Alexander & Baldwin(ALEX) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2022, the company recorded net income of $10.5 million or $0.14 per share, with FFO of $19.7 million or $0.27 per share, and core FFO of $20.8 million or $0.29 per share [19][20] - The company raised its 2022 guidance for core FFO per share to a range of $1.01 to $1.07, up from the previous range of $0.94 to $1.00, primarily due to improved outlook for CRE same-store NOI growth [24][25] Business Line Data and Key Metrics Changes - The Commercial Real Estate (CRE) segment saw revenues increase by nearly 15.5% to $46.1 million, and NOI increased by 17.8% to $29.8 million compared to the prior year [20][21] - Same-store NOI for CRE increased by 17% to $29.6 million, with the retail segment achieving over 26% improvement in same-store NOI [11][21] Market Data and Key Metrics Changes - Domestic visitor arrivals in Hawaii exceeded pre-pandemic levels, up about 8% compared to 2019, contributing to economic growth [12][13] - The unemployment rate in Hawaii improved to 4.1%, down from a peak of 22.4%, indicating a strong recovery in the local economy [13] Company Strategy and Development Direction - The company is focused on simplifying its operations and strengthening its balance sheet, with plans to actively pursue acquisitions in retail, industrial, and ground leases [10][14] - The company is also advancing its ESG initiatives, including a solar PV installation project at Pearl Highlands Center [26][56] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery in Hawaii and its positive impact on leasing demand for high-quality commercial real estate assets [12][13] - The company anticipates that rising interest rates may create acquisition opportunities as highly leveraged buyers may be disproportionately affected [45][46] Other Important Information - The company reported non-core land sales totaling approximately $8 million in Q1 2022, indicating ongoing monetization efforts [12][18] - The Materials & Construction segment had its best quarter in 1.5 years, producing $4.1 million of adjusted EBITDA [13][22] Q&A Session Summary Question: Can you expand on the expanding acquisition pipeline? - The company remains focused on retail, industrial, and ground leases for acquisitions, despite a tight acquisition market [30] Question: Is the increase in guidance driven by first quarter outperformance or a stronger outlook for the year? - The increase in guidance is primarily driven by first quarter outperformance [32] Question: What impact will the pension plan have on second quarter earnings? - The anticipated pre-tax settlement charge related to the pension plan is expected to be between $81 million to $95 million [34] Question: Will macroeconomic factors impact redevelopment plans? - While there are some supply chain delays and inflationary pressures, the company remains optimistic about its redevelopment projects [37] Question: What is the status of rental collections and deferrals from the pandemic? - The company is performing well on collections, with rates exceeding 90% overall for CRE [40] Question: What is the outlook for international travelers and COVID restrictions? - The company noted a return to full capacity in terms of tourism, although some retailers may still be affected by changes in visitor demographics [42][43] Question: How might rising interest rates affect acquisition opportunities? - Rising interest rates may create opportunities for the company to pursue acquisitions as other buyers may be constrained [45][46] Question: What is the status of land sales and pricing? - The company is optimistic about ongoing interest in non-core land sales and has strong inquiries from buyers [48][49] Question: What is driving the improved performance at Grace? - The improved performance at Grace is attributed to operational momentum and a strong backlog of projects [52][54] Question: How is the solar project structured financially? - The solar project involves minimal initial investment from the company, with expected annual NOI of about $300,000 once operational [56]