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Cousins Properties Inc (NYSE:CUZ)
Q1 2020 Earnings Call
May 1, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Cousins Properties First Quarter 2020 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Pam Roper, General Counsel. Please, go ahead.

Pamela F. Roper -- General Counsel and Corporate Secretary

Thank you. Good morning and welcome to Cousins Properties first quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer; Richard Hickson, our Executive Vice President of Operations; and Gregg Adzema, our Chief Financial Officer. The press release and supplemental package were distributed 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 requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information link in the Investor Relations page of our website. Please be aware that certain matters discussed today may constitute forward-looking statements within the meaning of federal securities laws and actual results may differ materially from these statements, due to a variety of risks and uncertainties and other factors, including the risk factors set forth in our Annual Report on Form 10-K and our other SEC filings.

In particular, there are significant risks and uncertainties related to the scope severity and duration of the COVID-19 pandemic along with the direct and indirect impact that the pandemic and related mitigation efforts, including governmental requirements and private sector responses may have on our financial condition and operating results and those of our customers. The company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise. The full declaration regarding forward-looking statements is available in the supplemental package posted yesterday and a detailed discussion of some potential risks including those posed by COVID-19 is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly.

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Thank you, Pam, and good morning, everyone. These are undoubtedly extraordinary times and I want to begin by thanking the brave healthcare workers and first responders across this country, who risk their lives every day to help the nation battle COVID-19. We are truly indebted to their work as our industry, communities and country, navigate unprecedented circumstances. At Cousins, the health and safety of our customers and our employees is our top priority. In these challenging times, we have taken great care to ensure that we are staying true to our values and principles. We have always taken the approach that if we take care of our dedicated employees who deliver excellent service to our customers, our company will drive strong results for our shareholders. This remains as true today as it did when Cousins began over 60 years ago. Cousins has been closely monitoring and following the CDC's guidelines to help protect the health of our teams, customers and communities. Importantly, we have not had a Cousins employee to-date test positive for COVID-19. We are thankful for that. Our employees who can work from home have been doing so since mid-March.

We have also adjusted our operations to ensure the safety of our essential property employees, as our buildings all remain open to support our customers. As we look ahead, we will continue to follow CDC, state and local guidelines to fully prepare ourselves and our customers for a new normal when business returns to the office. We also believe we have an obligation to give back to the communities in which we live and work, especially as many of those communities currently face extreme hardships. As communities fight COVID-19 on many fronts, Cousins has committed $900,000 from our non-profit foundation to support organizations fighting the virus on the front lines or helping those who are economically impacted by it across our geographic footprint. I firmly believe that crises don't build character, they reveal character. And I am so proud that Cousins has handled this difficult situation with compassion and grace. The COVID-19 pandemic arrived swiftly and our lives changed almost overnight. Appropriately, we are all focused on what is to come. While I will delve into that in a moment, I want to quickly highlight our fantastic first quarter results. The team delivered FFO of $0.76 per share during the first quarter, same-property cash NOI increased by 11.4%.

Second-generation cash rents grew by 14.3%. Also, we closed three property dispositions: Woodcrest in New Jersey; Hearst Tower and Gateway Village in Charlotte. Gross proceeds totaled over $533 million, which reduced our net debt to adjusted EBITDA to 3.66 times at quarter end. These underlying metrics are exceptional and highlight the strength of our portfolio coming into this current health crisis. In just six weeks the economy pivoted 180 degrees from robust growth to certain recession. Without question, the commercial real estate sector will be adversely impacted, as leasing activity slows. Black swan events, such as this current health crisis never provide an early warning. Fortunately at Cousins, we continuously plan both operationally and financially for potential disruptions. Many years ago, we crafted a compelling and resilient strategic plan. Our core principles include the following. First, assemble the premier Sun Belt office portfolio; second, maintain a disciplined approach to capital allocation; third, build a best-in-class balance sheet; and lastly, create strong local operating platforms. We strictly adhere to our principles even during extended bull markets like the last several years. Thus, we are well prepared for this unprecedented change in the market.

