Q1 2021 Alexander & Baldwin Inc (Hawaii) Earnings Call
First quarter 2021 Alexander <unk> Baldwin earnings Conference call.
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I would now like to turn the conference over to Karen Smith Investor Relations. Please go ahead.
Thank you Aloha and welcome to our call to discuss Alexander <unk> Baldwin first quarter, 'twenty, 'twenty, one or Inc.
With me today for our presentation are Abb's, President and CEO, Chris Benjamin.
Brett Brown CFO.
We are also joined by Lance Parker, <unk>, Chief Real estate Officer, and Clayton Chun, Chief Accounting Officer, who are available to participate in the Q&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 from those contemplated by the relevant forward looking.
<unk>.
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 Companys plans and responses to the novel Coronavirus pandemic and related.
Economic disruptions.
Forward looking statements speak only as of the date. The statements were made and are not guarantees of future performance.
Forward looking 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 REIT status on the company's business.
Risks associated with COVID-19, and its impacts on the Companys goodness is 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 to the development of cuckoo ULA generally discussed in the company's most recent form 10-K.
Form 10-Q, and other filings with the SEC. The information on 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 Www Dot Alexander <unk> Baldwin Dotcom crisp.
Will open up today's presentation with a strategic and operational update. He will then turn the presentation over to Brett who will discuss financial matters, Chris will return for some closing remarks, and then we'll open it up for your questions with that let me turn it over to Chris.
Thanks, Carol and good afternoon to our listeners we hope this call funds everyone well.
We're very happy today to reported strong first quarter Hawaii's economy continues to recover steadily and we are seeing the benefits of the steps. We took in 2020 to position us for recovery in 2021.
Each of our business segments exceeded our expectations for the quarter. So while we still have work to do we're off to a good start.
Before I get into the details of our quarterly results. Let me provide you with an update on the improving Hawaii economy.
The state continues to reopen prudently not only did Hawaii experienced the best health outcomes of any state through the pandemic, but our vaccine vaccination program is one of the most successful in the country.
We are one of the leading states in the pace of our vaccinations and according to the Department of Health survey more than 90% of our residents have indicated a willingness and intent to get the vaccine.
All of this creates a safe environment to rich tourists and homebuyers are flocking.
There is a remarkable rebound in tourism and continued high demand for homes in the islands with many people from the mainland U S relocating or buying second homes here.
Our local stores restaurants, and bars are all open or are able to open for business and most of them are.
And the continued move to relax travel restrictions the state announced a vaccine exemption for Hawaii residents traveling between our islands.
This will take effect on may 11th and will further encourage economic recovery by making resident travel significantly easier.
As a reminder, traveling between the islands without quarantine is generally required a COVID-19 test.
Negative tests since October this vaccine exemption is a precursor to a similar exemption that is expected to be implemented from mainland travelers sometime this summer.
A benefit of the late February lifting of COVID-19 restrictions has been the surge in tourism.
In January tourism levels were just 26% of the same month in 2019.
By April we were already back to 63% of 2019 levels and the outlook for the summer months is even stronger.
With this strong demand hotels are filling up more hotels are reopening and.
And we're seeing airlines add capacity.
While our portfolio is not heavily tourism dependent.
These are all strong signs for our local economy.
Already we have seen the lift in the performance of our neighborhood shopping centers, which make up most of our portfolio and we expect that our resort retail centers, which comprise just 8% of our portfolio's pre COVID-19 NOI.
We will show market improvement in the second and third quarters of this year.
This economic recovery aligns with the strategy, we laid out at the start of the pandemic. We believe then that supporting our tenants and keeping them in place would be our best path to capitalize on the recovery when it arrived.
We're very pleased to report today that this strategy is paying off as demonstrated by the 17% sequential improvement in our net operating income this quarter.
Directionally, consistent with but even better than our expectations.
Something we didn't anticipate at the beginning of the pandemic was the strong growth in demand for Hawaii assets and land. This.
