 2018 guidance. We leased 1,600,000 square feet with 2nd generation net rents up 13.2% for the year. We increased the same property pool to 94.5% leased. We increased the annual same property cash NOI by 4.7%. In addition, our development platform performed exceptionally well. The team successfully delivered Spring in 8, NCR's new corporate headquarters with a total project cost of $332,000,000 on time and on budget. Lastly, our strategy positions Cousins well for future growth opportunities. Within our existing portfolio, the embedded mark to market on our in place rents remains in the 8% to 10% range and our leases typically include annual escalators between 2% and 3%. Externally, we believe that demand driven development remains our most attractive investment opportunity at the moment, given the robust pricing environment for existing assets. Our current development pipeline totals approximately 240,000,000 dollars 45,000,000 at share and includes 898,000 square feet of office that is 74% pre leased. This pipeline includes our dimensional place project in Charlotte, which is expected to deliver later this quarter, 300 Colorado in the Austin CBD, 120 West Trinity, which is a mixed use project in Atlanta and 10000 Avalon also in Atlanta, which is now 40% pre leased as we executed a full floor to a growing technology company in December. Notably, demand for the remaining space at our 110,000 Avalon project remains very strong and we are encouraged by our progress to date. In addition to our active projects, we have a very strong shadow pipeline that includes well located sites for office development in Uptown Dallas, Westshore in Tampa and our most recent addition 901 West Peachtree in Midtown Atlanta and 100 Mill, which is adjacent to our existing 1,300,000 square foot portfolio in Tempe. In aggregate, we could potentially build approximately 1,400,000 square feet and we are very encouraged by the interest in our projects from both our existing customers needing to grow and potential new prospects. Related to our development efforts, I would like to address recent press reports regarding Norfolk Southern's corporate relocation to Atlanta. I can confirm that Cousins is in advanced discussions with Norfolk Southern to sell our recently purchased site at Third and West Peachtree in Midtown to create its new headquarters. As a part of the transaction, Norfolk Southern intends to engage Cousins to manage the development. While this urban headquarters project will not be capitalized on our balance sheet and may sound on the surface like a typical fee based development, the proposed transaction is financially compelling for Cousins and will highlight our local sharpshooter capability. I do want to point out that we are under confidentiality agreement, so we are not able to comment further at this time. However, we look forward to sharing additional details upon closing of the transaction, which we currently anticipate to occur during the Q1. In closing, we are excited about the opportunity for Cousins Properties in 2019. Despite volatility in public markets, fundamentals in our Sunbelt markets remain healthy with solid demand and rising rental rates. I want to thank my teammates across the company for their tireless work and dedication to each other, our customers and our shareholders. With that, I'll turn the call over to Richard. Thank you, Colin, and good morning. As Colin mentioned, 2018 was a year characterized by strong leasing volume and impressive economics. At the portfolio level, this past quarter, our team completed over 450,000 square feet of leasing at an average lease term of 8 years. In terms of mix, 61 percent of our activity was new and expansion leasing. Rent growth remains strong with 2nd generation net rents increasing 36% on a GAAP basis and 13.1% on a cash basis. With our solid leasing performance, our operating portfolio ended the year at 94.9% leased. Looking forward, only 5.6 percent of our leases are set to expire during 2019. Turning to our markets. 4th quarter leasing activity in Atlanta was robust despite sluggish headline office employment statistics. According to JLL, Atlanta Class A rental rates have hit historic highs for 8 quarters straight. Importantly, Class A rental rates in urban submarkets have risen 3 times faster than in the suburbs, a material tailwind for our largely urban portfolio. Our Atlanta team executed 258,000 square feet of leasing in the quarter with sizable activity in each of our submarkets, taking the portfolio to 93.4% leased. Notable leases included a 92,000 square foot early renewal of Fraser and Dieter, an accounting firm at Promenade and a full floor expansion of WeWork at Terminus and Buckhead. WeWork's success at Terminus and their desire to expand is an encouraging sign regarding the vibrancy of Buckhead and in particular an interesting concentration of technology companies building along the Piedmont Road corridor. While 2018 leasing activity in Buckhead