Cousins Properties Inc (CUZ) 2009 Q1 法說會逐字稿

Good day, and welcome to the Cousins Properties Incorporated first quarter 2009 conference call.

Today's call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Tom Bell.

Good afternoon, everyone.

I'm Tom Bell, Chairman and CEO of Cousins Properties, and on the phone with me today are Larry Gellerstedt, our President and COO; Jim Fleming, our Chief Financial Officer; Craig Jones, our Chief Investment Officer; and Steve Yenser, our Executive Vice President for Leasing and Asset Management.

I would like to welcome you to our first quarter conference call, and at this time I'll turn it over to Jim to review our financial results for the quarter.

Thank you, Tom, and thanks everybody for your interest in Cousins.

Certain matters we will be discussing today are forward-looking statements within the meaning of Federal Securities laws.

Actual results may differ materially from these statements.

Please refer to our filings with the SEC including our annual report on Form 10-K for the year ended December 31, 2008 for a discussion of the factors that may cause such material differences.

Also, certain items we may refer to today are considered nonGAAP financial measures within the meaning of Regulation G as promulgated by the SEC.

For these items, the comparable GAAP measures and related reconciliations may be found through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website at www.cousinsproperties.com.

This quarter we reported FFO of $0.15 per share compared with $0.20 per share last quarter.

Once again, the lumpiness of our FFO has shown itself this quarter, as we had very low gains from lots, land tracts, and outparcels, and as a result our FFO was several cents lower than the analyst estimates.

I'll go through the details in a minute, but you should keep in mind that while there were several differences between the fourth quarter and the first quarter, such as tract sales and leasing fees, the biggest item was the loss of the Wachovia lease at 191 Peachtree, which we've known about since we bought this building.

I also want to point out that by the end of this year we expect both the occupancy and the NOI at 191 Peachtree to get back to about the same level as we had in the fourth quarter of last year based on new leases that will commence later in the year.

Next quarter, the lumpiness in our FFO will show up again with a substantial increase in FFO from a debt repurchase I'll talk about in a few minutes.

This again demonstrates why it's important to take a longer view of our earnings because of the nature of our business.

Having said all of that, I would like to highlight the factors that contributed to the differences from last quarter.

You can follow by looking at our supplemental package beginning on page 8.

Rental property revenues less rental property operating expenses from our properties decreased $3.9 million between the first and fourth quarters.

This decrease is primarily attributable to our office properties.

As I mentioned a minute ago, FFO from 191 Peachtree decreased by $2.3 million as a result of the termination of the Wachovia lease.

As you probably know, we acquired 191 Peachtree after Wachovia had vacated and we began working on replacement tenants as soon as we acquired the building.

We have released over 100,000 square feet of the Wachovia space and we expect revenues from these leases to commence in the second quarter of this year as these replacement tenants take occupancy.

FFO from Terminus 100 decreased by $1.1 million from the fourth quarter to the first quarter for two reasons.

First, we had an increase of bad debt expense associated with one tenant in the first quarter, which we don't expect to be repeated in future quarters.

Second, we received a reduction in 2008 real estate taxes in the fourth quarter, which made fourth quarter FFO from Terminus 100 a bit higher than normal.

These decreases were somewhat offset by an increase in revenues associated with new leases.

One Georgia Center decreased $252,000 in the first quarter, primarily as a result of a fourth quarter adjustment to reduce 2008 real estate tax expense.

This year, with full occupancy by the Georgia Department of Transportation, we expect taxes will be passed through to the tenants and we also expect our operating income from this building will be higher in 2009 than in 2008.

FFO from Galleria 75 decreased $115,000 between the first and fourth quarters due to a reduction in economic occupancy between the periods.

FFO from 8995 Westside Parkway which is formally called the AtheroGenics building, decreased $135,000 between quarters as a result of the termination of the AtheroGenics lease in the first quarter.

AtheroGenics continues to lease 29% of the building under a short term lease.

FFO from our retail properties did not change significantly in the aggregate, but there were changes at the individual properties worth noting.

The Avenue WebGen increased $229,000 in the first quarter as a result of the decrease in bad debt expense.

San Jose Market Center increased $150,000 in the first quarter, partly as a result of a revision to estimate in common area maintenance revenues from 2008 and a decrease in bad debt expense.

The Avenue Forsyth increased $301,000 between quarters as a result of the decrease in marketing and promotional expenses and an increase in rental revenues.

