Q4 2019 Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Alexander <unk> Baldwins fourth quarter and full year 2019 earnings conference call.
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After the speaker presentation, there will be a question and answer session.
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I'd now like to handle conference over to your Speaker Mr., Stephen Sweat with Investor Relations. Please go ahead Sir.
Thank you a law and welcome to our call to discuss Alexander <unk>, Baldwin's fourth quarter and full year 2019 earnings.
Me today or in Beach, President and CEO, Chris Benjamin and but Brown CFO.
We're also joined by Lance Parker and BSG Real estate Officer, gluten, Sean Chief Accounting Officer, who will participate in the Q a portion of the goal.
Before we commence please note the 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 that 1995 involve a number of risks and uncertainty it could cause actual results could differ materially from those contemplated by the relevant forward looking statements.
These forward looking statements include but are 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 are made and are not guarantees of future future performance.
Forward looking statements are subject to a number of risks uncertainties assumptions and other factors that could cause the 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 we'd status the company's business.
Well as evaluation alternatives by the company related to its materials and construction business by the company's joint venture related to the development of cuckoos ULA generally discussed in the company's most recent form 10-K form 10-Q, and other filings with the SEC.
The information in this call and presentation to be evaluated in light of these important risk factors.
We do not undertake any obligation to update the company's forward looking statements.
That is we'll be referring to non-GAAP financial measures during our call today.
Included in the appendix of today's presentation slides is a statement regarding our use of these non-GAAP measures and reconciliation.
Slides from this presentation are available for download at our website Alexander <unk> Baldwin Dotcom.
Chris will open up today's presentation with a strategic and operational update.
He will then turn the presentation over to Barbara Good Brett who will discuss financial matters.
Chris will return for some closing remarks, and then we'll open up for your questions with that let me turn it over to Chris.
Thanks, Steve and good afternoon to our listeners.
Today, I will provide an update on our strategic progress and provide high level comments on our fourth quarter and full year 2019 result, Brett will then review our financial and operational results in more detail summarize our balance sheet and introduce our guidance for 2020.
I'll come back with a few closing remarks, and then we will open the call to your questions.
In 2019, we made significant progress on our path to refocus and simplify our business model on the ownership and operation of strategic Hawaii commercial real estate assets.
We believe we're well positioned to create outsized value by capitalizing on our embedded opportunities and deep local market knowledge in a unique geographic market in which developable urban land is scarce and barriers to entry our high.
Let me take a few moments to walk through 2019 accomplishments and our priorities for the year ahead.
Our focus is on increasing NN life from our Hawaii real estate portfolio and I'm very pleased with our teams results this year.
Our fourth quarter total commercial real estate revenue increased by 18.6% over the prior year and cash NOI increased by 27.4% over the same period, primarily driven by our acquisitions earlier in 2019.
Our income producing portfolio now consists of 3.9 million square feet of operating commercial real estate and 154 acres of ground leases.
Further we now derive all of our $104.2 million of cash NOI exclusively from strategic Hawaii commercial real estate assets.
Up from just $73.3 million three years ago.
We materially exceeded our stated goal of driving CRT and NOI over $100 million this year.
At a time when macro industry trends are impacting other segments of the retail sector and world health concerns raised questions about tourism levels. We're pleased to be focused on a daily needs based retail and light industrial asset base that caters primarily.
To the local Hawaii population.
Within our portfolio operations continued to be strong.
In the fourth quarter, we signed 52 leases for approximately 124000 square feet of Gls.
On the 43000 square feet of comparable leases, we recorded an average leasing spread of 8.6%.
At December 31, our total commercial real estate portfolio was 93.9% occupied an increase of 150 basis points over year end 2018.
Our same store portfolio was 94.1% occupied an increase of 190 basis points over the same period in 2018.
These results were driven by increased occupancy in our industrial portfolio, particularly at Kohona Industrial Park and the PNM warehouse.
In addition to leasing we continue to execute on our value add redevelopment program.
