A Premier Hawaii Real Estate and Land Company Third Quarter 2012 Q Operating and Financial Results November 8, 2012
DISCLOSURE Kai Malu Maui Mall 36,000-acre sugar plantation on Maui 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 statement. Factors that could cause actual results to differ materially from those contemplated in the statements include, without limitation, those described on pages 20-38 of the information statement filed as Exhibit 99.1 to the Company s registration statement on Form 10. These forward-looking statements are not guarantees of future performance. We do not undertake any obligation to update our forward-looking statements. Third Quarter 2012 Operating and Financial Results November 8, 2012 2
CALL AGENDA Opening remarks....stan Kuriyama Operations update.. Chris Benjamin Financial matters..paul Ito Closing remarks.....stan Kuriyama Questions and answers Third Quarter 2012 Operating and Financial Results November 8, 2012 3 The Lake at Kukui ula
EARNINGS Dollars in Millions, Except Per Share Amounts 30 25 Adjusted Net Income 1 30 26.5 23.6 25 Net Income 26.5 20 20 15 13.8 15 13.4 11.8 10 10 5 44 4.4 5 44 4.4 0 0-5 3Q11 3Q12 YTD 2011 YTD 2012-5 3Q11 3Q12 YTD 2011 YTD 2012 Adjusted Diluted Earnings Per Share 1 Diluted Earnings Per Share 3Q YTD 3Q YTD 2011 $0.10 $0.63 2011 $0.10 $0.63 2012 $0.32 $0.56 2012 $0.31 $0.28 1 See appendix for a statement regarding management s use of non-gaap financial measures and reconciliations of GAAP to non-gaap measures Third Quarter 2012 Operating and Financial Results November 8, 2012 4
QUARTER HIGHLIGHTS ONE Ala Moana Artist rendering subject to change Kukui ula Concorde Commerce Center Waipio Shopping Center The Golf Course at Kukui ula Third Quarter 2012 Operating and Financial Results November 8, 2012 5
HAWAII ECONOMIC UPDATE YTD September 2012, Except as Noted Exceptional performance for Hawaii s visitor industry continues Total expenditures up 19% Arrivals up 9% Air seats increased 7% Oahu hotels (3Q12) Led the nation in average daily rate increases with a 15% increase over last year Revenue per available room increased 21% 2012 expected to be a record year for arrivals and expenditures Sources: Hawaii Dept. of Business, Economic Development & Tourism Data provided for informational purposes only; no endorsement of forecast implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 6
HAWAII ECONOMIC UPDATE YTD September 2012, Except as Noted The Shops at Kukui ula Economic recovery extending to Hawaii consumers September unemployment drops to 5.7% Oahu at 5.1% Bankruptcy filings down 26% Foreclosures down 30% Credit and debit sales activity up 9% State general fund revenues projected to increase by 15% for fiscal year 2012 Construction beginning recovery (1H12) Private permits up 33% Construction income up 4% Contracting GE tax base up 15% Sources: Hawaii Dept. of Business, Economic Development & Tourism; First Hawaiian Bank Activity Report; U.S. Bankruptcy Court District of Hawaii; RealtyTrac Data provided for informational purposes only; no endorsement of forecast implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 7
HAWAII ECONOMIC UPDATE Real estate performing well Oahu median prices improve Homes - $623,250, up 9% Condos - $315,000, up 4% Low levels of available inventory Statewide residential sales October 2012 v. October 2011 up significantly Homes up 26% Condos up 33% Oahu commercial markets stable (3Q12) Retail (1H12) and industrial vacancies below 5% Office vacancies stable at 13% Sources: Title Guaranty; Honolulu Board of Realtors; Colliers International (Hawaii); University of Hawaii Economic Research Organization (UHERO), State Forecast, November 2, 2012 http://www.uhero.hawaii.edu Data provided for informational purposes only; no endorsement of forecast implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 8
OPERATIONS UPDATE Ka Milo Kaneohe Bay Shopping Center Waihonua The Bluffs at Wailea Kukui ula Kukui ula Third Quarter 2012 Operating and Financial Results November 8, 2012 9
DEVELOPMENT PROJECTS KUKUI ULA Third quarter sale closings: 2 cottages closed at $2.5M & $2.6M ($1,200 psf) 1 residential custom home lot closed at $1.6M ($75 psf) 1 cottage closed in Oct at $2.7M ($1,280 psf) 2 cottages in escrow at $2.8M to $3.0M ($1,300-$1,400 psf) Third Quarter 2012 Operating and Financial Results November 8, 2012 10
