Cousins Properties Inc (CUZ) 2017 Q4 法說會逐字稿

Good morning, and welcome to the Cousins Properties Fourth Quarter 2017 Earnings Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Pam Roper. Please go ahead.

Good morning, and welcome to Cousins Properties Fourth Quarter Earnings Conference Call. With me today are Larry Gellerstedt, our Chairman and Chief Executive Officer; Colin Connolly, our President and Chief Operating Officer; and Gregg Adzema, Chief Financial Officer.

The press release and supplemental package were made available on the Investor Relations page of our website yesterday afternoon as well as furnished on Form 8-K. 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 requirement.

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 statement, whether as a result of new information, future events, or otherwise. The full declaration regarding forward-looking statements is available in the press release issued yesterday and a detailed discussion of some potential risk is contained in our filings with the SEC.

With that, I'll turn the call over to Larry Gellerstedt.

Thanks, Pam, and good morning, everybody. 2017 marked another milestone year for Cousins. After completing the most transforaminal transaction in Cousins' history just 16 months ago, the team performed exceptionally on all fronts resulting in strong earnings of $0.61 per share for the year.

At the same time, we made significant progress on the ambitious business plan we outlined for ourselves post-Parkway. First, we set out to refine our operating portfolio and to optimize our geographic footprint in the markets and submarkets that we believe are best positioned for long-term growth.

Since closing the merger, we completed $1.2 billion in dispositions, exiting Philadelphia, Orlando, Miami and Downtown Atlanta. We also purchased the remaining equity interest in 2 joint ventures, which grew our Tempe and Buckhead, Atlanta portfolios. Cousins now operates in 5 core markets with a focus on building concentrations in the best-located and most highly amenitized submarkets. Effectively, we have created a dominant presence in some of the most attractive office markets, as the #1 landlord of Class A office space in Downtown, Austin; Buckhead, Atlanta; Uptown, Charlotte; the Tempe submarket of Phoenix; and Tampa's Westshore.

Next, we focused on unlocking embedded growth in the portfolio through the lease up of vacant space and rolling rents to market. Collectively, the team has completed approximately 3 million square feet of new and renewal leases since closing the merger.

Today, our office portfolio is 94% leased, in-place rents have increased more than 8% and near-term explorations account for less than 7% of our portfolio.

To highlight, the Tampa team began 2017 with a 1.7 million square foot portfolio at 88% leased. Today, that same portfolio is 96% leased. In Tempe, the team completed more than 0.5 million square feet of leasing activity since the merger. At the same time, we collected more than $5 million in fees from strategic terminations of which the team backfilled 100% of the space rolling up rents 27%.

Lastly, we aggressively sought to enhance the balance sheet by deleveraging and mitigating near-term debt maturities. Gregg will give more specifics in his comments, but, in short, we effectively utilized a wide variety of capital sources available to us, including asset sales and equity issue -- issuance and a successful private placement.

In addition, we further strengthened our financial position in January of 2018 by extending and increasing our unsecured credit facility to $1 billion. I can say with confidence that at no time has Cousins' balance sheet been better positioned.

Looking forward, my outlook for Cousins is very optimistic. I believe we've positioned the company extremely well to continue to create value for our shareholders. Our trophy office portfolio is well leased. We have modest near-term lease explorations, and our balance sheet is strong. Equally important, Cousins have a deep and talented team looking for new investment opportunities. As I've said in the past, we are always evaluating new asset and portfolio acquisitions, but we have generally found the current pricing environment for existing assets to be less than compelling. Rest assured though, if we see a pullback in the market, we have a list of strategic assets that we would like to own and the liquidity to take advantage of the opportunity.

While the acquisition activity remains limited at this time in the cycle, that's where our development platform shines. For more than 50 years of experience, Cousins has created incredible value for our shareholders through development and today is no exception. We delivered 2 development projects in 2017, 8000 Avalon in Atlanta and Carolina Square in Chapel Hill North Carolina. And just last month, we opened Phase 1 of NCR's new global headquarters in Midtown Atlanta.

