ALEXANDER & BALDWIN, INC.’S REAL ESTATE SUPPLEMENT UPDATE
AS OF AND FOR THE QUARTERS ENDED SEPTEMBER 30, 2013 AND 2012
(Unaudited)
About This Supplement Update
This periodic Supplement Update is designed to provide current and potential shareholders of Alexander & Baldwin, Inc. with additional information regarding the Company’s Real Estate operating segments. This information is supplemental to and does not replace the information provided to shareholders in the Company’s periodic filings with the Securities and Exchange Commission.
This third quarter Supplement updates the following tables in the Company’s Real Estate Supplement as of and for the years ended December 31, 2012 and 2011:
Table 7: Property Detail – Hawaii Improved Properties
Table 8: Property Detail – Mainland Improved Properties
Table 9: Comparable % Occupancy Data by Geographic Region and
Asset Class
Asset Class
Table 10: Weighted Average Gross Leasable Area by Geographic Region and
Asset Class
Asset Class
Table 11: Occupancy Analysis Trend – Last Five Quarters
Table 12: Real Estate Leasing Cash Net Operating Income (NOI)
Table 13: Real Estate Leasing Same Store Cash NOI
Table 14: Reconciliation of Real Estate Leasing Operating Profit to Cash NOI and Same Store Cash NOI
Table 15: Improved Property Portfolio Acquisitions/Dispositions
Table numbers used in this Update correspond with table numbers used in the full-year Supplement.
The information contained in this Supplement Update is unaudited and should be read in conjunction with the Company’s Real Estate Supplement as of and for the years ended December 31, 2012 and 2011, its 2012 Form 10-K and other filings with the SEC through the date of this Supplement Update.
Feedback and suggestions regarding the contents of this Supplement Update from the investing audience are welcomed, and should be directed to Suzy P. Hollinger, Director, Investor Relations, via telephone at (808) 525-8422 or via email to shollinger@abinc.com.
Alexander & Baldwin, Inc. │Real Estate Supplement Update
INDEX TO REAL ESTATE SUPPLEMENT UPDATE
(Unaudited)
AS OF AND FOR THE QUARTERS ENDED SEPTEMBER 30, 2013 AND 2012
| Forward-Looking Statements | 2 |
| Basis of Presentation | 2 |
| Real Estate Leasing Segment – Asset Descriptions and Statistics | 3 |
| Property Detail – Hawaii Improved and Unimproved Properties (Table 7) | 3 |
| Property Detail – Mainland Improved Properties (Table 8) | 4 |
| Comparable % Occupancy Data by Geographic Region and Asset Class (Table 9) | 5 |
| Weighted Average Gross Leasable Area by Geographic Region and Asset Class (Table 10) | 5 |
| Occupancy Analysis Trend – Last Five Quarters (Table 11) | 5 |
| Real Estate Leasing Net Operating Income (NOI) (Table 12) | 6 |
| Real Estate Leasing Same Store NOI (Table 13) | 6 |
| Statement on Management’s Use of Non-GAAP Financial Measures | 7 |
| Reconciliation of Real Estate Leasing Operating Profit to NOI and Same Store NOI (Table 14) | 7 |
| Portfolio Acquisitions and Dispositions | 8 |
| 2013 and 2012 Improved Property Portfolio Acquisitions/Dispositions (Table 15) | 8 |
1
Forward-Looking Statements
Statements in this Supplement Update that are not historical facts are “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. These forward-looking statements are not guarantees of future performance. This Supplement should be read in conjunction with pages 18-28 of Alexander & Baldwin, Inc.’s 2012 Form 10-K and other filings with the SEC through the date of this Supplement, which identify important factors that could affect the forward-looking statements in this Supplement. We do not undertake any obligation to update our forward-looking statements.
Basis of Presentation
The information contained in this Supplement Update does not purport to disclose all items required by accounting principles generally accepted in the United States of America (GAAP). The information contained in this Supplement Update is unaudited and should be read in conjunction with Alexander & Baldwin, Inc.’s Real Estate Supplement as of and for the years ended December 31, 2012 and 2011, its 2012 Form 10-K and other filings with the SEC through the date of this Supplement Update.