Looking forward let me highlight the metrics that we believe will matter most. First, we have a fortress balance sheet with low leverage and liquidity of $1.1 billion. Second, our trophy portfolio of 19.4 million square feet is 93% leased as of quarter end with 6.6 years of average lease term, and we have a diverse and financially strong customer base, who as of this morning has now paid 95% of total rent in April. Importantly, our portfolio is among the newest vintage in the office sector and located in the best submarkets across the Sun Belt. Third, our $566 million development pipeline remains on time and on budget, as construction continues across our markets. Fortunately, the office development pipeline is 82% committed to leading companies like Amazon and Facebook, and will add $70 million of NOI by year-end 2022. Fourth, Cousins entered this period as a lean organization with G&A as a percentage of enterprise value at 42 basis points for the year ended 2019, which is one of the lowest in the office sector according to Green Street Advisors. Lastly, our dividend is well protected with an FAD payout ratio of 67% for the year ended 2019. Cousins is extremely well positioned to weather the impacts of this pandemic. Naturally, many are speculating about the long-term impacts of COVID-19 on the office sector. On one end of the spectrum, work-from-home is undergoing a nationwide test and is proving viable, albeit not efficient or optimal for most. On the other end, density and office spaces will clearly be reduced to protect employees health. These two competing forces will play out over time, so it is far too early to project the net result. We do believe that the pandemic will accelerate other trends that have already been influencing the office market.

The health and wellness of employees both physical and mental will likely increase in importance to corporate America as it should. As a result, we believe that newer, higher quality and better amenitized office properties should fare disproportionately well. Also, migration to the leading cities in the Sun Belt could potentially increase over time. Markets like Atlanta, Austin and Charlotte offer dynamic environments, while also providing greater personal space. Cousins is well positioned at the intersection of these two powerful long-term tailwinds. While the post COVID-19 environment and what eventually becomes our new normal is still very fluid. We feel confident that we are in the right markets, with the right portfolio and the right customer mix. This combined with an exceptionally strong balance sheet positions us for future growth opportunities and long-term success. We continue to believe that our strategy in building the preeminent Sun Belt office REIT is unique and compelling even in the most challenging environment. As a final point, I would like to provide color on our decision to withdraw our 2020 earnings guidance. Our approach should not be interpreted as a lack of confidence in the resiliency of our portfolio. Rather our decision is an acknowledgment that COVID-19 has an unknown duration and has created unprecedented economic uncertainty. At Cousins, we pride ourselves on our transparent relationship with the investor community. To that end, we provided detailed information in our supplemental on the potential impact of COVID-19 on our business based on what we know today.

As you will note, our strong start to the year in conjunction with potential cost savings and long-term incentive compensation and interest expense, helps mitigate a meaningful component of the potential negative impacts in 2020 relating to the health crisis. Before turning the call over to Richard, I want to thank the Cousins team, which continues to work tirelessly in all of our markets. I particularly want to recognize our property management and engineering teams, who are essential to our building operations. They have continued to calmly provide outstanding service to customers under difficult circumstances. I appreciate your talents and dedication to the company. I have never been prouder to be part of Cousins. Richard?

Richard Hickson -- Executive Vice President of Operations

Thanks Colin. Good morning everyone. I'll begin with a quick review of our first quarter performance. Similar to prior quarters, our portfolio is performing extraordinarily well as the pandemic arrived. Our team completed over 475,000 square feet of leasing in the first quarter, 73% of which were new and expansion leases. Rent growth was noticeably strong with second-generation net rents increasing 14.3% on a cash basis. Net effective rents for the quarter came in at $25.01 per square foot, a level surpassed in only two other quarters since 2017. We also ended the quarter at 93.3% leased with in place gross rents at a record $39.29 per square foot. Our same-property portfolio increased to 94.8% leased as of quarter end. However, as we all know the favorable market backdrop present for much of the first quarter is now a backdrop of distinct uncertainty. With the arrival of COVID-19, market activity substantially cooled. And our sense is the majority of our current leasing activity is mission-critical in nature. Despite the new market backdrop, it is interesting to note that 28% of our first quarter leasing activity was signed in March amid the onset of the pandemic. Additionally, we signed 133,000 square feet of leases in April, including a 74,000 square foot new lease with a leading global law firm at Colorado Tower in Austin.

This new customer will occupy space currently leased by Parsley Energy with planned phased commitments starting in early 2021. This new long-term lease represents a significant rent roll-up, while at the same time reducing our energy exposure which I will talk about later. Our signed April activity excludes any lease amendments precipitated by the pandemic and saw second-generation net rents increase 16.8% on a cash basis. With regard to ongoing leasing activity our lease and negotiation pipeline has seen some erosion, but remain squarely in line with our latest 12 month average. Our earlier-stage leasing pipeline is decidedly less active however given the various shelter-in-place orders but there is still some tour and proposal activity happening. In general, to-date we have observed more leasing decisions being delayed rather than canceled. The bottom-line, it is still too early to tell the full extent of the impact of this demand shock. As it relates to our development pipeline, our construction activity has continued largely uninterrupted in all of our markets with a small setback in Austin measured in days and our active development pipeline is well-leased, on time, and on budget.

