Q3 2020 Alexander & Baldwin Inc (Hawaii) Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Alexander <unk> Baldwins third quarter 2020 earnings Conference call. At this time, all participants are in a listen only mode. After.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press Star then one on your telephone.
Please be advised that todays conference is being recorded.
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I would now like to hand, the conference over to your speaker today Mr., Steve Swett with Investor Relations. Thank you. Please go ahead.
Thank you Hello, and welcome to our call to discuss Alexander well risks third quarter 2020 earnings with.
With me today for our presentation or HBS, President and CEO, Chris Benjamin and Brett Brown CFO.
We're also joined by Lance Parker, NBC real estate officer, including Sean Chief Accounting Officer were available to participate in the Q and a portion of the call.
Before we commence please note that 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 statements.
These forward looking statements include but are not limited to statements regarding possible or assumed future results of operations business strategies growth opportunities and competitive positions as well as the rapidly changing challenges with and the company's plans and responses to the novel grown a virus COVID-19 pandemic and related economic disruptions.
Such forward looking statements speak only as of the date. The statements were made and are not guarantees of future performance.
These statements are subject to a number of risks uncertainties assumptions and other factors that could cause 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 reach status and the company's business risks associated with the COVID-19, and its impacts on the company's businesses results of operations liquidity and financial condition. The evaluation of alternatives by the company related to its materials and construction business and by the company's joint venture related.
The development of Kukuiula 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 should be evaluated in light of these important risk factors, we do not undertake any obligation to update the company's forward looking statements.
Management will 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 reconciliations.
Slides from this presentation are available for download at our website Alexander Baldwin Dot com.
Chris will open up today's presentation with a strategic and operational update we will then turn the presentation over to Brett who will discuss financial matters. Kris will return for some closing remarks, and then we will open it up for your questions with.
With that let me turn the call over to Chris.
Thanks, Steve and good afternoon to our listeners.
As always we hope everyone on this call as well and that your families remain safe and healthy. While these are challenging and uncertain times, we're pleased to be reporting steady progress in both our core commercial real estate business and in our strategic efforts to continue simplifying our business model.
Before getting into the specifics of ambient performance, let me start with an update on Hawaii with respect to COVID-19, and recent progress on health outcomes and reopening.
Hawaii has remained relatively shielded from Covance health impacts as the fifth lowest state in terms of total cases per capita since the start of the pandemic. According to CDC data.
However, during the third quarter daily New case counts did rise triggering a one month stay at home order for a while ago from late August to late September so.
So after reopening for almost three months of Wahoo again mandate and the closure of all non essential businesses on the island for about one more month at the end of the summer.
As a reminder, allahu contributes roughly three quarters of Hawaii, GDP and the same proportion of NVS commercial real estate net operating income.
This and earlier shutdowns have had a significant impact on the state's economy with a report from the University of Hawaiis Economic research organization or new hero, noting that Hawaii second quarter 2020, real GDP declined at a 42% annual rate.
It's worth mentioning that the majority of the impact to Hawaii's economy stems from the states restrictions on the tourism industry. One of Hawaiis main economic drivers, while most of our properties are not directly reliant on tourism all of Hawaii does benefit from the revenue and jobs the tourism industry generates.
However, as we stand here today in late October the situation has improved dramatically weve.
We've seen improvement in coated control on Oahu with daily case counts dropping to levels that facilitated a move to the second tier of the Wahoo is reopening process last week.
Most businesses on Oahu were allowed to reopen on September 24th with the first tier of the reopening and then the second tier U.S retail restrictions further on October 22nd.
Facilitating indoor Jones and more indoor dining flexibility.
As a result, 95% of our portfolio is now open.
Most importantly, the mandatory two week quarantine requirement for mainland travelers.
And which had been in place since March was relaxed on October 15, domestic travelers may now enter Hawaii without quarantine after providing a negative pre travel covance test.
And earlier this week the governor approved a pre travel testing program for travelers from Japan that will begin in early November.