And FFO from the Avenue Carriage Crossing decreased $727,000 between periods as a result of higher bad debt expenses, lower revenues received for percentage rents, and termination of the Linens 'N Things lease.

I commented last quarter that we had tried to be conservative on our reserves for tenant receivables especially at our retail properties.

We continued with the same approach this quarter, finding a number of cases we've been able to collect some of the amounts we had previously reserved.

In the first quarter, we sold one outparcel at the Avenue WebGen for a $582,000 gain and we had no outparcel sales in the fourth quarter.

FFO from tract sales in the first quarter was $331,000 and primarily consisted of a sale at CL Realty's Summer Lakes project.

FFO from other joint ventures improved from an expense of $988,000 in the fourth quarter to an expense of $146,000 in the first quarter, primarily related to revenues earned on oil and gas leases at certain residential projects in addition to the recording of a $325,000 impairment charge on one residential project in the fourth quarter.

We recorded no sales of condominiums in the first quarter so multi-family FFO decreased by $867,000 between periods.

Leasing fees decreased $1.8 million between quarters, primarily as a result of a strong fourth quarter of third party leaving activity in Dallas and Atlanta.

General and administrative expenses increased $331,000 in the first quarter as a result of a number of trueup adjustments recorded in the fourth quarter that reduced G&A expenses during that quarter.

In addition, in the first quarter we capitalized less overhead due to reduction in development activities.

Interest expense decreased by $374,000 in the first quarter as a result of a reduction in the average outstanding balance under our credit facility.

This decrease was partially offset by a decrease in capitalized interest because of lower levels of development activity.

Joint venture FFO was $910,000 higher in the first quarter as a result of higher occupancy at Palisades West in Austin.

Our predevelopment and other expenses were $865,000 for the quarter.

We continue to evaluate all of our potential future development projects.

In this quarter, we determined that one retail project is no longer probable.

Finally, preferred stock dividends decreased in the first quarter because we repurchased 1.2 million shares of our Series A and B preferred stock during the fourth quarter.

During the quarter, one item had a significant effect on net income, but not FFO the recognition of $167 million of deferred gain on our Avenue fund transaction with Prudential.

In 2006, when we closed the Avenue Fund transaction, we deferred the gain on the conveyance of the property to the venture, because Cousins received a partnership interest rather than cash for [consideration].

In the first quarter, Venture made a pro rata distribution of cash from the partnership in an amount that required us to recognize all of the deferred gain in net income.

Because the gain for accounting purposes was the result of a sale of these properties, we did not include it in FFO.

In the supplemental package we removed 191 Peachtree from our development pipeline and included it as an operating property in our portfolio listing.

At this stage in the redevelopment of 191 Peachtree, we believe it's more appropriate to view it as an operating property than a development property.

As a result of this change, our overall leasing percentage decreased to 90%.

If we had not included 191, the lease percentage would have been 95% versus 97% last quarter.

We also removed Glenmore Gardens, a 71 unit townhome project in Charlotte, from our development pipeline schedule.

At this point, we have suspended development of the project until market conditions improve.

We currently have six built town homes and 12 pads in ready to build condition.

Another change to our balance sheet occurred in the first quarter as a result of a new accounting pronouncement, FAS 160.

Under this standard we are required to reclassify any nonredeemable minority interest and consolidated subsidiaries to equity.

Accordingly, we reclassified approximately $33 million of minority interest into stockholders equity as of the end of the quarter, and reclassified all previously reported amounts.

We also created a new balance sheet account with redeemable noncontrolling interests in consolidated subsidiaries that contains third party interests and consolidated subsidiaries that are redeemable at the request of the third party at some point in the future.

As of the end of the quarter we had approximately $13 million in such interests recorded on the balance sheet.

Please note that on page seven of our supplemental package, we've replaced the generic interest and fixed charge coverage ratios with the leverage and fixed charge coverage ratios as defined in our credit agreement.

These are the two key covenants for our credit facility, and we believe this new information should give you a better picture of where we stand.

We kept the overall debt to total market capitalization ratio in our supplemental, even though its meaning is somewhat diminished with such a low stock price.

We think our bank covenant leverage calculation at 54% is a more meaningful measure of the stability of our balance sheet.

In the earnings release, we announced that after quarter end, we prepaid our San Jose mortgage loan at a discount and expect to record FFO of $12.7 million in the second quarter.

The loan had an outstanding principal balance of $83.3 million and was scheduled to mature in 2010 with a possible extension to 2011.

We paid off the loan at the discounted amount of $70 million using proceeds from our credit facility.

