Attached files

file filename
8-K - 8-K - Alexander & Baldwin, Inc.a2014q2resupp8k.htm



ALEXANDER & BALDWIN, INC.’S REAL ESTATE SUPPLEMENT UPDATE

AS OF AND FOR THE QUARTERS ENDED JUNE 30, 2014 AND 2013
(Unaudited)





About This Supplement Update

This periodic Supplement Update is designed to provide current and potential shareholders of Alexander & Baldwin, Inc. with additional information regarding the Company’s Real Estate operating segments. This information is supplemental to and does not replace the information provided to shareholders in the Company’s periodic filings with the Securities and Exchange Commission.
This second quarter Supplement updates the following tables in the Company’s Real Estate Supplement as of and for the years ended December 31, 2013 and 2012:
Table 7:
Property Detail - Hawaii Properties
Table 8:
Property Detail - Mainland Improved Properties
Table 9:
Comparable % Occupancy Data by Geographic Region and Asset Class
Table 10:
Weighted Average Gross Leasable Area by Geographic Region and Asset Class
Table 11:
Occupancy Analysis Trend - Last Five Quarters
Table 12:
Real Estate Leasing NOI
Table 13:
Real Estate Leasing Same Store NOI
Table 14:
Reconciliation of Real Estate Leasing Operating Profit to NOI and Same Store NOI (Non-GAAP)
Table 15:
Improved Property Portfolio Acquisitions/Dispositions
Table numbers used in this Update correspond with table numbers used in the full-year Supplement.
The information contained in this Supplement Update is unaudited and should be read in conjunction with the Company’s Real Estate Supplement as of and for the years ended December 31, 2013 and 2012, its 2013 Form 10-K and other filings with the SEC through the date of this Supplement Update.
Feedback and suggestions regarding the contents of this Supplement Update from the investing audience are welcomed, and should be directed to Suzy P. Hollinger, Director, Investor Relations, via telephone at (808) 525-8422 or via email to shollinger@abinc.com.








Alexander & Baldwin, Inc. | Real Estate Supplement Update

INDEX TO REAL ESTATE SUPPLEMENT UPDATE
(Unaudited)
AS OF AND FOR THE QUARTERS ENDED JUNE 30, 2014 AND 2013


Forward-Looking Statements
Basis of Presentation
Commercial Portfolio Acquisitions and Dispositions
Real Estate Leasing Segment – Asset Descriptions and Statistics
Property Detail – Hawaii Improved and Unimproved Properties (Table 7)
Property Detail – Mainland Improved Properties (Table 8)
Comparable % Occupancy Data by Geographic Region and
Asset Class (Table 9)
Weighted Average Gross Leasable Area by Geographic
Region and Asset Class (Table 10)
Occupancy Analysis Trend – Last Five Quarters (Table 11)
Real Estate Leasing Net Operating Income (NOI) (Table 12)
Real Estate Leasing Same Store NOI (Table 13)
Statement on Management’s Use of Non-GAAP Financial Measures
Reconciliation of Real Estate Leasing Operating Profit to NOI and
Same Store NOI (Table 14)
Portfolio Acquisitions and Dispositions
2014 and 2013 Improved Property Portfolio Acquisitions/Dispositions (Table 15)
 
 
 
 
 
 
 
 
 
 





1


Forward-Looking Statements

Statements in this Supplement Update 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. These forward-looking statements are not guarantees of future performance. This Supplement Update should be read in conjunction with pages 19-32 of Alexander & Baldwin, Inc.’s 2013 Form 10-K and other filings with the SEC through the date of this Supplement Update, which identify important factors that could affect the forward-looking statements in this Supplement Update. We do not undertake any obligation to update our forward-looking statements.

Basis of Presentation

The information contained in this Supplement Update does not purport to disclose all items required by accounting principles generally accepted in the United States of America (GAAP). The information contained in this Supplement Update is unaudited and should be read in conjunction with Alexander & Baldwin, Inc.’s Real Estate Supplement as of and for the years ended December 31, 2013 and 2012, its 2013 Form 10-K and other filings with the SEC through the date of this Supplement Update.

