Alexander & Baldwin, Inc. (NYSE: ALEX) is a fully integrated real estate investment trust (REIT) headquartered in Honolulu, Hawaii. The company has a long and storied history in the state, dating back to 1870 when it operated as a 571-acre sugar plantation on Maui. Over time, Alexander & Baldwin has evolved into one of Hawaii's premier commercial real estate companies and the owner of the largest grocery-anchored, neighborhood shopping center portfolio in the state.

Business Overview

Alexander & Baldwin operates in two segments: Commercial Real Estate (CRE) and Land Operations. The CRE segment functions as a vertically integrated real estate investment company, owning, operating, and leasing a portfolio of 22 retail centers, 13 industrial assets, and four office properties, representing a total of 3.9 million square feet of gross leasable area (GLA). The Land Operations segment includes the company's legacy landholdings and assets that are subject to a simplification and monetization effort.

Financials

In the second quarter of 2024, Alexander & Baldwin reported net income available to shareholders of $9.1 million, or $0.13 per diluted share. For the first six months of 2024, net income available to shareholders was $29.1 million. Total operating revenue for the second quarter was $51.0 million, and for the first six months of 2024, total operating revenue was $208.9 million. Operating cash flow for the first six months of 2024 was $67.1 million, and free cash flow was $35.9 million.

The company's CRE segment continued to deliver solid performance in the second quarter, with total Net Operating Income (NOI) growing 1.1% and same-store NOI increasing 0.9%. Same-store NOI, excluding the impact of prior year reserve collections, grew 1.7%. Alexander & Baldwin executed 47 leases in its improved property portfolio during the quarter, achieving blended spreads of 7.3% on a comparable basis. Occupancy metrics remained strong, with same-store leased occupancy at 94.8% and same-store economic occupancy at 93.7%.

The Land Operations segment generated $1.8 million in revenue during the second quarter, primarily from the sale of one development lot at Maui Business Park. For the first six months of 2024, the Land Operations segment reported $14.2 million in revenue, including revenue from unimproved land sales and the sale of three development lots at Maui Business Park.

Liquidity

Alexander & Baldwin's balance sheet remains strong, with total debt outstanding of $470 million and total liquidity of $473 million as of June 30, 2024. The company issued an eight-year unsecured private placement note in April with a 6.09% interest rate and used the proceeds to repay a maturing mortgage. Additionally, Alexander & Baldwin utilized one of its forward-starting interest rate swaps to hedge the floating interest rate on its revolving credit facility, resulting in all of its debt being at fixed rates with a weighted average interest rate of 4.75%.

Outlook

Looking ahead, Alexander & Baldwin has raised its guidance for 2024. The company now expects same-store NOI growth in the range of 1.25% to 2.25% and total company Funds from Operations (FFO) in the range of $1.17 to $1.26 per share. The improved FFO guidance is driven by higher CRE and corporate-related FFO, as well as increased Land Operations FFO. Alexander & Baldwin also raised its Adjusted FFO (AFFO) guidance to a range of $0.99 to $1.08 per share.

Recent Developments

The company's streamlining efforts continue to progress, with the recent sale of 81 acres of non-core land for $10.5 million, enabling further improvements to the cost structure. Alexander & Baldwin also remains focused on unlocking value within its portfolio, with pre-construction work advancing on an industrial build-to-suit project at Maui Business Park and several photovoltaic projects in various stages of development.

While the Hawaii tourism market has not fully recovered to pre-pandemic levels, with visitor arrivals down 4.1% year-to-date through May, Alexander & Baldwin's portfolio has demonstrated resilience. Foot traffic at the company's retail centers grew by 3.3% during the second quarter, highlighting the needs-based and neighborhood-focused nature of the company's assets.

Conclusion

Alexander & Baldwin's diversified portfolio, strong balance sheet, and streamlining efforts position the company well to navigate the current market environment and capitalize on growth opportunities. The company's focus on operational excellence, portfolio growth, and cost optimization should continue to drive value for shareholders.