We will have the added short term benefit of paying interest on $70 million at the borrowing rate under our credit facility, which is currently under 2% instead of paying interest on $83 million at 5.6%.

San Jose Market Center is performing well and we believe the discount on the loan resulted from the lender's desire to have additional cash at this time and not because of problems with the collateral.

We were pleased to be able to use our balance sheet to act on this accretive opportunity.

Also after the end of the quarter, we announced that our board decided to pay 67% of the second quarter dividend in common stock.

In taking this action the board, wanted to strengthen our balance sheet by conserving cash in this challenging economic environment while ensuring that we meet our distribution requirements for recompliance purposes.

In the coming quarters, we will work with the board to formulate a dividend plan that puts us in the strongest position from a capital preservation perspective while meeting all requirements to qualify as a REIT.

As we've been discussing over the last few quarters, refinancing risk and liquidity are serious concerns for some real estate companies today.

In 2009, we have maturities of only $8.3 million, consisting of several small loans.

In 2010, after repayment of the San Jose loan, our two largest loan maturities are the Avenue Murfreesboro, of which our share is $55 million, and Meridian Mark Plaza, which is $23 million.

The Murfreesboro loan has an extension option into 2011 subject to certain conditions.

We believe the cash flows from Meridian Mark would support a higher loan amount than the current $23 million loan even in today's challenging credit environment.

Our credit facility matures in 2011, but we have the right to extend it to August 2012.

Our Terminus 200 loan also matures in 2011, but it too may be extended subject to certain conditions.

So our most significant exposure to maturing debt does not come until 2012 when our extended credit facility, bank term loan, and Terminus 100 loans will mature.

We hope by that time the economy will have stabilized somewhat and the credit markets will be more rational than they are today, but we can't count on that happening.

However, based on our medium term cash flow modeling, we believe if our development activities remain low, we will be in a position to pay down our bank debt substantially by the time our bank term loan and credit facility mature.

Our leverage level under our credit facility is currently 54% out of a maximum of 60%, which is higher than I would like, but we are still holding over $50 million in cash to cover future funding needs.

We don't foresee a problem with this covenant and anticipate our leverage trending down over time.

We are also in good shape on the rest of our bank covenants.

With that, I will close my remarks and turn it back over to Tom.

Thanks, Jim.

We are in an interesting point now for REITS, I think.

The debt markets continue to be very difficult, and as a result a number of REITS are going to the equity markets for capital.

Frankly, I'm encouraged -- there seems to be strong appetite in the equity markets for REIT investments as long as investors can be confident the companies they are investing in will survive.

Unfortunately, although REIT prices have recovered just a bit, many are still trading at extremely low levels and it's hard to reconcile this with the functioning real estate market long-term.

At Cousins, we are fortunate we haven't needed additional capital and have limited loan maturities over the next couple of years as Jim has pointed out.

But it's good to know the equity markets are available if we get to the point where we see strong investment opportunities that require additional capital.

Most of you are aware our board decided to pay the dividends this quarter two-thirds in stock and one-third in cash.

Now this may cause some dilution for those shareholders who require high levels of cash dividends, but we believe most of our shareholders will be in a position to hold the dividend in stock.

In any case, I believe it was prudent for the board to move to a stock and cash dividend in today's capital starved environment.

If we were to continue to pay a reduced cash dividend, we would accumulate an additional $100 million by the time our credit facility matures in 2012, and this would further strengthen our capital position and would make more capital available for future investment opportunities.

While dividends payments are up to our board, I believe our future dividend policy will depend at least in part on the state of the credit markets, and assuming the IRS allows us to continue using this approach, it probably makes sense for us to use the stock dividend to preserve cash until these markets open back up.

I also believe the board is inclined to pay out all of our taxable income, but not more than that amount in this constrained credit market.

Given the extremely depressed real estate markets, it appears our taxable income will be somewhat less than we had anticipated last fall when the board set the dividend level at $1.

Now I'll move on to where we see our business today.

The economics situation continued to decline in Q1 and the real estate economy is worse than the general economy.

We did not take on any new development risk last year, and at this time it appears unlikely we will begin any new developments for the remainder of this year.

Our Emory mixed use infill project continues to attract positive comments and we will take a look at it later this year to see when it makes sense to move ahead.

We also have a couple of other projects on hold that we could begin when the markets support them.

For now, we will focus our efforts on finishing up the final stages of the projects we still have underway and getting them fully leased.

As we said before, our first priority right now is keeping our stabilized assets leased and continuing to lease up our new projects that are not fully occupied today.