2




Commercial Portfolio Acquisitions and Dispositions

In 2013, the Company completed a number of significant commercial property acquisitions and dispositions in connection with the migration of its Mainland portfolio to Hawaii. The largest acquisition, which closed on December 20, 2013, consisted of retail, industrial and ground leased properties primarily located in Kailua, Oahu for $373 million. For purposes of this Supplement Update, information about the acquired portfolio is reported in five categories:

Kailua Industrial/Other
Kailua Grocery Anchored
Kailua Retail Other
Kailua ground leases
Other Oahu ground leases

The acquisition was primarily funded by 1031 proceeds generated by the sale of six Mainland commercial properties, sales proceeds from Maui Mall, other 1031 proceeds, and reverse 1031 proceeds from future commercial property and non-core land sales.

In addition to the December 20 acquisition, in 2013 the Company acquired three retail assets in Hawaii, with over 630,000 square feet (primarily on Oahu), for approximately $191 million. The Company also assumed control of The Shops at Kukui'ula, a 78,900 square-foot retail center on Kauai.

Due to the significant changes to the Company's commercial portfolio from acquisitions and dispositions, historical leasing NOI may not be indicative of future results.

See Table 15 for additional information on the Company’s commercial property acquisitions and dispositions in 2014 and 2013.


3





Real Estate Leasing Segment – Asset Descriptions and Statistics
TABLE 7
PROPERTY DETAIL - HAWAII IMPROVED AND UNIMPROVED PROPERTIES
Property
Number of properties at 6/30/14
Island
Gross leasable area at 6/30/14 (sq. ft.)
Leased1 (percent)
Outstanding
debt
($ in 000s)
2Q 2014 NOI2 ($ in 000s)
% NOI to total Hawaii portfolio
Retail:
 
 
 
 
 
 
 
Gateway at Mililani Mauka
1

Oahu
18,900

87

$

$
166

1.1

Kahului Shopping Center
1

Maui
47,200

98


126

0.8

Kailua Grocery Anchored3
4

Oahu
189,200

97

11,267

1,326

8.9

Kailua Retail Other3
11

Oahu
127,000

96


795

5.4

Kaneohe Bay Shopping Center4
1

Oahu
125,100

99


541

3.6

Kunia Shopping Center
1

Oahu
60,400

94


513

3.5

Lahaina Square
1

Maui
50,200

77


171

1.2

Lanihau Marketplace
1

Hawaii
88,300

88


385

2.6

Napili Plaza
1

Maui
45,100

90


275

1.9

Pearl Highlands Center
1

Oahu
415,400

94

60,789

2,485

16.7

Port Allen Marina Center
1

Kauai
23,600

76


118

0.8

The Shops at Kukui'ula
1

Kauai
78,900

82

42,223

508

3.4

Waianae Mall
1

Oahu
170,300

89

19,538

643

4.3

Waipio Shopping Center
1

Oahu
113,800

95


757

5.1

Subtotal – Retail
27

 
1,553,400

93

$
133,817

$
8,809

59.3

 
 
 
 
 
 
 
 
Industrial:
 
 
 
 
 
 
 
Kailua Industrial/Other3
6

Oahu
68,800

100

$

$
168

1.1

Komohana Industrial Park5
1

Oahu
238,300

100


978

6.6

P&L Building
1

Maui
104,100

96


266

1.8

Port Allen
3

Kauai
63,800

96


166

1.1

Waipio Industrial
1

Oahu
158,400

98


521

3.5

Subtotal – Industrial
12

 
633,400

98

$

$
2,099

14.1

 
 
 
 
 
 
 
 
Office:
 
 
 
 
 
 
 
Gateway at Mililani Mauka South
1

Oahu
18,700

100

$

$
213

1.4

Judd Building
1

Oahu
20,200

64


39

0.3

Kahului Office Building
1

Maui
59,600

77


310

2.1

Kahului Office Center
1

Maui
33,400

87


91

0.6

Lono Center
1

Maui
13,400

88


41

0.3

Maui Clinic Building
1

Maui
16,600

60


60

0.4

Stangenwald Building
1

Oahu
27,100

90


102

0.7

Subtotal – Office
7

 
189,000

81

$

$
856

5.8

Table 7 continued on the next page.

