Earnings call transcript Q3 2022

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Operator

Good afternoon and welcome to the Third Quarter 2022 Alexander & Baldwin Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Steve Swett, Investor Relations. Please go ahead.

Steve Swett

Thank you, aloha and welcome to our call to discuss Alexander & Baldwin’s third quarter 2022 earnings. Officer, our Chris are Officer, Benjamin; and Chief for Chief President Lance today our Officer, Executive our Financial me earnings A&B’s call and Parker; With Brown. Brett Chief Operating for Accounting Chief call. present be of is Clayton the Chun, portion Officer, Q&A and also will available the

involve operations, call as of growth Private are differ as of number Before were within pandemic forward-looking actual disruptions. a include, we this plans the coronavirus limited are commence, statements XXXX Securities competitive future positions are and rapidly but uncertainties that and the meaning and statements cause are business novel forward-looking economic and contemplated statements strategies, the date and to, that note These presentation possible responses results please statements the statements. regarding Litigation the materially guarantees by statements Act well opportunities COVID-XX not the related Reform not that made challenges in of and or forward-looking could speak risks statements and of changing with assumed historical the those of relevant from facts company’s performance. only not the as forward-looking that to to of Such future results

associated of COVID-XX its to, of filings by company’s do status and non-GAAP Forward-looking implied and certain the evaluation Form factors to other operations, any Management the or REIT light timing to of statements. related and not the this of businesses, actual events the with be statements and from are company other related other differ expressed and We financial the limited risks business other number our liquidity and update financial forward-looking the not Form XX-Q the company’s undertake are in assumptions but discussed alternatives results market evaluated to to as prevailing XX-K, important subject risks. on risks, results These as referring factors and conditions the statements. in uncertainties, factors include, to impacts its a The company’s cause company’s with during that could the information those factors measures well Materials call in most obligation in Construction recent and call. & today by business forward-looking the should condition presentation will SEC. be of the to these and company’s materially

return today’s download presentation these our and presentation regarding Included with He to estate open a a real at turn slides we some will today’s where for of presentation www.alexanderbaldwin.com. Lance measures discuss use operations, in the upon Chris an financial our update for Investors will are matters. will non-GAAP available then strategic Chris section the of and up remarks, up this for will closing from on open will presentation questions. it Slides Brett the your appendix at then of statement update. over is reconciliations. for website

to let that, it turn over me With Chris.

Chris Benjamin

and our listeners. Steve Thanks, to afternoon good

one was very quarter for third The A&B. good another

assets lease Brett is a but strategic produced results performance, step major final Grace the advancing details of results. the process indications let sell of marketing strong our summary to several our retail, with Lance ground This is our provide interest. me high-quality again portfolio with and simplification. of in yet on high-level and more Our industrial and Pacific will begin

remains ended industrial of very occupancy XX at prior for by spreads and the at at and our leases quarter. we FFO X% year NOI XXX,XXX square signed up quarter CRE X.X%. diluted revenue strong, over and CRE grew feet blended Core for we was of with retail leases. XX% XX.X% comparable XX.X%. performance achieving X.X% quarter rent the portfolio The during share per the about of X%, increased GLA, leased

up We benefit months are of Hawaii’s year-to-date XXXX. of each and Domestic have pre-pandemic the were for visitor arrivals XX% continue XXXX arrivals XX international levels full increasing. visitor economic to over from growth. exceeded over Further,

holiday level, are the expected yet they for at are bookings rebound season last and pre-pandemic to the upcoming continue not to amount. year’s total While surpass

spending X% compared sign economy. Visitor to positive for XXXX, nearly another is Hawaii’s also up year-to-date

an While is to our earlier activity, and unemployment community points directly state’s now XXX down from X.X% Hawaii not increases the the X improvement line portfolio unemployment to state’s broad tourism a rate. based dependent in basis September national rate The is and for on tourist provide economy. XXXX, in with year of benefit

nationally needs-based portfolio arise economic confident to with uncertainty has be proven we’re we’re Hawaii, As positioned pressures well inflationary that and here in high-quality and a resilient.

