Earnings call transcript Q2 2023

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Operator

Good afternoon, and welcome to the Alexander & Baldwin Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note that today’s event is being recorded.

I would now like to turn the conference over to Steve Swett of Investor Relations. Please go ahead, sir.

Steve Swett

you. Thank to earnings. discuss welcome second & call XXXX quarter our and Alexander to Baldwin’s Aloha, today our Financial me Lance With for Parker; Executive A&B’s and Officer, Chief our Chief Officer, Chun. earnings Clayton call are

joined who available of Management, the also of Q&A in is by Vice to Senior We’re President Millan, Asset call. the participate portion Kit

our please refer supplemental our on available investors.alexanderbaldwin.com/supplements. call, to XXXX During website information our second at quarter

are are please future commence, Reform are statements that possible of statements competitive the only of statements by this and the of in relevant the of meaning forward-looking that results materially facts positions. performance. speak are that the not Act statements. growth but involve Litigation note statements limited not a risks or call Such the historical regarding not cause could These from opportunities number assumed to as Before that business actual forward-looking date include, XXXX forward-looking strategies, Securities operations, differ statements the contemplated and within those of future made we Private forward-looking uncertainties to, results and of were guarantees statements

subject of assumptions other results in or risks, that forward-looking a statements the and statements. that actual to of and could from uncertainties, cause certain timing those expressed Forward-looking factors the events are materially number differ implied by

Materials factors. limited business not financial status related and well evaluation conditions and & its market but alternatives the other to other prevailing operations, include, company’s the XX-Q evaluated forward-looking as the information and SEC. REIT of to, business the and call The Construction company related factors presentation company’s company’s are obligation results in to These with condition of by liquidity factors of risk most as We be recent other company’s the do in not factors any Form filings the to light undertake important should update XX-K, statements. and these this Form in discussed and the

to measures financial the call supplement. today. referring non-GAAP refer statements our non-GAAP be to reconciliations measures second XXXX our and in Please Management will these regarding our included of during use quarter

will discuss for Lance and the will Lance upon today’s on provide And financial will Clayton with of overview it an closing real open we matters. quarter estate remarks, then but up return an your up open some operations. will for where questions. update presentation

that, With to it turn let me Lance. over

Lance Parker

results and Steve, real everyone. you, estate quarter, with second shareholders. aloha, commercial the Thank excellent portfolio our for Beginning we again in our generated

of and momentum produced lease XXXX. high-quality portfolio, continued in Our industrial our quarter from the ground first retail, assets consisting results and strong

quarter of revenue X.X% was year certain was the X.X%, base and up higher rent, higher quarter, in primarily removing the second first the from accelerating CRE ago quarter. Same-store basis cash impact revenue up recognition from compared driven expense recoveries. tenants to NOI the by

our quality strong These and portfolio diversified of the reflect the results focused team. efforts of our

unemployment seasonality to jobs XXXX a the X.X% performance increase from nearly end adjusted the robust What downward rate past X.X%. increased local Our economy. as continuing was added benefit in an months, at trend. prior year. over June, continues the of its wages the X%, of June to XX compared And for Non-farm we XX,XXX

sectors, are industries. most economic tourism market, across solid large construction our including the and seeing Throughout activity we

tourism our dependent before, but As we state’s activity, community-based the tourist have supports said portfolio generally and economy. less on was overall

was XX% points same-store leasing basis retail up at to leased XX decrease to quarter metrics. end a leased basis occupancy points portfolio earlier. leased basis CRE XX.X%, our Same-store XX occupancy was and from Same-store months XX of to points industrial was down Turning occupancy XXX XX.X%.

from economic due occupancy Center to was Kaka’ako tenant in points first Same-store of was portfolio and primarily overall in XX to year-over-year leased decrease Commerce quarter was at quarter basis XXX same-store the the move-out down end XXXX. quarter, economic XXX Same-store XX%. last and points noted basis expected months down retail XX.X% industrial economic up occupancy to we an occupancy earlier. XX.X%, points As basis was industrial at occupancy XX

attributable to base or SNO, were months $X.X rent opened, million quarter to last and from but at signed million million. This $X leases end $X.X earlier not Annualized XX quarter. compares

quarter, XX second the During property leases we in improved our executed portfolio.