4


Property
Number of properties at 6/30/14
Island
Gross leasable area at 6/30/14 (sq. ft.)
Leased1 (percent)
Outstanding
debt
($ in 000s)
2Q 2014 NOI2 ($ in 000s)
% NOI to total Hawaii portfolio
 
 
 
 
 
 
 
 
Ground Leases
 
 
 
 
 
 
 
Kailua3
28 acres

Oahu

 
$

$
1,063

7.2

Other Oahu3
23 acres

Oahu

 

1,195

8.0

Neighbor Island
3,151 acres

Neighbor Island

 

826

5.6

Subtotal - Ground Leases
 3,202 acres

 

 
$

$
3,084

20.8

Total Hawaii
46

 
2,375,800

93

$
133,817

$
14,848

100.0




1  
Represents the average percentage of space leased during the period referenced or A&B’s ownership period, whichever is shorter. Space is considered leased when a tenancy agreement has been fully executed or the space is revenue producing.
2 
See page 9 for a statement regarding the Company’s use of non-GAAP financial measures and a reconciliation of Leasing operating profit to NOI for the total portfolio.
3 
Portfolio was purchased from Kaneohe Ranch/Harold K.L. Castle Foundation on December 20, 2013.
4  
Kaneohe Bay Shopping Center is a leasehold property.
5 
Includes ground leased income.
Note: For portfolio asset class and geographic occupancy see Table 9 on page 7. Gross leasable area is periodically adjusted based on remeasurement or reconfiguration of space.


5



TABLE 8
PROPERTY DETAIL - MAINLAND IMPROVED PROPERTIES
Property
Number of properties at 6/30/14
Location
Gross leasable area at 6/30/14 (sq. ft.)
Leased1 (percent)
Outstanding
debt
($ in 000s)
2Q 2014 NOI2 ($ in 000s)
% NOI to total Mainland portfolio
Retail:
 
 
 
 
 
 
 
Little Cottonwood Center
1

Sandy, UT
141,500

94

$
5,943

$
355

7.7

Royal MacArthur Center
1

Dallas, TX
44,800

100


261

5.7

Wilshire Shopping Center
1

Greeley, CO
46,500

72


48

1.1

Subtotal – Retail
3

 
232,800

91

$
5,943

$
664

14.5

 
 
 
 
 
 
 
 
Industrial:
 
 
 
 
 
 
 
Midstate Hayes
1

Visalia, CA
790,200

97

$
8,278

$
636

13.9

Sparks Business Center
1

Sparks, NV
396,100

97


470

10.2

Subtotal – Industrial
2

 
1,186,300

97

$
8,278

$
1,106

24.1

 
 
 
 
 
 
 
 
Office:
 
 
 
 
 
 
 
Concorde Commerce Center
1

Phoenix, AZ
138,700

100

$

$
575

12.5

Deer Valley Financial Center
1

Phoenix, AZ
126,600

76


207

4.5

Gateway Oaks
1

Sacramento, CA
58,700

87


62

1.4

Ninigret Office Park
1

Salt Lake City, UT
185,500

100


573

12.5

1800 and 1820 Preston Park
1

Plano, TX
198,800

95


505

11.0

2868 Prospect Park
1

Sacramento, CA
162,900

98


375

8.2

San Pedro Plaza
1

San Antonio, TX
171,900

61


179

3.9

Union Bank
1

Everett, WA
84,000

100


342

7.4

Subtotal – Office
8

 
1,127,100

90

$

$
2,818

61.4

 
 
 
 
 
 
 
 
Total Mainland
13

 
2,546,200

93

$
14,221

$
4,588

100.0




1  
Represents the average percentage of space leased during the period referenced or A&B’s ownership period, whichever is shorter. Space is considered leased when a tenancy agreement has been fully executed or the space is revenue producing.
2 
See page 9 for a statement regarding the Company’s use of non-GAAP financial measures and a reconciliation of Leasing operating profit to NOI for the total portfolio.
Note: For portfolio asset class and geographic occupancy see Table 9 on page 7. Gross leasable area is periodically adjusted based on remeasurement or reconfiguration of space.




6


TABLE 9
COMPARABLE % OCCUPANCY DATA BY GEOGRAPHIC REGION AND ASSET CLASS
 
2Q 2014
2Q 2013
Percentage point change
Location
Retail
Industrial
Office
Total
Retail
Industrial
Office
Total
Retail
Industrial
Office
Total
Hawaii improved
93

98

81

93

91

96

79

92

2

2

2

1

Mainland improved
91

97

90

93

88

98

89

95

3

(1
)
1

(2
)
Total
92

98

88

93

90

98

88

94

2



(1
)