In addition, we are currently under construction on the second phase of the NCR project, and our dimensional place development in Charlotte. Both will deliver at the end of 2018. We also continue to replenish our development pipeline with the commencement of 120 West Trinity, our mixed-use project with AMLI in Atlanta's Decatur submarket and most recently with 300 Colorado, our 100% preleased office development in downtown Austin.

Parsley Energy, our customer at Colorado Tower approached our team last year with a need to expand. Our 1.9 million square foot Austin portfolio at 94% leased could not accommodate their space needs, so we went to work. As a result, the team identified an exceptional site across the street from our Colorado Tower building, where Parsley today occupies 135,000 feet.

We then entered into a 50-50 joint venture with local developers, who control the site to build 300 Colorado and new 309,000 square foot tower. Construction on the $170 million office development is projected to begin in December.

As the Parsley's project highlights control of high-quality land site is critical for success in the development business. Therefore, we plan to further strengthen our land bank over time by investing in prime sites in the highly amenitized submarkets we target. We want to be armed with best sites if another Parsley or NCR opportunity surfaces this cycle while also positioning Cousins with the option to be first out of the ground during the next cycle.

With that, I'll turn the call over to Colin for a deep dive into our markets, our portfolio performance and our recent transaction activity. Gregg will then close with financial highlights for the year and a review of our initial earnings guidance for 2018. Colin?

Thanks, Larry, and good morning, everyone. The Cousins team delivered another exceptional quarter of strong performance, including notable wins in each of our Sunbelt markets. Before I elaborate on each of the market's quarterly highlights and give an update on recent activity, I'll start by recognizing the company's collective achievements.

During the fourth quarter, the team executed 943,000 square feet of new and renewal leases, which marks Cousins' third best quarter of leasing performance this cycle. In addition to the new lease with Parsley Energy at 300 Colorado in Austin, we feel vacancies across the portfolio while completing some key renewals and expansions. Second generation net rents posted positive growth for the 15th straight quarter up 19.7% on a GAAP basis and 6.3% on a cash basis.

Equally important, our weighted average net effective rent in the fourth quarter was $32.73, which was a 24% increase over the same period in 2016. Our 302,000 square foot lease with Parsley Energy in Austin was a key contributor to this impressive growth. Even excluding the Parsley lease, our weighted average net effective rent was still up over 5% relative to the fourth quarter of 2016.

With that, let me switch gears to our markets. At Atlanta, we see no immediate signs of softening market conditions. The city's outside population and job growth, business-friendly environment and affordable talented workforce fuels the demand for premium office space.

Class A asking rents climbed at the highest rate on record in the fourth quarter, increasing 26% since hitting bottom in 2012. In the highly amenitized submarkets we target, we've experienced even larger rental increases this cycle. For example, Class A gross asking rents for trophy office products in Buckhead are now in the low- to mid-40%, or $40 a square foot and over 25% premium compared to the Class A suburban market.

On the supply side, speculative office construction in Atlanta remains well below the historical average. While a few new projects are being marketed around the metro area, no significant activity is underway. The most notable new project this cycle, Three Alliance Center in Buckhead, delivers in 2017 and just last month the 507,000 square foot tower now over 90% leased sold to the Florida state pension plan for an estimated $535 a square foot, a record for the Atlanta office market.

Given the current fundamentals, we like Cousins' position in our headquarters market, including the first phase of the NCR project which opened in January, Cousins own 6.6 million square feet of trophy office products which was 91% leased at year-end. Our terrific Atlanta leasing team posted another solid quarter results, executing approximately 145,000 square feet of new and renewal leases. Notable wins were captured at Terminus 100 in Buckhead, where WeWork executed a new lease for 48,000 square foot taking 2 full floors and Morgan Stanley expanded by another 33,000 square feet now leasing a total of 119,000 square feet.

As previously disclosed, Bain and CBRE will move out of the combined 140,000 square feet at Terminus in 2019. The team is actively marketing this attractive large block and given our recent momentum, I feel optimistic we will backfill this space with minimal downtime.