During the fourth quarter, we completed planning indefinitely demolition at our project at like he PERC shopping center, where we were repurchasing a grocery anchored shopping center into a vibrant community center with dining grocery and service based retail and sustainable design.
A significant element of this plan is repurchasing of vacant theater space, which will help drive occupancy at completion.
Already this year landlord construction has started on the theater redevelopment portion and the broader refresh work at the center is scheduled to begin shortly in March.
Additionally in July we celebrated the Grand opening of whole Kelly shopping center phase one on Maui.
The Safeway grocery store gas station and convenience store are now complete and opened for business and exceeding tenant expectations.
Strong leasing activity continues at this well located center and we look forward to announcing.
Exciting new tenants to serve the now community in near future.
Also in November we celebrated the Grand opening of the final tenant at low how the shops are sustainable adaptive reuse of a department store.
This project is 100% leased.
Suffice it to say that 2019 was a great year with respect to advancing the strategic growth of our Hawaii income producing commercial real estate portfolio beyond the organic and redevelopment growth I just summarized we acquired $218 million of assets all in our preferred asset classes funded with 10 31 proceeds.
From sales of non income producing agricultural land.
We did not place new capital into acquisitions, but thats consistent with the guidance. We provided early last year that once we plan once we placed the Maui land sale proceeds.
We refocused our efforts on deleveraging and dispositions of non commercial real estate assets, including development inventory and noncore lands.
As we've said the monetization of these assets will help us further improve our balance sheet and ultimately simplify our business model.
For the full year 2019, we closed on the sale of 42 acres of while they are land on Maui closed out of increment one of the come on money project, which consisted of 44 unit sales.
Closed out of the Kahala project, which consisted of five lots.
Completed the sale of nine acres at Maui business Park, which was a nice pickup in momentum at that property.
And finally closed the sales of 30 units at the crew you a joint venture project also a very good outcome for that project.
In total we generated over $90 million of net cash proceeds, helping us to retire $73.5 million of debt.
While we're very proud of these results and I'm, particularly proud of our team's hard work in achieving them. We do recognize the continued progress on this front is critical.
Going forward, we expect to monetize additional land holdings, we no longer have large contiguous parcels like to 41000 acres. We sold in December 2018, but we're actively pursuing sales of both development inventory at our remaining two active developments Maui business Park, and Pikula and noncore parcels that include both inactive develop.
Mints underutilized urban land and agriculture or conservation land.
In the near future and until we achieve the leverage metrics were targeting we will use most proceeds from sales to reduce leverage.
Regarding Grace Pacific Theres, no sugar coating. It 2019 was a tough year. However, we did take several positive steps to stabilize the business in the second half 2019 under new leadership and I believe the modestly positive EBITDA achieved in the fourth quarter is assigned we're making progress while it's still early our efforts to shift our operator.
Additional focus and rightsize costs are beginning to bear fruit. It will take some time, but the board and our team are committed to maximizing value for shareholders and we believe stable in improving operations will create the conditions necessary to monetize this business at the appropriate time as we continue to simplify our overall business model.
Next we continue to focus on streamlining our organization as we transform from a diversified conglomerate into a pure play commercial real estate company.
That's a gradual process that probably will take two or three more years, but over the past 12 months, we took steps several steps to reduce our cost structure and DNA and have seen positive results from those efforts.
Various cost savings initiatives have resulted in lower software technology and consulting expenses.
The fourth quarter of 2019 reflected DNA reduction compared to the same quarter in 2018, and we expect continued progress over time as we simplified both our business mix and our processes.
We remain relatively diversified company that faces many legacy issues, but we are committed to transforming and simplifying in a thoughtful manner.
Finally, we remain committed to being good corporate citizens, we significantly expanded the scope of our ESG or environmental social and governance initiatives in 2019 and continue to ensure SG as ingrained in our culture.
There's no better time than the occasion of our 100 fiftyth anniversary to both reinforce the socially mind is DNA that has guided us through our first 150 years and lay the groundwork for even better engagement with our community employees investors and the environment in the future.