$5 million of which one $6 million has already been repaid and and substantially all of the remainder is scheduled to be repaid by the end of 2021.
Additionally, we have that we have provided several other or taken several other measures to assist our tenants, which grip Brett will address later.
Further we made progress in our ongoing efforts to monetize our development projects and non-core assets this quarter and great specific continues its steady recovery.
Turning to our quarterly results, while we did experience and expected year over year decrease in commercial real estate revenue and NOI. This quarter for the reasons I just mentioned, we had several key positive developments across our business.
First we had solid new and renewal leasing activity, we completed 35, new and renew leases and for the comparable leases spreads were four 2%.
Within our retail portfolio leasing spreads were negative three 1%, but we were pleased with our ability to secure longer term leases for a number of key spaces and reduce future occupancy risks.
Additionally, we completed 35 least modification extensions related to Covid.
At an average term of a little more than one year, which helps us which is near term occupancy risks, while studying tenants get to the other side of this pandemic.
Second same store portfolio occupancy was up 10 basis points from the prior year to 95.1%, while our overall occupancy was down 150 basis points year over year to 93.5%.
This was largely driven by the addition of Portland in a shopping center to our portfolio occupancy calculations.
Further our industrial portfolio occupancy achieved a high watermark of 97, 8%.
Due to the incremental leasing at come on an industrial park.
Third or redevelopment efforts continue.
That I copied park shopping center while.
While we have delayed other portfolio redevelopment efforts in the interest of capital preservation. We felt this project was too attractive for both A&P and the community to put on hold the financial return outlook for the redevelopment remains strong thanks to the resilience of the center.
And our tenant mix, there as well as the new leases we've negotiated at the center.
Fourth we continued to make steady progress on monetizing assets and simplifying our business one of the most pleasant surprises through the pandemic has been the resilience of the market for Hawaii real estate land and operating assets.
Homebuyers and investors remain bullish on Hawaii in.
In the third quarter, we close to sales at nine a business park and four units it could cronulla. Additionally, we completed the sale of the Port Allen solar facility on Kawaii.
We were very proud to develop this facility back in 2012 at the time it was the largest solar farm and the state of Hawaii.
With its power purchase agreement expiring in 2032, however, the NPV of this assets to declined steadily over time and we determined it was a strong monetization candidate we were very pleased with the transaction.
As we physician certain of our non core assets for sale, we're addressing many legacy obligations in identifying others that we will address in the future we.
We created a non-cash reserve of six $7 million to address certain of these obligations.
Certainly these future obligations, which offset a portion of the book gain recorded for the Port Allen sale, though it was not related to that sale.
And fifth with respect to materials and construction.
We remain focused on the continued improvement of operations in this segment.
Begin realized positive EBITDA in the segment in the third quarter, the majority of which was generated by great specific.
We're pleased with our year to date progress, including G&A reduction successful bidding activity that increased our backlog and improving operational efficiencies all of which reflect the discipline new leadership in that business and the hard work of the greatest team over the past year and a half.
Looking ahead, we expect moderating profitability in the fourth quarter is work schedules weather related delays and normal seasonality may impact performance.
We do expect continued steady improvement in the business and are hoping for greater profitability in 2021, but acknowledged that earnings growth won't necessarily be linear.
Before I turn the call over to Brett and wanted to discuss our ongoing corporate commitment to ESG initiatives.
The values that drive ESG are not only important to investors and stakeholders. They are extremely important to me personally and are I believe consistent with the companies DNA and 150 year history.
On the governance front, we continue to improve with recent board changes that enhanced independence on.
On the environmental front allow Hollis shops received the Nijhoff, Hawaii chapters Kudu Holiday award for commercial renovation, which recognized are environmentally friendly adaptive reuse of the farmer Macy's box in Kailua.
On the social front I am pleased to note that in the third quarter. We were recognized with a business of Pride Award by Pacific Business News, which acknowledged our leadership on diversity and inclusion.