2
Real Estate Leasing Segment – Asset Descriptions and Statistics
TABLE 7
PROPERTY DETAIL - HAWAII IMPROVED AND UNIMPROVED PROPERTIES
| Property | Number of properties | Island | Gross leasable area at 09/30/13 (sq. ft.) | Leased1 (percent) | Outstanding debt ($ in 000s) | 3Q2013 net operating income (NOI)2($ in 000s) | % net operating income to total Hawaii portfolio | ||||||
| Industrial: | |||||||||||||
| Komohana Industrial Park | 1 | Oahu | 238,300 | 100 | $ | — | $ | 948 | 11.4 | ||||
| P&L Building | 1 | Maui | 104,100 | 90 | — | 271 | 3.2 | ||||||
| Port Allen | 3 | Kauai | 63,800 | 98 | — | 148 | 1.8 | ||||||
| Waipio Industrial | 1 | Oahu | 158,400 | 94 | — | 489 | 5.9 | ||||||
| Subtotal – Industrial | 6 | 564,600 | 96 | $ | — | $ | 1,856 | 22.3 | |||||
| Office: | |||||||||||||
| Gateway at Mililani Mauka South | 1 | Oahu | 18,700 | 100 | $ | — | $ | 169 | 2.0 | ||||
| Judd Building | 1 | Oahu | 20,200 | 64 | — | 19 | 0.3 | ||||||
| Kahului Office Building | 1 | Maui | 58,400 | 81 | — | 267 | 3.2 | ||||||
| Kahului Office Center | 1 | Maui | 32,900 | 85 | — | 115 | 1.4 | ||||||
| Lono Center | 1 | Maui | 13,400 | 84 | — | 49 | 0.6 | ||||||
| Maui Clinic Building | 1 | Maui | 16,600 | 91 | — | 84 | 1.0 | ||||||
| Stangenwald Building | 1 | Oahu | 27,100 | 86 | — | 68 | 0.8 | ||||||
| Subtotal – Office | 7 | 187,300 | 84 | $ | — | $ | 771 | 9.3 | |||||
| Retail: | |||||||||||||
| Gateway at Mililani Mauka | 1 | Oahu | 5,900 | 100 | $ | — | $ | 67 | 0.8 | ||||
| Kahului Shopping Center | 1 | Maui | 48,700 | 91 | — | 80 | 1.0 | ||||||
| Kaneohe Bay Shopping Center | 1 | Oahu | 124,300 | 100 | — | 480 | 5.8 | ||||||
| Kunia Shopping Center | 1 | Oahu | 60,400 | 95 | — | 539 | 6.5 | ||||||
| Lahaina Square | 1 | Maui | 50,200 | 68 | — | 125 | 1.5 | ||||||
| Lanihau Marketplace | 1 | Hawaii | 88,300 | 88 | — | 370 | 4.4 | ||||||
| Maui Mall | 1 | Maui | 185,700 | 95 | — | 740 | 8.9 | ||||||
| Napili Plaza | 1 | Maui | 45,100 | 91 | — | 272 | 3.3 | ||||||
| Pearl Highlands Center | 1 | Oahu | 415,400 | 98 | 62,270 | 416 | 5.0 | ||||||
| Port Allen Marina Center | 1 | Kauai | 23,600 | 72 | — | 83 | 1.0 | ||||||
The Shops at Kukui'ula3 | 1 | Kauai | 78,900 | 82 | — | — | — | ||||||
| Waianae Mall | 1 | Oahu | 170,300 | 90 | 20,125 | 824 | 9.9 | ||||||
| Waipio Shopping Center | 1 | Oahu | 113,800 | 97 | — | 808 | 9.7 | ||||||
Subtotal – Retail3 | 13 | 1,410,600 | 93 | $ | 82,395 | $ | 4,804 | 57.8 | |||||
| Hawaii unimproved | — | — | — | 887 | 10.6 | ||||||||
Total Hawaii3 | 26 | 2,162,500 | 93 | $ | 82,395 | $ | 8,318 | 100.0 | |||||
1 | Represents the average percentage of space leased during the period referenced or A&B’s ownership period, whichever is shorter. Space is considered leased when a tenancy agreement has been fully executed or the space is revenue producing. |
2 | See page 7 for a statement regarding the Company’s use of non-GAAP financial measures and a reconciliation of Leasing operating profit to NOI for the total portfolio. |
3 The Shops at Kukui’ula was originally held in a joint venture, but was consolidated as of September 30, 2013. Accordingly, income from the property for the quarter was included in joint venture earnings for the quarter and occupancy data was not included in the calculation of portfolio occupancy for the quarter.
