Source: https://alexanderbaldwin.com/
FULL DISCLOSURE:
I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
I will not blog about any positions of stocks, ETFs or REITS and cryptocurrency which were initiated just within the last 72 hours of posting this blog article.
It is recommended that you should always consider visiting a financial advisor for independent financial advice before making investment decisions.
I do not work in the financial industry, so just because I write about it, doesn’t mean you should own it. So, consult with a financial advisor and do your due diligence, RESEARCH!
I am not receiving compensation by the company for this blog post.
I have no working relationship with any company whose stock, ETF, REIT or cryptocurrency mentioned in this blog post. Nor do I have a family member or friend who works with the company.
I have wanted to invest in real estate in Hawaii and I figured the best way for me to do so, without it costing me an arm and a leg, was to invest in REITs (Real Estate Investment Trust), but also to do my research and look for a company who has a history with the island and sure enough, I decided to invest in Alexander & Baldwin Inc.
According to the company:
Alexander & Baldwin (NYSE: ALEX) is a premier Hawaii real estate company with a history of serving the islands for 150 years. We are Partners for Hawaii, committed to creating special places and experiences in our state while acting with an abiding respect for our communities, people, cultures and environment.
We own, operate and manage 3.9 million square feet of retail, industrial and office space in Hawaii. We are a real estate investment trust (REIT) and the largest owner of grocery and drug-anchored retail centers in the state.
Our work in the islands extends beyond commercial real estate. We are a major private landowner in Hawaii, primarily on Maui and Kauai, and Hawaii’s largest materials and paving company.
The company was founded by Samuel Thomas Alexander and Henry Perrine Baldwin, sons of pioneer missionaries, who met in Lahaina, Maui. They grew up together and had developed a sugar-growing partnership.
Alexander taught at Lahainaluna High School and he and his students grew sugarcane and bananas. When the owner of Waihee sugar plantation near Wailuku heard, he gave Alexander the manager’s position and Alexander hired Baldwin as his assistant, who was helping his brother raise sugarcane in Lahaina.
Their first major real estate purchase together was by purchasing 12 acres of Bush Ranch in the Sunnyside area of Makawao on Maui for $110 to grow sugarcane. They following year, they paid $8,000 for an additional 559 acres and planted sucarcane on their land and Alexander & Baldwin, Inc. was born.
And for the next 30 years, the two would become agents of nearly a d9ozen plantations and expanded their plantation interests by acquiring Hawaiian Commercial & Sugar Company and the Kahului Railroad.
While the men had successful careers, Samuel Alexander was struck by a boulder while hiking with his daughter on the edge of Victoria Falls, Africa. While Baldwin passed away at the age of 68 due to failing health.
Alexander & Baldwin would continue, by expanding its sugar operations, developing essential water resources and investing in shipping to bring supplies to Hawaii and transport sugar to the U.S. Mainland markets.
And today, the company has properties in commercial real estate, land operations (such as Kukuiula in Poipu, Kauai) and Maui Business Park in Kahului, materials and construction through their subsidiary, Grace Pacific, Hawaii’s largest asphalt paving contractor and one of the state’s largest natural materials and infrastructure construction companies.
Alex & Baldwin’s portfolio includes the Queen’s Marketplace in Waikoloa, The Collection in Honolulu, Waianae Mall in Waianae, Pearl Highlands Center in Pearl City, Manoa Marketplace in Honolulu, Kunia Shopping Center in Waipahu, Lanihau Marketplace in Kailua-Kona, Laulani Village in Ewa Beach, Kaneohe Bay Shopping Center in Kaneohe, The Shops at Kukui’ula in Koloa and many more.
Currently, Alexander & Baldwin, Inc. is sold for $19.51 a share. The company has a market cap of $1.4 billion, an enterprise value of $2.0 billion and has 72.47 million shares outstanding.
In the 2017’s, the company had its highest price per share at $46.96 but has declined since 2017 and has decreased in pricing during the pandemic with a low of $8.31.
For those not sure what happened from 2017-2018, Alexander & Baldwin was going through a Maui land sale but impairment at Kukui’ula.
According to Chris Benjamin, CEO, back in 2017, “Shrinking exposure to the less strategic parts, however, is just as important but not always as fun. In many cases, we have simply been selling off development inventory at attractive prices and attractive margins. But in other cases, we have incurred some noncash book impairments as we’ve either transitioned out of businesses like the sugar operations in 2016 or changed our strategic intent as with Kukui’ula in 2018. As I said before, there will be some pain along the way in transitioning to become a pure commercial REIT, but the benefits of focus will be worth it”.