TABLE 10
WEIGHTED AVERAGE GROSS LEASABLE AREA BY GEOGRAPHIC REGION AND ASSET CLASS1
 
2Q 2014 (in sq. ft.)
2Q 2013 (in sq. ft.)
Percentage Change
Location
Retail
Industrial
Office
Total
Retail
Industrial
Office
Total
Retail
Industrial
Office
Total
Hawaii improved
1,553,400

633,400

189,000

2,375,800

901,400

564,600

187,400

1,653,400

72.3

12.2

0.9

43.7

Mainland improved
232,800

1,186,300

1,127,100

2,546,200

718,600

4,346,000

1,274,100

6,338,700

(67.6
)
(72.7
)
(11.5
)
(59.8
)
Total
1,786,200

1,819,700

1,316,100

4,922,000

1,620,000

4,910,600

1,461,500

7,992,100

10.3

(62.9
)
(9.9
)
(38.4
)


TABLE 11
OCCUPANCY ANALYSIS TREND – LAST FIVE QUARTERS2 
 
2Q 2014
1Q 2014
4Q 2013
3Q 2013
2Q 2013
 
# of properties
Weighted average
sq. ft.
% leased
# of properties
Weighted average
sq. ft.
% leased
# of properties
Weighted average
sq. ft.
% leased
# of properties
Weighted average
sq. ft.
% leased
# of properties
Weighted average
sq. ft.
% leased
Retail
30

1,786,200

92

30

1,786,200

93

31

2,081,900

92

18

1,773,600

91

17

1,620,000

90

Industrial
14

1,819,700

98

14

1,819,700

100

14

3,509,100

99

12

4,829,200

99

13

4,910,600

98

Office
15

1,316,100

88

15

1,316,100

86

15

1,314,500

86

15

1,412,400

87

16

1,461,500

88

Total
59

4,922,000

93

59

4,922,000

93

60

6,905,500

95

45

8,015,200

95

46

7,992,100

94


1  
Weighted average GLA for the second quarter was significantly lower due to the sales of industrial and retail properties on the Mainland in the fourth quarter 2013, proceeds of which were used to purchase the Kaneohe Ranch/Harold K.L. Castle Foundation Hawaii portfolio.
2  
Number of properties is as of 6/30/14.
Note: Gross leasable area is periodically adjusted based on remeasurement of reconfiguration of space.


7



TABLE 12
REAL ESTATE LEASING NET OPERATING INCOME (NOI) 1 
(in millions)
 
2Q 2014
2Q 2013
Percentage Change
Location
Retail
Industrial
Office
Total
Retail
Industrial
Office
Total
Retail
Industrial
Office
Total
Hawaii improved
$
8.8

$
2.1

$
0.9

$
11.8

$
4.2

$
1.8

$
0.8

$
6.8

109.5

16.7

12.5

73.5

Hawaii unimproved



3.1




0.8




287.5

Total Hawaii
$
8.8

$
2.1

$
0.9

$
14.9

$
4.2

$
1.8

$
0.8

$
7.6

109.5

16.7

12.5

96.1

Mainland improved
0.7

1.2

2.8

4.7

2.2

4.4

2.2

8.8

(68.2
)
(72.7
)
27.3

(46.6
)
Total
$
9.5

$
3.3

$
3.7

$
19.6

$
6.4

$
6.2

$
3.0

$
16.4

48.4

(46.8
)
23.3

19.5



TABLE 13
REAL ESTATE LEASING SAME STORE NOI2 
(in millions)
 
2Q 2014
2Q 2013
Percentage Change
Location
Retail
Industrial
Office
Total
Retail
Industrial
Office
Total
Retail
Industrial
Office
Total
Hawaii improved
$
3.3

$
1.9

$
0.9

$
6.1

$
3.3

$
1.9

$
0.8

$
6.0



12.5

1.7

Hawaii unimproved



0.8




0.8





Total Hawaii
$
3.3

$
1.9

$
0.9

$
6.9

$
3.3

$
1.9

$
0.8

$
6.8



12.5

1.5

Mainland improved
0.7

1.1

2.8

4.6

0.6

1.1

1.7

3.4

16.7


64.7

35.3

Total
$
4.0

$
3.0

$
3.7

$
11.5

$
3.9

$
3.0

$
2.5

$
10.2

2.6


48.0

12.7




1  
NOI for Mainland improved portfolio for the second quarter was significantly lower due to the sales of industrial and retail properties on the Mainland in the fourth quarter 2013, proceeds of which were used to purchase the Kaneohe Ranch/Harold K.L. Castle Foundation Hawaii portfolio.
2  
Same Store NOI relates to properties that were operated throughout the duration of both periods under comparison.
Note: See page 9 for a statement on the Company’s use of non-GAAP financial measures and a reconciliation of Leasing operating profit to Real Estate Leasing NOI and Real Estate Leasing same store NOI.