As part of our 150 celebration, we are empowering our employees to spend more time and community service and to direct charitable gifts to organizations that are meaningful to them.
I was proud to join about 80 of my coworkers of their family members at a day of service on Martin Luther King Junior day in January.
We partnered with the department of land and natural resources Division of Forestry and wildlife to plant trees at the home accrue in March which is in Kailua on Oahu, a very important community for the company.
We also took important strides in 2019 to increase our employees and community members roles in setting our priorities for social engagement with our employee led Pride initiative and increased community engagement just two of the results.
We're very proud of our heritage in history and aim to be partners for Hawaii for the next 150 years.
With that ill now turn the call over to Brad who will discuss our operational and financial results in more detail Brett.
Thanks, Chris and good afternoon, everyone.
Let me begin with our financial results.
For the fourth quarter, we recorded net income of $5.2 million or seven cents per share compared to a net loss of $136.6 million or $1.90 cents loss per share in the same quarter of 2018.
The net loss in the fourth quarter of 2018 included a non cash impairment charge totaling $189 million.
For the full year 2019, we recorded a net loss of $36.6 million or 51 set loss per share compared to net loss of $72 billion for $1 to set loss per share in 2018.
The net loss in 2019 included the impact of the $49.7 million net non cash goodwill impairment and impact of 69 cents per share in 2019.
Net income in 2018 again included certain strategic items, including non cash impairments and gains on asset sales.
Turning to our commercial real estate segment, we're very pleased to report that revenues were up 18.6% for $6.6 million over the prior year quarter.
Similarly, total portfolio cash NOI increased $5.9 million or 27.4% compared to the same period last year.
This year over year growth was driven primarily by new acquisitions as part of the commercial real estate investments. We had made in the last 12 months as well as growth in the same store portfolio.
For the full year, 2019 revenues were up $20.3 million or 14.5% to $160.6 billion.
Total portfolio cash NOI increased by almost 21% or $18 million to $104.2 million, which again was driven primarily by capital recycling into income producing real estate and same store growth.
Same store cash NOI for the fourth quarter increased by $890000 or 4.8% to $19.4 million.
For the full year 2019, same store cash NOI increased by $3.9 million or 5.2% to $78.6 billion. We're pleased with our full year result, which fell at the high end of our previously stated increased guidance.
Moving onto our land operations segment. This business unit produced revenue of $31.7 million during the fourth quarter of 2019, as a result of sales and distributions related to land and development for sale projects, resulting in EBITDA of $5.3 million in the quarter.
During the year monetization activity included the closing out of Kahala as well as a nice uptick in sales at both Maui business Park with nine acres and Kukuiula with 30 units closed.
For the full year 2019 revenue for land operations was $114.1 million, resulting in EBITDA of $22.4 million.
For the full year monetization activity resulted in approximately $90 million of total net cash proceeds.
Within our materials and construction segment, we continue to work to improve operations. Despite certain structural challenges, having taken a meaningful write down in the third quarter fourth quarter, adjusted EBITDA was positive $600000 and negative $6.1 million for the full year 2019.
This compares to negative $400000 in the fourth quarter of 2018 and positive $14.5 million for the full year 2018.
Additionally, as we continue to simplify our company and streamline operations, we should continue to benefit in the form of lower operating expenses.
In the fourth quarter, 2019, and excluding noncash impairment charge in the fourth quarter of 2018 operating costs and expenses decreased by nearly 28% from the prior year quarter due to lower operating expenses in the land operations and materials and construction segments.
For the full year 2019, excluding the non cash impairment charges in both 2018 at 29 team operating costs and expenses decreased nearly 10% over the prior year.
Selling and Gina expenses decreased 16.4% to $13.8 million in the fourth quarter of 2019 compared to 16 and a half million dollars in the fourth quarter of 2018.
Similarly, SDMA expenses decreased by 3.8% to $58.9 million for the full year 2019 versus $61.2 million in the full year 2018.
I'd like to take a few moments to update you on our financial priorities as they relate to our overall strategic direction.