started slowly, we saw a meaningful uptick in activity as the year progressed, including important commitments to the submarket by established tech companies such as Salesforce and Workday. You will remember that Workday recently leased 40,000 square feet at our 3,350 Peachtree asset. In total, we executed 70,000 square feet of leases across our Buckhead portfolio last quarter. And I'm pleased to report that we are far along with a potential customer to take the 46,000 square foot Bain space at Terminus expiring at the end of March. In Austin, meaningful commitments from large cap tech companies such as Google and Apple continue to drive impressive demand for office space. Since 2013, the office market has grown by more than 8,000,000 square feet and full service rental rates have increased 52%. According to CoStar, Class A vacancy in the CBD is only 5% after more than 446,000 square feet of net absorption in the 4th quarter. Our primarily CBD portfolio stood at 95.1% leased at year end. Today, absorption has outpaced new deliveries, although we will keep a close eye on future construction activity. There are more than 1,000,000 square feet of new office projects underway in the CBD that stand at 60% pre leased. This includes our 87% pre leased 300 Colorado project. Our team was busy signing renewals and expansions last quarter, including 34,000 square feet of leases at 111 Congress. In addition, just last week, we signed an important 40,000 square foot long term renewal with Wells Fargo at that property. Charlotte is also experiencing solid rental growth. According to CoStar, market wide rents have grown 6.1% over the past year and rent growth hit 8% in both 2017 2018 in the market's premium assets. New supply has certainly increased, but the market is steadily absorbing the deliveries. Of the 2,000,000 square feet of Class A construction in Uptown, 69% is pre leased. As Colin touched on, Dimensional Place, our development for Dimensional Fund Advisors in South End is expected to be operational by the end of the Q1, at which point DFA will vacate 2 floors at 5th Third Center. This remains one of the best large block availabilities for near term occupancy in all of Uptown and we feel good about our ability to release it soon. Excluding DFA, only 3.7% of our Charlotte leases expire over the next 2 years and our properties are nearly 99% leased. With that in mind, we are closely tracking new supply and focusing on executing important renewals. Moving on to Phoenix. According to CBRE, 2018 marked the 8th straight year of positive net absorption for this market, pushing vacancy to its lowest level in a decade. From November of 2017 to November of 2018, Phoenix has been a top 4 market for office employment growth, driven by a 12.1% increase in information services jobs. In Tempe, where our entire portfolio is located, Class Tempe, where our entire portfolio is located, Class A Vacancy is significantly lower than any other submarket, currently at 3.8%. Our portfolio ended the year at 96.2% leased. During the Q4, our Phoenix team signed its first lease with flexible office provider Industrious for one full floor at Tempe Gateway. With the commencement of this new lease and our expansion of WeWork at Terminus, flexible office providers will comprise about 1.5% of our total portfolio on a square footage basis. Wrapping up with Tampa, while CoStar had full year 2018 net absorption at only 1.1% of total inventory, leasing results in our Westshore portfolio tell a more powerful story. The 4th quarter was our 2nd strongest quarter of 2018 in terms of both leasing volume and economics. Our team signed 120,000 square feet of new and renewal leases at Corporate Center, including the backfill of substantially all of the 71,000 square foot T. Rowe Price space set to expire in January of 2020. At Harborview, our previously announced new full floor customer is expected to commence early in Q2 of this year and we are optimistic about our activity for the remainder of the available space of this asset. Again, overall, our market teams continue to deliver solid results and we are very encouraged by our strong position as we look toward the balance of the year. With that, I'll turn it over to Greg. Thanks, Richard, and good morning, everyone. I'll begin my remarks by providing an overview of our financial results. Then I'll move on to our balance sheet before closing my remarks with our 2019 earnings guidance. As you could tell from Colin and Richard's remarks, it was a solid quarter on many fronts. At $0.17 per share, FFO was up 11% over last year. And the important operating metrics that both you and we focus on were strong. Leasing velocity remained brisk, 2nd generation leasing spreads were again up double digits and same property year over year cash NOI growth was positive for the 28th consecutive quarter. It was also a very clean quarter. The only unusual line item was inside our general and administrative expenses, which