8


Statement on Management’s Use of Non-GAAP Financial Measures

Net operating income (NOI) is a non-GAAP measure derived from real estate revenues (determined in accordance with GAAP, less straight-line rental adjustments) minus property operating expenses (determined in accordance with GAAP). NOI does not have any standardized meaning prescribed by GAAP, and therefore, may differ from definitions of NOI used by other companies. 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. 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. 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 NOI. A reconciliation of Real Estate Leasing operating profit to Real Estate Leasing segment NOI and same store NOI is as follows:

TABLE 14
RECONCILIATION OF REAL ESTATE OPERATING PROFIT TO NOI AND SAME STORE NOI (NON-GAAP)
(in millions)
 
2Q 2014
2Q 2013
Real Estate Leasing segment operating profit before discontinued operations
$
12.0

$
10.6

Less amounts reported in discontinued operations

(3.9
)
Real Estate Leasing segment operating profit after subtracting discontinued operations
$
12.0

$
6.7

Adjustments:
 
 
Depreciation and amortization
$
7.1

$
6.0

Straight-line lease adjustments
(0.6
)
(0.9
)
General and administrative expense
1.1

0.7

Discontinued operations

3.9

Real Estate Leasing total NOI
$
19.6

$
16.4

Acquisitions/ disposition and other adjustments
(8.1
)
(6.2
)
Real Estate Leasing segment same store NOI1
$
11.5

$
10.2




1  
NOI related to properties that were operated throughout the duration of both periods under comparison.


9



Portfolio Acquisitions and Dispositions

TABLE 15
2014 PROPERTY PORTFOLIO ACQUISITIONS/DISPOSITIONS
Property disposed in 2014
Disposition date
(month/year)
 Disposition price
(in millions)
 Gross leasable area (sq. ft.)
Leased percentage at disposition
Maui Mall
1/14
$
64

185,700
97


2013 PROPERTY PORTFOLIO ACQUISITIONS/DISPOSITIONS
Property acquired in 2013
Acquisition date
(month/year)
 Acquisition price
(in millions)
 Gross leasable area (sq. ft.)
Leased percentage
at acquisition
Waianae Mall
1/13
$
30

170,300
931
Napili Plaza
5/13
19
45,100
92
Pearl Highlands Center
9/13
142
415,400
98
The Shops at Kukui'ula2
9/13
0
78,900
82
Kaneohe Ranch/Harold K.L. Castle Foundation Portfolio3
12/13
373
 386,200 sf + 51 acres ground leased to third parties and improved with 760,000 sq. ft.
98
Total
 
$
564

1,095,900
 

Property disposed in 2013
Disposition date
(month/year)
 Disposition price
(in millions)
 Gross leasable area (sq. ft.)
Leased percentage at disposition
Northpoint Industrial
1/13
$
15

119,400
100

Centennial Plaza
9/13
15

244,000
100

Issaquah Office Center
9/13
22

146,900
100

Republic Distribution Center
10/13
20

312,500
100

Industrial Portfolio
12/13
165

2,604,400
99

Activity Distribution Center
12/13
 
252,300
100

Heritage Business Center
12/13
 
1,316,400
98

Savannah Logistics Park
12/13
 
1,035,700
100

Retail Portfolio
12/13
101

485,800
88

Broadlands Marketplace
12/13
 
103,900
90

Meadows on the Parkway
12/13
 
216,400
82

Rancho Temecula Town Center
12/13
 
165,500
95

Total
 
$
338

3,913,000
 


1  
79 percent occupied at closing on 1/23/13. Lease signed prior to closing, but effective on 2/1/13, brought occupancy up to 93 percent.
2 
In November 2013, A&B refinanced and acquired The Shops at Kukui’ula. The Shops were originally developed in 2009 through a joint venture as part of the amenities for the Kukui’ula resort.
3 
Portfolio is reported in five categories: Kailua Industrial/Other, Kailua Grocery Anchored, Kailua Retail Other, Kailua ground leases and Other Oahu ground leases.

10