ALEXANDER & BALDWIN. May 8, 2018

Transcription

1 1 ALEXANDER & BALDWIN F I R S T Q U A R T E R E A R N I N G S P R E S E N T A T I O N May 8, 2018

2 SAFE HARBOR STATEMENT 2 Statements in this call and presentation that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding possible or assumed future results of operations, business strategies, growth opportunities and competitive positions. Such forward-looking statements speak only as of the date the statements were made and are not guarantees of future performance. Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from those expressed in or implied by the forward-looking statements. These factors include, but are not limited to, prevailing market conditions and other factors related to the Company's REIT status and the Company business generally discussed in the Company's most recent Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission. The information in this call and presentation should be evaluated in light of these important risk factors. We do not undertake any obligation to update the Company's forward-looking statements.

3 STRATEGIC OVERVIEW 3

4 4 Value Creation Themes 1. Continued strong execution of our strategy 2. Excellent performance from our core CRE business 3. Continued focus on improving and/or monetizing our non-cre operations

5 CRE STRATEGIC PROGRESS 5 Completed mainland-to-hawaii portfolio migration Acquired Terramar Hawaii assets for $256.7M ($254.1M purchase price and $2.6M of other assumed obligations) in February Expanded Hawaii retail presence into two new, strategic locations Hokulei Village Completed funding in March principally with 1031 exchange proceeds Focused on integration of acquired assets into the portfolio Laulani Village

6 COMPLETED MAINLAND MIGRATION TO HAWAII 6 $61.8M 57% 43% CASH NET OPERATING INCOME 57 % 37% $84.8M 13% 87% 100% Began process in 2012 Invested $956M in highly strategic Hawaii assets Mainland dispositions of $600M were the primary funding source Benefits: Concentrated portfolio geographically and by asset class Pro Forma Post Terramar Exchanges Hawaii Mainland Traded into higher-quality assets Note: See appendix for a statement on management s use of non-gaap financial measures and reconciliations.

7 CRE STRATEGIC PROGRESS 7 Advanced repositioning, renovation and ground-up projects to grow commercial portfolio REIT conversion completed with Special Distribution in January Lau Hala Shops Ho`okele Shopping Center Rendering

8 SOLID PERFORMANCE CONTINUES 8 Performance Metric 1Q18 4Q17 3Q17 2Q17 1Q17 Same-store cash NOI growth 2.8% 5.5% 4.0% 4.8% 4.6% Leasing spreads 10.2% 6.9% 8.4% 19.8% 13.3% % Occupancy 3/31/18 3/31/18 ABR/sf Retail 93.1 $29.05 Industrial 89.3 $13.85 Office 90.1 $32.01 Total 91.8 $24.87 Note: See appendix for a statement on management s use of non-gaap financial measures and reconciliations. Manoa Marketplace

9 HAWAII IS A TIER-1 MARKET 9 Hawaii Calif. New York Median HH Income $72,000 $63,800 $60,700 Retail Sales Per Capita % Sales to HH Income 2017 Personal Income Growth Unemployment at 12/31/17 $13,600 $12,700 $12, % 19.9% 21.1% 3.1% 4.1% 2.9% 2.1% 4.5% 4.7% Source: U.S. Census Bureau and Bureau of Economic Analysis; no endorsement implied. The Shops at Kukui`ula

10 STRONG CRE MARKET FUNDAMENTALS 10 Low Strip Retail SF Per Capita Low Internet Sales Penetration

11 STRONG PORTFOLIO CHARACTERISTICS ALEX Peer* Range 3-Mile Trade Area Population 55K K 3-Mile Median HH Income $80K $67-100K Percent neighborhood centers 77% 2-57% % of ABR 20% 15% 10% 5% 0% LOW EXPOSURE TO AT RISK RETAILERS Peer* average ROIC ALEX REG FRT AKR WRI BRX AAT UE KIM RPAI DDR FUNDAMENTALS DRIVE PERFORMANCE $29.05 A&B 1Q18 RETAIL ABR PSF vs $789 A&B 2017 AVERAGE GROCER SALES PSF * Green Street Advisors, Company disclosures; comparative data set represents strip retail peers under Green St. coverage (AKR, AAT, BRX, DDR, FRT, KIM, REG, ROIC, RPAI, UE, WRI) At Risk retailers are those most likely to close stores or seek lower rents upon lease expirations as defined by Green St. in their 4/20/18 Strip Center Sector report. Data provided for informational purposes only; no endorsement implied. 11 $ Q18 PEER* AVERAGE RETAIL ABR PSF