I also want to share some other insights beyond our leasing and construction activity in an effort to give you a more comprehensive view into our current positioning and real-time business activity. First, some commentary on the quality of our revenue and customers. As you might expect, we estimate about 93% of our annual revenue is contractual rent for office and retail space. Cousins has limited exposure to non-contractual revenue with transient parking as our largest exposure. Our total parking revenue is about 7% of revenue with transient parking representing about 20% of that or 1.4% of total revenue. Our customer base is well diversified across many industries with an average office customer size of approximately 22,000 square feet. Our largest industry exposure is to technology at almost 19% which is a leading growth sector heading into this crisis and is generally expected to be a leader coming out. Our exposure to more economically sensitive users like retailers and flexible office providers is only 1.7% and 1.8% of annualized rent respectively. Additionally, we have two medical office buildings in Atlanta that total 339,000 square feet at share and represent 2% of annualized rent at share.

Some of the smaller practices in these medical assets to perform elective procedures have seen some temporary disruption, but these properties are generally anchored by large hospital customers with much deeper resources. Our top 20 office customers which represent nearly one-third of our annualized rent are an impressive group. For one, the General Services Administration is a top 20 customer. Of the remaining 19, 16 are public or are a major subsidiary of a public company and 13 are currently investment-grade according to S&P or Moody's. We have one law firm in our top 20 customer list McGuirewoods which is a well-regarded Am Law 50 firm. Given the state of the energy industry, I want to dive deeper into our energy and utilities customer base. While this segment represents 5.8% of our annualized rent from a practical perspective we view this to be only 3.7%. Now, for some details. Of our approximately 900 customers portfoliowide, fewer than 30 operate directly in the energy sector. Of these the three largest by a wide margin are Ovintiv USA formerly Encana in Dallas; Apache Corporation in Houston; and Parsley Energy in Austin. Together those three account for 67% of our energy exposure. Ovintiv and Apache are currently investment-grade rated by either S&P or Moody's and all three are highly sophisticated have critical mass are well capitalized relative to peers and we feel are well positioned to weather this current environment.

Another critical dynamic of note is that long before this pandemic, Ovintiv sub-leased 80% of its 319,000 leased square feet at Legacy Union One in Dallas to non-energy companies. The Ovintiv non-energy sub-leases and the pending giveback of 74,000 square feet by Parsley Energy at Colorado Tower are why we view our true energy industry exposure to be only 3.7%. I would also like to touch on the durability of our rent revenue, namely as of the end of the first quarter only 4.5% of our portfolio contractual rent was scheduled to expire during the balance of 2020 and only 21.4% is scheduled to expire through 2022. We are reassured by this lower cumulative expiration schedule in the coming years and as always our team is laser-focused on converting explorations to signed renewals. I'll now turn to April rent collections. I'm pleased to report that as of today 95% of our customers overall have paid April rent charges. Not surprisingly some customer segments are lagging, specifically our retailers stand at 33% paid; our flexible office providers at 75% paid; and our medical office customers at 90% paid. Most importantly though, 96% of our office customers paid April rent and 100% of our top 20 customers paid April rent. I would also note that 99% of our energy customers paid April rent.

These numbers do not reflect the impact of any rent relief amendments completed to-date or any application of security deposits. We attribute these encouraging numbers to great customers and our hard-working operating team. With that said, collections in the coming months could potentially be more challenging than April, as the full economic impact of this health crisis comes into view. We have not been immune to rent relief requests, which have spanned a variety of industries as well as customer types and sizes. We have received requests from the majority of our retailer and flexible office provider population and from a much lower proportion of our traditional office customers. Early on, we intentionally and proactively began working with nearly all of our retail customers on rent relief and that effort has been successful so far. On the office side, we are being very selective and entertaining requests, appropriately scrutinizing each customer's financial situation and crafting our approach based on our determination of need, credit risk and existing lease terms. This is not a one size fits all game and we are approaching each request based on its merits. Outcomes will range from a near-term bridge abatement in exchange for either, one, a medium-term payback; two, an extension of term; three, removal of customer lease rights or options; or four, a combination of any of these. As Colin said, our sense is the current environment is also likely to provide compelling opportunities to create long-term value by proactively renewing select customers early. However, by doing so, we may pull forward renewal-related rent abatement and further impact near-term cash operating income.