Over to our Northpark asset, the percent leased ticked down, as expected, this quarter with Aetna vacating 37,000 square feet in October. On a positive note, WestRock began to move into its new 205,000 square foot headquarters location in November. And as of last week has taken occupancy of approximately 180,000 square feet with full occupancy slated for May of 2018. I have nothing concrete to report regarding the lease up of the remaining vacancy, but I can tell you that the space requirements circle, Atlanta Central Perimeter submarket, Northpark tops the list as the most attractive option due to its direct access to MARTA and proximity to major highways.

Over in Austin, the team has had some key wins over the last few weeks. In addition to our new 300 Colorado project, a few weeks ago the team has received very high praise in the press for the opening of the Fareground project at One Eleven Congress.

In an effort to modernize and activate the plaza and lobby space at One Eleven, the team incorporated an upscale food hall, which is open to the public for lunch, happy hour and dinner. And just last month, Zagat named this project, which features 6 local restaurants, one of the 30 most anticipated openings in the United States during 2018.

We are confident that the addition of the Fareground project to One Eleven Congress will enhance the experience for our customers at the property as well as our customers at St Vincent Plaza, which is directly across the street.

Similar to Austin, Charlotte office fundamentals remain very solid. In 2017, Charlotte's office market recorded the highest annual net absorption since 2000 and market wide vacancy dipped to 7.9%. According to CBRE and the Uptown submarket, where Cousins owns 3.1 million square feet, rental rates increased over 12% year-over-year.

As I've mentioned in previous quarters, new office construction remain slightly elevated, but we are encouraged by the pace it is being absorbed now over 65% preleased. With our portfolio's occupancy averaging 98% and no material explorations during the year, leasing activity was light in Charlotte during 2017 as expected.

However, late in the fourth quarter, the team produced a huge win for the company with the expansion and renewal with Bank of America at Fifth Third Center. The transaction expanded Bank of America's lease to 318,000 square feet and extended its maturity from 2022 to 2025. Fifth Third Center is now 99% leased.

As a reminder, Dimensional Fund Advisors will vacate their 50,000 square foot space at the end of 2018, when they move into our new build-to-suit project Dimensional Place. The team in Charlotte sees this vacancy as a great opportunity as the 2-floor block at Fifth Third Center is considered one of the most attractive large blocks in Uptown, Charlotte and rents are approximately 6% below market.

Moving down the Tampa. Real estate fundamentals are the best we've seen this cycle. Metrowide, the Tampa office market is experiencing historically low vacancy rates and generating one of the highest office rent gross in the nation. In the Westshore submarket, where Cousins' $1.7 million square foot portfolio is located, Class A vacancy has dropped to 7%, asking rents have grown 6% compared to a year ago and no new office projects have broken ground this cycle.

These positive tailwinds translated into healthy leasing activity for the Tampa team. During the fourth quarter, we signed another 48,000 square feet of leases for a total of 286,000 square feet for the year. As we've disclosed on previous calls, Laser Spine Institute will give back -- or gave back their 60,000 square feet at Harborview at the end of January. As one of the few larger blocks available in the Westshore submarket, this state continues to garner interest, and we feel very optimistic we'll have something to announce in the coming quarters.

Closing out 2017, our team in Phoenix posted another fantastic quarter executing approximately 74,000 square feet of new and renewal leases. Second generation releasing spreads in Phoenix led our portfolio up over 32% on a cash basis in the fourth quarter. This comes as no surprise as the Phoenix market as a whole continues to outperform. Annual absorption totaled more than 2 million square feet for the fourth conservative year. And interestingly, State Farm's 5 building campus, which is located adjacent to the Cousins portfolio in Tempe sold for $438 a square foot, the largest sale in states history.

In the high growth submarket at Tempe, where Cousins' 1.3 million square feet is located, supply continues to remain limited. As a result, vacancy levels further declined in 2017, while rental rate escalated to historic highs. This trend is also evident within our portfolio. At year-end, Cousins' Tempe portfolio was 97% leased with double-digit cash releasing spreads during the fourth quarter.

Finally, I would like to take a moment to update you on our recent transaction activity. As we previously disclosed, Cousins successfully exited Miami and Orlando during the fourth quarter. First, we sold our 20% equity interest in our sole Miami asset, Courvoisier Center, to our joint venture partner in a transaction valuing our interest at $33.9 million.