12 IMPROVING AND SIMPLIFYING NON-REIT BUSINESSES 12 Focus on improving Materials & Construction business Minimize capital going into and/or pull capital out of development-forsale projects Kukui`ula

13 MATERIALS & CONSTRUCTION 13 Fundamentally strong business Progress in the quarter not reflected in financial results Appointed Pike Riegert as president of Grace in March Performance improvement initiatives underway to advance strategic priorities: Enhance sales efforts to increase volume of third-party aggregate sales Optimize labor management to reduce costs of paving operations Implement new information systems to improve cost management and contract bidding Position for anticipated increases in state and federal contracts later in 2018

14 LAND OPERATIONS PRIORITIES Increase monetization of development units and parcels Actively market and sell available development inventory Monetize development assets when appropriate Entitle certain Hawaii lands to respond to market demand while meeting community needs Undertake opportunistic development of fully entitled land while limiting investment risk and capital commitment Emphasize short-term developments Advance diversified agriculture on our former plantation lands Sales of residential inventory in 1Q18 generated $28M in sales proceeds and cash distributions from partners 14 Kahala Avenue Kamalani

15 15

16 FINANCIAL UPDATE 16

17 1Q INCOME AVAILABLE FROM CONTINUING OPS DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS Q Q17 Diluted Earnings Per Share 1Q18 1Q17 $0.66 $

18 SOLID CRE PERFORMANCE 18 Performance Metric 1Q18 Same-store cash NOI growth 2.8% Leasing spreads 10.2% Hawaii retail leasing spreads 7.5% % Occupancy 3/31/18 3/31/17 3/31/18 ABR/sf Retail $29.05 Industrial $13.85 Office $32.01 Total $24.87 Note: See appendix for a statement on management s use of non-gaap financial measures and reconciliations. Kaneohe Bay Shopping Center

19 LAND OPERATIONS UPDATE 19 Land Operations produced a net operating loss of $5.4M in 1Q18 $4.2M loss on a builder joint venture Margins from sales of development and joint venture units Unit sales generated $28M of sales proceeds and cash distributions from joint venture partners Expect modest operating profit in 2Q18 Increased monetization activity expected to result in increased sales activity this year Keala o Wailea Diversified Ag

20 MATERIALS & CONSTRUCTION UPDATE 20 1Q18 operating profit of $0.2M, compared to $5.6M in 1Q17 1Q18 Adjusted EBITDA of $3.1M, compared to $7.9M in 1Q17 Quarter highlights: Firmed up over half of planned third-party aggregate sales for 2018 Contracts on more than half of third-party hot mix asphalt sales planned for 2018 Cautiously optimistic about catching up on weather-delayed paving work Note: See appendix for a statement on management s use of non-gaap financial measures and reconciliations.

21 RECENT FINANCING ACTIVITIES 21 First quarter financings: Assumption of a $62M mortgage for the purchase of Laulani Village (Terramar Acquisition) $50M term loan facility maturing in 2023 with interest at LIBOR plus a margin determined using a leverage-based pricing grid In April refinanced Series E note with three new fixed-rate financings: $10M at 4.66% maturing in 2025 $34.5 million at 4.81% maturing in 2027 $18M at 4.89% maturing in 2028 The Shops at Kukui`ula

22 CAPITAL STRUCTURE SPECIAL DISTRIBUTION & 1Q18 FINANCINGS DOLLARS IN MILLIONS 22 Dec. 31, Q18 Change Mar. 31, 2018 Total debt Shareholders equity ,325.2 Net debt to EBITDA 7.0x (0.3x) 6.7x Change in Shareholders Equity 1Q18 Activity Shares issued in Special Distribution Net income 47.4 Share-based compensation 1.3 Noncontrolling interest-related and other, net (1.0) Weighted Average Diluted Shares O/S (mils) 1Q18 Shares at 12/31/ Shares issued in Special Distribution weighted as if outstanding for the entire quarter 22.6 Compensation-related weighted-average shares during 1Q Weighted-avg diluted shares for 1Q Note: See appendix for a statement on management s use of non-gaap financial measures and reconciliations.