As we previously stated our intention is to maintain a strong balance sheet that will support the long term growth of the company, having recycled nearly $1 billion of capital in the past seven years into Hawaii income producing real estate assets, we have improved the quality and stability of our income streams for shareholders at us as a REIT.
Our strategy is to balance that capital recycling with debt repayment in order to reduce our leverage to a level more consistent with our rate peers.
In the fourth quarter, we repaid approximately $28 million of debt.
Further we are working with our existing lenders to enhance our covenant structure and extend maturities.
This balance sheet improvement combined with our ability to issue Opie units as acquisition currency will provide us with access to well priced capital and position us to grow our CRM business over the long term.
At year end, our total debt was $704.6 million and we had total liquidity of $364.8 million.
Our net debt to consolidated adjusted EBITDA was 7.4 times and our debt to total market capitalization ratio stood at 31.8%.
This compares favorably to 37% just one year ago, as we continue to reduce leverage to strengthen our balance sheet and support our long term growth objectives.
Finally, with respect to our dividend yesterday on February 25, our board declared a first quarter 2020 dividend of 19 cents per share.
The dividend is payable on March 24th 2022 shareholders of record on March nine 2020.
Moving on to guidance for 2020, we expect same store NOI of 2% to 3%.
Leasing spreads from 4% to 5%.
Maintenance Capex between 16 million to 20 million.
And growth Capex between 17 million and 21 million.
Also our same store pool includes only properties that were owned and operated for the entirety of the prior calendar year.
And putting 25 properties Lani village hopefully village, while hollow shops, the collection at hopefully industrial will enter our same store pool.
With that I'll turn the call back to Chris for closing remarks.
Thanks, Brett we're very proud of all that our team has accomplished in 2019.
We've made significant strides in our effort to transform Andy into a focused commercial real estate operating company.
Today, the vast majority of our capital invested in operating real estate that is performing extremely well.
We own great assets, and a strong and growing market and we have unique competitive advantages that drive derived from our local market knowledge in deep history.
This is our focus into the future and I look forward to communicate in our results in 2020 and beyond.
Before we begin our Q and a session I'd like to take a moment to think Allen down former chairman and CEO.
Alexander involvement for his 29 years of leadership.
Alan is retiring from our board at our April annual meeting consistent with our mandatory retirement age.
Since 1991 Allen has been part of MBS dramatic evolution and accomplishments, bringing his tremendous intelligence and breadth of industry knowledge to bear in helping guide the company as both at CEO and longtime director.
Personally I have benefited from that guidance as well as the many opportunities. He has given me. Thank you Alan from all of US here at a and B, we will Miss you.
With that we will now open the call for your questions.
Thank you as a reminder to ask a question you want me to press Star one on your telephone to withdraw your question press that tells me please standby and while we compound the culinary roster.
Our first question will come from Sheila Mcgrath with Evercore.
I guess good afternoon.
Chris I was wondering if you could give us a little bit more insight on the drivers of the positive EBITDA.
Great and fourth quarter and is it possible the factors could carry over into 2020.
And is the current plan for Grace to try to improve the operations.
Moving to positive EBITDA and revisit the sale process.
Yes, Sheila thanks, all good questions.
So first of all I believe that the positive drivers of performance will continue and hopefully.
Actually build on themselves.
One critical component of fourth quarter performance was just getting some of our costs in line and that included both DNA and some operating costs, obviously, our book of business and the level of activity.
Shrunk quite a bit during the year.
And we were able to get some of our costs more in line with that level of activity. So that was a help what we didnt accomplish as much as we would've liked is an increase in the level of activity and that's something that I'm hopeful we'll continue to improve this year where.
It's early in the year, but we do have an improving book of business. We have won some bids early in the year tentatively we.
We still need to await the official awards, but our belief is that were low bidder on some some attractive work.
And with that I think that we'll be able to maintain some of the cost improvements and add on to that more activity now.
I don't want to get carried away it's early in the year.
But I do believe that we should we should be on a path to a better 2020.
