Progress made in converting old sugar cane lands
Half of company’s 36,000 acres may be leased more quickly than expected – A&B
Valley Isle property sales and progress in diversifying former Maui sugar lands were among the highlights of Alexander & Baldwin’s third-quarter financial report, released Tuesday.
Overall, for the three months ending Sept. 30, A&B reported net income attributable to shareholders of $6.1 million (13 cents per diluted share), compared with a $1.9 million (3 cents per share) for the same period last year during the yearlong closure of the 36,000-acre Hawaiian Commercial & Sugar Co. plantation on Maui.
The company told investors that its ongoing discontinued operations costs were $800,000 (2 cents per share) for the recently ended quarter, compared with $13.6 million (27 cents per share) for last year’s third quarter.
A&B President and Chief Executive Officer Chris Benjamin told stock analysts in a conference call Tuesday that the company was making surprisingly fast progress in its transition from sugar to diversified agriculture on Maui.
“We originally had assumed a very long time frame for repurposing of these lands, so the pace at which we’re identifying uses and tenants is quite encouraging,” he said. But he added that, “I should point out however that signing a lease is only the first step, and it could still take some time before crops are planted, and lease rents ramp up.”
Benjamin said A&B has been working with local farmers and ranchers, energy companies and Maui County “in pursuit of what we hope will be a patchwork of farms covering a wide range of agricultural uses on our former sugar lands.”
Later, during a question-and-answer session with analysts, Benjamin said the company’s agricultural sector would not be a major profit driver for A&B, but he hoped that within a couple of years it could either break even or turn a modest profit.
So far, A&B has converted 4,500 of its 36,000 acres former sugar lands into diversified ag uses, he reported.
Also, the company is working with Maui County to expand its Kula Ag Park by 900 acres, and A&B is in “active negotiations for leases to other ag users that could take our total repurposing of our land to more than half of the old sugar lands in a relatively short time.”
The largest of the potential lessees intends to grow energy crops, he said.
Benjamin also reported the sale of 293 acres of vacant land on Maui and a half-acre commercial lot at the Maui Business Park.
A&B spokesman Darren Pai said Wednesday the 293 acres is located in Haiku and sold for $7.9 million. He said he was not at liberty to disclose the buyer. The half-acre property sold for $1 million to an undisclosed buyer, he said.
The company’s property sales, including a 273-acre ranch on Kauai, sold for a gross amount of $17 million, with $10.5 million netted after subtracting its costs.
When asked for specifics about negotiations for the agricultural leases, Pai said: “These discussions are ongoing, so (to) preserve the integrity of those negotiations, we need to keep them confidential. We are hopeful, however, that we will be able to announce these soon.”
Meanwhile, Benjamin told stock analysts that there’s been “significant increases in sales interest and activity” in the first 170-unit increment of A&B’s 600-unit Kamalani housing project in north Kihei.
As of Tuesday, 10 units had closed; 51 were under binding contracts; and 18 were under nonbinding contracts, he said.
“Based on the current construction schedule and the number of bound contracts, we expect 38 additional closings in the fourth quarter,” he said. “Proceeds from these sales will be recycled and will allow us to continue development of the first increment without additional cash contributions while we evaluate potential partnerships for future increments.”
The affordable homes in the project’s first increment will not generate income for the company, but they “will fulfill the affordable requirements for the market-priced portion of the project and provide an additional 55 affordable credits for other Maui development projects,” he said.
Meanwhile, A&B had 62 out of 70 of its Keala O Wailea units under binding contract this week, Benjamin said. The company had expected to close 20 units in December, but a minor construction delay was expected to push back 15 of the closings into January.
“We want to ensure the quality of the homes rather than rushing their delivery,” he said. “We expect an additional 25 closings by the end of the first quarter and expect to sell out the entire project by the end of 2018.”
Noting the company’s progress with its pension funding, refinancing, leasing and diversified agriculture, Benjamin said: “I’m incredibly excited about where the company is going, and I want to acknowledge our team for all the progress they’re been making.”
A&B’s stock closed at $43.01 on Wednesday. Its third quarter yielded investors a profit of 15 cents per share, compared with 24 cents for the third quarter of 2016.
Commercial real estate revenue in the third quarter was $33.9 million, compared with $32.7 million for the same quarter last year. The sector’s profits were $13.6 million, compared with $13.5 million a year earlier.
Land operations brought in $22.6 million in revenue in the quarter, compared with $18.1 million last year. Its profits were $10.4 million, up from $7.8 million.
And, materials and construction income was $55 million, up from $52.1 million. And profits in the sector were $6.5 million, up from $5.6 million.
The company is continuing its conversion to a real estate investment trust. Costs associated with that in the third quarter were $4.4 million, up from $1.9 million in the same period last year.
* Brian Perry can be reached at email@example.com.