| Note: | For portfolio asset class and geographic occupancy see Table 9 on page 5. Gross leasable area is periodically adjusted based on remeasurement or reconfiguration of space. |
3
TABLE 8
PROPERTY DETAIL - MAINLAND IMPROVED PROPERTIES
| Property | Number of properties | Location | Gross leasable area at 09/30/13 (sq. ft.) | Leased1 (percent) | Outstanding debt ($ in 000s) | 3Q2013 net operating income (NOI)2($ in 000s) | % net operating income to total Mainland portfolio | ||||||
| Industrial: | |||||||||||||
| Activity Distribution Center | 1 | San Diego, CA | 252,300 | 100 | $ | — | $ | 590 | 7.0 | ||||
| Heritage Business Park | 1 | Dallas, TX | 1,316,400 | 100 | — | 1,394 | 16.6 | ||||||
| Midstate Hayes | 1 | Visalia, CA | 789,100 | 97 | 11,488 | 720 | 8.6 | ||||||
| Republic Distribution Center | 1 | Pasadena, TX | 312,500 | 100 | — | 112 | 1.3 | ||||||
| Savannah Logistics Park | 1 | Savannah, GA | 1,035,700 | 100 | — | 787 | 9.3 | ||||||
| Sparks Business Center | 1 | Sparks, NV | 396,100 | 100 | — | 391 | 4.6 | ||||||
| Subtotal – Industrial | 6 | 4,102,100 | 99 | $ | 11,488 | $ | 3,994 | 47.4 | |||||
| Office: | |||||||||||||
| Concorde Commerce Center | 1 | Phoenix, AZ | 137,200 | 100 | $ | — | $ | 151 | 1.8 | ||||
| Deer Valley Financial Center | 1 | Phoenix, AZ | 126,600 | 75 | — | 95 | 1.1 | ||||||
| Gateway Oaks | 1 | Sacramento, CA | 58,700 | 53 | — | 58 | 0.7 | ||||||
| Ninigret Office Park | 1 | Salt Lake City, UT | 185,500 | 100 | — | 370 | 4.4 | ||||||
| 1800 Preston Park | 1 | Plano, TX | 78,300 | 90 | — | 189 | 2.2 | ||||||
| 1820 Preston Park | 1 | Plano, TX | 120,500 | 96 | — | 298 | 3.5 | ||||||
| 2868 Prospect Park | 1 | Sacramento, CA | 162,900 | 86 | — | 372 | 4.4 | ||||||
| San Pedro Plaza | 1 | San Antonio, TX | 172,000 | 69 | — | 219 | 2.6 | ||||||
| Union Bank | 1 | Everett, WA | 84,000 | 100 | — | 334 | 4.0 | ||||||
| Subtotal – Office | 9 | 1,125,700 | 88 | $ | — | $ | 2,086 | 24.7 | |||||
| Retail: | |||||||||||||
| Broadlands Marketplace | 1 | Broomfield, CO | 103,900 | 91 | $ | — | $ | 208 | 2.5 | ||||
| Little Cottonwood Center | 1 | Sandy, UT | 141,500 | 94 | 6,115 | 364 | 4.3 | ||||||
| Meadows on the Parkway | 1 | Boulder, CO | 216,400 | 81 | — | 553 | 6.6 | ||||||
| Rancho Temecula Town Center | 1 | Temecula, CA | 165,500 | 95 | — | 899 | 10.7 | ||||||
| Royal MacArthur Center | 1 | Dallas, TX | 44,400 | 100 | — | 269 | 3.2 | ||||||
| Wilshire Shopping Center | 1 | Greeley, CO | 46,500 | 57 | — | 54 | 0.6 | ||||||
| Subtotal – Retail | 6 | 718,200 | 88 | $ | 6,115 | $ | 2,347 | 27.9 | |||||
| Total Mainland | 21 | 5,946,000 | 96 | $ | 17,603 | $ | 8,427 | 100.0 | |||||
1 Represents the average percentage of space leased during the period referenced or A&B’s ownership period, whichever is shorter. Space is considered leased when a tenancy agreement has been fully executed or the space is revenue producing.