Having said that the sales process is still a process that we're going through we did initiate that process in the latter part of 2019 and.
There are few different assets in the portfolio that we are marketing that the main paving business as well as a couple of smaller subsidiaries. So we are still going through that process.
And I really can't comment on timing.
Other than to say that the process hasnt been terminated, but we do recognize the benefit of getting some positive performance behind us and in order to get maximum value for the asset so.
Where I guess I would just summarize by saying we remain committed to simplification we recognize that.
We're not right long term owner Grace, but we do want to extract as much value from the asset which is of course is very valuable asset that's fallen on some hopefully temporary hard times and if we can improve that performance continue to improve the performance. We think we'll be in a better position to to accomplish our simplification objectives.
Get fuller value for the asset.
I hope I answered your questions yes.
No. That's that's helpful.
On to Cook Leila.
To that.
Did turn around meaningfully from where it had been a couple of years ago.
I'm just wondering if you could talk big picture, what you think is driving.
The improvement of sales at Kukuiula.
And how many units sold this year and.
Based on the inventory that you have the backlog of sales is it possible to achieve this similar sales level in 2020.
Well starting with your last question, we certainly hope and expect to be at a similar sales level. This year I I'd say first of all let me just state some very good news, which is that we havent had to put any operating subsidy into the project.
For overweight or about 18 months I think and so that's been a good outcome, we havent had to direct any capital for operating subsidy there we.
Have continued to build out inventory there and that has been probably the biggest single driver.
Sure. It's a combination of the fact that we have a wider range of product and price points available at the project.
This means that the buyer that comes to the project is more likely to find something that she or he wants to buy and so thats been very helpful. At the same time. The byproduct of that is just the project is so much more vibrant and active and when someone comes to see if they see a real driving community.
And for many years it was a fairly quiet place and now.
I think we've had and ill, let lance jump in here and maybe elaborate but I think in general ourselves and then as strong as any project in Hawaii and the last year too and I think that were really feeling that positive momentum it does still require.
Having the inventory available and so we will be building out some some more lots this coming year, but I think that if we're able to do that which we expect to we'll be able to to continue to have the kind of sales performance. We we have had in the last.
Yeah, and a half two years lance's anything else you'd like to add.
No I would just add Sheila that based on the Escrows that we have to date through the first two months of the year.
We certainly do expect to and to be where we were last year in terms of sales if not slightly higher so the.
The strong activity that we had in terms of buyer interest has continued so far through 2020.
Okay, Great and one last one and I'll get back in the queue, but at least leasing spreads specifically for retail were pretty strong at 11.5%. If you could just give us a little bit more information. If there were specific one or two leases are driving that and then if you could talk about the tenant watch.
Well I know that pier one is closing some stores.
In Hawaii.
Yes, Lafferty binder.
Gentlemen that sorry.
So.
With regard to retail re leasing spreads it was really just to.
A single tenant that drove the majority of that and I won't get into the specifics of.
The deal itself, but suffice it to say that it will say.
Renewal or we were able to convert a meaningful part of it was a step up in rent as well as converting percentage rent and to contract rent and as we're able to do that we get the benefit of increased leasing spreads.
And then with regards to the tenant watch list you are correct. We do have a pure one in our portfolio at Pearl Highlands Center. So pro Highlands was the center that we repositioned last year, we got almost up to 100% occupancy we did receive the space back just this week.
So the loss and Hawaii has been factored into the guidance that that Brett presented earlier and from an occupancy standpoint, it's probably going to be about 31 bits on the entire portfolio. So we'd expect to see that next quarter, but our leasing team.
As is actively pursuing.
Backfill opportunities.
Okay. Thank you.
Thank you. Our next question will come from Alexander Goldfarb with Piper Sandler.
Hey, I think it's still good morning out there so I had good morning.
Actually just afternoon.
Good afternoon, Okay, great excellent excellent.
So just a few questions from our side.
One just picking up on Sheilas question on the materials business.
It looks like you guys had about 600000 of EBITDA in the fourth quarter. So I mean, it was positive but it wasn't like.