For X.X%. feet leases leases of spreads X.X% blended achieved spreads square and with approximately XXX,XXX for at spreads and at industrial retail X.X%, for

Park approximately of four included $X.X million leases square activity to GLA Marketplace GLA feet in and XX,XXX XX,XXX feet of million square at Queens’ of properties Shopping ABR. Highlands and ABR. XX totaling This Center Aikahi totaling feet totaling of One of $XXX,XXX located GLA Kailua, square leases XX,XXX and approximately approximately at of $X Pearl related including Center, and lease ABR,

In addition renewal property value spread the on reset executed improved activity, to which Windward also Shopping to $X.X ground we from City lease XX%. a at renewed market fair million a $X.X for of Center, million

of pace and pipeline continued the of active deals. with pleased activity are leasing We

growth. to Turning

foot. during noted, a previously to for in $XXX square foot other XX-foot quarter, the submarket close Kapolei property and in the a per Oahu As is transaction property height, located our approximately is clear in acquired or on The square industrial assets. loading we industrial proximity sale-leaseback million $X.X XX,XXX dock-high

with the in lease, cap increases cash rent. Based on rate annual base X.X% the X% XX-year going-in is

to we will pursue have that nimbly we to opportunities country, when our portfolio. help Our remain in execute market bid-ask wide accretive to knowledge are believe Similar continue and to seen disciplined arise. markets the spreads, our investment other deep us team opportunities complementary continues but

In meantime, within to continue the pursue value opportunities creation we our portfolio.

result area, time. in in third refresh focused completion believe We to this only the for will quarter. at the over improvements mainly grocery-anchored on cosmetic enhance in customer remains experience refresh center Our Manoa Manoa neighborhood rental rates the track on higher Marketplace,

our for long-term We growth and continue to to evaluate value. drive additional cash opportunities within capital in portfolio flow deployment

that, for details. financial over Clayton the turn call I’ll With Clayton? to

Clayton Chun

Lance, our supplemental. Starting Table with Thanks, and everyone. our metrics X on aloha, consolidated of

$X.XX income net XXXX, or of quarter to per share. million $XX.X available second shareholders was the diluted For

core and FFO to Turning FFO.

$X.XX prior or $X.XX million $XX.X or FFO $X.XX quarter in these compared was years of approximately was $X.XX diluted benefited Core XXXX of to share metrics per second million share. reserved diluted amounts the $XX.X FFO of per collections million for of per diluted XXXX. Each $X.X of share. quarter or quarter second or $XXX,XXX the Second per diluted as in share from

The from also the the There quarter quarter-to-date tenants metrics XXXX. cash or benefited resulting second of second from tenants from million removal quarter basis a the from diluted of per no of in share were removed cash $X.X certain XXXX. basis in $X.XX

on please our results details supplemental earnings XXXX, release prior in our periods additional see For information and comparison in to package.

Commercial Table our on X. Let me now segment Estate turn to Real

increased base the over quarter increase tenants driven from year certain CRE the $XX.X of second removing revenues X.X% basis ago recoveries. higher by or higher the the year to For from million cash primarily impact rents, was $X.X quarter, expense quarter prior This million. and

period or million the compared NOI year. same $X.X last X.X% million CRE same-store to to $XX.X increased

Excluding XXXX quarter. collections in amounts of been previously and reserved for NOI the same-store XXXX, second both have growth X.X% would

in Turning the change on the quarter XX. to of compared second sale second to Adjusted was in assets of presented The operations on island same primarily EBITDA $XX in last due the million $X.X quarter year. $XX occurred million the to the XXXX. quarter was Table gain Kauai on land that million of noncore of XXXX

G&A is X. highlighted on Table

result second to costs. The XXXX. compared second onetime a the were $X.X quarter higher million the of was in For management of quarter million primarily transition XXXX, G&A G&A of $X.X expenses related

complete We to $X.X in the made the as quarter, is work primarily in operations we sale Pacific reported operations. second operations remains from the discontinued of income of discontinued which of entity. million Grace up Grace

additional at We continue on progress but this details we time. provide make to this cannot goal,

balance liquidity made Table June credit million of Turning $XXX.X of available was $XXX.X on we million, facility. and X. up our our approximately to total metrics $X.X total liquidity outstanding sheet cash revolving on debt XX, had and million in $XXX.X and At million XXXX,

XX-months trailing net consolidated end, quarter times. At debt was X.X EBITDA adjusted to

at were trailing the last times excluding assets year, primarily was times second months debt adjusted on the quarter consolidated at XX to operations, we compared purposes, the quarter because comparative times the gain the X.X noncore X.X sale the of of land end Kauai. Net For to XXXX. of EBITDA, of in on X.X

of third paid a on share second payable that X. $X.XX recently share per Board a is X our October dividend and of $X.XX quarter dividend declared per July quarter We on

are We the with guidance and year. our are results for raising pleased

We primarily due expect share CRE for core an FFO to diluted per in of in $X.XX the to $X.XX improvement outlook NOI performance. our range same-store

within range of expect the growth, reversals growth of to We same-store NOI same-store X.XX%. excluding a and within X.XX% year to prior NOI X.X% range reserve X.X%