2 See page 7 for a statement regarding the Company’s use of non-GAAP financial measures and a reconciliation of Leasing operating profit to NOI for the total portfolio.
Note: For portfolio asset class and geographic occupancy see Table 9 on page 5. Gross leasable area is periodically adjusted based on remeasurement or reconfiguration of space.
4
TABLE 9
COMPARABLE % OCCUPANCY DATA BY GEOGRAPHIC REGION AND ASSET CLASS
| 3Q 2013 | 3Q 2012 | Percentage point change | ||||||||||||||||||||||
| Location | Industrial | Office | Retail | Total | Industrial | Office | Retail | Total | Industrial | Office | Retail | Total | ||||||||||||
| Hawaii improved | 96 | 84 | 93 | 93 | 97 | 88 | 91 | 93 | (1 | ) | (4 | ) | 2 | — | ||||||||||
| Mainland improved | 99 | 88 | 88 | 96 | 97 | 86 | 86 | 93 | 2 | 2 | 2 | 3 | ||||||||||||
| Total | 99 | 87 | 91 | 95 | 97 | 86 | 88 | 93 | 2 | 1 | 3 | 2 | ||||||||||||
TABLE 10
WEIGHTED AVERAGE GROSS LEASABLE AREA BY GEOGRAPHIC REGION AND ASSET CLASS
| 3Q 2013 (in sq. ft.) | 3Q 2012 (in sq. ft.) | Percentage Change | ||||||||||||||||||||||||
| Location | Industrial | Office | Retail | Total | Industrial | Office | Retail | Total | Industrial | Office | Retail | Total | ||||||||||||||
| Hawaii improved | 564,600 | 187,400 | 1,055,400 | 1 | 1,807,400 | 564,700 | 187,400 | 698,200 | 1,450,300 | — | — | 51.2 | 24.6 | |||||||||||||
| Mainland improved | 4,264,600 | 1,225,000 | 718,200 | 6,207,800 | 4,465,600 | 1,272,800 | 718,300 | 6,456,700 | (4.5 | ) | (3.8 | ) | — | (3.9 | ) | |||||||||||
| Total | 4,829,200 | 1,412,400 | 1,773,600 | 8,015,200 | 5,030,300 | 1,460,200 | 1,416,500 | 7,907,000 | (4.0 | ) | (3.3 | ) | 25.2 | 1.4 | ||||||||||||
TABLE 11
OCCUPANCY ANALYSIS TREND – LAST FIVE QUARTERS
| 3Q2013 | 2Q2013 | 1Q2013 | 4Q2012 | 3Q2012 | ||||||||||||||||||||||||||
| Number of properties | Weighted average sq. ft. | Percentage leased | Number of properties | Weighted average sq. ft. | Percentage leased | Number of properties | Weighted average sq. ft. | Percentage leased | Number of properties | Weighted average sq. ft. | Percentage leased | Number of properties | Weighted average sq. ft. | Percentage leased | ||||||||||||||||
| Industrial | 12 | 4,829,200 | 99 | 13 | 4,910,600 | 98 | 13 | 4,910,700 | 98 | 14 | 5,030,300 | 97 | 14 | 5,030,300 | 97 | |||||||||||||||
| Office | 16 | 1,412,400 | 87 | 17 | 1,461,500 | 88 | 17 | 1,461,200 | 89 | 16 | 1,460,200 | 89 | 16 | 1,460,200 | 86 | |||||||||||||||
| Retail | 18 | 1,773,600 | 91 | 17 | 1,620,000 | 90 | 16 | 1,588,600 | 90 | 15 | 1,416,500 | 89 | 15 | 1,416,500 | 88 | |||||||||||||||
| Total | 46 | 8,015,200 | 95 | 47 | 7,992,100 | 94 | 46 | 7,960,500 | 94 | 45 | 7,907,000 | 94 | 45 | 7,907,000 | 93 | |||||||||||||||
1 Hawaii improved retail weighted gross leasable area and occupancy and the corresponding totals do not include 78,900 square feet of GLA related to The Shops at Kukui’ula that was consolidated on September 30, 2013.