And our come on a project on Maui, which provided badly needed affordable housing also was honored by now.
Finally, we have directed a significant portion of our charitable giving budget to covid related causes.
Our efforts to be partners for Hawaii remain core to our company's mission. Most importantly during times like this.
I would like to thank each member of the ANV team for their ongoing dedication and commitment throughout the pandemic and with that I'll turn the call over to breath.
Thank you, Chris and good afternoon, everyone.
Let me begin with our financial results for the third quarter, we recorded net income of $3 million or four per share compared to a net loss of nearly $50 million or 69 cents per share.
In the same quarter of 2019, as a reminder, or third quarter 2019 results were impacted by a non-cash impairment taken a great specific of $49 $7 million.
For the third quarter of 2022 reporting funds from operations of 12 $5 million or 17 cents per share compared to a negative $40 million.55 per share respectively for the same period of the prior year.
<unk> was $11.6 million 16 per share compared to 18 $5 million and 25 per share respectively. In the same quarter of 2019.
The decrease in <unk> was primarily driven by impacts related to the COVID-19 pandemic and that resulted in accumulative third quarter charge of $8 $9 million or 12 cents per share primarily related to the collectability of revenue and the impacts of other tenants relief modifications.
For context, the tenant relief modifications during the quarter, which represented approximately $2.6 million or four cents per share. It was out of that $8 9 million dollar charge, primarily reflects rent abatements granted as well as the impact of converting certain tenant leases from a fixed rent structure to one that's predominantly based upon for <unk>.
Set a trend.
It should also be noted that $8 9 million dollar charge taken during the third quarter also includes $1.6 billion or <unk> per share related to straight-line lease receivables.
Turning to our commercial real estate segment third quarter, CRE revenue was down $16, 4% or $7 million from the prior year quarter. A primary driver of the decrease was the second government mandated shutdown on Oahu, which contribute 75% of our NOI.
And our total portfolio occupancy was down 150 basis points a year over year.
Total portfolio NOI decreased five $7 million or almost 21% driven by the charges recorded related to the reduced collectability in billings as a result of COVID-19.
Same store NOI for the third quarter decreased by 18.8% compared to the prior year, primarily due to those charges.
Our land operations business unit produced revenue of seven $7 million during the third quarter of 2020 and generated EBITDA of three $8 million in the quarter as a result of sales and other operating revenue.
As Chris mentioned during the quarter, we completed two sales totalling one acre at Maui business Park, and we closed four units at our cuckoo Eula joint venture projects.
Additionally, we did complete the sale of the Port Allen Solar facility Ah non-core asset onkelos, which generated again on disposal of $8 $9 million.
A portion of the gain was partially offset by a non-cash reserve of six $7 million recorded in the quarter to address future obligations associated with our non-core legacy assets.
Our materials and construction segment generated adjusted EBITDA of three $8 million for the third quarter compared to a $4.4 million loss in the same quarter of the prior year.
We are encouraged by positive momentum in this segment and remained focused on improving operations and cost controls at this time with a longer term focus on monetization.
At the same time, we continued to reduce costs across our business operating costs exclusive of G&A at non-cash impairment charges taken in the prior year decreased by approximately 7.1% from the prior year quarter due to a significant decrease in costs incurred in the materials and construction segment.
G&A expenses decreased 12% to $11.7 million in the third quarter of 2020 compared to $13 $3 million in the third quarter of 2019, due primarily to reduced G&A and our CRE segment as well as the materials and construction segment.
Let me now turn to the balance sheet and liquidity metrics.
Our years long effort to streamline our business positioned AMB to withstand this pandemic with an asset base that is focused on commercial real estate.
At September 30th 2020, our total debt outstanding was approximately $764 million and we had total liquidity of $385 million, including $117 million of cash in approximately $268 million of remaining capacity on our credit facility.
We have no material debt maturities until September 2022.
