Business Overview
Alexander & Baldwin, Inc. (ALEX) is a real estate investment trust (REIT) that has been a dominant player in Hawaii's commercial real estate landscape for over 150 years. The company's unique focus on Hawaii-based properties has allowed it to capitalize on the state's thriving economy and robust real estate market, delivering consistent financial performance and shareholder returns.
Alexander & Baldwin's origins can be traced back to 1870 when it was established as a 571-acre sugar plantation on the island of Maui. Over the decades, the company has evolved into a diversified real estate company, with a portfolio that includes 21 retail centers, 14 industrial assets, and four office properties, totaling approximately 4 million square feet of gross leasable area (GLA) across Hawaii. Additionally, the company owns 142 acres of commercial land, the majority of which is leased through urban ground leases.
In the 1970s, Alexander & Baldwin began investing in commercial real estate in Hawaii, acquiring and developing retail, industrial, and office properties. This strategic shift allowed the company to capitalize on Hawaii's growing economy and real estate market. By the 2000s, AB had become a significant player in Hawaii's commercial real estate industry, owning and operating a large portfolio of properties across the state.
The company faced challenges during the global financial crisis in 2008-2009, which impacted its real estate holdings and operations. To strengthen its financial position, AB sold non-core assets and focused on its core commercial real estate business. This strategic decision helped the company weather the economic downturn and emerge stronger.
In 2017, Alexander & Baldwin successfully converted to a REIT, a strategic move that has enabled the company to streamline its operations and focus on its core commercial real estate business. This transition has been a key driver of the company's recent financial success, as it has allowed management to concentrate on optimizing the performance of its high-quality Hawaii-based portfolio. The REIT conversion also provided tax advantages and solidified AB's position as a premier owner, operator, and developer of high-quality commercial properties in the state.
Today, Alexander & Baldwin is known as the owner of the largest grocery-anchored, neighborhood shopping center portfolio in Hawaii, reflecting its strong position in the local retail real estate market.
Financial Performance
Alexander & Baldwin's financial results have been consistently strong, reflecting the resilience of its Hawaii-focused strategy. In 2024, the company reported net income available to common shareholders of $60.5 million, or $0.83 per diluted share, and a 3.3% same-store net operating income (NOI) growth, excluding the impact of prior-year reserve collections.
The company's funds from operations (FFO), a key metric for REITs, reached $1.37 per diluted share in 2024, up 25.7% from the previous year. Adjusted FFO (AFFO), which excludes non-recurring items, was $1.10 per diluted share, representing a 25.9% year-over-year increase. These strong financial results were driven by the company's successful leasing efforts, disciplined expense management, and strategic capital allocation decisions.
For the full year 2024, Alexander & Baldwin reported annual revenue of $236.6 million, annual net income of $60.5 million, annual operating cash flow of $102.1 million, and annual free cash flow of $47.2 million. In the most recent quarter (Q4 2024), the company reported revenue of $62.5 million, representing an 18.1% year-over-year increase, and net income of $12.4 million, a 3.7% increase from the same period last year.
Leasing and Occupancy
Alexander & Baldwin's commercial real estate portfolio has maintained high occupancy levels, with leased occupancy of 94.6% as of the end of 2024, up 60 basis points sequentially. The company's retail portfolio, which accounts for the majority of its GLA, achieved a leased occupancy of 95.2%, reflecting the strength of its grocery-anchored neighborhood shopping centers.
The company's leasing team executed 209 leases covering 630,000 square feet of GLA in 2024, with blended leasing spreads of 11.7% on a comparable basis. This strong leasing activity has enabled Alexander & Baldwin to maintain high occupancy levels and drive consistent revenue growth.
Growth Initiatives
Looking ahead, Alexander & Baldwin is focused on several key growth initiatives to further enhance its financial performance and shareholder value. The company is actively pursuing internal growth opportunities, including the development and redevelopment of its existing land bank and industrial properties. In 2024, the company began construction on a 30,000 square foot industrial asset on the island of Maui, and it is actively underwriting additional development and redevelopment projects.
Furthermore, the company is evaluating potential external growth opportunities, such as accretive acquisitions and strategic investments, to expand its commercial real estate footprint in Hawaii. Management has indicated that its 2025 guidance includes a modest contribution from external growth initiatives, underscoring the company's commitment to value-enhancing expansion.
