Cane land sale nets $162M

Alexander & Baldwin realized a profit of $162 million from its sale of 41,000 acres of Maui agricultural land and expects to see a boost in income as it reinvests the money in commercial properties, A&B said Wednesday in its 2018 earnings report.

“The Maui land sale was transformative in many ways, because it transitioned us largely out of diversified agriculture and will result in roughly a $12 million increase in net operating income,” said Chris Benjamin, A&B’s president and chief executive officer. “It also puts us an important step closer to the Hawaii commercial real estate company we’ve committed to become.”

A&B reported its fourth quarter and full year earnings for 2018 during a conference call with investors on Wednesday.

The company reported a net income loss of $136.6 million and $1.90 per share in the fourth quarter of 2018, compared to a net income gain of $212.2 million and $3.42 per share in the same quarter of 2017.

The net income loss for all of 2018 was $72 million and $1.02 per share, compared to a net income gain of $230.1 million and $4.34 per share in 2017.

A&B’s biggest transaction in 2018 was the Dec. 20 sale of 41,000 acres to Mahi Pono for $262 million. The sale generated $258 million in cash that the company is now looking to reinvest in commercial real estate, Benjamin said. On Dec. 28, A&B put $40 million of those proceeds toward two warehouse buildings totaling 150,000 square feet of industrial space in Kapolei. About 75 percent of the space across the buildings were to be leased to the former owner, Covan, a national moving company.

Benjamin said A&B made “tremendous progress in 2018” toward becoming a Hawaii-focused investment company, and that the Maui land sale would “further accelerate that growth.” He added that 77 percent of reinvestment proceeds from the Maui land sale are closed or under contract.

In 2018, A&B completed its conversion to a real estate investment trust and sold its last seven Mainland properties while buying three new retail centers in Hawaii.

The company also broke ground for the Ho’okele Shopping Center in Kahului in March. Benjamin said the center is on track to open its first phase — which will include Safeway, a gas station and in-line shops — in the third quarter of this year. As of December, the 94,000-square-foot facility was 64 percent pre-leased, phase 2 will get underway as the leases are executed, Benjamin said. The whole project will cost an estimated $42 million.

Other Maui transactions in 2018 included the $8.6 million sale of 313 acres next to the Kahului Airport to the state, and the $11.3 million sale of the Lahaina Square Shopping Center and adjacent parcels to an unnamed buyer in November. A&B also sold 262 acres to Maui County for $5.9 million in December for an expansion of the Kula Agricultural Park.

As part of its deal with Mahi Pono, A&B also sold 50 percent of its ownership interest in East Maui Irrigation, which includes 15,000 acres, to Mahi Pono on Feb. 1.

A&B also closed on a bulk land sale of 42 acres in Wailea for $23.6 million on Feb. 12.

Cash generated from sales proceeds and joint ventures totaled $104.2 million in 2018, including from A&B’s close out of the 69-unit Keala o Wailea project and the closing of 91 additional units at Kamalani, its affordable housing project in Kihei, and 1.1 acres at the Maui Business Park.

Since 2012, A&B’s net operating income from commercial real estate assets has more than tripled, from nearly $30 million to more than $80 million, and A&B expects to eclipse the $100 million mark soon. A&B commercial real estate assets now represent 69 percent of the company’s total book value, compared to land operations, which make up close to 16 percent, and materials and construction, which make up a little over 13 percent.

“We’re also kicking off a strategic planning process that will help us to find the other elements of our path ahead, such as what will we look like when we’re simply a commercial real estate company,” Benjamin said. “We need to define a path toward this even though it can’t be implemented overnight. Effectively managing the process of streamlining the organization will not be easy, but it’s essential to reducing our corporate expense over time.”

To view the full report or to listen to the earnings call, visit alexanderbaldwin.gcs-web.com.

* Colleen Uechi can be reached at cuechi@mauinews.com.


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