adjusted Materials our process to the sell EBITDA and quarter last have XXXX. from segment, improved Most and we as Construction we marketing to preceding commenced the & Pacific. quarter announced profit third significantly, operating a quarter, of both Turning Grace

the process. We and next the have of to several indications of are interest phase advancing

but more we cannot comment the forward, provide at will that on I beyond time. timing as this updates move We process on

the for On Commerce PV front, have at completed initiative. Center our Highlands Kakaako TV rooftop solar and Pearl the X.X-megawatt as installation have we ESG identified a next property

August, progress in third efforts annual corporate our our we responsibility highlighting and on all published matters. ESG Additionally, report,

to to CRE over activities. Lance? Operating Now recent Chief and turn our Officer, portfolio our highlights Parker, I review will the other call Lance

Lance Parker

XXXX. was was XX.X%, our and X.X% from XX Beginning Thank industrial at to third XX.X% unchanged the earlier. at you, leased were quarter occupancy the occupancy same-store basis third leased same-store perform quarter points CRE retail quarter XX.X%, aloha, end occupancy same-store earlier. with end X.X%. Overall operations, leased months and Economic in up XXX up points Same-store XX XX Chris year-over-year was was to continued XX NOI well was portfolio from occupancy of from basis up occupancy months everyone. leased NOI quarter. basis and XX.X%, up down points and

spreads quarter and executed to XXX feet of including approximately XX spreads leases occupancy approximately new X.X% leases activity for XX Shopping economic We feet renewal third in basis up XX.X% Center XX.X%. three related XXX,XXX and Retail Kailua, and XX X.X% for economic of Bay achieved Center XX,XXX feet. leases. points XX,XXX leases Aikahi approximately for to square for leases basis occupancy Kaneohe square was included square up This at industrial to Shopping and the or during properties was points

We’re our pleased with portfolio performance.

Our compared well-located properties experiencing according are higher traffic to of Placer.ai XXXX this higher also most pre-pandemic reporting tenants foot and year are sales. to our

our reserve of performance elevated quarters several COVID economic rent quarter significant in occupancy. Following primarily improvement deferred driven collections, was to third the related reversals by

are acquisition With regard to pursuing is complementary our current team our that growth, portfolio. opportunities to investment

to and remain we creative yields. meantime, development our will serve liquidity and deep the us timing we pursuit the such will markets of as pursue better growth. relationships In disciplined opportunities redevelopment, growth While ample approach and global internal uncertainty, well and believe in to are investment in where and in dynamic we markets our due challenges or the knowledge, continue control financial market can

In has is and sustainable the quarter, third elements, been the Pearl of fixtures visitor to the completed lighting, building including construction features. at the while commenced X.X-megawatt solar stalls, water-efficient sustainable Marketplace Manoa design improve Also, and power. Center LED system experience incorporating other among Highlands installation now delivering construction rooftop and parking at EV

evaluating solar advancing Kakaako and goal be Center across We of installation will Commerce another our rooftop sustainability. are commencing at portfolio opportunities associated our additional soon with portfolio

activity. quarter third quiet land was several after of our to quarters sales, Turning the significant

with for non-core monetization discussions of and in progress our We’re buyers to this expect active interested make holdings certain land year. additional

turn the details. I for Brett? will Brett now to call over financial

Brett Brown

or of income income third driven an diluted the or per per in quarter We last for net and third available as to Thank FFO financial $X.X you, million million quarter, million the in $X.XX we year per $XX.X of FFO our Lance primarily recorded or share, X.XX year-to-date results, and only compared mentioned, FFO million aloha, or the of share. benefit of reserve $XX.X On $XXX,XXX diluted net improvement everyone. $XXX,XXX diluted million share core or Starting $XX occupancy. this generated that $X.XX quarter expected diluted with increase diluted shareholders Lance a per and to $X.XX diluted core $X.XX was reversals FFO contributed same quarter Demonstrating, performance this or of $XX.X diminishing $XX.X economic by of in share is as and per share. share. was basis, million $X.XX per year. The the

For to see details comparisons please our on package. information our XXXX, results, including supplemental earnings additional release and