And a quarter and net debt to trailing 12 months consolidated adjusted EBITDA was six six times and our total debt to total market capitalization stood at 48%.
With respect to our dividend the board will likely to Clara catch up dividend in the fourth quarter. As we currently expect full year re taxable earnings to exceed dividends paid year to date.
We intend to pay out 100% of re taxable income and the exact amount will be determined by our board at the appropriate time.
With that I'll turn the call over to Christopher's closing remarks.
Thank you breath as we look toward 2021 and beyond I'm encouraged by our prospects, we own high quality assets and one of the most supply constrained markets in the country are tenant base, an asset mix of resilient and with tourism, returning and 95% of our tenant based now open I believe we are on a path to continued improvement in our commercial real estate perfect.
Additionally, demand for our Hawaii landholdings in non-core assets remains strong, allowing us to continue to execute on our asset monetization and simplification strategy.
<unk> great specific continues to show improving results.
Finally, our ESG focused culture means that we are tasked with creating value for all of our stakeholders and the COVID-19 pandemic has given us an opportunity to rise to that challenge.
With that will now open the call for your questions.
Thank you as a reminder to ask a question you almost taller than one on your Touchtone telephone so which are your question from the queue. Please press the pound key please standby will be compiled Q&A roster.
Our first question comes from Alexander Goldfarb from Hyper Stanleigh airline is now open.
Okay and good morning, good morning out there.
So just a few questions.
First.
On the on the rent collections.
Chris I think you said that you guys are 75% rent collections, which I get it less and what's going on the mainland but two parts to this one the 25% that you haven't collected because you said the bright collections or lower just because of the longer the duration of the lockdown pattern y. So.
Should we infer that that 25% that have been collected are all local operators or are there. Some nationals, who are part of that.
Paid uncollected rentz.
We answered that and then I have a second one to that that question as well.
Okay, I'll briefly start and I'll, let lance jumping here, probably more detail keep in mind, 75% is just for the month of October and we're still even though we're at the end of October.
We're relatively early in the rent collections cycle for October So I think probably focus more on the 80, 81%.
That we have for for prior months, but last you want to elaborate on kind of the local national mix or.
Hey, Alex Good afternoon to you, it's really a combination of both and I think the point that Chris made is an important one so it.
81% overall collections for Q3 when.
When we look at October and specifically that 75% collection right. We are tracking above the collection curve. So in other words at this at the same point in time. We are ahead of where we were for.
For the same months in Q3, so we feel good about our prospects to continue to have that number increase as time goes on.
And then as far as the make up like I said it. It really is it's a combination of both and we've been.
Transparent in the past about our proactive nature on deferrals to our local tenants in and extending a hand to help them through their short term needs.
And then also on the national side, and being able to reach resolution with many of our tenants most of which were deferrals and most of which we expect to get paid back by the end of this year.
Okay. So in other words and I didn't hear you comment on it but we can leave the fitness in movie theaters I guess, they just part of it but yeah, a big picture so it sounds like the nationals.
The rent issue is going to be differ all not abatement.
But then Lance is it fair to say that the bulk of that let's just for a simple math call, 20%, so a little bit of that sounds like some deferrals for nationals that will get repaid like the remainder of that sounds like our locals and of that reminder, do you think that that is mostly going to beat the fur.
With a little bit of the basement or you think that it's going to be more of a mix of abatement plus a bunch of closures.
Yes.
It's hard to tell at this point and maybe another way to think about it Alex is within that.
Call it the 20% of uncollected rent, but we tried to highlight and the deck here is the portion of unresolved collections and that's maybe maybe getting to your point or your question may be the majority of that unresolved.
And the local market and that's going to be a combination of some deferrals, it's going to be a combination of in all likelihood a little bit of a basement and one of the things. We've also been doing is moving some tenants two percentage rent structures, so where we give some downside protection based on sales in hopes of increase.
Activity for them with the tourism now being open.
Being able to capture some of that as time goes on.