Risks and Challenges
While Alexander & Baldwin's Hawaii-focused strategy has been a key strength, it also exposes the company to certain risks and challenges unique to the local market. The company's performance is closely tied to the overall health of the Hawaii economy, which can be influenced by factors such as tourism, government spending, and military activity.
Additionally, the high cost of living and limited land availability in Hawaii present ongoing challenges for the company's development and redevelopment efforts. The company must also navigate a complex regulatory environment when pursuing new projects, which can impact the timing and feasibility of its growth initiatives.
Financials
Alexander & Baldwin's financial performance has been consistently strong, as evidenced by its reported net income and FFO growth. The company's focus on optimizing its Hawaii-based portfolio has resulted in steady revenue growth and improved profitability. Additionally, the company's strategic capital allocation decisions have contributed to its financial success.
The company operates in two main business segments: Commercial Real Estate (CRE) and Land Operations. The CRE segment, which is the core focus of AB's business, generated revenue of $197.4 million in 2024, up 1.7% from the prior year. CRE segment operating profit was $89.4 million, a 10.1% increase year-over-year, driven by higher rents and recoveries from tenants, partially offset by lower percentage rent revenue and higher net bad debt expense.
The Land Operations segment, which includes AB's legacy landholdings and joint venture investments, reported revenue of $39.3 million in 2024, up significantly from $14.9 million in 2023. This increase was driven by higher sales of unimproved land and development lots. Segment operating profit was $18.9 million, compared to $10.8 million the prior year, due to higher margins on land sales and equity earnings from the company's joint ventures.
As part of its simplification strategy, AB completed the sale of approximately 430 acres of legacy land holdings on Maui and Kauai for $20.2 million during 2024. The company has been actively monetizing its non-core assets to focus on its commercial real estate operations in Hawaii.
Since becoming a REIT in 2017, Alexander & Baldwin's same-store NOI growth has averaged 3.8% per year, compared to 2.3% for the Nareit shopping center subsector. The company's FFO has achieved a CAGR of 20.4% since 2020, compared to 9.3% for the Nareit shopping center subsector, demonstrating its strong performance relative to industry peers.
Liquidity
The company maintains a strong balance sheet with ample liquidity to support its ongoing operations and growth initiatives. Alexander & Baldwin's disciplined approach to capital management has enabled it to maintain financial flexibility while pursuing value-enhancing opportunities in the Hawaii real estate market.
As of December 31, 2024, the company reported a debt-to-equity ratio of 0.47, cash and cash equivalents of $33.4 million, and a $450 million revolving credit facility with $300 million of available capacity. The company's current ratio and quick ratio both stand at 0.70, indicating a solid short-term liquidity position.
Guidance and Outlook
For 2025, Alexander & Baldwin has provided guidance that reflects continued growth and operational improvements. The company expects same-store NOI growth of 2.4% to 3.2% and FFO between $1.13 and $1.20 per share. CRE and corporate related FFO is projected to be between $1.11 and $1.16 per share, representing a 4.1% increase at the midpoint when normalizing 2024 for certain adjustments.
The 2025 guidance incorporates about 50,000 square feet of vacancy within the industrial portfolio and 13,000 square feet within the office portfolio that the company is actively working to address. Additionally, the FFO guidance includes a $0.01 per share contribution related to external acquisitions programmed for the second half of 2025.
The company expects G&A expenses to be flat to a $0.01 per share improvement from 2024. Contributions from land operations are projected to range from $0.02 to $0.04 per share in 2025, reflecting a modest amount of assumed land sales margin and joint venture income.
Conclusion
Alexander & Baldwin's long history of successful operations in Hawaii, coupled with its strategic focus on the state's commercial real estate market, has enabled the company to deliver consistent financial performance and shareholder value. With a strong balance sheet, disciplined capital allocation, and a talented management team, Alexander & Baldwin is well-positioned to continue capitalizing on the unique opportunities presented by the Hawaii real estate landscape. As the company executes on its growth initiatives and navigates the inherent risks of its regional concentration, investors can look forward to Alexander & Baldwin's continued contribution to the Hawaii community and its commitment to shareholder returns.