Commercial to Estate Real segment. me our turn now Let

the third by quarter, $XX.X million the portfolio to as increased or the year $X.X million. CRE last X% from to previously X.X% the ago This period or driven For revenues reflects year. by our same year economic CRE and prior tenants occupancy. and $XX mentioned, of by quarter compared strength over million quarter increased $XXX,XXX to increase NOI the

The XXXX. XX,XXX attributable of land the loss $X.X income the renewable adjusted were assets an was generated of business on streams in quarter in operations second performance EBITDA quarter monetization land recurring acres in the million and to of of that third approximately XXXX. energy holdings of sold loss [indiscernible] strategic partly year-over-year the of following non-core Our decline

we efforts. the agreements risks, to over hydroelectric $X million as stated, we power the a long-term diminished potential liabilities resulted simplification assets, EBITDA expired as sold reduction time sale lost in naturally income and the important previously of Net very annualized a approximately we it facilities. purchase our making thus related step When of energy power would in substantial have and

operating million third the Our of $XXX,XXX of loss XXXX. quarter from in was same profit Materials in for to million in third Adjusted $X.X last third up the & period Construction operating segment quarter, year. compared posted million $X.X an an $X.X EBITDA of quarter the the

to during process as stated have we and sell moves will As third Pacific quarter, updates process commenced we Grace the the provide forward. the

$XX.X expectations. quarter $XX.X expenses the XXXX were third in to in third and XXXX, line of of quarter the with compared G&A For million million

Turning end, total full $XXX to was cash than of EBITDA debt we including more $XXX XX XXXX, to quarter outstanding adjusted XX, and net liquidity over our consolidated trailing X.Xx. adjusted $XXX $X facility. excluding Including metrics. XX EBITDA, and our had capacity adjusted trailing liquidity M&C contribution interest those net and and was our and on debt near Xx. million, was million operations sheet At nearly At non-controlling million segments, million, months total balance EBITDA credit of M&C months land September of EBITDA to consolidated debt

debt debt. quarter capitalization at and at XX.X% was of to exposure X% just debt total floating total stood rate market end, Our our

amount October. modest quarter a we You shares stock added nearly repurchased significant the XX,XXX shares of NAV, to and will discount we during a when wrote note, the in

tool, have provides allocation an from before, repurchase time. our use plan additional stated we As capital which we may share to time

with attractive this of a our payment to in respect tactical commercial dividend, confidence modest December does signal in valuation at real declare to invest an ability opportunities. Board and not XXXX. our to our investment With quarter our January However, in find stock any growth in lack dividend estate fourth in plans

turning for Finally, outlook NOI $X.XX per from our is in same-store a due X.X% NOI to FFO the range We X.X% our new we growth to from prior from X.X%. prior reversals CRE range X.X% growth, up CRE third of of increase range of guidance, to improvement range our to prior at prior of CRE a expect to X% to NOI to now guidance year with full of a XXXX within share same-store our reserve raising is same-store to increased X%. an to time X% growth. $X.XX excluding range core are year This share. per X% per $X.XX $X.XX share,

to will call the over for I that, his turn closing Chris With remarks.

Chris Benjamin

Thank you, Brett.

matured this to remarks, I REIT the past Chun Brett is smooth and and want to AMD closing over want CFO to in Xst. contributions help my many make Brett’s X.X facilitating on I that December last as become A&B years Clayton for call acknowledge thank to his I will a transition we with his for as Clayton. Before a

and you the As dislocations with to quality Market in historically our and again portfolio. growth. growth active that remain are the existing played that of complementary demonstrated portfolio to occupancy We quarter CRE solid strength. third our pursuit Hawaii deepen seen, market presence our of our the strength have have high in opportunities and