With that, his over turn I’ll to closing for remarks. Lance the call

Lance Parker

Thanks, Clayton.

demonstrated Hawaii quarter our again strength experience the market. ongoing the and our and The depth of portfolio, the of health of the team second

I performance. for for dedication environmental, to these of like governance-related I the remainder entire As would will we drive our look thank year, success. their to to continue their and factors to our team believe matters. social the we to team thank contributions our also to the want

focused just have I’m of for be we Hawaii. annual as operational we results. proud highlighting ESG, report and in But our for accomplished Today, will corporate published fourth responsibility commitment our our on to what – August partners

Chris know, as his into future. mentorship you Board call together this to the thank have we to friendship Benjamin as lead over many the Finally, and fantastic for is this CEO. opportunity the worked the for that earnings I and years want my thank first team

up With that, we’ll now call open questions. the to

Operator

Alexander Goldfarb take will which with question, Sandler. ahead. Please our we from time, this At Piper Instructions] come first will [Operator go

Alexander Goldfarb

there. Hey, out morning good

that but latest year-end? you So feel by to and will comfortable just ask. your questions year? it comment, into will do think have was do think this a part few on Grace of no I drag be next and I you Or exited The it

Lance Parker

This afternoon Hey is you. Alex, to Lance. good

still process engaged in formal Grace. So we with a are

integrity the price absolute is But can’t disposition priority that for business process. for the can or Grace say on of us. timing specifically I comment of the So that what is I buyers’ an

Alexander Goldfarb

Okay.

the curious, you of like of A signed retailers And not I said I but that top about, XX% XX to portfolio guys just is grow. question, every like think still of next performance the which sort top sort it The you would that your million, that or seems the in number yet Mainland, talked not Hawaii, have rough XX given peers you that of on guys about sounded not previously. or but open I that the in same Okay. the expect fact yet think I’m quarter. it $X to strong signed something number yet grow numbers was was you’re commenced,

not could talk but bit just So a spaces in more much you’re just the about little maybe signed yet commenced, quicker. maybe you people putting

doesn’t grow because pipeline, in dynamics there at So other Or you’re quicker there? delayed just that maybe are just leasing?

Lance Parker

general and color. to some start comment, I’ll just Yes. then Maybe provide with the Kit ask I’ll

of million for $X.X it did QX pretty about but is our year-over-year, sequentially. – dramatically same So SNO the improve

maybe you color. provide Kit, statement, And so general can some just with that additional

Kit Millan

how Alex, doing? Hey are you

Alexander Goldfarb

Doing well.

Kit Millan

Good.

So now, XX between really and healthy XXX leased economic, points the basis basis it’s is points up a spread that right and sequentially.

$X.X was QX, it and So in million now million. it’s $X.X

So coming with many retailers. pointing here few to to about ABR in your significant many that’s yet, in we’re discussions online the months. that retailers engaged some And is are not that question different next

We other anchors in and have like new ones seeing recent ones And so. continue interest do we’re past, the brought we market. the on some some in strong to Chick-fil-A, some from

Alexander Goldfarb

Hawaii the tenants. But just you REIT on the insurance seeing what’s has your final market. are guys been property level in in a what insurance curious And just from then don’t big on hear question We much land. Okay. definitely from about and both topic is going the

ability better and clearly, to So viable mom an meaning imagine pops, mom-and-pop. but and increases, need obviously, guys you your you insurance I absorb than have would

to in your scale, you premiums to seeing using insurance what will that property buy tenants renewals? will, of for help able you – sense for bought insurance be are a ability And year wrapper and or of two, the if just economies their, for to the to there’s corporate way seeing if to be the from a sort as to perspective, provide guys what tenants a you guys wrapper. So far get their as on want are A&B’s then sustain

Clayton Chun

Hey, Alex doing? Clayton, how you

Alexander Goldfarb

well. Doing

Clayton Chun

part like – we that significant And insurance everyone to operations. of So that rates general. is in happening with property the else, is monitoring insurance with cost what’s that cost our respect are overall a

it monitoring. are that hasn’t impact We but are currently to overall, is closely an in I our I say historical a position think, what had we would results, where