Next, we completed our exit from Orlando. Our 1 million square foot Orlando portfolio which consisted of Bank of America Center, Citrus Center and One Orlando Centre received a remarkable amount of attention from a deep pool of quality buyers during the marketing process. As a result, we were extremely pleased with the outcome. Selling the 3 asset portfolio in a single transaction for a gross purchase price of $208.1 million.

With that, I'll turn the call over to Gregg.

Thanks, Colin. Good morning, everyone. I'll begin my remarks by providing an overview of our financial results, including same property performance. Then I'll move on to our capital markets activity and its impact on our balance sheet. Before closing my remarks with our introductory 2018 earnings guidance.

As you could tell from Larry and Colin's remarks, we had a terrific fourth quarter. It was clean, it was simple and it was strong. Net income was $0.07 per share and FFO was $0.15 per share. We continue to do well, where we like to do well.

Property NOI. On a same property basis, year-over-year cash NOI was up 4.2% for the Cousins portfolio and 5.7% for the Legacy Parkway portfolio. These are solid numbers that reflect the underlying quality of our urban properties as well as the continued strength of our Sunbelt markets.

You may have noticed that Cousins' same-property occupancy declined by 2.7% year-over-year. This was solely driven by our Northpark asset, which on a square-foot basis comprised about 1/3 of our same property portfolio. Occupancy at Northpark declined by 10% over the past year as several tenants moved out, some of them proactively moved out by us to make way for the WestRock lease that Colin discussed earlier.

Once WestRock finishes relocating to Northpark this spring, we anticipate Northpark's occupancy to return to approximately 85%. Over the past year, in-place rents increased 7.4% at Northpark and 5.4% for our entire same property portfolio. This strong rent growth more than absorbed the occupancy decline in our same property portfolio and led to a 1.2% increase in year-over-year revenues in the fourth quarter. This will be the last quarter we break out reporting for these 2 same property portfolios.

Going forward, the Legacy Parkway properties will be included in our comprehensive same property portfolio, which will represent over 98% of our total NOI, excluding development properties providing a meaningful look through to our property level performance.

With that, let's move on to our capital markets activity in our balance sheet. As Colin stated earlier, we sold 3 properties and a joint venture interest in a fourth property for gross proceeds of $242 million during the fourth quarter. Subsequent to quarter end, we recashed our unsecured credit facility, increasing the size to $1 billion while improving the pricing and mainstreaming the covenant package. I believe our ability to obtain this facility on these terms is a validation of our strategy and an endorsement of our financial strength.

As of year-end 2017, we have nothing drawn on our new $1 billion facility and over $200 million in cash on the balance sheet. Our net debt-to-EBITDA ratio was 3.75x, and our fixed charge coverage ratio was 6x. The weighted average interest rate on our debt was 3.69%. Our weighted average maturity was 6.3 years, and we have no debt maturities of any significance until 2021. By any metrics, this is a rock solid balance sheet. And although our current financial flexibility is outstanding, this isn't a recent phenomena. With very few exceptions, we've maintained a net debt-to-EBITDA ratio below 4.5x since the beginning of 2014. A conservative balance sheet is a core tenet of our strategy.

I'll wrap up my comments today by providing the details behind our 2018 FFO guidance. Before I begin, I'd like to remind everyone that all of the assumptions I will provide align with the FFO presentation in our earnings supplement, located on pages 12 through 14 in our current supplement. This means we don't breakout unconsolidated operations into their own line item as is the case with our GAAP financial statements. Instead, we include unconsolidated data along with consolidated data for each assumption.

As we outlined in our earnings release, we expect 2018 FFO in the range of $0.59 per share to $0.63 per share. This guidance is driven by the following assumptions all of which are provided on an annual basis: first, we anticipate positive year-over-year same property NOI growth of between 2% and 4% on a GAAP basis and between 3.5% and 5.5% on a cash basis.

Moving on, we anticipate fee and other income of between $10 million to $12 million. For clarity, any termination fees we receive are included in this line item. We do not include them in property level NOI. At this time, we have not included any termination fees in our 2018 guidance.