Finally, I would like to discuss our property level operations. Throughout this pandemic, all of our properties have remained open, with prudent adjustments to our security, access, visitor and cleaning protocols. Our operations team has performed at the highest level, adjusting staffing to reflect distancing guidelines and daily priorities to meet the demands of each day all the while keeping safe. Throughout this crisis, we have sought to reduce energy consumption given our low physical occupancy. And in addition, with low occupancy we have seized on the opportunity to perform preventive and other critical maintenance in a time when it will have minimal disruption to our customers. While we know we are using less energy for the time being, and we expect the property tax environment should be more favorable than in prior years. We feel there are still too many unknowns to reasonably quantify the potential operating expense savings for the full year. Our operations team has also been intently focused on finalizing a comprehensive operational plan for the anticipated return to full occupancy in our buildings. And finally, depending on how economic conditions evolve, we have charted a course for how we may delay or reduce building capital expenditures without impacting leasing, the quality of our properties or our customer service.

Before I hand off to Gregg, I want to say how proud I am of the Cousins team and the way our teammates across the entire company have responded to this pandemic. They have more than risen to the occasion and demonstrated great poise, competence, ingenuity and an unwavering focus on providing great support and service to our customers and to each other. I'm inspired by the fact that our team will emerge from this pandemic stronger, closer, more resilient and with invaluable perspective. Gregg?

Gregg Adzema -- President and Chief Financial Officer

Thanks Richard. Good morning, everyone. I'll begin my remarks this morning by providing an overview of our quarterly financial results and activities, followed by a discussion of our balance sheet, before closing my remarks with information that we believe will help you assess our outlook for the balance of 2020. As you can tell from Colin and Richard's earlier comments, our first quarter results were outstanding on several fronts. Leasing capacity was solid second generation leasing spreads were positive and same-property year-over-year cash NOI increased by double digits. Bottom line, these were among our strongest organic growth numbers over the past decade and are clearly indicative of the positive momentum we had heading into the COVID-19 disruption. Despite the volatility of the past few weeks, our first quarter results were very clean with a little if any unusual noise running through the data. That being said, our general and administrative expenses were significantly below prior quarters, as well as the run rate we provided in our previous earnings guidance. As has been the case many times over the past few years, this variance was driven by our long-term incentive compensation accrual. Like most REITS, our share price fell precipitously during the second half of March and our compensation accrual reflects this decline. The variance would have been larger, but for our Board's recent decision to begin settling our performance-based LTI in stock instead of cash, beginning with the LTI issued in 2020.

The other components of G&A were generally in line with our forecast. In addition to the first quarter property dispositions that we have previously disclosed and that Colin discussed at the beginning of the call, we also sold the remaining land at our Wildwood development in Atlanta during the first quarter, generating a gain of a little over $1.3 million. This sale was included in the assumptions we provided in our prior earnings guidance. Subsequent to quarter end we also completed a one-year extension of the existing loan on our Carolina Square asset in North Carolina. With this extension, we have no further debt maturities during the remainder of 2020. Turning to the balance sheet, we've entered this period of volatility with exceptional financial strength and outstanding liquidity, among the very best of our office peers and perhaps the strongest financial position in the history of Cousins. Not only do we have low leverage, our liquidity position of over $1.1 billion at the end of the first quarter comprised of a $1 billion undrawn credit facility and over $100 million in cash is more than enough to fund the remaining $200 million necessary to complete our current development pipeline.

In addition, we have no debt maturities until a small maturity of less than $40 million in May of 2021, and beyond that a well-balanced debt maturity schedule with no single year, representing more than 14% of our total debt outstanding. In conclusion as you could see from our press release last night, we've withdrawn 2020 earnings guidance. I don't need to repeat what Colin said earlier, but I do believe it merits reiterating that this withdrawal does not reflect the lack of confidence. In fact as you could tell from our strong first quarter results, we entered the COVID-19 disruption with tremendous positive momentum. Rather it reflects a lack of visibility. Despite no specific earnings guidance, we have provided what we hope is valuable information that will assist you in assessing our performance over the balance of 2020. The actual numbers within this information were included in our press release, so there's no need for me to read them back to you. However, I believe I can add value on this call by providing some context where appropriate.