23 2018 GUIDANCE DOLLARS IN MILLIONS 23 Metric Full-year 2018 Guidance 1Q18 Actual CRE Leasing spreads % 10.2% Same-store NOI growth 3-4% 2.8% Maintenance cap ex $9 $1.4 Growth cap ex $35 $6.1 Materials & Construction EBITDA ~$30 $3.1 Total company G&A ~$60 $15.0 Note: See appendix for a statement on management s use of non-gaap financial measures and reconciliations

24 CLOSING REMARKS 24

25 CLOSING REMARKS 25 Tremendous progress in advancing strategies in CRE REIT conversion Terramar acquisition Completion of mainland-to-hawaii migration Commercial portfolio continues to perform well and are supported by strong market and portfolio fundamentals On track to meet full-year 2018 guidance in CRE Remain diligent in building out CRE portfolio, tenanting and renewing leases Strategic focus has incrementally turned toward executing priorities in our Land Operations and Materials & Construction segments

26 26 ALEXANDER & BALDWIN F I R S T Q U A R T E R E A R N I N G S P R E S E N T A T I O N May 8, 2018

27 APPENDIX 27

28 STATEMENT ON USE OF NON-GAAP FINANCIAL MEASURES 28 The Company presents certain non-gaap financial measures in this presentation. The Company uses these non- GAAP measures when evaluating operating performance because management believes that they provide additional insight into the Company s and segments' core operating results, and/or the underlying business trends affecting performance on a consistent and comparable basis from period to period. These measures generally are provided to investors as an additional means of evaluating the performance of ongoing core operations. The non- GAAP financial information presented herein should be considered supplemental to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP. The Company s methods of calculating non-gaap measures may differ from methods employed by other companies and thus may not be comparable to such other companies. Required reconciliations of these non-gaap financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are set forth in the following slides.

29 CRE CASH NET OPERATING INCOME 29 Cash Net Operating Income (Cash NOI) is a non-gaap measure used by the Company in evaluating the CRE segment s operating performance as it is an indicator of the return on property investment, and provides a method of comparing performance of operations, on an unlevered basis, over time. Cash Net Operating Income (Cash NOI) is calculated as total Commercial Real Estate operating revenues less direct propertyrelated operating expenses. Cash NOI excludes straight-line rent adjustments, amortization of favorable/unfavorable leases, amortization of lease incentives, general and administrative expenses, impairment of commercial real estate assets, lease termination income, and depreciation and amortization (including amortization of maintenance capital, tenant improvements and leasing commissions). The Company s methods of calculating non-gaap measures may differ from methods employed by other companies and thus may not be comparable to such other companies. The Company reports Cash NOI on a same-store basis, which includes the results of properties that were owned and operated for the entirety of the prior calendar year. The same-store pool excludes properties under development or redevelopment and also excludes properties acquired or sold during the comparable reporting periods. While there is management judgment involved in classifications, new developments and redevelopments are moved into the same-store pool upon one full calendar year of stabilized operation, which is typically upon attainment of market occupancy. The Company provides guidance on the projected growth in same-store Cash NOI for While it is not practicable to provide a reconciliation of the Commercial Real Estate operating profit to same-store Cash NOI for 2018, the Company believes that the differences between the Commercial Real Estate operating profit and same-store Cash NOI for 2018 would be similar to the items included in the 2017 reconciliation.

30 CRE CASH NET OPERATING INCOME RECONCILIATION OF GAAP TO NON-GAAP MEASURES DOLLARS IN MILLIONS 30 1Q18 4Q17 3Q17 2Q17 1Q17 CRE Operating Profit $15.5 $(6.9) $13.6 $13.4 $14.3 Plus: Depreciation and amortization Less: Straight-line lease adjustments (0.1) (0.3) (0.3) (0.5) (0.5) Less: Favorable/(unfavorable) lease amortization (0.6) (0.7) (0.6) (0.8) (0.8) Less: Termination income (1.1) (1.7) Less: Other (income)/expense, net Plus: Impairment of real estate assets Plus: Selling, general, administrative and other expenses CRE Cash NOI $21.8 $21.0 $21.2 $21.4 $21.4 Acquisition/dispositions and other adjustments (3.0) (2.2) (1.8) (1.6) (3.1) CRE Same-Store Cash NOI $18.8 $18.8 $19.4 $19.8 $18.3 Change in Same-Store Cash NOI from same quarter in the prior year 2.8%* 5.5% 4.0% 4.8% 4.6% Change calculated on non-rounded amounts. Note: Additional information is included in the Company s quarterly Supplemental Information report, which is furnished to the SEC and available at