Okay and then the second question is if we think about reopening tourism is sort of the discovery of a vaccine to the Hawaiian economy, how long do you anticipate before.
Some resumes because obviously the country sorry that I was not going back to what it was back in February how long before you think enough tourism is in is floating through the economy that it really starts to show up as far as.
Tenet health performance and the activity.
Yeah. It's a great question, an important one and there is an important distinction that I think we need to draw in light of our portfolio. Because we are not directly dependent on tourists. It is not as important to us that tourism comes back to say 80, 9100% of where it was before what's important is that the <unk>.
People that shop in our centers and utilize or retail are largely back to work and so while of course, we'd love to see the tourism industry get back to full strength.
I think what's going to drive and already is driving the recovery of our centers is just the level of economic activity that is more back to normal so we'd certainly like to see the unemployment rate dropped, but we think that's going to happen just as hotels open whether they're fully occupied or not and whether as people get the airline.
Begins to call people back and all of that so I guess my point is I think that the tourism industry will recover over the next year to a degree that is probably enough to really fueled the recovery of our portfolio, even though if you look at projections of the full recovery of tourism industry.
They are stretching out to multiple years.
So it's hard to predict with precision, but I think that we're going to be much better off just as tourism recovers to eat.
Even a moderate degree.
Okay, and then just the final question.
The dividend or the dividends to the fourth quarter.
Brad you anticipate that being a regular dividend that we can look for on a go forward basis or is it just sort of a stab dividend unethical stub is there a sense of.
What size like the date.
It's going to be a catch up.
Alex not a recurring run right and we will determine the right amount at the appropriate time here before year end.
Okay. Thank you.
Thank you.
Thank you and our next question comes from Sheila in the grasp of Evercore airline is now open.
I guess good afternoon, I'm, sorry, I had.
Had multiple calls that one if I Miss to ask a question that's already been asked but.
Just on that materials and construction it was positive to see that operating profit was positive and also EBITDA I know you've guided too fourthquarter being a little bit softer just wondering what was driving the better performance in the quarter.
Number one and number two just on thinking about monetizing that asset is it something that you wanted to have a.
Longer track record of positive EBITDA to maximize pricing or just how do you think about timing of monetization.
Yes, Sheila it's Chris Thanks, very much for the question. We were pleased with Grace's performance in the quarter, we have been saying for some time that we saw fundamentals in the business changing in a positive way unexpected that to translate into earnings as I said it towards the end of the call I don't expect it to necessarily be linear.
Here, but it's certainly go in the right direction I think the things that drove the profitability in the quarter were a combination of lower cost structure. As a result of some of the the G&A reduction efforts, we've made greater efficiency in the.
Just the operations, which has helped improve operating margins in the business and.
And.
Frankly, just the fact that the crews were a bit busier. Thanks to the fact that we've been winning more jobs of late and some of the.
Initial covid impact.
In terms of slowing down some of the the work activity head.
Had subsided. So I think it was a good quarter, but to your question about.
Monetizing the business.
We can't as your question implies.
As you rightfully implied in your question, we can't just take one quarter of performance and expect to get optimal pricing from the asset we feel we do need to have a few solid quarters behind us.
And we hope that we can do that we would expect a bit of moderation in the fourth quarter, but we do expect to have continued profitability into next year and so if we can prove that out and demonstrate.
That we really have turned the corner on the business I think we'd be in a better position to revisit the market sometime next year.
Okay, Great and then on page nine of your flight deck.
There is a bullet that mentions that you secured leases for key space typically as future occupancy risks I was wondering if you could give us a little bit more detail behind that comment.
Yeah, let's do you want to talk to them.
Yeah I'd.
I'd say in general Sheila we had.
We felt good about our leasing activity for for the quarter. So on.
On a number of leases completed relative to other quarters. We felt there was good activity now it's fair to say that about half of that were modifications related to two covid.
Covid modifications with tenants and so the 35 remaining leases is sort of more of our traditional.