First, our prior earnings guidance assumed approximately $1.5 million of revenue generated from new speculative leasing for the remainder of 2020. To assume 100% of that doesn't materialize may prove to be too conservative especially in light of what Richard said earlier about our ongoing leasing discussions with new customers. However, the certainty and the timing of these discussions remains very fluid right now and we believe a conservative approach is merited. Next, we've taken our actual experiences with rent deferral and parking over the past six weeks and we've used this to generate forecasts on both items over the remainder of 2020. As you can see the forecasted ranges for these items are fairly wide. This reflects the highly uncertain nature of the duration of the COVID-19 pandemic and the economic impact on office owners. Turning to G&A expenses. The largest driver for the remainder of 2020 will be our performance-based long-term incentive compensation. As I stated earlier, we're not selling this compensation in stock, which will reduce volatility. However, we did leave previously issued LTI unchanged, so the volatility will take a couple of years to wind down.

Moving on floating rate debt comprised 15% of our total debt at quarter end. We continue to use the forward LIBOR curve as our tool to forecast our floating rate debt expense. This curve has moved down significantly since the beginning of the year and as a result so has our interest expense forecast. Next, we've executed a termination agreement with Parsley Energy at Colorado Tower as Richard discussed earlier. The associated termination fee is $2.8 million with $2.1 million of that running through FFO and $700,000 of straight line rent being written off. This agreement was completed after quarter end and therefore these numbers are not in our first quarter results, but will be realized between the second and fourth quarter of this year. This transaction included a releasing of three of Parsley's 5.5 floors in the building to a global law firm with a significant rent roll up and a lease maturity extension from 2025 to 2033. Parsley will remain in the other 2.5 floors of the building. Finally, potentially the largest COVID-19 variable driving our performance for the remainder of 2020 tenant defaults is the hardest to qualify -- I'm sorry to quantify. As noted earlier, total April rent collections were 95% as of this morning and we've received 100% from our top 20 customers so we start from a very strong position. However, collections in May and beyond are difficult to forecast with any conviction and we believe it's prudent to hold off on making predictions at this time. With that I'll turn the call back over to the operator for your questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Blaine Heck with Wells Fargo. Please go ahead. Mr. Heck, your line is open.

Blaine Heck -- Wells Fargo -- Analyst

Sorry, about that. Can you hear me?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

We can hear you.

Blaine Heck -- Wells Fargo -- Analyst

Great. Thanks. Good morning. Colin or Richard just wanted to get your updated thoughts on the Midtown Atlanta market specifically. As we know we've seen a pretty significant uptick in construction which seemed like it was going to be met with really strong demand pre-COVID, but given that the music has stopped here a little bit how are you guys thinking about the risk in that submarket in particular? And do you think we could see some meaningful downward pressure on rents if some of those projects don't get leased up?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Good morning, Blaine and good to hear your voice. The Midtown has been an exceptionally dynamic market in Atlanta and that's primarily been driven by the technology community and its adjacency to Georgia Tech. So over the long term we believe those trends will continue. And as Richard outlined we do expect the technology sector to help lead the country out of this current market environment. Now that being said, on the supply side, if you do look at the overall statistics on the construction pipeline in Midtown it stands a little over four million square feet. Now from our vantage point about one million of that square footage is on the other side of the connector and we felt has really never competed with the core of the Midtown submarket. So in aggregate it's about 3.4 million square feet that stands at 67% pre-leased.

But from our intelligence on the ground we do feel like there are several very large leases that have either been signed recently but yet to be announced as well as some others that we think will get signed relatively soon with very, very large organizations. So in aggregate we think that will put the pre-leasing in the core of Midtown right about 80%. So we do think there is some cushion to the supply and demand that might not be obvious in the overall statistics.

Blaine Heck -- Wells Fargo -- Analyst

Okay. Great. So some of those leases still are going through that's good. And then Colin, I guess, bigger picture do you think there's going to be much of an opportunity to buy buildings or land at distressed values? Or even just put money to work through acquisitions at pricing that might be accretive for you guys? And do you see more opportunity for those sorts of investments in any specific markets that you guys operate over the others?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Well, Blaine we -- bigger picture has set up Cousins Properties to find compelling investment opportunities regardless of the cycle whether it be development as we've been able to accretively do over the last several years or from an acquisition perspective. Clearly with the dislocation in the market, I think, you'll see our bias shift from development to acquisitions. And as Gregg outlined, we have an exceptionally strong balance sheet and over $1 billion of liquidity. So as attractive investment opportunities emerge and they likely will in the coming months, we'll be positioned to look at those opportunities and we'll do so at the time. But I do think we're there's likely some time that we'll need to pass as the bid-ask between buyers and sellers I think will remain a little bit wide until we get further into the year.