We are hearing.

price our a agents that helping of out have We keep trends. there us are

something And will our through. continue manage to we so that that’s way

Alexander Goldfarb

any on having the what really And or about is insurance issue tenants? they Are it’s that your out challenges the that there we with Mainland? not see

Kit Millan

good at done at So I sale. immune an and overall, we think issue that last for that’s or both different of portfolio customer to well past up. But the that terms tenants. significantly Cost higher it, tenants. as traffic for look news the heard, year have is for is year, sales restructure over up in level, so. is And we’ve true sure. that’s to of structure into and anchors been ways tenant as in-line X% in nobody It’s is a our advantage to And translated lot the take

Alexander Goldfarb

Okay. Thank you.

Operator

from Mitch, line question Please your Mitch And Germain open. JMP go come will Securities. ahead. our next is with

Mitch Germain

Can you me? hear

Lance Parker

Mitch. Hi, Yes.

Mitch Germain

Sorry just that. spreads it about about I mix, probably of declined read there apologies. anything is the that really it My little bit Is Or is but leasing guess quarter-over-quarter. into I’m rolled? a curious to trends. leases there? some of mix of

Lance Parker

market number would leasing of say continues. We QX, very had signed demand. process QX. strong talked total do into had maybe of just had use a into the would as in activity get that visibility that Kit get tenant spreads good good we XXXX. I demand what in of in And about activity in we And let And activity strong. remains leases some on We strength Mitch. say the specifically, of real the for on is GLA. of time, the terms I details ABR, sort I’ll in basis, lease our But we committee just we’ve through space weekly real-time past, in

specifically So can you with that spreads. Kit, maybe backdrop, speak to

Kit Millan

Sure.

And in than we’re So really, has of and new been we expectations retail in portfolio. happy spread. in points overall economic volume were About quarter occupancy. and deals in GLA, volume, higher terms anticipated about significant that what the of future is really XX% the exceeded gains far and deal the that ABR we to

Mitch Germain

would How helpful. newly you super characterize that the referenced? That’s that activity vacant Okay. you at property

Lance Parker

Yes.

it’s own way So we industrial Honolulu. about – XXX,XXX Kaka’ako just of a in square Center background, some urban multistory facility. building is It’s foot by a Commerce that

converted are So time while the office. industrial, it was us where quite floor vacancy ago, is five pre-acquisition sixth the of the to six for that’s floors And occurred. some

feet through as single well see asset and the XX,XXX as to had XX.X% building, square it vacancy tenant, of you the we with portfolio. about represented industrial can So this class about which the flowing

wouldn’t The office industrial. not market certainly here it’s I is stable, as as but say strong

So to what tenant, we be consider it to a an depending preferred time backfill the our take little converting that space use, of from for on will office us would but will to have other a would likely space – is bit of we which uses backfill tenant demand.

Mitch Germain

of the question I core just on for I’m done two missing back If Super it I to helpful. the guidance. annualizing Last What part correct, going that down? high you’ve am of like FFO the above it’s at trend If $X.XX number, end year your in looks look quarters. numbers last the could the bring that range.

Clayton Chun

factors couple also which that had our of Clayton. There FFO, when overall year, is it’s Yes, the of reserve results for impact there we guidance a Mitch, that different are in commented core this as G&A. provided Hi, one so year. are is that of our reversals occurred we our last original far influencing as

whole, half look results. the half. to ended will for performance had as fact And to we so FFO there good same-store of that affect the on core result, up. the I our we ability on And where And but felt execute and the as continue are we overall in about second where year-to-date some trending. the of increased terms And quarter – forward we had that is we guidance factors a second of we our the still NOI, level to to our year, Those think uncertainty. second

Mitch Germain

helpful. That’s Okay.

about just for Is macro if baking you’re as each backdrop as the appears and now, the year let just on proceed. and conservatism some think the revisit it way that as progress So quarter you it? to

Clayton Chun

Yes.

I think that’s fair.

Mitch Germain

quarter. Nice guys. Thanks Great.

Lance Parker

Thanks Mitch, thanks.

Clayton Chun

Thanks.

Operator

And this to I’d back Steve remarks. to like turn concludes question-and-answer closing conference our any session. the for Swett over

Steve Swett

joining you us thank and operator, for you, Thank all today.

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

Operator

The today’s you conference much Thank very has now presentation. attending for concluded.

have disconnect day. great your and a now lines, You may

Alexander & Baldwin (ALEX) 27 Jul 232023 Q2 Earnings call transcript