Alexander & Baldwin Earnings Call Nuggets: Safeway Sale Pricing and Partner Possibilities

Alexander & Baldwin (NYSE:ALEX) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Safeway Sale Pricing

Young Ku – Wells Fargo Securities: My first question is regarding to the 24 acreage sale to Safeway, could you comment on the pricing?

Christopher J. Benjamin – President and COO: Well, under the terms of our agreement, we’re not at liberty to disclose pricing. I would say though that if it’s generally consistent with wholesale pricing for light industrial zoning in that area and so if you were to look back at prior transactions you’d be in the ballpark.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Young Ku – Wells Fargo Securities: You mentioned that you guys started to pass for the corporate center transaction. I was just wondering why you guys decided to pass on it after proceeding with the due diligence.

Christopher J. Benjamin – President and COO: Yeah, I really can’t comment on that. I think that really says it all. We’ve conducted our due diligence and felt that it wasn’t an opportunity that we wanted to pursue. I really can’t elaborate on that.

Young Ku – Wells Fargo Securities: In terms of new investment opportunities in Hawaii, could you comment on maybe what product types on the commercial side that you guys feel most (favored) about this point between retail, industrial and office?

Christopher J. Benjamin – President and COO: Yeah, I’ll make a very short general comment and then ask David to jump in. We — just to reiterate for those who may not know we typically look to have fairly diversified portfolio and we will over time try to maintain some level of diversification. So, the short answer is we’ll look at office, industrial and retail and perhaps other asset classes. But specifically to kind of the current market and what we’re seeing what we like, I’ll let David comment.

David I. Haverly – SVP, Leasing, A&B Properties, Inc.: Sure. Based on our current acquisition criteria and what we’re looking at we’re finding a lot of success on the retail side of primarily due to the growth in retail market and the growth in rents we’re seeing and other factors relating to the economy. So as you can see by the announcement for Waianae Mall and the (indiscernible) that tends to be our current factor, but again as Chris indicated we’re looking at all asset classes and we’ll continue to do so.

Young Ku – Wells Fargo Securities: And maybe I misunderstood but the Waianae Mall transaction you guys said that you did it at an 8% cap. I think previously you said it was around 7.5%, is that right? Did something change?

Christopher J. Benjamin – President and COO: You’re correct. We’re 8% cap after our acquisition and execution of a new lease upon closing of the property.

Young Ku – Wells Fargo Securities: So, it’s beyond the 93% leased or is that (indiscernible) at 93% leased?

Christopher J. Benjamin – President and COO: 93% leased was at acquisition once the lease was signed.

Young Ku – Wells Fargo Securities: And do you happen to – can you give pricing range on the Napili Plaza transaction maybe?

Christopher J. Benjamin – President and COO: At this point, we can’t comment on it, as we’re still finalizing the closing.

Partner Possibilities

Sheila Mcgrath – Evercore: I was wondering if you could talk a little bit more specifically on the collection, the approximate cost of the project and if you’re entertaining taking on partners for that development.

Christopher J. Benjamin – President and COO: Yeah, Sheila, based on where we are in the project cycle, I wouldn’t be prepared to talk about cost estimates. We, of course, haven’t gone out for bids yet. We’re still haven’t even gone to pre-sales yet. So, we’re still working both the pricing and of course will be for a while working the cost estimates. Of course, we’ve got pro formas and we’ve made assumptions, but I wouldn’t be comfortable disclosing anything at this point unless Stan or anyone else wants to add to that. And then – I am sorry I forgot the second question.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Sheila Mcgrath – Evercore: No, I just asked if you would…

Christopher J. Benjamin – President and COO: Oh, partners, yes.

Sheila Mcgrath – Evercore: A partner.

Christopher J. Benjamin – President and COO: So, this would – we may well look to bring in financial partners, both from a capital planning and risk mitigation standpoint, we may do that but from a development standpoint, we anticipate and plan to be the developer of the project.

Sheila Mcgrath – Evercore: And then I did notice that…

Christopher J. Benjamin – President and COO: Just to add to that, from a modeling standpoint, I would assume that we will bring in a joint venture partner for sort of half the capital, I think, would probably be the going assumption.

Sheila Mcgrath – Evercore: And given that you haven’t started the sales and everything, it’s safe to say that it’s probably a 216 kind of closings, or it’s not 2015, is it that fair to say?

Christopher J. Benjamin – President and COO: It’s probably a safe assumption, yeah.

Sheila Mcgrath – Evercore: And then I did notice that Hawaiian Airlines is going to start direct flights to Beijing in 2014 and also that there are some proposed legislation to simplify the visa process for people from Hong Kong and I was just wondering if you could talk about the potential there in terms of China visitors and what you’re hearing in Hawaii.

Stanley M. Kuriyama – President and CEO: Yeah, Sheila, this is Stan. I think the potential does remain quite robust. I mean, 2012, when I look at the numbers, there are about 120,000 or so Chinese visitors which is about 1.5% of the total number of visitors to Hawaii. So there is enormous room for growth and this compares for example, to the Japanese where we receive 1.2 million visitors, so about 15%. So the potential for growth is enormous, and the thing we like about the Chinese visitors is that they have thus far been by far the highest spenders per day while in the state. The Japanese have typically been the highest spenders when visiting Hawaii, but the Chinese on the daily basis are outspending the Japanese considerably. So, those are some good statistics that I think bode well for Hawaii tourism.

Sheila Mcgrath – Evercore: Then the recovery in Hawaii seems so strong on Oahu across most whether visitor arrivals or residential trends but still slower on the neighbor island. I was just wondering if you could talk about like historically if this how it typically plays out it takes a while for the recovery to hit the neighbor islands and just a little perspective on how that is historically and how you think it may play out in the current recovery?

Christopher J. Benjamin – President and COO: Yeah, I think if you look back historically Sheila the neighbor islands have always lagged Oahu. The economic recovery is usually initiated by tourism. We have such a large and powerful tourism based on Oahu that as tourism picks up it really begins to affect Oahu immediately and quite substantially. The neighbor islands of course have much smaller populations so while the tourism might increase it just doesn’t have the direct impact that it has on Oahu. The other major factor influencing the different island economies is the military. We have a much, much larger military presence on Oahu so as the military has sustained it’s investment in the state you continue to see the benefits much more on Oahu as opposed to the neighbor island. Then finally construction that’s a third main engine for economy and usually that’s in response to first improvement in the primary housing. So, as Oahu primary housing market recovers you see the construction sector improve more significantly on Oahu. So for kind of all those reasons neighbor islands typically lag, among the neighbor islands, you might see different results, but traditionally that’s been the case and it’s certainly what we’re seeing in this cycle as well..

Sheila Mcgrath – Evercore: And last kind of housekeeping question, on G&A in the quarter, it was a little bit higher than I had expected. I’m wondering if you could comment on that and if you think first quarter is a good quarterly run rate for the year?

Paul K. Ito – SVP, CFO, Treasurer and Controller: Sheila, this is Paul. As I mentioned, we did have some professional service fees related to a range of investments that we’re looking at. We can’t elaborate further at this time, but our previous guidance excluding those types of fees is still appropriate which is a run rate of about $80 million.