As for the impairment, Benjamin continued, “This impairment is not triggered by a degradation of our outlook for the project but rather a change in our investment horizon. Let me explain. The joint venture closed on 28 units in 2018, including lots ranging from $525,000 to $4.8 million and homes ranging from $1.3 million to $4.5 million. This momentum, which is carried over into 2019 with two closings and seven new contracts and reservations in just the first two months, is very encouraging.”
“While sales and homebuilding activity are growing, we are committed to simplifying the company, and we ran a process in 2018 to explore strategic alternatives, which included, among other options, selling the project. However, as I mentioned in December, we were not satisfied with the results of the process and, thus, decided not to pursue any of the alternatives. We believe the joint venture can continue to build on the favorable sales trends, and we can position the project for later monetization. We’re not putting any time line on exiting but decided in December that we’re not the best long-term owners for the project.”
“This reflects the best interest of both our shareholders and the project itself as there likely will be other parties that can ultimately be better stewards for a project like this in the long term. As long as we remain involved in the project, however, we will remain committed to its continued build-out and sales since this is the path toward maximum valuation. Even though momentum of the project is good, our change in intent in December triggered an assessment of the carrying value of the investment. In the past, we simply had to be confident that we would recover our carrying value over time, which we absolutely were.”
“We stated in December our intent to pursue strategic alternatives for this business, but that’s not what triggered the impairment in this case. In this case, it was an annual goodwill testing, which is conducted each year in the fourth quarter, and it produced this year a lower valuation than it had in prior years, primarily due to declines in our recent financial results, our view of the market and business outlook going forward. This segment has struggled due to increased competition in a declining paving market, and our operational improvement initiatives have yet to bear fruit. As with Kukui’ula, we engaged an independent valuation firm to conduct an assessment of the value, and that produced the aggregate noncash $78 million impairment, primarily in the paving and quarry operations of Grace.”
“As a result of the impairment, our net book value at the end of 2018 was adjusted down to $233 million.”
So, there were no doubt difficult decisions made by the company and heading on to 2019, the company remained consistent until March 2020, when a lot of commercial locations closed and tourism to Hawaii literally stopped.
But as of 2021, you can see things are slowly now making its way back up, especially now with tourism now reopening (Note: Alexander & Baldwin’s portfolio is not tourism dependent) and people are going out more and more, hopefully we will see the state’s economy start to flourish.
And with the economy flourishing, that points to usually positive tenant performance and rent collections.
But I like what I see in terms of Alexander & Baldwin Inc. getting back to normal levels.
Schwab Equity Rankings has it as a C and Reuters Research Average Rating has it as outperforming and Market Edge Second Opinion Weekly has it set as “Long”.
The company who has the largest holding of ALEX is BlackRock Inc.. (12,439,435), Vanguard Group Inc. (10,671,993), Wellington Management Group LLP (3,332,722), State Street Corp. (2,502,103), Reinhart Partners Inc. (2,085,657).
According to Insider-Monitor, there hasn’t been any Insider Buying for 2021 or Insider Sales. But there are Option Exercises of 25,677 shares by Benjamin Christopher J. (President & CEO).
The company’s dividends aren’t the greatest when it compares to other REITs but they had an interesting consistent growth from 2013, while 2017, the company gave out a special dividend of nearly $16.
But by 2019, they issued a dividend of $.69, and then $.34 in 2020 (which was understandable as the REIT was at its lowest point) and we’ll see how things go in 2021.
On March 17th, ALEX traded their ex-dividend for their respective upcoming dividend. Alexander & Baldwin IOnc. will pay a quarterly dividend of $.15 (which started on April 2nd). So, it will go up from $.34 to $.60.
With a return back to some normalcy, I hope for the potential of ALEX to get back to 2018-2019 levels.
In their latest Q1 2021 Earnings Call, which was held on April 29th, President and CEO, Christopher J. Benjamin said, “we collected 87% of first quarter billings, which includes any abatements, 300 basis points ahead of the prior quarter at this same point in time. Portfoliowide same-store leased occupancy remained steady at 93.8%, with minimal COVID-related lease terminations.”
Benjamin also said, “Leasing demand continues to gain momentum as we signed approximately 122,000 square feet of new and renewal leases in the first quarter. Looking ahead, we are pleased with the strength of our leasing pipeline. For perspective, we are seeing meaningful increases in restaurant-leasing activity, both a mix of QSRs and local businesses who may see an opportunity to take space that is rarely available.”
For the most part, I look forward to see how things go in Q2 for Alexander & Baldwin Inc. (Hawaii).
I do have high conviction towards the company and how they handled things during the Pandemic. I do invest in ALEX, and it aligns with me wanting to invest in real estate in Hawaii.
As always, perform due diligence and do a lot of research before investing. Talk to a financial advisor and find out if investing in Alexander & Baldwin Inc. (Hawaii) (NYSE: ALEX) would be a perfect investment for you.