DEVELOPMENT PROJECTS KA MILO AT MAUNA LANI KAI MALU AT WAILEA Third Quarter 2012 Operating and Financial Results November 8, 2012 11
DEVELOPMENT PROJECTS WAIHONUA JV partners to provide half of $65M equity capital $120M construction loan commitment Finalized general contractor agreement with Hawaiian Dredging Majority of closings expected in first half of 2015 Third Quarter 2012 Operating and Financial Results November 8, 2012 12
DEVELOPMENT PROJECTS Project Site Ala Moana Beach Park Ala Moana Center Waihonua Site Third Quarter 2012 Operating and Financial Results November 8, 2012 13
INVESTMENTS ONE ALA MOANA TOWER 206-unit ultra luxury residential condominium project Premium location at Ala Moana Center Average unit price: $1.6M A&B to make $20M preferred investment with profit participation Marketing expected to commence soon Artist rendering subject to change Artist rendering subject to change Third Quarter 2012 Operating and Financial Results November 8, 2012 14
PLANNING KAKA AKO HIGH-RISE CONDOMINIUM Long-term option to purchase a 3.3-acre fully-zoned ocean-view high-rise condominium site Well located near downtown Honolulu, shops, restaurants and beaches Marketing expected to begin in 2013 View from Kaka ako high-rise site Third Quarter 2012 Operating and Financial Results November 8, 2012 15
COMMERCIAL PORTFOLIO Industrial park lease-up increases Hawaii occupancy 2 percentage points to 93% Mainland occupancy up slightly to 93% 10 new office leases executed, 66,000 square feet 2013 rollover exposure reduction 29% to 11% of portfolio GLA 16% to 8% of portfolio rents Migration strategy progressing Concorde Commerce Center Kunia Shopping Center Third Quarter 2012 Operating and Financial Results November 8, 2012 16
AGRIBUSINESS Port Allen Solar Project HC&S Forward priced all of the 2012 crop; 67% of 2013 crop Port Allen Solar Project Expected to be placed in service in December Total cost of $23.5M, 6% under budget 70% of project cost recaptured by the end of 2013 Long-term PPA with KIUC for $200 per MWH Projected after-tax IRR of 20% $2M increase in annual operating cash flow 36,000-acre sugar plantation Third Quarter 2012 Operating and Financial Results November 8, 2012 17
OPERATING PROFIT 30 Operating Profit by Business Segment ($ in Millions) 22.6 20 16.5 10 9.2 10.2 3.5 3.8 3.3 9.1 0-10 Leasing 1 Development & Sales 1 3Q11 Agribusiness 3Q12 Total Operating Profit 1 1 Includes real estate discontinued operations Third Quarter 2012 Operating and Financial Results November 8, 2012 18
REAL ESTATE LEASING 12.0 100 perating Pr rofit O ) ($ in Millions) 10.0 8.0 60 6.0 9.2 10.2 90 80 cy t) Occupan (in Percent 4.0 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Operating Profit Hawaii Occupancy Mainland Occupancy 70 Operating profit up 11% YOY Cash NOI of $16.0M 1, up 8% from 3Q11 Waipio Shopping Center 1 See appendix for a statement regarding management s use of non-gaap financial measures and reconciliations of GAAP to non-gaap measures Third Quarter 2012 Operating and Financial Results November 8, 2012 19
REAL ESTATE DEVELOPMENT AND SALES 5 Operating Profit ($ in Millions) Ka Milo at Mauna Lani 3.5 3.3 0 3Q11 3Q12 sales activity: 3Q12 $7.3M of margin on 286-acre non-core land sale on Maui 1 residential lot and 2 cottages at Kukui ula 1 residential unit on the Big Island Third Quarter 2012 Operating and Financial Results November 8, 2012 20
AGRIBUSINESS 10 Operating Profit ($ in Millions) 9.1 36,000-acre sugar plantation 5 3.8 0 3Q11 3Q12 $5.3M higher results: Completion of two sugar voyages in quarter compared to one voyage last year Higher sugar pricing on raw sugar sold during the quarter Higher molasses and power margins Third Quarter 2012 Operating and Financial Results November 8, 2012 21
CORPORATE EXPENSES AND INCOME TAXES Corporate expenses $3.7M 3Q12 vs. $4.7M 3Q11 Lower compensation-related expenses Lower professional service fees $700K of separation-related expenses Taxes 12% quarter effective tax rate 22% YTD effective tax rate Rate reduction resulted primarily from renewable energy tax credits Sources: Title Guaranty; Honolulu Board of Realtors; Colliers International (Hawaii); University of Hawaii Economic Research Organization (UHERO), State Forecast, November 2, 2012 http://www.uhero.hawaii.edu Data provided for informational purposes only; no endorsement of forecast implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 22