Extensions one in particular that ironically was the driver of our negatively spread on the retail side was a really good backfill at Cooney shopping center. It was an old gamestop space that we were able to get.
A veterinary clinic and 10 year of term.
The reason we have the negative lease spread is there is a fair amount of of Ti that they have to put it on their site to improve the space and so that was a good example of where we had some some risk.
On the occupancy side that we were able to address and I think representative of the types of deals we continue to see through Covid.
Okay, Great and then also on the same page 97, 8% high watermark and industrial what's driving that and then can you remind us if there's any.
Near term development opportunities on the industrial side on any of ear land holdings.
Sure.
So the biggest driver for that was our Como Honda Industrial Park, which is over in the city of <unk> on the island of a Wahoo. We did have a vacancy that we were able to lease last year and is now being reflected on a year over year basis, that's really driving that all time high.
So we continue to feel very good about our industrial portfolio as well as being bullish about that asset class in general here in the state.
In terms of opportunities for us in the future. The most obvious one is probably Maui business Park, where we've continued to have.
Strong unit sales to buyers, but continue to look for opportunities, where we can do build the suits.
Four tenants and then retain those assets in our portfolio.
Okay, Great and then any insights on non-core asset sales 'n' fourthquarter, something some assets that might be under.
Contract at <unk> or just any visibility you can give us an non-core in fourth quarter.
Yeah sure I'll start with just kind of the environment and our degree of optimism in general for non-core sales going forward as you know, we always shied away from predicting the timing closings of any transactions just because they are unpredictable.
But overall I think we are very.
Very good position to continue the <unk>.
Pace of monetization both at our two development projects being Maui business Park in cooler as well as some of our non-core lend assets.
We do have a number of transactions, we mentioned to you earlier in the year that our investment team was shifting its focus more to the divestment side and dispositions and they've done a fabulous job along with.
Number of our other team members, who have been focused on land monetization and so I think we've got a good pipeline a potential.
Transactions I think that it's likely will closed some over the balance of the year and also have some more that may spillover in the next year. So I don't know if lance wants to add anything, but I know, we will shy away from being too specific on timing or what we might sell but we do feel good about the <unk>.
Environment and potentially.
Could be position next year to to even increase the pace of of.
Of monetization.
And it all gets back to the fact that there's a lot of demand for Hawaii real estate right now one of the things just anecdotally that were seen as.
People during the.
The travel quarantine period, and essentially the tourism shutdown.
Have been buying homes in Hawaii sight unseen and flying over in quarantine and then quick quarantine in them for two weeks is there's a lot of desire to be in Hawaii and there is also a lot of desire to.
Do development in Hawaii, So I think that those two facts are going to bode well for us.
I don't think I left anything for lamps.
Alright.
He was looking very anxious to get a word in it.
Chris Hi, I.
I guess met frequently you disclose if there's any.
Lots or on your contract it quickly and all that where valley business Park I didn't mean to you talking to that five minute answer was totally upgrade [laughter].
I'll, let and I'll, let Lance answered the question you really ask [laughter].
Not getting any any specificity Sheila give me because we always try to shy away from from forecasting timing and amounts we do have units in escrow at cuckoo look.
We do have a significant amount of land in escrow at Maui business Park, and we do have some other non-core transaction. So I think just underscoring Christmas comments, the dark Lord or the scoreboard rather is relatively.
Full and we're hopeful that we can take some of those over the goal line in the in the near term.
Okay and last question did you disclose the solar facility.
Pricing.
And do you have other solar assets that could be for sale I forget.
Hi, Sheila spread we indicated at the gain on that.
Solar facility, we do not have the pricing outline.
So that was again of $8 $9 million.
And we do not have any other solar facilities, but we do have other.
Renewable energy we have.
The hydro electric plants also on Kuwait.
Okay, great. Thank you.
Thank you showed up so.
Thank you and we have a follow up from Alexander Goldfarb, what type of satellite. Your line is now open.