We anticipate general and administrative expenses of between $24 million and $26 million, net of capitalized salaries. We anticipate interest and other expenses of between $46 million and $48 million, net of capitalized interest. Our 2018 guidance includes no property acquisitions, no dispositions or any new developments except those already underway and disclosed on Page 26 of the current supplement. This is not to say we won't complete any of these transactions in 2018, but none is assumed in the guidance we have provided. We will update these assumptions when and if necessary.

Finally, we anticipate GAAP straight line rental revenues of between $26.5 million and $28.5 million and above and below market rental revenues of between $6.5 million and $8.5 million. As you can tell from these assumptions, we anticipate our core operating metrics to remain solid in 2018. So you may be asking yourself, why 2018 FFO per share is the same as 2017 at the midpoint of our guidance. This is driven by 2 items. First, we recognized over $10 million in termination fees in 2017, and we are assuming none in 2018. Second, we've proactively decided to exit Orlando and Miami and while this significantly delevers the balance sheet, it also impacts earnings.

With that, let me turn the call back over to the operator.

(Operator Instructions) The first question will come from James Feldman of Bank of America Merrill Lynch.

I'm hoping you guys can give more color on rent growth across the markets. Just where do you -- whether you're looking year-over-year to the end of '17 or even a year ahead, what are you expecting across your major markets?

Jamie, it's Colin. It -- rent growth continues to be very solid across -- really all of our Sunbelt markets. If I want to look across and, I guess, dive into some of the specifics. I'd say, we've seen that range anywhere from, call it, 3.5% to over 8%. Charlotte has really led the way, kind of, year-over-year at the upper-end of that range. Austin, the rent growth has moderated a bit. As we've gotten to, kind of, higher or nominal rents, but it's still been, call it, 3.5% year-over-year. And our other 3 markets today Atlanta, Tampa and Phoenix have all been kind of right around 5%. As we look forward to this coming year, we do continue to see the opportunity to push rental rates, and that's really driven by -- we continue to see good solid steady demand. And as we mentioned in our prepared remarks very little speculative construction.

Okay. And then what about on the concession front? Is there any increase or decrease there? Or it's pretty consistent?

It stayed pretty steady, Jamie, and we do look at that, kind of, every quarter, what the trends have been. And I'd say, as a general statement, they've kind of flat to, actually, continuing to slightly decrease whether that be TIs coming down a touch or free rent coming down a touch, we've seen this hold or -- and in some cases our ability to, kind of, push from the landlord perspective.

Okay. And then finally, from me, you signed a lease with WeWork in Atlantic, can you just talk about your thoughts on coworking, WeWork and maybe what -- how much they're changing the dynamics in your market? And how we should expect to see Cousins react to that?

Sure, Jamie, this is Larry. We are pleased to do our first deal with WeWork and we think that the Terminus location is perfect for that type of opportunity to come to Terminus. And we're doing coworking spaces as are a lot of other folks, with various other operators across our portfolio. We spent a lot of time thinking as a company, and we had our board meeting this week and talking about coworking and how we view it. And I would say our house view is that coworking in the right building at the right location is an important amenity to our portfolios and our customers and potential customers to go in. We don't think it works everywhere. And we'll approach it really on a building-by-building, submarket-by-submarket basis. But the fact of the matter is that there is a significant amount of the -- a growing amount, it's not huge on a percentage basis, but it's a growing amount of workers that are looking for more flexible office space, with more flexible terms, or corporations that are looking to have some component of that in their overall portfolio. And we think it's the right level. It's an additive thing to have in our portfolio. The other thing that, corporately, we're having a lot of fun doing is pushing the concentration we have on -- in our leased key submarkets is allowing us to push ourselves to show additional benefits to our customers other than just the space we lease and the way we manage that space, whether that's being able to have flexible parking spaces between different buildings and if one customer needs more spaces at one, or whether it's allowing folks to use our amenity base or marketing centers or meeting conference rooms in all of our buildings and a number of things like that. So we certainly, it's an active part of our ongoing discussions and, Colin, I don't know, you may have some color a little bit on how much of that we have to...

