Alexander & Baldwin, Inc. Q4 FY2024 earnings call

Key Points

• 2024 was Lance Parker's first year as CEO. Since becoming a REIT in 2017, same-store NOI growth averaged 3.8% per year vs. 2.3% for the Nareit shopping center subsector. FFO CAGR on CRE and corporate was 20.4% vs. 9.3% for the subsector.
• 2024 priorities: operational excellence, balance sheet strength/flexibility, cost structure streamlining, growth. Grew FFO and NOI, strong leasing activity. Refinanced $130M mortgage debt, extended revolving credit facility maturity to 2028, sold over 400 acres of non-core land, began construction of 30,000 sq. ft. industrial asset on Maui.
• Fourth quarter same-store NOI grew 2.4%, full-year 2.9%. Excluding prior year reserve collections, quarter same-store NOI grew 2.9%, full-year 3.3%. Executed 47 leases in improved portfolio, 209 leases for 2024. Blended leasing spreads strong: 14% in Q4, 11.7% for 2024. Leased occupancy 94.6%, up 60 bps sequentially. Economic occupancy 92.9% at quarter end.
• 2025 objectives: improve retail revenue via renewals/new leases, increase industrial occupancy, develop land bank, source accretive acquisitions/investments.

The commercial real estate portfolio was a key segment. In 2024, same-store NOI grew by 2.9% for the year. Full-year FFO was $1.37 per share, with AFFO at $1.10 per share. Land operations saw carrying costs reduced, starting the year with a run rate of $6-$7 million and ending with $5.8 million for the year and a run rate of $4-$5 million. The land segment contributed to cost structure improvements.

Guidance

• Expect same-store NOI growth 2.4%-3.2%.
• FFO between $1.13-$1.20 per share.
• CRE and corporate related FFO $1.11-$1.16 per share.
• Assumptions: normalizing 2024 for swap/financing adjustments, considering industrial/office vacancies and opportunities, $0.01 FFO contribution from external acquisitions in second half of 2025, G&A expected to moderate (flat to $0.01 per share improvement from 2024), land operations contribution $0.02-$0.04 per share.

Risks

• Prevailing market conditions and factors related to REIT status and business.
• Evaluation of alternatives by companies related to non-core assets.
• Risks discussed in recent Form 10-K, 10-Q, and SEC filings, including factors like market conditions, non-core asset evaluations, etc.

Q: Gaurav Mehta asked about external growth and lease expirations for 2025.

A: Lance Parker and Kit Millan discussed external growth opportunities, including development/redevelopment in Maui Business Park, and lease expirations mentioning 50,000 sq. ft. industrial move-outs with backfill opportunities and low exposure to bankrupt tenants like Liberated Brands.

Q: Rob Stevenson asked about bankrupt tenant, lease expirations, and guidance swings.

A: Kit Millan and Clayton Chun discussed the Liberated Brands space status, retail lease expirations backfilled at Waianae Mall, and guidance swings due to tenant occupancy, bad debt, etc.

Q: Alexander Goldfarb asked about tenant credit, legacy land costs.

A: Kit Millan and Clayton Chun discussed strong tenant credit, low bad debt reserves, and progress in simplifying land cost structure.

Q: Mitch Germain asked about cost containment, land activity, same-store.

A: Clayton Chun and Lance Parker discussed G&A reduction, land sales impact, and same-store growth drivers by asset class.

Q: Brendan McCarthy asked about rent spread, office exposure, acquisition guidance.

A: Lance Parker and Clayton Chun discussed rent spread contributors, office asset repurposing/sale potential, and acquisition guidance unspecified but confident in capital placement.