Oh. Thank you just a question Ah remind me and it may predate when I pick the coverage or be guidance, but you've been steadily selling parts of the Maui business Park.
Can you just remind me what the sales are.
And you know, presumably if you guys want to expand industrial I'm guessing that what you're selling is not conducive to develop intricate industrial like just just.
Just wanted better understand it.
Sure.
So Maui business Park is is a business park near the airport in Central Maui and the zoning is very flexible there. So it allows.
A number of different uses from industrial and one and all the way through more traditional commercial and up to and including retail on the other.
And so sales have been across that spectrum to users both industrial users who have built facilities for their own operations as.
As well as retailers like lows, who have relocated and constructed stores there.
On the development side, we have taken advantage of of building on the retail side. So the best and most recent example of that is our whole Kelly shopping center, where Safeway open rushed year.
Grocery anchored center.
We've now completed the majority of our spec space in terms of leasing and we also leased or to retail pads earlier this year.
So really looking to sort of wrap up phase one.
And we will continue to look for those types of opportunities Alex within the business Park on the retail side, but we will also look for opportunities on the industrial side. So while we have had users as buyers we have not had as many users as tenants.
That are coming to look into have somebody with the capital and the development wherewithal to construct at least to them and that's a road that we'd love to play.
Okay, but just if I understand it correctly there is opportunity for you to build industrial there, but you basically are going you're building whatever is the product that most available in the market today.
Is that correct.
We that that is correct. We are also selling lots to owners, who will in turn build owner users who will in turn build.
The type of product that is most in demand today.
Okay. So the zoning does allow us to do industrial some more traditional warehouse light light industrial type uses.
Okay. So I guess just going back to it if it's difficult to get landed Hawaii, especially adjacent to the airport logistically convenient on Maui why wouldn't you just save that land and build it into industrial in bulk up your industrial exposure I guess I'm a little confused if you have good position land I realized that may not.
B I use our court today, but if you know that you guys want to grow industrial and that rather than having shipping containers in the back parking lot at the at the groceries at the dropping centers you want to provide warehouse facilities why not keep that land and then that becomes the development pipeline.
It's a it's.
It's a good question and it's.
Sort of a business plan of ours.
Really it comes down to opportunities and present valuing what we can get for selling land today and potentially reinvesting dose proceeds later compared to what it would cost for.
For the lab basis to build it to lease the land with construction prices being the way they are but suffice it to say, it's certainly a desire of ours to play the role of developer will rebuild inventory for our portfolio in the long term.
Yeah, we haven't.
Yeah that was one of the things we haven't wanted to do is just built spec warehouse, we want them to have tenants lined up and we've come close to doing a couple of deals deals and others just haven't gotten across the finish line and I think some of that.
May may take a little while but we are very mindful of the fact that.
We'd rather.
On the Lan longterm, if we can if we can make that work, but there are a lot of users that do not want to lease land or space they want to on and so.
Tradeoff that we make and we certainly have gone vertical.
Most of the Kelly shopping center on the retail side of my business.
But.
And I would expect that.
Do that.
Yeah.
I understand I'm, just saying from the market perspective.
You guys have this amazing story for being the sort of one stop user for both retail and then growing the industrial then.
I think that vouchers would be willing to sit on land.
If you guys eventually can develop into industrial so it's just it's just review that there seems to be opportunity. There I don't think you'd get penalized. If you were sitting on that land for a period of time in for you could develop it for a user on the warehouse Friday.
For thought I guess.
Well thank.
Thank you.
Okay listen thank you.
Alright, Thanks Alley.
Thank you and I'm showing no further questions in the queue at this time I'd like to tell a call back with a flat for any closing remarks.
Thank you all for joining US today do you have any follow up questions. Please feel free to call us at 8085258475.
E Mail us at Investor Relations at a BHI dot com.
Ahah and have a great day.
Ladies and gentlemen, thank you for your participation on today's topic that does conclude your program and you may now disconnect.
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