CONDENSED BALANCE SHEET Dollars in Millions, Except Per Share Amount or as Noted Assets 12/31/11 9/30/12 Current assets 69 70 Available Investments in affiliates 291 312 borrowing capacity Real estate developments 143 145 Property, net 831 844 Other assets 53 67 Total 1,387 1,438 Liabilities & Shareholders Equity 12/31/11 9/30/12 Current liabilities excluding debt 55 48 Long-term debt including current portion 362 252 Deferred income taxes 164 156 Accrued pension and post-retirement benefits 55 54 Debt to debt + equity Other long-term liabilities 25 22 Debt to total Shareholders equity 726 906 assets Total 1,387 1,438 $325M 22% 18% Third Quarter 2012 Operating and Financial Results November 8, 2012 23
CONDENSED CASH FLOW TABLE Dollars in Millions Condensed Cash Flow Year-to-Date 9/30/11 9/30/12 Operating cash flows before real estate development inventory cap ex 3 19 Cap ex for real estate development inventory (9) (32) Operating cash flows (6) (13) Capital expenditures (12) (34) Other investing activities, net (6) (6) Debt proceeds (payments), net 50 (113) Contributions from (distribution to) Alexander & Baldwin Holdings, Inc. (29) 146 Proceeds from issuances of stock, including excess tax benefit -- 12 Change in cash and cash equivalents (3) (8) Capital Expenditures Reconciliation Year-to-Date 9/30/11 9/30/12 Capital expenditures per cash flow statement 12 34 Cap ex for real estate development inventory 9 32 JV developments and real estate investments 22 9 1031 exchanges 31 9 Total capital expenditures 74 84 Third Quarter 2012 Operating and Financial Results November 8, 2012 24
CAPITAL EXPENDITURES Dollars in Millions 2011 YTD 9/30/12 2012 Forecast Development, joint ventures and investments 44 41 55 Leasing (excludes 1031 exchanges) 9 9 11 Port Allen Solar Project -- 19 1 14 2 Agribusiness/other 10 6 11 Subtotal 63 75 91 1031 exchanges 39 9 9 Total capital expenditures 102 84 100 1 Before related tax credits 2 $25M budgeted total costs - $11M tax credits Third Quarter 2012 Operating and Financial Results November 8, 2012 25
CLOSING REMARKS Solid earnings performance in the third quarter Tourism s exceptional performance benefitting broader Hawaii economy Positive long-term outlook Solid demand for primary residential on Oahu Good opportunities in the Hawaii market Encouraged by modest pick-up in resort residential sales activity Kai Malu at Wailea Kaneohe Bay Shopping Center Kukui ula Third Quarter 2012 Operating and Financial Results November 8, 2012 26
CLOSING REMARKS 4Q12 outlook Solid performance from commercial portfolio; fourth quarter results expected to be modestly above last year Property sales difficult to predict Agribusiness results will be lower in the fourth quarter due to the timing of sugar sales; strong full-year results expected Continue to create value in our landholdings ldi and through h our capital investments Kai Malu at Wailea Maui Business Park II Brydeswood Gateway at Mililani Port Allen Mauka Solar Third Quarter 2012 Operating and Financial Results November 8, 2012 27
A Premier Hawaii Real Estate and Land Company Third Quarter 2012 Q Operating and Financial Results November 8, 2012
MANAGEMENT S USE OF NON-GAAP FINANCIAL MEASURES Alexander & Baldwin, Inc. reports net income and diluted earnings per share in accordance with GAAP and on a non-gaap basis. Reconciliations of the Company s GAAP to non-gaap financial measures for the three months ended September 30, 2012 and 2011 are presented on the following slide. The Company uses these non-gaap financial measures when evaluating operating performance because management believes that the exclusion from net income of 1) one-time advisory, legal, equity conversion and other expenses that were incurred to effect the separation of the Company from Matson, Inc., and 2) the reduction in carrying values of two of the Company s Mainland development projects that do not align with the Company s post-separation focus on Hawaii real estate development, provides insight into the Company s core operating results, future cash flow generation, and the underlying business trends affecting performance on a consistent and comparable basis from period to period. A&B provides this information to investors as an additional means of evaluating 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. Third Quarter 2012 Operating and Financial Results November 8, 2012 29