A big a big number but I'm, assuming based Chris on your comments on what you guys are trying to do that this business is capable of more than just 600000 that EBITDA a quarter. So I guess can you frame. It as what do you think is an EBITDA number that you now would be more representative or too as.
You guys assess all the hard work that you need to do relative to the impact that it has to you guys as a public company is it worth your time focusing on it maybe just sort of you know whatever price you get move on let someone else deal with it but focus your energy on the stuff that really is.
Is what people looked Alex and Baldwin for which is the retail the residential being that Hawaii entity.
Yes, Alex its good question and first of all I want to make it very clear you can rest assured that our real estate team is singularly focused on the performance of the portfolio. Our there's no doubt that for me and for Brett and some of the other senior executives.
The corporate level, we are doing everything we can make sure that we continue the simplification.
With Grace graces, the sale of Grace be an important part of that but.
It really is not just distracting the team that is managing the portfolio I think thats evident in the performance of the portfolio not to the very important question of timing of Grace.
It's more than just management distraction as you know, it's simplification of our story and so we do place a lot of importance on that and all things being equal.
We would like to monetize it sooner rather than later I do think though that the timing of when we got to market and really the needier of our.
Formants there.
We're coincident and that meant that it was very difficult.
To get deep buyer interest the process is still ongoing and we do have.
Some continued buyer interest, but I believe.
That getting a couple of quarters of improving performance under our belt could be very positive. So.
I don't want to give any on the impression that we've changed our mind about our long term direction with Grace.
But I do want to make sure that we can realize.
Optimal value I won't say highest value because highest value could take a multi year turnaround and that may not be in our best interest, but getting a couple quarters few quarters a year I just don't know what exactly it will take but back to your question about EBITDA.
I don't want to make a projection of EBITDA. This year, because theres still are a lot of unknowns, but we do expect to have positive earnings. We do expect to have demonstrated that weve.
Correct and a lot of the operational challenges that we've had and hopefully we'll have some more positive momentum and we think that will position us to try to realize.
You know better value for the assets so.
I'm balancing a lot of things here, but just suffice it to say that where we remain focused on monetization, but we want to do it at the right value and at the right time, and that's going to be a judgment call but.
But will be thoughtful about that judgment.
And then a prior calls you had referenced.
Going back after uncollected.
Jobs, either because like the job hadn't been fully wrapped up for the money never collected how is that process going or have you wrap that up or that's another thing that will take several quarters or maybe longer to actually get all those prior jobs fully paid port.
I'm proud of the team's efforts on that front I think we made good progress in that so even though our EBITDA was well well below our our expectations last year, our cash flow was not significantly below our expectations, because we were able to accelerate some of our collection activity and that's.
That's a it's an ongoing process, we're not done we still have some receivables that we would like to collect and as far as close enough jobs. So we should continue to continue to see.
The benefits of that but.
There's also some more work to do on that front. So I'd say I don't know for halfway through it or what but we're certainly made meaningful progress and we still have a little more work to do on that front.
Okay, and then looking at your guidance.
Cash same store two to three this year you had cash same store five so what's the Delta was it just you picked up some occupancy last year or there was some backfill or why is the what's the what's the difference between.
Last year versus this year.
So, yes, I mean, I ask lands to comment on that but I'd say the short answer is probably what you pointed to it was certainly helped by occupancy I would only say before Lance provides more color that we feel good about.
Continued growth off of what was a very good number this year. So we see the two to three well, it's a lower number it's a lower number up a really good year and maybe lets can add little more color.
Yeah.
I would just.
Reiterate those points it was.
A portion of our 5.2 was occupancy driven.
And that I'd point to the other.
Thing for Us in 2021 off the same store number we expect meaningful growth in our total NOI.
As we get the benefit of our acquisitions from last year and full year performance.
Okay, and then just one final thing from us.
You know thoughts on on FFO on reporting FF, though you have 19 cents, a dividends, which is great, but seven cents of earnings makes it a little.