We are pleased that things are generally holding up well for both our office and retail portfolios and encouraged by our leasing team success to date.

With the exception of 191, the office operating portfolio saw a 2% decrease in leasing percentage in the quarter to 95%.

This decrease was largely the result of the AtheroGenics bankruptcy.

We were able to renew a significant amount of smaller and mid-sized tenants in Q1 that were set to expire this year.

The remaining 2009 lease rollover is now about 6% or 320,000 square feet, down from 10% at the beginning of the year.

And approximately 100,000 square feet of this either have renewed or plan to renew with minimum rolldown.

The largest remaining lease is AT&T at American Cancer Society Center for 139,000 square feet.

AT&T will not renew and we are working with a handful of prospects to fill the space.

This lease doesn't expire until September, which allows us some time to market the space while still receiving rent.

The retail operating portfolio closed the quarter at 83% leased, down slightly from 84% leased at the close of Q4 2008.

Given the continued slowdown in consumer spending, we are pleased with this minimal reduction.

We have continued to partner with our retail tenants where merited over the past few months on short term lease concessions and restructurings necessary to offset the tough sales stretch early in the year.

As of the end of the first quarter, the impact from writ concessions on Cousins was less than $0.01 per share and less than 1% of our total 2009 retail revenue.

We will continue to monitor this, but we've been very encouraged by the positive sales momentum we have seen at our centers in March and April of this year.

We made significant progress on the backfill of our vacated Linens 'N Things and Circuit City spaces.

Of the combined 211,900 square feet of these vacancies, we are actively negotiating letters of intent for leases for over 173,000 square feet.

And as a result of these efforts, we are pleased to announce we are in the final stages of negotiating the lease for the 28,000 square feet linens box at Avenue Carriage Crossing to Bed Bath and Beyond, who are scheduled to open this fall.

Additionally the retail leasing team has 87,000 square feet of new deal activity committed with tenants opening their first stores in Cousins operated centers.

We are very encouraged by the momentum our team has created in our retail portfolio given these difficult markets.

For our one condominium project, 10 Terminus Place, we recently launched the Cousins Assurance Program.

This program provides the buyer with short term seller financing, value protection, and downside assurance and should help defray our carrying costs and create significant momentum for this project in a stagnant condominium market.

Different from a lease to own program, the Cousins insurance program provides the buyer with benefits of home ownership, including interest and real estate tax deductions.

The program directly addresses the most prevalent issues facing our customers and it's already making a difference.

Traffic in our sales office is up 300% since announcing the program and we've already signed a handful of contracts since we launched the program in late March.

We believe this new program will provide significant benefits for the company by generating activity at 10 Terminus Place and offsetting some of our ownership costs.

However, we will not recognize sales gains under this program until the buyers have paid us their full purchase price.

At Terminus 200, construction continues to keep pace with our August 2009 delivery date.

We recently announced the execution of a 50,000 square foot lease with Firethorn, a Qualcomm subsidiary, with occupancy scheduled for September 1 of this year.

Over the last 30 to 60 days, leasing activity has picked up and we are negotiating approximately 160,000 square feet of proposals and responding to two new requests for proposals totaling an additional 100,000 square feet.

At Palisades West in Austin, the first building is 100% leased and we continue to see modest but consistent leasing activity for the remaining 120,000 feet in the second building.

We are in final negotiations with a 7,000 square foot lease with a law firm and have an additional 38,000 square feet of active prospects.

On the debt front, while we don't have pressing loan maturities, we are working on extending the ones we have.

Recently, we were in these discussions about our San Jose loan that we were presented with an opportunity to pay off the loan at a substantial discount.

Although we would like to keep as much unused capacity as possible in our credit facility, this was a great opportunity to create almost $13 million of immediate value to reduce our overall company debt by the same amount and to deal with a loan that had a short term maturity.

We remain open to other opportunities like this and are keeping our eyes open for them.

We think we are finally starting to see potential opportunities with distressed real estate.

As we've section we have two of our senior people, Craig Jones and David Nelson, looking for these opportunities every day.

It has taken a while for banks and other financial institutions to start dealing with their problems on the office and retail side, and it may be a while before we have anything specific to report.

But we are seeing some activity in pricing now that could provide good opportunities in the future.

In addition, we've launched an effort to expand our third party services business by helping financial institutions that have real estate needs because of problem loans and loan foreclosures.

Clearly there are many financial institutions that simply do not have the real estate expertise they need to address some of their upcoming issues.