Blaine Heck -- Wells Fargo -- Analyst

And any specific markets do you expect to see maybe a little bit more distressed than others?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

No I don't. If you look at the again, the underlying fundamentals across all of our markets today they entered this period in very strong position both from a supply and demand equilibrium. And so they're all strong today. Obviously, the dislocation will result in some weakening of all of the markets. But we don't see any of the markets that we're in as a better or worse position entering this phase.

Blaine Heck -- Wells Fargo -- Analyst

Got it. Thanks, guys.

Operator

The next question comes from Jamie Feldman with Bank of America Merrill Lynch. Please go ahead.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Thank you, and good morning. I was hoping to get a little bit more color just on Austin in general. Obviously, the news of you bringing the law firm on and Parsley shrinking, it sounds like it's a net positive for the portfolio. But just generally, compared to some of the other markets around the country, how would you say tenants are reacting to the crisis? And then I guess just any longer-term change in their space needs?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Well Jamie, it's Colin, and good morning. And again, Austin entered this period as strong as it really -- as it's ever been. And that growth in Austin was primarily driven by extraordinarily large technology companies that have been growing. And I think in this environment, we're seeing many of those companies kind of continue to grow. So that gives us again a lot of confidence in the long-term fundamentals for Austin. Again, there'll be, I'm sure, some near-term disruption in the fundamentals there. But as it relates to the underlying customers and their usage of space, many of the technology companies had adopted highly dense work environments. And whether that be hoteling concepts or bench seatings and in our early conversations with those customers I think they're likely to adapt their workplace environments to reduce the density and focus on the health and wellness of their employees. So that's the early feedback and that will obviously take a little bit of time to play itself out.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. And so as you think about the change I mean, thinking about your recent big acquisition there, anything that you would have done differently or any property type you think are better or worse suited for what's to come?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

And Jamie, are you referencing the TIER transaction?

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Correct. Yes.

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Yes. Again as we look back we think the timing of the TIER transaction, last year has only positioned the company better and made us stronger both from an overall enterprise value but also increased our concentration again to the technology sector which continues to grow and will likely be a leader for the long term. And so we think that has only enhanced our positioning as a company. And importantly as we came out of that transaction, we had articulated early that while leverage ticked up as a part of that transaction that we were going to in a very disciplined manner bring our leverage down to our long-term targets. And so we're thrilled that we were able to close the transactions in the first quarter at Hearst Tower Gateway and Woodcrest in New Jersey. So we had a plan both with the transaction and post closing and we feel it's terrific that the team in a disciplined manner executed on that.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you. And then just last for me just thinking about 10,000 Avalon, 300 Colorado and 100 Mill, can you just talk about the leasing pipelines or interest pipelines for those projects?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Sure, Jamie. So I'll hit each one of those. And here in Atlanta at 10,000 Avalon, we just announced that we've signed a couple of leases during the first quarter and have increased the occupancy, the percent leased in that building is 75%. So really just two floors left to go. And that is a differentiated product in the Alpharetta submarket, highly amenitized and importantly a lot of open space. So we think that will continue to do well. The other projects you referenced at 300 Colorado, there's just two floors of speculative nature. We have some activity on that space. I think it will likely pause as we work through the pandemic but there is customer interest in that space that we don't think will go away. I think it will likely just slow as we work through that. And then out at 100 Mill, we've started that project at 44% pre-leased with Deloitte having one floor and a Fortune 50 technology company with the balance of that space. And we do look forward, hopefully in the coming weeks and months to share the identity of that customer. But I think when the market appreciates who that company is they'll have confidence in the potential growth opportunity with that particular customer.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. Are you actually keeping space off the market for that customer?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Not at this time.

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Okay. All right. Thank you.

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Thanks, Jamie

Operator

The next question comes from Michael Lewis with SunTrust. Please go ahead.

