Alexander & Baldwin, Inc. (ALEX Q2 FY2024 earnings call

Objectives

• Operational excellence to provide best commercial real estate platform for tenants.
• Grow commercial real estate portfolio via internal development and external investments.
• Maintain strong and flexible balance sheet.
• Streamline business and cost structure.

Portfolio Highlights

• Total NOI grew 1.1%, same-store NOI 0.9%, same-store NOI excluding prior year reserves 1.7%.
• Leasing: Executed 47 leases, blended spreads 7.3%, same-store leased occupancy 94.8%, economic occupancy 93.7% at quarter end.
• Internal Growth: Pre-construction on industrial build-to-suit at Maui Business Park, expect construction early 2025; five photovoltaic projects expected to add $400k-$600k incremental NOI in 18 months.
• Streamlining: Sold 81 acres of non-core land for $10.5 million in July.

Economic Indicators

• Hawaii unemployment rate 2.9% vs national 4.1%; visitor arrivals down 4.1% YTD, but retail foot traffic grew 3.3%.

Total NOI grew by 1.1%, with same-store NOI up 0.9% and same-store NOI excluding collections of prior year reserves growing 1.7%. CRE and corporate-related FFO was $0.28 per diluted share in Q2 2024, compared to $0.25 per share in Q2 2023. Land operations FFO was negligible in Q2 2024 vs $0.02 per share in Q2 2023. AFFO was $16.9 million or $0.23 per diluted share in Q2 2024, down from $18 million or $0.25 per diluted share in Q2 2023. G&A expenses decreased by $2.7 million or 26.8% to $7.3 million in Q2 2024 compared to Q2 2023.

Same-store NOI

• Raised same-store NOI growth guidance to 1.25% to 2.25%, same-store NOI excluding collections of prior year reserves to 2.1% to 3.1%.

FFO

• Total company FFO guidance raised to $1.17 to $1.26 per share. CRE and corporate-related FFO guidance $1.04 to $1.08 per share. Land operations FFO guidance $0.13 to $0.18 per share.

AFFO

• Raised 2024 AFFO guidance to $0.99 to $1.08 per share, due to improvements in FFO.

Forward-looking statements involve risks such as prevailing market conditions, company's REIT status, evaluation of non-core assets, and risks detailed in Form 10-K, 10-Q, and other SEC filings.

Q: About rent spreads and annual bumps A: Lance Parker discussed contractual 3% annual increases, percentage rent clauses, and different tenant mix in Hawaii compared to mainland peers Q: About land sale impact on legacy overhead A: Clayton Chun said legacy overhead run rate reduced to $4-5 million annually Q: About external investment opportunities A: Lance Parker said more opportunities at top of funnel, potential before end of year Q: About ATM issuance relative to NAV A: Lance Parker said ATM is a tool for capital allocation, looking for accretion in opportunities Q: About incremental solar projects A: Lance Parker said focusing on current five projects, priority for team Q: About Waipouli retail property A: Lance Parker said no updates as of end of Q2, but priority project Q: About acquisition markets A: Lance Parker discussed thawing of acquisition market with more buyer interest but seller expectations on pricing Q: About capital allocation priorities A: Clayton Chun said evaluate opportunities based on risk-adjusted return; Lance Parker added holistic view on opportunities Q: About tourism impact A: Lance Parker said tourism YTD down 4% led by Maui, but no property-level impact at A&B Q: About NOI trends by asset class A: Lance Parker said retail strong with recoveries, industrial market tight with vacancy up slightly from 80bps to 110bps