Yes, Jamie, I would just add in terms of coworking, we do continue to spend a lot of time with WeWork, spaces, industrious and really getting to know them. I think, as we look at the deal specific to Terminus, I think, the hope is that transaction with WeWork is going to allow a broader universe of underlying customers to access Terminus. We typically aren't in the business of leasing 500 feet or 1000 feet to some individuals or small organizations. So I think WeWork's ability to aggregate some potential space takers who otherwise were -- can't be in an office building or a trophy office building of Terminus' stature in a rent profile, we think it's going to be a positive. And as we continue to look around the portfolio as Larry mentioned, we are looking at other opportunities to add coworking and view it as that could be positive for those particular assets. As we sit today to, kind of, coworking our traditional executive suites would account for about 250,000 square feet of our portfolio, a little bit under 2% of the total. So still a really -- a relatively modest amount, but one that we think could grow marginally over time.

The next question will come from John Guinee of Stifel.

Larry, I guess, in the build-to-suit world, it appears to me that the tenants come from either your existing portfolio, they're already in the market, but not in your portfolio, or they're coming from out of town. For example, AllianceBernstein is supposedly moving about half of their New York City employees into one of your Sunbelt cities fairly soon. And I'm looking at Page 27, your land inventory, you guys have whittled it down significantly. Do you have any land now which is appropriate for the, kind of, build-to-suit you expect to build or do you need to have more land on inventory?

John, yes, I'll take that. And it's a great question. And I would say yes to both. We do have land in our existing portfolio. For instance, the victory site that we have in Dallas that we own with Hines, certainly does and it gets a lot of interest on those types of inquiries. We get a lot of inquiries of that type on our Avalon 10000 (sic) [10000 Avalon] project, the second building that we've got going through predevelopment right now, and in Avalon and in North Atlanta. But you highlight the right thing. And it's the reason I mentioned it in my remarks is, we are very focused on making sure that in these key submarkets that we do have a site available whether it's for a build-to-suit or whether it's for the first building out in the next cycle. And so as we've said, we want to keep the overall land inventory at sort of the 2% to 3% level, but we're well below that and some of the land we have, we don't consider core land as we move forward. So we are focused and have been focused on acquiring some sites and I anticipate we'll do that in '18 given discussions that we've been having. We have seen a little bit of a let up in land prices, as the apartment cycles has begun to taper just a bit. And that's begun to open up some opportunities for us in some of these key submarkets and it's a major focus. And I'm optimistic that you'll see us make some progress there in the next couple of quarters or so.

And the next question will come from Dave Rodgers of Baird.

Colin, wanted to ask you 2 questions. Maybe, one, any additional details on AIG, which I know is listed in the supp as a January '19 exploration? As well as just in general in Atlanta, we've seen a little bit of a slowdown in office employment trends just over the last 6 months or 8 months or so in Atlanta. Are you feeling any of that on the ground? And is that reflected in the recent absorption of leasing stats?

Dave, taking your first question as it relates to AIG, they are out in the market. And as you mentioned they are an early 2019 expiration, little over 100,000 square feet with us at Northpark. They are continuing to look at the Central Perimeter. They are also looking at the Buckhead submarket. And so we are actively engaged in that conversation with AIG. It's a little bit premature to get a sense of where their ultimate direction will be. But as we think about kind of, again, our overall portfolio and having a critical mass that we do in Atlanta, we're -- we see -- we're excited about the flexibility that we have in terms of offering them a trophy optioning the Central Perimeter. And Northpark adjacent to MARTA, we've got various options in Buckhead as well that we think they'll find attractive. So we're going to keep after that. We're focused on it. It will be a competitive process, but we like the quality of the assets that we have to compete with that. Stepping back, just looking at Atlanta as a whole. We're encouraged as we look forward to 2018. I was with our leasing team yesterday, they're as busy and active as they've been in years. And really that interest -- kind of, customer interest is widespread across Central Perimeter, Buckhead, Midtown, continues to perform very, very well, so we're enthusiastic. And as I mentioned, it's all with -- at a high level without any real speculative construction for -- that we'll deliver for the foreseeable future. We think the market is continuing to -- is positioned very well.