Doesnt tell this fall story, if you well so what are the thoughts on on you know moving towards an AFFO is that something maybe not this year, but maybe for 2021 or something for us to think about.
Hey, Alex its Brad.
Yep.
We're always committed to providing good disclosure and obviously want to be responsive to your your feedback on that and we'll can continue to monitor that and and start reporting.
When we feel appropriate in there. So we will let you know.
Thank you Brad Thank you Chris.
Alright, Thanks, Alex Thank you Alex.
Thank you. Our next question will come from Steve O'hara with Sidoti.
Hi, Thanks for taking my question.
Hi.
Hi, I'm, just I guess quickly on the growth Capex.
17 21 million is that.
No.
CRT additions that your growth capex or is that something else for grades or something else.
Who you would be.
But any of the progress.
I'll, let lance jump in I believe last or Brett, but I believe it's almost entirely.
If not entirely commercial real estate, but not acquisitions it would be more development.
It's a maintenance capex for the corsi or no portfolio majority of that number.
And then the growth Capex I mean, I'm, sorry, so growth Capex of 17 to 21.
The growth Capex. The majority of that is going to be redevelopment in the portfolio. So I cocky shopping center, which we've commenced is going to take up the majority that capital and then we do have a couple of smaller repositioning redevelopment opportunities that will commence.
In the first half of this year that will take of some of that capital, where we expect to get similar recursive what we've done on other prospects into high single digit ridge.
Okay and.
And then.
What's the best way to think about.
No kind of the.
Traction from acquisitions dispositions.
For 20 Twond.
I think 25.8 million in 29.
He is our way to think about.
Some of that drops off.
No what you've owned but what's the with the right way to think about that number.
Brett to you.
I'm not sure I'm not sure I understand the question.
I guess, you jump right into its kind of back into the your.
Cash NOI.
Oh.
Expectations, I mean is or kind of.
You said meaningful growth, but yet in terms of NOI.
As a way to bracket that terms of.
With that.
No.
No single digits high single digits.
Better.
Yeah, I'm going ask if either Clayton or.
Or someone else has insights on the components of course are going to be the same store growth of 2% to 3% on a little less than $100 million.
[music].
Of of the portfolio and then.
Really the realization of the the full year impact from those assets that are not in same store. So I don't know quite in or or Brett if you've got thoughts on what that overall number would be but.
We could maybe provide that breakdown later.
Okay.
Yes, I think you hit the nail it.
As far as the cash NOI goes the non same store component is going to be most impacted by by the acquisitions that we had.
In 2019 in the full year impact for 2020, we did not provide guidance on that though if you.
You mentioned.
But the vast majority to divest the vast majority of the portfolio is now in same store so that that would apply.
The 2% to 3% to that and then we could.
Might provide more guidance later on book value.
All right the five acquisitions that occurred in the early half of 29 team would that have a full year impact in the current year. It so it'd be that delta between a full year compared to the the whatever fraction of your they were in for 2019.
Okay. Okay.
Then I guess just in terms of.
Macquarrie around.
Using cash for debt repayment things like that is there.
I didn't know.
And you had any issues in Hawaii.
Sorry, maybe I know.
Sounded like Japanese traveling down pretty significantly.
In February.
I'm just wondering you guys you're seeing right now is there any.
Ability or desire.
The more aggressive on acquisitions, it things kind of.
Great.
Dislocated price or is that not like the way things move the move a little more slowly than.
Other asset classes.
Thanks.
Okay, well, let me, let me try to take that one Steve there there was a lot implied and expressed in that so let me I think you're basically saying is corona virus going to destabilize the market and create opportunities.
So let me kind of start with the current a virus answer which is first of all the good news the state put out an announcement today that there. There are no cases of current virus in Hawaii at this point there are no cases being investigated so thats good news, having said that.
It is conceivable that could come to Hawaii, and even if it doesn't it there is likely to be as you suggest a slowdown in Japanese tourism.
And potentially from other countries.
But that way with Sars as an example, since you raised that that was a fairly short lived phenomenon and it didnt lead to any kind of protracted downturn that would if we would expect to drive property values down so I certainly don't expect.