remained below trend for the 2nd consecutive quarter, again driven by a reduction in our long term incentive compensation accrual. Within our same property portfolio, the year over year cash NOI was up 1.2% during the 4th quarter, driven by 3.4% revenue growth. For the year, cash NOI grew at a very healthy 4.7% despite a 12% increase in property taxes. Excluding property taxes, same property cash NOI growth would have exceeded 5% during 2018. That being said, we're certainly not complaining about large tax increases in our portfolio. It's a high class problem and indicative of the significant appreciation in the property values that we're seeing. Turning to our balance sheet. Most investors often focus on the strength of a company's credit profile, and ours would certainly qualify as strong. Our net debt to EBITDA is 3.7 times and our net debt to unappreciated assets is 24%. However, equally important is the company's liquidity position. When times get tough, liquidity usually dries up and the companies with committed access to cash have an important competitive advantage. We have this covered as well with a $1,000,000,000 undrawn credit facility. This combination of strength and liquidity is powerful, and we're convinced it will allow us to create significant value for our shareholders as the economic cycle unfolds. As discussed last quarter, we launched the sale process for our Meridian Mark asset in early January, with the closing anticipated during the Q2 of 2019. This is 160,000 square foot medical office property located in the Pill Hill submarket of Atlanta, adjacent to Northside Hospital. Although this building is non core for us, it's a very attractive asset for many different types of buyers and we're seeing outstanding demand. The proceeds from this sale will be used to fund our development efforts. And with the closing of this sale, our current development pipeline is fully funded on a leverage neutral basis. We've consistently pre funded all of our development projects through this entire cycle. A conservative approach to funding our development activities has been and will continue to be a core tenant of our strategy. Finally, post quarter end, we closed on a nonrecourse construction loan on our 300 Colorado office development in Downtown Austin. It's a $126,000,000 facility with a 3 year initial term priced at 2 25 basis points over LIBOR, declining to 200 basis points once the building is occupied. I'll wrap up my comments today by providing the details behind our 2019 FFO guidance. As we outlined in our earnings release, we expect 2019 FFO in the range of $0.61 to $0.65 per share. This guidance range is driven by the following assumptions. First, we anticipate positive year over year same property NOI growth of between 2% 4% on a cash basis. This assumption includes a 10% increase in property tax expense. In general, our quarterly same property performance will be lower in the first half of the year and higher in the second half, driven by free rent burning off on some large recently occupied space as well as the commencement of already signed leases as the year progresses. Moving on, we anticipate fee and other income will be between $7,000,000 for clarity, termination fees are included in this line item. They are not in property level NOI. We anticipate general and administrative expenses of between $27,000,000 $29,000,000 net of capitalized salaries. This number includes internal leasing costs that were previously capitalized and must now be expensed for the new FASB leasing standard that came effective January 1. We anticipate interest and other expenses of between $48,500,000 $50,500,000 net of capitalized interest and depreciation and amortization of non real estate assets between $1,500,000 $2,500,000 We anticipate GAAP straight line rental revenues of between $22,500,000 $24,500,000 and above below market rental revenues of between $5,500,000 $7,500,000 Our 2019 guidance includes 1 disposition, the Meridian Mark sale I discussed earlier. And please note, there's a mortgage on Meridian Mark that matures in August 2020 that will need to be assumed or prepaid. Our guidance assumes it is prepaid upon closing and a $1,000,000 prepayment penalty is incurred by us. Our 2019 guidance also does not include any speculative leasing or acquisition I'm sorry, speculative development or acquisitions. In his earlier remarks, Colin mentioned our strong shadow development pipeline. And if any of these projects commence, we'll disclose it to you and update our guidance if necessary. Before turning the call over to the operator, I wanted to provide one more data point. While we anticipate our same property performance to be solidly positive in 2019, in isolation, it does not capture our full NOI growth story. To do that, we think it's important to look at both the same property pool and our 5 most recent development projects, all of which are not in our same property pool. These projects include both