And Dave, this is Larry. I would just add relative to Atlanta. When I look at the pipeline, sort of, at the metro level, just through my activities with the Metro Chamber and others. The -- sort of the pipeline of prospects incoming from other cities or countries to Atlanta is actually longer today than it was 12 or 24 months ago. And it's been strong for those 2 years as well. So I think we're seeing those numbers reflected in the employment trends. We're not feeling that in terms of the quality of our leasing pipeline or the quality of prospects at this point.

Great. And then maybe just a follow-up if I could on asset sales. You clearly performed in Orlando and Miami of late, do you still view they're being kind of a bottom 10% annually that you'd want to kind of call out of the portfolio? Or given kind of the aggressive nature of what you had over the last couple of years? Do you feel like this position is probably something that's just not really on the radar at all, at this point in time?

Well, we're always grading our portfolio, but we have been aggressive with the $1 billion of sales we've done vis-�-vis Parkway and we like our hand right now, we've had a great market in order to make those sales into the last year just because of the amount of built up capital sitting on the sidelines that's been done. But I don't anticipate us having any dispositions this year of any note, unless we find a unique opportunity that makes sense. But we really -- we couldn't be more optimistic and bullish on the portfolio we have in the markets they're sitting in right now.

The next question will come from Jed Reagan of Green Street Advisors.

Was -- I know -- I was just curious how your pipeline for potential new developments is looking? And I know, in recent quarters, you said you'd likely to maybe just look at 1 or 2 more developments, kind of, given the advanced stage in this cycle. Is that still your mind frame? Or given recent tax reform and better economic signals, are you expecting to maybe be a little more active now?

Jed, I'll start with that one. We certainly have been, and I think will remain, primarily focused on build-to-suits that either give us a significant amount of preleasing. We certainly would be open to doing some spec, on top of preleasing. Or where we just -- there is a market where there is just clearly such a pipeline with existing customers that we feel like that, with the existing customers and our discussions with those customers, they might be ready to make some commitments right out of the gate to get that going. I don't see our portfolio having something right now that we would just be compelled to start on a spec basis at this point in the cycle. We really want to -- I think, it's -- I think our very disciplined strategy on development has delivered just great value to the shareholders, and we look to remain disciplined. Having said that, we do see build-to-suit opportunities coming in, as we talked in previous calls. And we do have some conversations with existing customers, where we see the potential of those needs maybe being able to do something of a similar nature that we've been able to grow with the other existing customers.

Okay, that's helpful. Can you give us a sense of yield expectations for your new Austin build-to-suit? Or maybe what's your projected cash yield for the entire active development pipeline at this point?

Jed, it's Colin. As we've said in the past, our -- across the -- we want to be careful on any specific deal to certainly don't want to put ourselves at a -- kind of, a competitive disadvantage as we go chase the next one. But as you look across the entirety of our development pipeline today, including 300 Colorado, I'd say we're certainly targeting GAAP yields north of an 8%.

Okay, that's helpful. And, I guess, related to that, when is Parsley's lease expiring in Colorado Tower, and do you have an indication that, that could end up being a sublease situation there?

We don't. Their current space at Colorado Tower doesn't expire, I think, until 2022. But we have a very close relationship with the company. And I think they are looking at this as truly expansion space. They have already been in the market in Austin and some adjacent buildings taking some additional space on a short-term basis to kind of bridge them to the 300 Colorado project delivering. So it's a company that's experienced very rapid growth. As they came into the Colorado Tower project, their equity market cap was about $1 billion. Today, it stands over $7 billion and so -- and a very, kind of, low leveraged balance sheet. So it is a company that needs the space. And I think long-term is excited to have this space in Colorado Tower and then have this new expansion space directly across the street.

Jed, I might just have one quick thing on that. We continue to talk about the power of our local strong operating teams. And this is another example, where Parsley had options in the Austin market with other speculative developments to go fulfill this space requirement. And they had enjoyed doing business with Cousins, enjoyed doing business with our local team, and basically paused their decision for 6 months to allow us to go find a mutually acceptable site to do this building. And so sometimes it's in the excitement of the numbers and the buildings we miss the most important part, which is not just providing space, but showing value to the customer they see beyond just the built environment and Parsley is a great example of that.

