Alexander & Baldwin(ALEX) - 2024 Q3 - Quarterly Results

Q3 2024 Performance Overview Alexander & Baldwin reported strong Q3 2024 financial results, with significant growth in FFO and net income, alongside solid Commercial Real Estate performance Q3 2024 Highlights Alexander & Baldwin reported strong Q3 2024 results, highlighted by significant growth in Funds From Operations (FFO) and solid performance in its Commercial Real Estate (CRE) portfolio, including a 4.1% increase in Same-Store Net Operating Income (NOI) Q3 2024 Key Performance Indicators | Metric | Value | | :--- | :--- | | Funds From Operations (FFO) | $28.2 million ($0.39/share) | | Adjusted FFO | $23.4 million ($0.32/share) | | CRE Same-Store NOI Growth | 4.1% | | Leased Occupancy (as of Sep 30, 2024) | 94.0% | | Comparable Blended Leasing Spreads | 15.3% | - The company successfully closed on the acquisition of an 81,500 square foot food and distribution facility, demonstrating its strategy of recycling capital and growing its industrial portfolio[2][8] - CEO Lance Parker noted that strong performance in both CRE and Land Operations led the company to raise its 2024 guidance Strategic actions were also taken to support growth, including establishing a new at-the-market (ATM) equity program and recasting the revolving credit facility[3] Financial Results for Q3 2024 The company's net income available to common shareholders grew to $19.0 million, or $0.26 per diluted share, a significant increase from the prior year Q3 2024 vs. Q3 2023 Financial Comparison | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income to Shareholders | $19.0 million | $14.6 million | +30.1% | | Diluted EPS | $0.26 | $0.20 | +30.0% | | FFO | $28.2 million | $21.2 million | +33.0% | | FFO per Diluted Share | $0.39 | $0.29 | +34.5% | | Adjusted FFO | $23.4 million | $17.4 million | +34.5% | | Adjusted FFO per Diluted Share | $0.32 | $0.24 | +33.3% | - Selling, general and administrative (SG&A) expense decreased by 1.7% to $7.4 million from $7.6 million in the same quarter of 2023[4] Segment Performance The company's Commercial Real Estate and Land Operations segments demonstrated strong performance in Q3 2024, driven by healthy organic growth, strategic acquisitions, and increased land sales Commercial Real Estate (CRE) Operations The Commercial Real Estate segment demonstrated healthy organic growth in Q3 2024, with increases in operating revenue, profit, and Net Operating Income (NOI) CRE Financial Performance (Q3 2024 vs. Q3 2023) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Operating Revenue | $49.4 million | $48.2 million | +2.4% | | Operating Profit | $22.8 million | $20.6 million | +10.6% | | NOI | $32.4 million | $31.0 million | +4.4% | | Same-Store NOI | $32.2 million | $30.9 million | +4.1% | - The company executed 71 improved-property leases covering approximately 182,100 square feet of gross leasable area (GLA)[6] - Comparable leasing spreads were strong at 15.3%, comprising 18.2% for retail spaces and 9.9% for industrial spaces[6] Portfolio Occupancy (as of Sep 30, 2024) | Portfolio | Leased Occupancy | Change vs. Jun 30, 2024 | Change vs. Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Overall | 94.0% | +10 bps | -60 bps | | Retail | 92.9% | +10 bps | -110 bps | | Industrial | 97.4% | +30 bps | +60 bps | CRE Investment Activity During the third quarter, the company strategically recycled capital by acquiring an off-market distribution facility for $29.7 million - On September 20, 2024, the company acquired an 81,500-square-foot distribution facility for $29.7 million The property is fully leased to Hansen Distribution Group[8] - The company is proceeding with the development of a 29,550-square-foot pre-leased warehouse at Maui Business Park II, with construction expected to start in early 2025 and an in-service date in late 2025[8] Land Operations The Land Operations segment reported a significant increase in profitability, with operating profit rising to $7.9 million in Q3 2024 from $2.9 million in the prior-year quarter - Operating profit for Land Operations was $7.9 million for Q3 2024, a substantial increase from $2.9 million in Q3 2023[9] - The profit increase was mainly due to higher sales, including an 81-acre parcel on Maui and a lot at Maui Business Park, as well as higher legacy joint venture income[9] Financial Position and Capital Management The company maintained a strong financial position with substantial liquidity and a conservative debt profile, while enhancing flexibility through capital market initiatives and consistent shareholder returns Balance Sheet and Liquidity As of September 30, 2024, Alexander & Baldwin maintained a strong financial position with a total market capitalization of approximately $1.9 billion and a conservative debt-to-total market capitalization ratio of 25.3% Key Financial Metrics (as of Sep 30, 2024) | Metric | Value | | :--- | :--- | | Equity Market Capitalization | $1.4 billion | | Total Debt | $472.2 million | | Debt-to-Total Market Cap | 25.3% | | Total Liquidity | $445.9 million | | Net Debt to TTM Adj. EBITDA | 3.6x | - The company's debt has a weighted-average maturity of 2.9 years, a weighted-average interest rate of 4.58%, and 96.8% of the debt is at fixed rates (including interest rate swaps)[10][11] Capital Markets and Dividends The company enhanced its financial flexibility by establishing a new $200 million at-the-market (ATM) equity offering program and extending its revolving credit facility to 2028 - A new ATM equity program was established on August 13, 2024, allowing for the sale of up to $200.0 million in common stock No shares