phases of NCR here in Atlanta, Dimensional Place in Charlotte, 8,000 Avalon and Carolina Square. When both of these groups of properties are combined, we anticipate cash NOI to increase between 6.5% and 8.5% in 2019. This higher range does a much better job of reflecting the full cash flow potential of our platform, the organic growth embedded in our same property portfolio as well as the incremental growth generated by our development efforts. We are not going to provide ongoing updates to this metric, but I thought it was important to highlight. With that, I'll turn it back over to the operator. We will now begin the question and answer The first question comes from Dave Rodgers with Baird. Please go ahead. Yes, good morning everybody. Maybe I'll start with Richard. I just wanted to talk about 2 of the markets in particular, maybe some leases that you mentioned, both in Buckhead and Tampa. You said you had some replacement tenants for Bain and for T. Rowe. Can you give a little color maybe on the downtime associated with those leases and just kind of the broader activity that you mentioned in each of those markets? Sure. Happy to do that. For Buckhead and in terms of the vein space, again that expires at the end of March of this year. And we expect downtime to be roughly a couple of quarters, pretty typical for a deal of that size in Atlanta. And then to your question on T. Rowe, again, I'd probably pegging it about that as well for a customer of that size, roughly 70,000 feet. We'd expect construction time downtime of around 6 months or so. Great. That's helpful. Maybe, for Colin, I know you have a confidentiality agreement, but since you mentioned them by name and that sounded like it was going to be some sort of land sale. Can you talk about kind of whether that was your option or theirs to for you not to own that asset? Was that kind of an for you or purely on their part? And just kind of maybe discuss how you got there? Yes, Dave, it's I would love to elaborate further. Unfortunately, we will have to wait until we're able to get that transaction closed. But as I mentioned in my prepared remarks, we do think as we're able to disclose more, you'll see that it is a very financially compelling opportunity for Cousins. And I think just kind of stepping back as well, I think overall this is a very positive kind of testament to what's happening in Atlanta, a large Fortune 500 company relocating to Atlanta, not just Atlanta into Midtown. And as I mentioned, I think speaks to our deep relationships and sharpshooter abilities to be able to work with somebody like Norfolk Southern on a direct basis. So as we get the transaction further along, we'll look forward to providing all those details. Great. And then maybe last question. You mentioned 1.5% or so of revenues that likely come from that flex office business, industrial rework, industrious rework, etcetera. Any thoughts on kind of an upper bound that you're comfortable with? You have plenty of runway there? Do you anticipate doing more? Yes. We look at it building by building. But again, I think at a high level, we've been very pleased and encouraged with our experience with some of the larger co workers. We've got now a spaces lease up at our 8,000 Avalon project. And we, as Richard mentioned, just expanded WeWork at Terminus and we're excited to do our first lease with Industrious out in Tempe. And we've had lots of communication with our underlying customers and they viewed it very favorably in terms of really the flexibility, the accordion feature that it's provided to many of our customers. And we're actually starting to see some opportunities where we've seen companies, I'd say graduate perhaps out of flexible, more short term space and then look to perhaps a larger long term more traditional lease with us on a direct basis. So it's been a positive experience. Certainly, we'll be mindful of credit and we look at that really no different than we would kind of any other industry, but we're mindful of credit. And so we continue to watch that carefully. So we'll keep that the overall amount of that in context with the portfolio. But I wouldn't say there's a specific number. We just we want to be thoughtful and balanced about it. Great. Thank you. Sure. The next question is from Jamie Feldman with Bank of America ML. Please go ahead. Great. Thanks and good morning. I appreciate the color on Bain and T. Rowe. Can you talk about some of the other large blocks you're looking to backfill, CBRE, AIG and then DFA? Sure, Jamie. It's Colin. And I'll just kind of walk you through that. And I'm sorry if you can just add what's in your guidance for any of these spaces that would be helpful. So it's well, Jay, let me just kind of break it down, maybe over the course of 2019 20 20. And as we've talked about and Richard walked through, I'd say that the large material expirations in 2019, AIG has now expired at North Park. That was about 105,000 feet. We've got the DFA space