Note: Gross leasable area is periodically adjusted based on remeasurement of reconfiguration of space.
5
TABLE 12
REAL ESTATE LEASING NET OPERATING INCOME (NOI)
(in millions)
| 3Q 2013 | 3Q 2012 | Percentage Change | ||||||||||||||||||||||||||||||
| Location | Industrial | Office | Retail | Total | Industrial | Office | Retail | Total | Industrial | Office | Retail | Total | ||||||||||||||||||||
| Hawaii improved | $ | 1.9 | $ | 0.8 | $ | 4.7 | $ | 7.4 | $ | 1.7 | $ | 1.0 | $ | 3.2 | $ | 5.9 | 11.8 | (20.0 | ) | 46.9 | 25.4 | |||||||||||
| Hawaii unimproved | — | — | — | 0.9 | — | — | — | 0.9 | — | — | — | — | ||||||||||||||||||||
| Total Hawaii | $ | 1.9 | $ | 0.8 | $ | 4.7 | $ | 8.3 | $ | 1.7 | $ | 1 | $ | 3.2 | $ | 6.8 | 11.8 | (20.0 | ) | 46.9 | 22.1 | |||||||||||
| Mainland improved | 4.2 | 2.6 | 2.4 | 9.2 | 4.4 | 2.6 | 2.2 | 9.2 | (4.5 | ) | — | 9.1 | — | |||||||||||||||||||
| Total | $ | 6.1 | $ | 3.4 | $ | 7.1 | $ | 17.5 | $ | 6.1 | $ | 3.6 | $ | 5.4 | $ | 16 | — | (5.6 | ) | 31.5 | 9.4 | |||||||||||
TABLE 13
REAL ESTATE LEASING SAME STORE NOI1
(in millions)
| 3Q 2013 | 3Q 2012 | Percentage Change | ||||||||||||||||||||||||||||||
| Location | Industrial | Office | Retail | Total | Industrial | Office | Retail | Total | Industrial | Office | Retail | Total | ||||||||||||||||||||
| Hawaii improved | $ | 1.9 | $ | 0.8 | $ | 3.2 | $ | 5.9 | $ | 1.7 | $ | 0.9 | $ | 3.1 | $ | 5.7 | 11.8 | (11.1 | ) | 3.2 | 3.5 | |||||||||||
| Hawaii unimproved | — | — | — | 0.8 | — | — | — | 0.9 | — | — | — | (11.1 | ) | |||||||||||||||||||
| Total Hawaii | $ | 1.9 | $ | 0.8 | $ | 3.2 | $ | 6.7 | $ | 1.7 | $ | 0.9 | $ | 3.1 | $ | 6.6 | 11.8 | (11.1 | ) | 3.2 | 1.5 | |||||||||||
| Mainland improved | 4.2 | 2.6 | 2.4 | 9.2 | 4.3 | 2.6 | 2.2 | 9.1 | (2.3 | ) | — | 9.1 | 1.1 | |||||||||||||||||||
| Total | $ | 6.1 | $ | 3.4 | $ | 5.6 | $ | 15.9 | $ | 6.0 | $ | 3.5 | $ | 5.3 | $ | 15.7 | 1.7 | (2.9 | ) | 5.7 | 1.3 | |||||||||||
1 Same Store NOI relates to properties that were operated throughout the duration of both periods under comparison.
Note: See page 7 for a statement on the Company’s use of non-GAAP financial measures and a reconciliation of Leasing operating profit to Real Estate Leasing NOI and Real Estate Leasing same store NOI.