RECONCILIATION OF GAAP TO NON-GAAP MEASURES Dollars in Millions, Except Earnings Per Share Three Months Ended September 30, Nine Months Ended September 30, 2011 2012 2011 2012 Net income 4.4 13.4 26.5 11.8 Professional service and other expenses incurred to effect separation - 0.4-5.7 Charge to convert pre-separation stock options to A&B-only shares - 03 0.3-11 1.1 Write-down of non-strategic Mainland development project carrying values - - - 9.8 Income tax effect of adjusting items - (0.3) - (4.8) Adjusted net income 4.4 13.8 26.5 23.6 Diluted earnings (loss) per share, net income (loss) 0.10 0.31 0.63 0.28 Professional service and other expenses incurred to effect separation - 0.01-0.13 Charge to convert pre-separation stock options to A&B-only shares - 0.01-0.03 Write-down of non-strategic Mainland development project carrying values - - - 0.23 Income tax effect of adjusting items - (0.01) - (0.11) Diluted earnings per share, adjusted net income 0.10 0.32 0.63 0.56 Third Quarter 2012 Operating and Financial Results November 8, 2012 30
MANAGEMENT S USE OF NON-GAAP FINANCIAL MEASURES In addition to adjusted net income and adjusted diluted earnings per share, the Company presents cash NOI, which is a non-gaap measure derived from real estate revenues (determined in accordance with GAAP, less straight-line rental adjustments) t minus property operating expenses (determined d in accordance with GAAP). Cash NOI does not have any standardized meaning prescribed by GAAP, and therefore, may differ from definitions of cash NOI used by other companies. Cash NOI should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company s financial performance, or as an alternative to cash flow from operating activities as a measure of the Company s liquidity. Cash NOI is commonly used as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. Cash NOI excludes general and administrative expenses, straight-line rental adjustments, interest income, interest expense, depreciation and amortization, and gains on sales of interests in real estate. The Company believes that the Real Estate Leasing segment s operating profit after discontinued operations is the most directly comparable GAAP measurement to cash NOI. A required reconciliation of Real Estate Leasing operating profit to Real Estate Leasing segment cash NOI is on the following slide. Third Quarter 2012 Operating and Financial Results November 8, 2012 31
RECONCILIATION LEASING OPERATING PROFIT TO CASH NOI Dollars in Millions Three Months Ended September 30, 2011 2012 Real estate leasing segment operating profit before discontinued operations 9.2 10.2 Less amounts reported in discontinued operations (0.4) - Real estate leasing segment operating profit after subtracting discontinued operations Adjustments: 8.8 10.2 Depreciation and amortization 5.6 5.5 FASB 13 straight-line lease adjustments (0.8) (0.4) General and administrative expenses 0.8 0.7 Discontinued operations 0.4 - Real estate leasing segment cash NOI 14.8 16.0 Third Quarter 2012 Operating and Financial Results November 8, 2012 32
KEY HAWAII ECONOMIC INDICATORS Indicator (% Change YOY, except unemployment rate) Real Gross Domestic Product 2009 2010 2011 2012F 2013F 2014F DBEDT DBEDT DBEDT UHERO DBEDT UHERO DBEDT UHERO DBEDT (2.6) 1.4 (0.2) 0.9 1.5 2.5 2.3 3.3 2.4 Visitor Arrivals (4.4) 7.7 4.0 9.1 8.6 3.6 3.5 1.9 2.6 Real Personal Income (1.7) 1.5 0.9 1.2 1.5 2.3 2.1 2.8 2.6 Unemployment Rate 6.9 6.9 6.7 6.3 NF 5.6 NF 5.0 NF NF: Not forecasted Sources: University of Hawaii Economic Research Organization (UHERO), State Forecast, November 2, 2012 http://www.uhero.hawaii.edu/; Hawaii Department of Business, Economic Development & Tourism (DBEDT), 3rd Quarter 2012 Report http://hawaii.gov/dbedt. Data provided for informational purposes only; no endorsement implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 33