This should be a good way to keep our experienced real estate people employed and in the flow of activity while our development activity is at a low level.

At a minimum it will help offset G&A costs and it may also lead to some opportunities for opportunistic investments.

Speaking of G&A, we've been working over the last two years to reduce our overhead cost as our development activity has tapered off.

This of course is a painful process, but I'm pleased that we have been able to maintain a strong and talented team at Cousins and I believe our morale has held up well despite the cuts we made.

Our nonproperty headcount is down about 25% from two years ago, and on a full year basis these payroll reductions have reduced overhead by $10 million per annum.

Although new development appears to be a ways off, I believe we will be thankful that we still have a high level of talent we can put to work over the next couple of years in leasing and maintaining occupancy in our existing portfolio, getting involved with financial institutions as they address their problems, and finding new opportunities.

With that, I'll conclude my comments and turn the floor over for any questions you might have.

Thank you, sir.

(Operator Instructions).

First question, Sloan Bohnen with Goldman Sachs.

Good afternoon.

Jay is on as well.

Just a question for Tom -- you spoke a little bit about what's going on in the REIT industry with regards to equity issuance and then spoke a little bit about some early looking at some opportunities.

Could you give us a sense of how much capital would you look to deploy either to debt repayment, to office and retail opportunities and maybe just give us a sense there?

And then in relation to that if you could just link that with the shelf you guys filed at the end of March?

Sloan, it's hard to say.

Most of the investments that we would make in stabilized assets or existing assets I think we would probably make with partners, not necessarily all of them but probably the majority of them.

We've been in consistent conversations with some of our traditional JV partners and new financial partners.

And obviously in those situations if we are acquiring distressed properties, which would be the case I think in most instances, we would invest smaller amount of equity, 15% to 25% and the financial partner investing 50% to 75% and we would hope for a promoted interest there.

With regard to debt repayment at discounted rates, frankly the San Jose loan took us by surprise but since then we've been talking to others, and we found out that this is something that's been happening quite a bit in the last 30 days as some of the lenders just need liquidity.

And so I think there might be some opportunities there for us in the future and those we would also pursue individually or with partners.

To quantify it and say there's this many dollars over this period of time, I simply couldn't can't do that.

Does that come anywhere near answering your question?

It seems like he has dropped off the queue.

Next question comes from John Stewart with Green Street Advisors.

Please go ahead.

Thank you.

Jim, was the San Jose market center loan still with Union Labor Life?

Yes, it was.

And can you just shed some additional light in terms of their motivation for letting that go at $0.84 on the dollar?

John, I can't really tell was their position was, but what we've been told is they have a number of construction loans and have some funding requirements and just simply wanted to have some more cash at this point.

If I understood correctly, it sounded like that opportunity came about as a result of you guys being out in the market talking to lenders.

What does that say specifically in terms of their appetite at this point?

We were talking to them about a potential extension, and then the conversation turned to this approach.

We are in the process of talking to a number of other lenders as we mentioned a while back, I mentioned in the speech -- we've got, we don't have a lot of loan maturities, but we have some in 2010 and 2011 and we are working on potentially extending those right now.

We have dialogue going on.

It could be those.

It could be other things.

We really don't know where opportunities might come up to buy loans at a discount.

I believe you also referenced that the release of the deferred gain on the Avenue funds was triggered by a cash distribution.

What was Cousins' share of the distribution?

John, that was a -- you may and I know that transaction has caused confusion since the very beginning, but that was a transaction we set up in 2006 that where we had a number of dollars in the deal for future development and we simply downsized that side of the venture, just given what's going on in the environment.

The total distribution was $40 million, Prudential's was 11.5%, which was $4.6 million, and ours was the remainder.

But keep in mind you don't see that distribution to Cousins on our balance sheet because the venture that we are talking about since we own 88.5% and control it has been consolidated all along.

And so you just don't see that cash stuff in the GAAP financial statements.

Okay.

You also referenced a retail project that you determined was no longer probable during the quarter.

Which project was that?

Boones Creek in the Tri-Cities area of Tennessee.

And then lastly, obviously you got some good news at Terminus 200 with the Firethorn lease during the quarter, but it looked like there were a couple of smaller leases that fell through.

Presumably the restaurants.

And likewise at Avenue Forsyth, it looks like the percentage lease has crept down the past couple of quarters.

What is it about those leases that have enabled the tenants to walk away?

Have there been bankruptcies or have you received lease terminations?

What's going on there?