in Charlotte, Bain, CBRE. Those are really the large material ones this year. And again, we're making really good progress. The if you'll recall from last quarter, we signed a long term lease with a company, technology company by the name of OneTrust that really will backfill the vast majority of the AIG space and that will come online over the course of 2019 as we will have a little bit of downtime to refit that space. Bain, again, we're making really good progress. We're hopeful in the not too distant future, we'll have good news to share there. And then we still have a little bit of work to do on the CBRE space. But again, I think as we've said in the past, it's important to get closer to those explorations to really be a viable opportunity for customers in the market. So the success that we have with Bain is their exploration comes along in March, I think bodes well for the opportunity on the CBRE space. Looking forward to 2020, again, the 2 kind of material expirations that we've got is the T. Rowe space and it was the well space at 111 Congress. And again, we're making really good progress there and really backfilled almost the entirety of that T. Rowe space and then just did a recent renewal with Wells. So the team in all our markets continues to do a great job before we're thinking with our customers and we're trying to attack that day by day and have had some good success. Great. Thank you. That's helpful. And then I guess just the Charlotte space, I think the comments were that you had good interest. I mean, is this something you've included in your 2019 guidance as getting backfilled or not yet? It is. We have with the dimensional play spaces, as Richard touched on, it really is some of the best space, existing space in the entirety of Uptown. It has been, as you know, tied to our dimensional place project, which will commence in the end of this quarter. So it's been a little bit of a moving target as we've continued to finish our work on that dimensional fund advisors has had some change orders, etcetera. We're confident we'll get it done this quarter, but it's been a little bit of a moving target in terms of when we could promise that space to a customer. So now that we're we've got some definition, I think we'll our teams got some activity and we'll keep working through that. But any leasing on or occupancy on that space would be towards the back half of the year in our guidance and not have a real material impact on our 2019 numbers. Okay, great. Thank you. I know you can't give a lot of color about Norfolk Southern, but just as you think about that parcel in Midtown and what you own around it and how that we just keep hearing more and more interest in that part of town. Can you maybe just give a big picture of what you think Midtown is shaping up to be and what you think the longer term opportunities are for you there and what it means for your portfolio there? Absolutely. It Midtown continues to be very robust in interest from large customers. And I would say, if you look back 5 plus years ago, Midtown was really known as the legal hub of Atlanta. And it's evolved from there quite significantly and certainly began to peak the interest of certainly technology companies and a lot of other large companies who are looking to tap into really the research and development and the talent over at Georgia Tech. And I'd say that really has been a key driver that was certainly our experience with NCR. They wanted to be in Midtown close to mass transit with Midtown offers and close to the talent and opportunity over at Georgia Tech. So we think that that will be a consistent theme. We've been positioning ourselves over the last several years to try to take advantage of those opportunities. And I think, again, in short order, hopefully we'll be able to highlight that with Norfolk Southern. We also own a terrific site at 901 West Peachtree. And there's a lot of big customers in the market, some who you would think of as traditional technology companies, but also some other large corporate and financial services oriented companies who think of the technology and operations aspects of their business is really what's going to differentiate them going forward. And so we're very bullish on Midtown and certainly an area that we'll continue to focus on. Okay. And then final question for me. Can you just talk about your outlook for rent growth across your markets? I know you talked about your mark to market and your rent bumps, but what do you think this year looks like for rent growth? Yes. Again, we're I'd say we're very constructive on it. Demand is solid and supply is certainly speculative supply has remained generally in check. And so we think that 2019 will look very similar to 2018 from that standpoint. And Dave, if we look over the last 12 months, our markets have ranged anywhere from 3% to 8 was really kind of an average of 5%. Phoenix over the last few months has probably been a little bit slower. I don't