I real Grace. that transformation a commercial to we raising years. and Hawaii, $X.X review Further, deployed and we strategic step $XXX quadrupling to We premier all moment sold the high-quality help past back several million company real past sell for mainland billion accomplished the significant approximately in company. into commercial want over commenced estate a have assets, state a transform decade. estate estate commercial process Hawaii in into real assets commercial estate real have of approximately over to and A&B We NOI the real Hawaii commercial the estate becoming pure-play our our the

through world-class systems. a lands, million of and XXXX, including sold We enhancing and Kauai lands XX% over approximately and of structure since reporting of opportunistic Kukui’ula, to non-core external Maui functions Grace And now CRE reduced McBride. we team acquirers be sale to We a past professionals, by be sales will step. REIT look built the converted and assets we have our $XXX operating as the all leverage in-house our those liquidity ahead. X.X bringing years, the final the The and ag

of G&A. but leverage eliminating from allowing focus core business the and us Some in our assets allowing CRE only our our reduce unprofitable growth, and short-term, non-income painful meaningfully steps simplified company, on portfolio were our these not to company, but or fueled our team producing to

diligence I this team want to thank work process. and our through all their hard for

Hawaii acquisition is Going forward, operating results steady growth and The predictable sight. market dynamic. in and are

And focused broader we attract as with as of a in investors company Hawaii. of partners assets, array great balance we for strength. mission sheet a live out as portfolio we are and believe our geographically the future much Our our a liquidity can

With now for will that, open we the questions. call

Operator

[Operator Sandler. Please question ahead. Instructions] Connor Piper with comes go Mitchell First from

Connor Mitchell

Hi. my for have Thank you question. a I couple. taking

one. first the guess I So,

buybacks, mentioned well. acquisitions You and the share then redevelopment, as guys development

about or light So, you further of maybe you acquisitions whether balancing to just how could shares some repurchase developments, think provide on use to your about and continue and color and the a shed to of you how little want think capital approach you capital? guys just use

Chris Benjamin

where Thanks anyone But – be wants I start commercial that. investments. this to would portfolio. continuing Yes. estate the with grow priority. we commercial in, And strategic Chris. estate grow for in else portfolio, that’s real our let will if how will start. successful I jump me we Especially I Connor, start of underwriting sort start always investments welcome are from then strategic question. highest we and to believe and And our real I to the that that is that’s

our and over year, some some acquisition And made always small development have year internal investments priority. investments investments. number We and some this the are past of those

we of time, at we of investment However, all stock. the the we market in have the back and with our late, tools did at pulling we same that opportunities have evaluate the merits all reinvesting and do look the

quiver of amount forward. Now, it into depressed price, will as was not of in not was an he at estate it it characterized But does going that we a arrow strategic and as real think it indicated, making A – be the our a in keep capital, confidence ability good as certainly as a you modest we does Brett said, certainly investment. signal investment investments commercial a tactical lack to small as any portfolio. and our

investment thoughts see I so in then and it our to And if anyone would other on leave wants jump related to process. there

Lance Parker

the now. I a to both Connor, use would we and add, view rising of get on Lance. that I the think very of dynamic word is result need our works allocation, given opportunities. go describe ahead Chris of interest and to sort Capital of risk-adjusted the as this and yield. a menu I And a it basis rates and acquisition appropriate, market obviously, higher on that right think

some been are sense starting constrained markets, We acquisition as start on we challenging side. some it think from on opportunities perspective. appreciating of will some to front. see sellers a that price well I signs the But And to make specifically see as debt need discovery the has capital just

we we still opportunities on And of that so internal feel are some really, focusing very been where have compelling. our are growth

Marketplace returns, Pearl well gave as basis, mid-teen Manoa get foldable that’s at an to as to buyback as price us we a we on we Highlands, IRR the extent compelling to where which can well. where like things very stock type So, unlevered low get returns compelling think

the those having capital decisions the balance to appropriate advantage across types, positioned sheet think take just So, market. strength well we of I investment make to now deploy to and all are

Connor Mitchell

helpful. very Okay. Yes. That’s

I is most we material into to of down up with think moving hold question items, sales, land they materials a construction, really the non-core Another how for little slowing just of just to would sales or still ask maybe land bit some amount maybe might about those the like forward ‘XX.

non-core as items guys if the that for insight give some in some of of any moving you Just items you think expect the business the related to – might forward into one-off any non-core year. what next

Chris Benjamin

Yes. Thanks Chris again. This is Connor.