On the Terminus 200 leases, the leases were contingent on financing and they were unable to finance the projects in the timely fashion that we needed them.

And we have other are restauranteurs who are interested in the space, and we terminated those, and began negotiations with the others who we believe can finance and do it in a timely fashion.

And I don't think the leasing is down at Forsyth.

Steve, do you have color on that?

There may have been tenants that were in on a short-term basis that expired at the end of the holiday season.

Where are we now at Forsyth and both where we are now and where we will be if you complete these leases that you are working on now?

Currently we are at 55% leased at Forsyth and -- actually Forsyth and if you take that and include the development portfolio which also includes Tiffany Springs, the deals that are active out there would take us to about a 67% leased if everything we have currently in the committed area gets signed and opened.

That's 67% on our development portfolio.

Which is primarily Forsyth and Tiffany Springs.

Does that answer your question?

Yes, it does, thank you.

Thanks, John.

Thank you, next question, follow-up question from Sloan Bohlen.

Please go ahead.

Sorry I dropped off there for a second.

Just to round out my first question, you spoke about comfortable level on the credit facility.

Do you have a number in mind or how should we think there?

Let me start this off.

With the reduced cash dividend and with our cash flow modeling and I don't want to get into a lot of detail, but we do cash flow modeling and look at it every two weeks and project it well out into the future -- we do think we will accumulate cash overtime.

We also have some assets that are not encumbered like our industrial assets that we would like to sell at the appropriate time.

That would also provide some additional cash as well as condominium units that don't have a loan on them.

My point is there should be cash coming in the door over -- a substantial amount of cash and you can do the modeling between now and when the credit facility matures, so we would have the ability to pay it down substantially.

So I think the trend is in the right direction.

The question is what do we want the balance to be today.

I can't answer that.

It depend on the opportunity and what we see.

Clearly the San Jose thing was a compelling opportunity.

I think that's I'm just trying to get a sense of -- you guys have spoken in the past about leverage returns in the 20% range.

That's still the level that you would look at and that's where maybe we would see the deployed capital in the future?

That's the neighborhood.

One last question on the AtheroGenics lease, you said it was $135,000 decline in the quarter.

At what point did they leave in the quarter and what's the expected run rate impact to FFO going forward?

We have to look that up.

I believe they left March 1, which was two-thirds of the way through the quarter.

They did take a reduced square footage from that point forward.

We can did get you some details on that.

Was there a lease term fee associated?

Their lease actually expired.

Okay.

Okay.

Thank you, guys.

(Operator Instructions).

Next question comes from the line of Justin Webb with Robert W.

Baird.

Please go ahead.

Hi, guys, I'm sorry if I missed this because I got in a little late.

But on the San Jose loan have you guys said anything or do you have any plans on what you are going to do with that property, just keep it unencumbered, refinance it, sell it and if you were going to refinance it, what proceeds do you think you could get there?

We are looking at both and have hired Eastdale to help us evaluate the project with regard to whether we would just refinance it or whether we should sell it, and we don't have a response back from them yet.

But I think it's 96% leased, it's performing very well, good credit tenants.

So I would say in today's market you probably would get 60% to 65%.

That works.

And then just more housekeeping.

On the lot and tract sales what kind of profit margins could you remind me did you guys get there?

What lot and tract sales?

Good point.

Traditionally, we underwrite that to margin of about 25%.

But we've got a sale that looks like it will close in the second quarter where we are delighted to sell it and get the cash and the return on that is probably going to be low teens.

So I think the market today is very different than the traditional market.

And is that low teens number for the foreseeable future more likely target?

I think it really depends on the assets.

I mean we did an outparcel sale or plan to do an outparcel sale in the quarter and I think that was at a 7.5% cap rate.

So we probably met our target, came very close to meeting our target.

We probably met our target on that one.

Some of the rural lands that we own in Paulding county, I think you are talking -- even though we have a very low basis, you are probably talking mid-teens.

Okay.

That works.

It's all I have.

Okay.

Thanks.

I'm showing no further questions in the queue.

I will turn it back to Mr.

Bell for any closing remarks.

Well, it's a busy, busy time.

I know yesterday kept you guys going all today and today's been busy too.

If you have any additional questions, you know where to find us.

We are always willing to provide whatever information we can.

We appreciate you being on the call today and we will see you next quarter.

Ladies and gentlemen, this concludes the Cousins Properties Incorporated first quarter 2009 conference call.

You may now disconnect.

Thank you for using ACT Teleconferencing.