were sold under the new or expired programs in the current year[11] - Subsequent to the quarter's end, the company amended and extended its revolving credit facility to October 2028, maintaining its $450.0 million borrowing capacity[11] - A third quarter 2024 dividend of $0.2225 per share was paid on October 7, 2024[11] 2024 Full-Year Guidance Reflecting strong year-to-date performance, the company has raised its full-year 2024 guidance across several key metrics Revised 2024 Full-Year Guidance | Metric | 2024 Revised Guidance | Prior Guidance | | :--- | :--- | :--- | | Net Income per diluted share | $0.74 to $0.82 | $0.64 to $0.73 | | FFO per diluted share | $1.27 to $1.35 | $1.17 to $1.26 | | Adjusted FFO per diluted share | $1.05 to $1.12 | $0.99 to $1.08 | | CRE Same-Store NOI growth % | 1.75% to 2.75% | 1.25% to 2.25% | FFO per Diluted Share Guidance Breakdown | Component | 2024 Revised Guidance | Prior Guidance | | :--- | :--- | :--- | | CRE and Corporate | $1.07 to $1.11 | $1.04 to $1.08 | | Land Operations | $0.20 to $0.24 | $0.13 to $0.18 | | Total FFO per diluted share | $1.27 to $1.35 | $1.17 to $1.26 | Financial Statements The financial statements for Q3 2024 reflect increased operating revenue and net income, a stable balance sheet with growing assets, and positive cash flow from operations Segment Data & Other Financial Information The company's total operating revenue for Q3 2024 was $61.9 million, up from $52.5 million in Q3 2023, driven by growth in both the Commercial Real Estate and Land Operations segments Q3 2024 vs. Q3 2023 Income Statement Highlights (in thousands) | Line Item | Q3 2024 (in thousands) | Q3 2023 (in thousands) | | :--- | :--- | :--- | | Total Operating Revenue | $61,944 | $52,495 | | CRE Operating Profit | $22,829 | $20,649 | | Land Operations Operating Profit | $7,881 | $2,878 | | Total Operating Profit | $30,710 | $23,527 | | Net Income Attributable to A&B | $19,004 | $14,649 | | Diluted EPS | $0.26 | $0.20 | Consolidated Balance Sheets The consolidated balance sheet as of September 30, 2024, shows total assets of $1.650 billion, a slight increase from year-end 2023 Balance Sheet Summary (in thousands) | Account | Sep 30, 2024 (in thousands) | Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Real estate investments, net | $1,488,179 | $1,482,989 | | Cash and cash equivalents | $17,919 | $13,517 | | Total Assets | $1,650,002 | $1,646,241 | | Liabilities & Equity | | | | Notes payable and other debt | $472,179 | $463,964 | | Total Liabilities | $651,820 | $643,230 | | Total Equity | $998,182 | $1,003,011 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash provided by operating activities was $73.7 million Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Net Cash from Operations | $73,674 | $43,613 | | Net Cash from Investing | ($25,847) | ($19,353) | | Net Cash from Financing | ($43,425) | ($43,220) | | Net Change in Cash | $4,402 | ($18,960) | Non-GAAP Financial Measures The company provides non-GAAP financial measures including NOI, FFO, Adjusted FFO, Net Debt, and Adjusted EBITDA to offer additional insights into its operational and financial performance NOI and Same-Store NOI The company utilizes Net Operating Income (NOI) and Same-Store NOI as key non-GAAP metrics to assess the unlevered performance of its Commercial Real Estate portfolio - Management believes NOI provides useful information because it reflects contract-based income and cash-based expenses at the property level, removing the effects of non-cash items like depreciation and straight-line rent adjustments[22] Reconciliation of CRE Operating Profit to Same-Store NOI (Q3, in thousands) | Line Item | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | CRE Operating Profit | $22,829 | $20,649 | | Adjustments (Depreciation, etc.) | $9,539 | $10,362 | | NOI | $32,368 | $31,011 | | Less: Non-Same-Store NOI | ($212) | ($132) | | Same-Store NOI | $32,156 | $30,879 | Funds From Operations (FFO) and Adjusted FFO (AFFO) FFO and Adjusted FFO are used as supplemental measures to evaluate performance in comparison to other REITs - Management uses FFO to provide an indication of the company's ability to service debt and fund capital needs Adjusted FFO further refines this by excluding certain items not related to ongoing property operations to enhance comparability[26][27] Reconciliation of Net Income to FFO and Adjusted FFO (Q3, in thousands) | Line Item | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Net Income to Shareholders | $18,998 | $14,628 | | Depreciation & Amortization (CRE) | $8,932 | $9,166 | | (Income) loss from disc. ops. | $300 | ($3,894) | | FFO | $28,230 | $21,150 | | Adjustments | ($4,803) | ($3,723) | | Adjusted FFO | $23,427 | $17,427 | Net Debt Net Debt, a non-GAAP measure, is calculated by adjusting total debt for unamortized costs and subtracting cash Net Debt Reconciliation (in thousands) | Line Item | Sep 30, 2024 (in thousands) | Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Debt | $472,179 | $463,964 | | Net unamortized costs | $329 | $149 | | Cash and cash equivalents | ($17,919) | ($13,517) | | Net Debt | $454,589 | $450,596 | EBITDA and Adjusted EBITDA The company reports EBITDA and Adjusted EBITDA to evaluate operating performance Consolidated Adjusted EBITDA Reconciliation (TTM, in thousands) | Line Item | TTM Sep 30, 2024 (in thousands) | TTM Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net Income (Loss) | $44,856 | $32,963 | | D&A, Interest, Taxes | $59,507 | $59,789 | | Consolidated EBITDA | $104,375 | $93,248 | | Adjustments | $20,430 | $14,837 | | Consolidated Adjusted EBITDA | $124,805 | $108,085 |