know if that's nothing particularly that we've seen on the ground, but that's what the data would show. And Charlotte has been on the upper end of that range at 8% with the others kind of in and around that 5%. But I think that that would be kind of a safe assumption looking forward to 2019. Okay, great. Thank you. The next question comes from John Guinee with Stifel. Please go ahead. Great. Very impressive guys. Thank you. Two questions. I'm not 100% sure, but my recollection is maybe SunTrust is located in Atlanta and BB and T is located or headquartered in Winston Salem. Anything you could comment on that would be interesting. And then the second comment is per the tone of someone's voice, I can't remember whose, you were it appeared as if you're not really happy about having co working in your buildings, but you've got to be in that game. Could you comment on either of those? Sure, John. It's Colin. I'll happy to touch both of those. So we were we woke up like everybody else to the news with SunTrust and BB and T. And SunTrust is headquartered here in Atlanta. It's interesting as a merger of Eagles, they've announced that Charlotte will in fact be their new corporate headquarters. But they did make very specific comments that Atlanta would continue to be their corporate and investment banking hub, wholesale banking as they call that. So here within the city, they've got, call it, 1,500,000 square feet. I'd say a vast majority of that is in downtown Atlanta, but we would not expect to probably see a material change there. But just stepping back at a high level, a couple of points that I would make. I think it speaks very favorably towards Charlotte and potentially the long term opportunity there. We've got great relationships with those banks. So we'll see in time. And then the other interesting point I want to make is, really if you look at what's happening between those two banks, they are doubling down on the Sunbelt, which is very consistent with our strategy. And as I looked at their deck this morning, one of the things that they were highlighting was that their geographic footprint, which is very complementary to ours, ranks number 1 in their peer set for both population growth and GDP growth. And so again, I think it really supports and shows 2 large companies making a bet on the Sunbelt. On co working, I think you might have misinterpreted our tone. I think that as we look forward, co working has been a very positive experience for us. And it is just 1.5%. It has garnered a lot of attention and headlines. But from our standpoint today, right, our customers have in the buildings where we've got that exposure have liked it, right? They like the flexibility and a new project comes along having that accordion feature. And we continue to see some interest from their underlying customers looking to graduate up into some of our space. So to date, it's been very positive. As I mentioned, from a credit perspective, it's something that we'll have to continue to watch. And just like any kind of below investment grade credit, right, we'll want to have kind of limit our exposure to that for the long term. Great. Thank you very much. The next question comes from Michael Lewis with SunTrust. Please go ahead. Good morning. This is Alexey filling in for Michael this morning. I was wondering if you could share some thoughts on related groups planned multifamily developments in Phoenix. I believe a number of news articles suggested that they plan to invest something to the tune of $500,000,000 in Phoenix and the surrounding areas. Sir, could you repeat your question? We couldn't quite hear the audio. Sorry, can you hear me right now? We can hear you. Is it better? Yes, it's better. Okay. Yes, I'll repeat it again. I was wondering if you could share your thoughts on related groups plant multifamily developments in Phoenix and the surrounding areas, which could total about $500,000,000 according to some news articles? Well, look related is clearly a very reputable group with a long and a proven track record throughout the U. S. And certainly, typically speaking in high barrier markets with growth. And I think their interest in Phoenix of something of that size and scale speaks very favorably to long term trends and prospects for Phoenix. In terms of kind of where they are in their process, right, I don't want to allow them to kind of speak for themselves over time. But again, we look at that as somebody making a big bet in Phoenix and clearly shares our view that there's really positive demographics and growth opportunities in the market. Okay. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Colin Connolly for any closing remarks. Thank you all for spending the time with us today. We appreciate your interest in Cousins Properties. We are always available for additional questions. Feel free to reach out. If we don't talk to you before, we'll look forward to our next conference call to discuss our Q1 results. Have a