we step We feel the and be I place are in with which I thinking and near-term, to think all as different our a a commercial little whole want think like are we investors we estate are simplification. possible, we the point as we where real team Grace, sale that’s those happen to of And reality is that thinking will and our estate, of just point real the be we reality. you the to hope the that get will about about at want is really the on of just certainly relatively commercial company. where

needle to can chunks. They into Again, investments. we some redeploy commercial generate will They real are they to be XXXX, cash going help still amount then that point of this have going we those years next are are year. have smaller close trickle year, And certainly we of could They of some few would a we in land. when place not anything sort sold is that lands. did billion we relatively be take you Now, needle small, we scale non-core We small to We assets have relatively former be yes, not going early are what going acreage will to some agricultural out that the ago. $X.XX sales to where estate movers. a some of to were not compared are be do of that out. non-core movers. They we had have

at are in where nice, point guess they going will be noise real exclusively or our movers. talking are six of, to movement and almost a next so, not that. or is And they estate I but really, not we within financials I am needle other there are months hoping that be lot So, we the commercial about beyond a

Connor Mitchell

getting helpful. that’s business. Yes, guess And the to back then, I core

driving about NOI growth. talked guys the You occupancy the

think might and you occupancy push how growing balancing rents? and that of the was of I think guys the the wondering then just occupancy you really see increasing can might top rents you on So, where you about when

Chris Benjamin

Yes. Lance, to take do that? you want

Lance Parker

Sure.

we I from would our the the that are of within Connor, vacancies standpoint. portfolio. say, with is what portfolio in an termed think on the performance pleased strategic have some still exist occupancy portfolio of I sort there opportunity we that

where So, some islands neighbor do spaces the ongoing. have larger currently predominantly deal activity we on

And really the opportunity so on exist, provide these would to particularly that rent. occupancy, also an but side, really vacancies retail improve on where both the

think interest. I the continued speaks perspective that market So, with tenant regard just confidence to and to in our

So, flow terms particularly larger in of our in just some deal vacancies. coming on of

that really in as of opportunity more an So, viewing the near-term.

Connor Mitchell

Okay.

one just the the the than to of you guess follow-up see kind rather near-term, growth pushing drive query the rents, I occupancy more correct? would is, in So, so continue

Lance Parker

that’s a to way good on I basis. think Yes, a sum it relative up. certainly,

Connor Mitchell

Thank Okay. That’s for all me. you.

Chris Benjamin

Connor. Thanks

Operator

is Ma go Wendy ahead. The question Evercore. from next Please with

Wendy Ma

taking Thank Yes. for my you question.

G&A the on expense. Just

in that you So, is within expectations. your mentioned XQ your –

going just about we maybe and am into how XXXX? for XQ that I forward, So, like curious think should

Chris Benjamin

Go No. ahead, Go ahead. Brett.

Brett Brown

once we think significant providing right are below sell even. the end year kind going But But and have we would as least trailing Grace, would now, of to expect last expect of I is full We tracking at to basis on quarterly we a it was a line. line ‘XX not in are say, or would reduction years’ we you obviously, kind see I in indicated, guidance. there.

the will progress and we making So, biggest Grace. impact and steady currently, slow the sale are of be

Wendy Ma

leverage compared your for And so Thanks. level, that’s low the historical to Okay. relatively current levels.

forward? saying you So, going comfortable target what’s your range, in or are this debt-to-EBITDA net range

Clayton Chun

hi Clayton. So, Wendy, this is

Xx be to in target EBITDA to is net the our debt Xx ratio. our to So, adjusted to have

as our sheet, arise. they stand balance the where us we a growth so enabling we it’s fund in position And we that opportunities think on today, and to are good

Wendy Ma

Thanks. That’s Yes. for all me. Okay.

Clayton Chun

Thanks Wendy.

Operator

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

Chris Benjamin

Well, Steve, just in case his connection. lost

Steve Swett

us here, I you all Yes. for you, Chris. am and Thanks. thank joining today. Thank Debbie,

Aloha, any have questions, or free you e-mail us investorrelations@abhi.com. at feel please If day. at follow-up XXX-XXX-XXXX and have us great call a to

Alexander & Baldwin (ALEX) 3 Nov 222022 Q3 Earnings call transcript