Michael Lewis -- SunTrust -- Analyst

Great. Thank you. I wanted to follow-up on the question about 100 Mill, the decision to go ahead and commence construction. I was just wondering, if that decision was made in January or March kind of pre-COVID-19 or post and if any of your underwriting or expectations there have changed from the beginning of the quarter to the end?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Michael, it's Colin. And we started that project really prior to the onset of the pandemic. That being said, with the pre-leasing that we have and the underlying customer base that is in place and I think over time will become known to the market gives us a lot of confidence in that project. And candidly, the decision wouldn't have been different, if it was -- the ground broking was post the onset of the pandemic.

Michael Lewis -- SunTrust -- Analyst

Okay. Great. And then again with the pandemic slowing down the economy, I was wondering how that impacts the space that Anthem has coming up about 200,000 square feet. And then Norfolk Southern obviously we know when they move out of their building, are there longer time lines or other new challenges now as we look at those spaces?

Richard Hickson -- Executive Vice President of Operations

Yes. This is Richard. Yes. We view one there's activity on all of our kind of larger expirations that we've been talking about the last few quarters, whether it be BofA Plaza in Charlotte or like you referenced the Anthem space here in Atlanta and Norfolk Southern coming up. But we still have activity on all those opportunities and we're still excited about getting those released. And I think that's right to characterize just a bit of a pause here kind of consistent with the rest of our pipeline. But we still feel good about the activity.

Michael Lewis -- SunTrust -- Analyst

And then lastly for me, some REITs were repurchasing their shares when the share price was 50% or 100% higher than it is today. And now they're not buying, so that they can focus on leverage and liquidity. You prepared your balance sheet when times were good and now your stock is down about 30% year-to-date, you're at 3.7 times net debt-to-EBITDA with all this liquidity. You mentioned kind of thinking through maybe shifting toward acquisitions versus development. How do you consider the attractiveness of potentially repurchasing the shares as part of those options?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Michael, it's Colin. The -- certainly the purchase of our own stock is always one of the investment opportunities in front of us that we as a team in conjunction with our Board evaluate all the time. I think as we sit here today, obviously with the dislocation in the market and really no true market visibility as to asset values and where appropriate cap rates are, we feel like we can be prudent and continue to be patient and thoughtful as this plays out further. And as we get to those points and we've got more visibility, we'll always consider share buybacks along with acquisitions and other environments' development.

Michael Lewis -- SunTrust -- Analyst

Great. Thank you.

Operator

The next question comes from Dave Rodgers with Baird. Please go ahead.

Dave Rodgers -- Baird -- Analyst

Yeah. Good morning everybody. I wanted to follow-up on a couple of development questions 300 Colorado. I think that's also Parsley in bulk at least. And so have you guys had any discussions? Do you and your partners think there's an opportunity to maybe recapture some of that space, just given the transaction order and kind of move forward at a higher rent there? I know it's a little uncertain at this time. And then maybe a brief comment on 120 West Trinity office. I think that 33,000 square feet is mostly kind of timing and any discussions there?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Well good morning, Dave. The -- as it relates to 300 Colorado, we haven't had any specific conversations with Parsley to recapture space. Over time, if they decide, they'd like to become more efficient, those are conversations we could have or they could always evaluate sublease options. But we feel again from our perspective that that will be a project that we'll deliver here at the end of the year and it's a very well capitalized company that will begin paying rent at -- during the first part of next year at very attractive rental rates. So from our perspective, there's no urgency to try to recapture space from them. That being said, over time I think they're looking with some of the larger technology companies, there could be an opportunity for Parsley to do that, but that will largely be driven by Parsley, not Cousins. As it relates to 120 West Trinity, there is a small office component there that is 100% pre-leased. But I'd just keep in mind that that's a project that we own just 20% of. So from an overall impact to the -- again the portfolio it's relatively minor.

Dave Rodgers -- Baird -- Analyst

Right. That's helpful Colin. And then maybe just a broader conversation on that co-working space and you gave some good prepared comments, but in terms of kind of the request for release and how that business looks going forward your continued comfort with it? I mean, have you had some ongoing discussions about not only deferments, but taking space back. What do those operators want to do today?

Richard Hickson -- Executive Vice President of Operations

Yes. This is Richard. I'd say, one, we haven't had any conversations with any of our co-working operators or flex office operators about recapturing space. And the conversations we've had to-date have been very constructive in talking through their business, how it's been impacted. I mean they're clearly seeing an impact. And -- but it's still early to tell how it's all going to play out structurally for their business models and the timing. But we feel good with our position. It's like I said in my remarks it's still less than 2% of our aggregate annualized rent. So our exposure is at a really healthy level and we have 11 different locations across our portfolio between four different operators right now. So we're also diversified pretty well. So we feel good about where we stand with co-working.