HAWAII ECONOMIC INDICATORS Visitors (by air) (YTD September 30, 2012) % Change From 2011 Arrivals (millions) 5.9 9.2 Expenditures (billions) $10.6 19.4 Building permits (YTD June 30, 2012) (millions) 1 $1,089.1 32.9 1 Oahu residential real estate (YTD October 31, 2012) Median home prices $623,250250 93 9.3 Home volumes 2,564 5.6 Home months of inventory (September) 3.3 (44.1) Median condo prices $315,000 4.0 Condo volumes 3,542 5.5 Condo months of inventory (September) 36 3.6 (34.5) Unemployment rate (September) 5.7 (16.2) 1 Increase in building permits primarily due to increase in alterations and additions. Sources: Hawaii Tourism Authority, Monthly Visitor Statistics, September 2012; DBEDT Monthly Economic Indicators, July 2012;; UHERO, November 2, 2012; Title Guaranty Sales of Existing Homes & Condominiums Report, October 2012; Honolulu Board of Realtors, October 2012; Hawaii Department of Labor and Industrial Relations. Data provided for informational purposes only; no endorsement implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 34
VISITOR ARRIVALS AND EXPENDITURES 8.5 YTD Arrivals: 9.2% YTD Expenditures: 19.4% 18 8.0 16 Arrivals Millions) Visitor (in M 7.5 7.0 6.5 14 12 10 Visitor Ex xpenditures ($ in Billions) 6.0 8 5.5 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F Visitor Expenditures Visitor Arrivals 6 Source: DBEDT Quarterly Statistical & Economic Report, 3rd Quarter 2012 http://hawaii.gov/dbedt; Hawaii Tourism August 2012 Visitor Highlights http://www.hawaiitourismauthority.org Data provided for informational purposes only; no endorsement of forecast implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 35
HAWAII AND U.S. UNEMPLOYMENT RATE Percent 10.0 Hawaii Average 9.0 Unemployment 8.0 7.0 6.0 5.0 4.0 3.0 September 2012 5.7% September 2011 6.8% 2.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F Hawaii U.S. Sources: DBEDT Quarterly Statistical & Economic Report, 3rd Quarter 2012 http://hawaii.gov/dbedt; UHERO State Forecast Update, November 2, 2012 http://www.uhero.hawaii.edu/; United States Department of Labor, Unemployment Data; Bloomberg Composite Forecast as of October 15, 2012 Data provided for informational purposes only; no endorsement of forecast implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 36
HAWAII REAL ESTATE OVERVIEW Residential Real Estate Resales; YTD October 31, 2012 County Single Family Homes Condominiums % Change Median % Change % Change Median % Change Sales from 2011 Price from 2011 Sales from 2011 Price from 2011 Hawaii 1,329 (3) 255,000 4 506 -- 250,000 16 Kauai 337 14 449,750 -- 263 7 290,000 22 Maui 765 3 465,000 7 1,009 2 350,000 9 Oahu 2,564 6 623,250 9 3,542 6 315,000 4 Total 4,995 3 5,320 4 Source: Title Guaranty Sales of Existing Homes & Condominiums Report, October 2012 Data provided for informational purposes only; no endorsement implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 37
HAWAII REAL ESTATE OVERVIEW - OAHU Oahu Single Family Homes and Condo Resales 800,000 2,500 Median Price 700,000 600,000 500,000 400,000 300,000 200,000 2,000 1,500 1,000 500 Sa ales Volume 100,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0 Oahu- SFH Median Price Oahu - SFH Sales Volume Oahu- Condo Median Price Oahu- Condo Sales Volume Source: Title Guaranty Sales of Existing Homes & Condominiums report, Honolulu Board of Realtors September 2012. Data provided for informational purposes only; no endorsement implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 38
HAWAII COMMERCIAL REAL ESTATE OVERVIEW Third Quarter 2012 Market Retail Industrial Office Trends Continued recovery in neighbor island markets in 2013; stable performance on Oahu Occupancy growth expected and slight improvement in rents Rents stable, nominal improvement over the mid-term horizon Oahu Commercial Market Statistics ti ti Retail Industrial Office Net absorption (sq. ft.) 154,308 1 186,269 38,651 Vacancy rate 43% 4.3% 2 43% 4.3% 13.4% Average asking rent per square foot per month (NNN) $3.35 2 $0.98 $1.57 Average operating expense per square foot $1.08 1 $034 $0.34 $1.28 1 Based on the first half 2012 2 Based on the second quarter 2012 Source: Colliers International (Hawaii) Data provided for informational purposes only; no endorsement implied. Third Quarter 2012 Operating and Financial Results November 8, 2012 39