31 CRE CASH NET OPERATING INCOME RECONCILIATION OF GAAP TO NON-GAAP MEASURES DOLLARS IN MILLIONS 31 Year Ended Dec. 31, Year Ended Dec. 31, Change* CRE Operating Profit $34.4 $54.8 Plus: Depreciation and amortization Less: Straight-line lease adjustments (1.6) (2.1) Less: Lease incentive amortization Less: Favorable/(unfavorable) lease amortization (2.9) (3.3) Less: Termination income (1.7) (0.1) Less: Other (income)/expense, net Plus: Impairment of real estate assets Plus: Selling, general, administrative and other expenses CRE Cash NOI $84.8 $ % Acquisition/dispositions and other adjustments (9.2) (10.8) CRE Same-Store Cash NOI $75.6 $ % Change calculated on non-rounded amounts. Note: Additional information is included in the Company s quarterly Supplemental Information report, which is furnished to the SEC and available at

32 CRE CASH NET OPERATING INCOME RECONCILIATION OF GAAP TO NON-GAAP MEASURES (DOLLARS IN MILLIONS) 32 Year Ended Dec. 31, Year Ended Dec. 31, Change* CRE Operating Profit $34.4 $41.6 Plus: Depreciation and amortization Less: Straight-line lease adjustments (1.6) (3.6) Less: Lease incentive amortization Less: Favorable/(unfavorable) lease amortization (2.9) (1.1) Less: Termination income (1.7) (0.2) Less: Other (income)/expense, net 0.3 (0.3) Plus: Impairment of real estate assets Plus: Selling, general, administrative and other expenses CRE Cash NOI $84.8 $ % Change calculated on non-rounded amounts. Note: Additional information is included in the Company s quarterly Supplemental Information report, which is furnished to the SEC and available at

33 EBITDA EBITDA is presented for the Company on a consolidated basis. EBITDA represents the Company s consolidated net income adjusted to exclude the impact of depreciation and amortization, interest expense and income taxes. The Company provides this information to investors as an additional means of evaluating the performance of the Company s operations and should be not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP. A reconciliation of consolidated net income to EBITDA follows: 33 Dollars in Millions Trailing 12 Months Ended Mar. 31, 2018 Year ended Dec. 31, 2017 Net income $270.9 $230.5 Depreciation and amortization Interest expense Income tax expense (benefit) (220.3) (216.9) EBITDA $119.5 $80.6 Note: Additional information is included in the Company s quarterly Supplemental Information report, which is furnished to the SEC and available at

34 EBITDA DOLLARS IN MILLIONS 34 Other discrete items impacting EBITDA Trailing 12 Months Ended Mar. 31, 2018 Year ended Dec. 31, 2017 Income attributable to noncontrolling interests $(1.6) $(2.2) Income from discontinued operations before interest, income taxes and depreciation and amortization 0.3 (3.7) REIT evaluation/conversion costs Reduction in solar investments, net Impairment of real estate assets Net gain on sales of improved property (55.9) (9.3) Note: Additional information is included in the Company s quarterly Supplemental Information report, which is furnished to the SEC and available at

35 MATERIALS & CONTRUCTION EBITDA EBITDA is presented for the Materials & Construction segment by adjusting segment operating profit, which excludes interest and tax expenses), by adding back depreciation and amortization. Adjusted EBITDA is calculated by adjusting for income attributable to noncontrolling interests from EBITDA. The Company provides this information to investors as an additional means of evaluating the performance of the segment s operations and should be not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP. A reconciliation of segment operating profit to EBITDA and Adjusted EBITDA follows: 35 Dollars in Millions Three months ended Mar. 31, 2018 Three months ended Mar. 31, 2017 Net income $0.2 $5.6 Depreciation and amortization EBITDA $3.2 $8.6 Income attributable to noncontrolling interests (0.1) (0.7) Adjusted EBITDA $3.1 $7.9 Note: Additional information is included in the Company s quarterly Supplemental Information report, which is furnished to the SEC and available at