Okay, great buying opportunities as a result of of.
Virus, but the good news there as I also don't expect any permanent degradation of value in our portfolio.
We can't really predict what the impact of a drop in tourism will be on our portfolio, but we can say.
That our portfolio is not geared towards the tourist trade it is much more a.
Grocery anchored community based needs based retail and then industrial portfolio and so we're not heavily exposed to the tourist trade and therefore.
Well, we're we're obviously from a human standpoint, we're very concerned about the virus.
We hope that that our portfolio.
As a.
Relatively resilient.
Okay, Alright, thank you very much.
Thank you.
Again, ladies and gentlemen, if you have a question at this time. Please press Star then one key on your Touchtone telephone we do have a follow up question from Sheila Mcgrath with Evercore.
I guess, Chris you mentioned in your deck.
In the future using Oh P units.
Which I'm sure at the current stock price you wouldn't be backbone doing but just curious if you've started the process of trying to educate sellers that has.
No basis and their property about a potential like tax efficient transaction.
We have Sheila and as you are aware, it's our belief that into Hawaii market. Because there is a lot of family ownership multi generational family ownership of assets.
And a lot of non institutional ownership, we think that there are.
Essentially a lot of.
Asset owners potential sellers that could be interested and LP unit deal and we have begun Jeff Alker and his team have have been working with the banks with some of the asset owners to try to educate them about LP units and we've had some receptive.
We've had good reception to that.
So while you are absolutely on point as far as you know the stock price needing to be right.
And our focus of our team's efforts right now are a little bit more towards the disposition side I fully expect that LP unit.
We'll be a currency that we use over the next several years to to help grow our portfolio.
Welcome Lance to jump in if he wants to add anything.
No.
Just to Echo your comments Chris.
Okay. Thank you.
Thank you.
Thank you again, ladies and gentlemen to ask a question. Please press star one.
We do have a follow up question from Alexander Goldfarb with Piper Sandler.
Hey, Thank you just quickly.
Thank you mentioned that maybe I missed it.
Chris you said about reducing leverage in the why is the disposition proceeds to pay off debt.
Is there a certain amount of debt you're looking to pay off and then as we think about dispositions.
How much income would be going away meeting, if you're selling assets and losing income that sort of a neutral transaction versus if you're selling not non income producing that's yes, thats sufficient deleveraging. So just want to sort of get a sense of how much debt you're looking to pay down and then if it's you know the balance between income producing assets and.
Well there versus non income producing assets.
Yeah, I'll, let Brett jump in in a moment on.
Of debt reduction targets, but what I will say is that in all of our monetization efforts. We're we're being very mindful of the relationship of the debt and the EBITDA. So our goal is to do to improve our debt to EBITDA.
Ratio and we've we've indicated our goal of about five to six times and so we would.
Obviously, if you can sell something at a good price that is generating no income that's a no brainer, but in in selling any income producing assets, we would be very mindful of the relationship there and make sure that it is accretive to our to our leverage metrics or anything else breadth you want to add in terms of.
Total.
Debt reduction targets.
Yes, we continue to target our debt to EBITDA number Alex to be in the five to six range by year end, we were at seven four and so we'll continue with monetization.
As we mentioned to pay that down and we believe that over overtime here will be able to get it down in that range with with the combination of.
Of debt reduction, but also with with earnings increase you're right. We do sell some we have to be mindful of what the income that goes away with that but we're also improving income in various areas specifically with Grace and then with the improvements at the at the CRT level. So.
We're attacking on both fronts, reducing the numerators wells, the denominator and so our increasing the dominator and getting us to to those levels.
Okay. Thank you.
All right. Thanks, Alex.
Thank you I'm showing no further questions in the queue at this time I would now like to turn the call back over to our house for any closing right.
Thank you shrink and thank you all for joining US today. If you have any follow up questions. Please feel free to call. It at 8085 to 58475 or email us at Investor Relations at AB H.I. Dotcom Aloha and have a great that.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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