Sure. Yes, that's great and congratulations on that deal. Maybe just last one quickly from me. Have you seen any changes in the asset pricing environment across your markets recently here, either on the plus or minus side?

Jed, we haven't and we're obviously coming off of the sale in Orlando in the fourth quarter. And as we've mentioned, that process was robust. The level of interest was deep from kind of a wide variety of institutional capital sources, both, domestic and foreign. And so that pricing has remained very firm and steady. I think, kind of, the recent events over the last week or 2 is far too early to speculate if that will have any impact on kind of private asset prices. But I would note there is a -- still a whole lot of private capital on the sidelines looking to -- looking for the right projects to invest. So I wouldn't anticipate any meaningful short-term changes in pricing.

(Operator Instructions) The next question will come from Chris Lucas of Capital One Securities.

Just a quick question for me. As you guys look to build your land bank and allocate capital in your different markets. I was just curious as to whether the feedback that Amazon provided to the markets that made the cut list to 20 or to those markets that didn't make it as well, whether that has any impact on how you're thinking about your capital allocation in different markets? And the other item would be, sort of, how you're thinking about how state and local tax limitations from the recent tax reform bill may impact talent migration? And, sort of, how those things factor into your allocation decisions related to building your land bank?

Chris, this is Larry Gellerstedt. The -- on the Amazon, I have to be careful because I'm helping lead the Atlanta effort, and I do have a confidentiality agreement in terms of what I'm allowed to say. But I do think that Amazon is representative really of the broader market. And that if you look at the cities that are under consideration, we are glad that 3 cities that were active core markets for us or on that list. You see the common themes of higher education talent is really the key in addition to having a quality level of life and focus on these urban highly amenitized submarkets we see that chase to be consistent with that. And so we think it's very complementary to our strategy. Certainly, the cost of living and tax advantage of the Sunbelt markets has been an additional driver to future growth. Where that is in terms of the prioritization, in terms of Amazon's decision that we -- I don't have any color on that.

Yes, the second piece to your question in terms of the tax reform and state and local taxes, there's certainly been a trend underway nationally for some time of -- kind of the north-to-south migration and kind of a West to -- Southwest-to-Texas kind of migration. And we think this will continue to help in from the standpoint of the Sunbelt markets. And as we look across our markets, I think, that certainly Phoenix and Dallas and Austin will continue to be beneficiaries from migration out of California. And I expect to see Atlanta and Charlotte to continue to do quite well from that migration coming out of the Northeast and Midwest.

The next question is a follow-up from Jed Reagan of Green Street Advisors.

Just a quick follow up for maybe Gregg or Colin. Can you give any color on how portfolio occupancy can trend during the year? And where you expect to finish the year? And also would you say that you are releasing spreads in 2017 are representative of, kind of, where you think you'll be for 2018?

Sure, Jed. It's Colin, and I'll answer that. And as I've been getting real-time feedback from our team, I will correct my earlier comment, the Parsley exploration is 2025 in Colorado Tower. So it's a whole team effort here. As we look forward to kind of occupancy in 2008, how we're projecting that, I do think that the first quarter we'll -- we're targeting to be the low point for the year as we've had some of these recent move outs that we've talked about. And then as really WestRock takes the rest of their space over the course of the year and Amgen down at Corporate Center in Tampa, that as a phase move-in over the course of the year. So we would expect the first quarter to be the low point and then continue to trend upwards through the remainder of the year. As it relates to the mark-to-market, I would say that across the portfolio, we have said in the past that, that range is roughly 8% or so below market. We still believe that to be the case today. And therefore, as we go through the coming quarters, I would expect the team to deliver results that would be kind of centered around that number. I think any given quarter could be higher or lower depending on the specific mix of leases during that quarter. But I think over time, we would hope to see this would average around that 8% if current market conditions persist.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Larry Gellerstedt for any closing remarks.

We appreciate everybody's continued interest in Cousins. We are looking forward to 2018. And as always, we'll be available for any follow-up questions that people may have after the call or during this next quarter. Thank you.

And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.