6
Statement on Management’s Use of Non-GAAP Financial Measures
Net operating income (NOI) is a non-GAAP measure derived from real estate revenues (determined in accordance with GAAP, less straight-line rental adjustments) minus property operating expenses (determined in accordance with GAAP). NOI does not have any standardized meaning prescribed by GAAP, and therefore, may differ from definitions of NOI used by other companies. NOI should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company’s financial performance, or as an alternative to cash flow from operating activities as a measure of the Company’s liquidity. NOI is commonly used as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. NOI excludes general and administrative expenses, straight-line rental adjustments, interest income, interest expense, depreciation and amortization, and gains on sales of interests in real estate. The Company believes that the Real Estate Leasing segment’s operating profit after discontinued operations is the most directly comparable GAAP measurement to NOI. A required reconciliation of Real Estate Leasing operating profit to r Real Estate Leasing segment NOI and same store NOI is as follows:
TABLE 14
RECONCILIATION OF REAL ESTATE OPERATING PROFIT TO NOI AND SAME STORE NOI
(in millions)
| 3Q 2013 | 3Q 2012 | |||||
| Real Estate Leasing segment operating profit before discontinued operations | $ | 11.2 | $ | 10.2 | ||
| Less amounts reported in discontinued operations | (0.7 | ) | (1.0 | ) | ||
| Real Estate Leasing segment operating profit after subtracting discontinued operations | $ | 10.5 | $ | 9.2 | ||
| Adjustments: | ||||||
| Depreciation and amortization | $ | 6.0 | $ | 5.5 | ||
| FASB 13 straight-line lease adjustments | (0.5 | ) | (0.4 | ) | ||
| General and administrative expense | 0.8 | 0.7 | ||||
| Discontinued operations | 0.7 | 1.0 | ||||
| Real Estate Leasing total NOI | $ | 17.5 | $ | 16.0 | ||
| Acquisitions/ disposition adjustments/ other | (1.6 | ) | (0.3 | ) | ||
| Real Estate Leasing segment same store NOI1 | $ | 15.9 | $ | 15.7 | ||
1 | NOI related to properties that were operated throughout the duration of both periods under comparison. |
7
Portfolio Acquisitions and Dispositions
TABLE 15
2013 IMPROVED PROPERTY PORTFOLIO ACQUISITIONS/DISPOSITIONS
| Property acquired in 2013 | Acquisition date (month/year) | Acquisition price ($ in millions) | Gross leasable area (sq. ft.) | Leased percentage at acquisition | |||
| Waianae Mall | 1/13 | 29.8 | 170,300 | 93(1) | |||
| Napili Plaza | 5/13 | 19.2 | 45,100 | 92 | |||
| Pearl Highlands Center | 9/13 | 141.5 | 415,400 | 98 | |||
| Total | 190.5 | 630,800 | |||||
| Property disposed in 2013 | Disposition date (month/year) | Disposition price ($ in millions) | Gross leasable area (sq. ft.) | Leased percentage at disposition | |||
| Northpoint Industrial | 1/13 | 14.9 | 119,400 | 100 | |||
| Centennial Plaza | 9/13 | 15.0 | 244,000 | 100 | |||
| Issaquah Office Center | 9/13 | 22.3 | 146,900 | 100 | |||
| 52.2 | 510,300 | ||||||
2012 IMPROVED PROPERTY PORTFOLIO ACQUISITIONS/DISPOSITIONS
| Property acquired in 2012 | Acquisition date (month/year) | Acquisition price ($ in millions) | Gross leasable area (sq. ft.) | Leased percentage at acquisition | |||
| Gateway at Mililani Mauka South | 6/12 | 11.4(2) | 18,700 | 100 | |||
| Property disposed in 2012 | Disposition date (month/year) | Disposition price ($ in millions) | Gross leasable area (sq. ft.) | Leased percentage at disposition | |||
| Firestone Boulevard Building | 3/12 | 4.2 | 28,100 | 100 | |||
1 79 percent occupied at closing on 1/23/13. Lease signed prior to closing, but effective on 2/1/13, brought occupancy up to 93 percent.
2 $11.4M acquisition price includes two existing buildings totaling 18,700 square feet and a 1.6-acre development parcel.
8