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

The only other thing I'd add Dave is that, again the vast majority of our co-worker -- co-working customers paid their rent in April. And we'll obviously as this plays out I'm sure have some conversations with those folks about some deferrals. But I'd make a broader point as it relates to co-working which we think is a kind of complementary offering in our buildings is likely here to stay. And if you really think back over a decade shared office space has been around and it's worked its way through cycles. As we look forward kind of the current form of it as it has evolved into a highly dense shared environment I think you'll likely see that adjust over time.

But we think the overall concept of shared office space in some small percentage will continue. And some of our customers the larger customers appreciate the accordion feature and I think some of the smaller customers like the flexibility. So I don't think it's going to go away. I just think it will adapt as it's done over many cycles.

Dave Rodgers -- Baird -- Analyst

Great. And then last question you've been asked this maybe in a different way earlier. So just to make it quick, but on the land inventory overall it's a pretty small piece. It seems like now if you start to see more tenants want to kind of leave some of the major markets and continue to migrate toward the south and given your balance sheet that you guys would be in the right position to pick up quite a bit of land here. What's your view? I mean has your view changed at all? I think you've given stats in the past on where you want to be, but it's now time to kind of bulk up just even on the land component more.

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Yes David it's an excellent point. And we do take a very -- again a long-term view as a company. And land ultimately while perhaps not in this near-term environment but in the medium and long-term environment will be a differentiator. And when the market returns, oftentimes it's hard to find the appropriate piece of land. So if those opportunities come along we certainly have the balance sheet and a very overall low position in land and we'll be prepared for the appropriate strategic pieces at the appropriate prices to make investments if they present themselves.

Dave Rodgers -- Baird -- Analyst

All right, great. Thank you.

Operator

[Operator Instructions] The next question comes from John Guinee with Stifel. Please go ahead.

John Guinee -- Stifel -- Analyst

Great. Thank you. Two questions one is more curiosity than anything else. Talk a little bit about Perimeter versus Midtown versus Buckhead and where people want to be in this day and age in Atlanta? And then second the Parsley space, correct me if I'm wrong, but I imagine that it's in pretty good shape. When you brought in that law firm for 74,000 square feet does that law firm want to take it as is where is? Or do they want to gut it down to the studs and start again or something in between?

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Well good morning John, it's Colin. The -- as you look at Atlanta and in the three different submarkets the Central Perimeter, Buckhead and Midtown they're all slightly different in terms of the type of customers that they have historically and I think currently attract. And so, Central Perimeter continues to be really a Fortune 500 hub here in Buckhead it is typically driven by the financial services and the insurance and real estate companies. And then clearly over the last five years or so Midtown has evolved from really the legal capital of Atlanta which it still is, but it's also really benefited from the growth of the technology sector in Atlanta.

So, I would say as we look forward you'll continue to see those various customer profiles be attractive to those submarkets. But interestingly enough I think as the technology companies in Midtown have become pretty full, you've started to see some of those companies look to the different submarkets and be focused on opportunities in the right buildings and even in this environment the buildings that have got close proximity to match transit. To touch on your other question in Austin and the law firm lease at Colorado Tower. No, that is not -- it's not an as-is where-is deal. And really what the driver of that is partially -- was really a dense environment. And as you would imagine, a leading law firm has got an entirely different approach to space use and so that will be a much less dense environment. And so, there'll be a pretty big overhaul of that space.

John Guinee -- Stifel -- Analyst

Great. Thank you and stay safe.

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Thanks you, John

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to Colin Connolly for any closing remarks.

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Well, I want to first again thank the entire Cousins team for your continued hard work, your flexibility, your commitment and your resiliency. And finally to our investors, we certainly thank you for your continued interest and support of Cousins Properties. Thank you. [Operator Closing Remarks]

Duration: 55 minutes

Call participants:

Pamela F. Roper -- General Counsel and Corporate Secretary

M. Colin Connolly -- President and Chief Executive Officer, Cousins Properties

Richard Hickson -- Executive Vice President of Operations

Gregg Adzema -- President and Chief Financial Officer

Blaine Heck -- Wells Fargo -- Analyst

Jamie Feldman -- Bank of America Merrill Lynch -- Analyst

Michael Lewis -- SunTrust -- Analyst

Dave Rodgers -- Baird -- Analyst

John Guinee -- Stifel -- Analyst

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