Alexander & Baldwin boosts leasing occupancy, seeks to sell Grace Pacific
Alexander & Baldwin Inc., the state’s second-largest retail property owner, improved its leasing occupancy during the second quarter to near pre-pandemic levels and said that its board has begun a formal marketing process to sell Grace Pacific, the state’s largest asphalt paving contractor, to “a more natural owner.”
Honolulu-based real estate investment trust A&B reported Thursday that its net income available to common shareholders declined 68.8% to $4 million, or 5 cents a share, from $12.8 million, or 18 cents a share, in the year-earlier quarter.
The company said, though, that its total leased occupancy improved to 94.6%, and robust leasing activity continued in the period.
“We executed 76 leases, with comparable leasing spreads of 11.9% for new leases and 5.4% for renewal leases,” A&B President and CEO Chris Benjamin said in a statement.
He added that the company’s high-quality commercial real estate portfolio continued to produce “excellent results, building on our strong start to the year.”
He said the company’s strong and flexible balance sheet has allowed A&B to remain active in pursuing opportunities across its target markets and preferred asset classes to expand its commercial real estate portfolio.
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“The continued strong performance of our CRE platform facilitated a third consecutive quarterly dividend increase and another positive revision of our guidance,” he said.
On Tuesday A&B announced it was increasing its dividend for the third consecutive quarter. The increase of 2 cents a share, to 22 cents a share, will be payable Oct. 5 to shareholders of record as of the close of business on Sept. 19. A&B said the third straight dividend increase “reflects strong second quarter CRE results and expected performance for the remainder of 2022.”
A&B said financial results from Grace Pacific in A&B’s material and construction segment were below expectations primarily due to the timing of key projects, COVID-19 impacts on its workforce and inflationary cost pressure,” Benjamin told analysts on the company’s conference call.
He said, however, that A&B “made good progress in ramping up paving operations late in the quarter and securing new work and this positions us well for the balance of the year.”
Benjamin said Grace Pacific is now the lone significant noncore asset that A&B still owns.
“This is a compelling business with a long history, strong market position, and many competitive advantages,” he said. “We hope to find a strategic buyer for whom Grace is a more natural fit.”
A&B has owned Grace Pacific since Oct. 1, 2013, when it purchased the company for $235 million to aid A&B in infrastructure development and replacement work.
Funds from operations, which measures cash flow from a REIT’s operations and is used to gauge operating performance, was $13.2 million, or 18 cents a share, last quarter compared with $22.3 million, or 31 cents a share, in the year-earlier period.
Total operating revenue slipped 1.3% to $88.1 million.
A&B said during the second quarter it closed on the sale of approximately 18,900 acres of primarily conservation and agricultural land on Kauai.
Most of Kailua’s commercial core and 22 shopping centers around the state make up much of A&B’s retail real estate holdings.
Individual properties include Kaneohe Bay Shopping Center, Aikahi Park Shopping Center, Pearl Highlands Center, Manoa Marketplace, Waianae Mall, Kunia Shopping Center, Waipio Shopping Center, Laulani Village, Kahului Shopping Center, Pu‘unene Shopping Center and Queens’ MarketPlace.
In all, A&B owns nearly 4 million square feet of retail, industrial and office space statewide.
Down earnings
Second-quarter net
$4 million
Year-earlier net
$12.8 million