This demand seems to be rooted in two things the desire of people to be somewhere safe and the new found flexibility. Many people have to live where they want to know where they have to.
Nowhere is this more evident than at our <unk> project, which is experiencing its best sales in 15 years.
But we're also seeing in demand for other development parcels and even unintelligible glands.
This helps create a positive environment for our non core asset monetization program on which we made good progress this quarter, having received $29 million in total cash proceeds.
We also believe our materials <unk> construction business is positioned for improved performance as the year progresses, but for different reasons.
The steps that the Grace leadership team has taken over the past two years to win more jobs and achieve greater efficiency set us up well for 2021.
There is a long process involved in turning winning bids into revenue because the work has to be contracted and scheduled but we believe the majority of the jobs. We won in 2020 will commence in 2021, and finally help us turn the corner.
For perspective, so far in April we have paved over 60% of the amount paid for the entire first quarter.
We're encouraged by this increased level of work and remain optimistic as more jobs commence from our backlog.
All of this progress and land sales and Grace performance will position us for greater simplification of our business model, we remain fully focused on becoming a pure play Hawaii commercial real estate company in the near term.
We're pleased with the progress we've made year to date.
Now I'd like to provide some more highlights of our quarterly performance.
For the first quarter as I said, we grew commercial real estate NOI by 17% compared to the prior quarter and cash collections by 5%.
Validation that supporting our tenants benefits us as the market recovers.
Our focus on collections bore fruit we can.
Collected $8 $3 million of cash in the quarter related to cash basis tenants and reserved amounts.
<unk> payments for approximately 62% of first quarter cash basis billings.
As well as payments related to approximately 10% of prior year billings that were reserved as of year end 2020.
With tenant performance, improving we expect continued improvement in collections and have in fact recently negotiated some settlements that will help boost our numbers this quarter.
We collected this coming quarter I should say.
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.
Portfolio wide same store leased occupancy.
Remained steady at 93, 8% with minimal COVID-19 related lease terminations.
I want to credit my team members for their proactive and strategic approach to working with tenants since the start of the pandemic.
Beginning this quarter, we're pleased to provide additional occupancy insight with both leased and economic occupancy metrics provided.
Expanding on the physical occupancy measures, we have historically disclosed.
Leasing demand continues to gain momentum as we signed approximately 122000 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 <unk> and local businesses, who may see an opportunity to take space that is rarely available.
Just this week, we back filled a grocer space in one of our resort centers that was vacant due to COVID-19. Another demonstration of the growing optimism, we're seeing for the resort retail sector.
With respect to our retail redevelopment, we remain on time and on budget at <unk> Park shopping center, the Safeway anchored center in Kailua that we're upgrading.
And in the process reclaiming some leasable area that had been abandoned by the previous owner.
Our return expectations for the project are 8% to 9% with anticipated incremental annual NOI uplift of $1 7 million.
We're making solid progress here and recently delivered the Starbucks space for tenant improvements.
We'll realize positive incremental NOI here in 2021, even though the project is not slated for completion until the end of this year.
Monetization of noncore assets in the first quarter was strong producing approximately $29 million from cash proceeds as we accelerated our simplification effort amid strong demand for Hawaii assets in.
In the quarter, we closed 12 units at <unk> the pace, we havent seen since before the great recession in 2008.
And the bulk sale of <unk> of a large developer parcels as well.
This significant activity of cuckoo ULA resulted in approximately $17 million of cash proceeds received from cuckoo ULA joint venture projects in the quarter, including the first ever capital distribution from the main partnership it could create a lot of $10 million.
We also completed six non core land sales totaling about 134 acres for another approximately $12 million in proceeds.
Since quarter end, we've completed two additional sales that could carry on and have a strong pipeline of sales in escrow.
Importantly, the demand for housing or conclude ULA has attracted homebuilders to the project and we are discussions for possible additional bulk parcel sales.
With respect to our materials <unk> construction business, we continue to focus on improving our prospects for future monetization at great specific.
While we anticipated a slower start to the year and an operating loss for the first quarter. Our results were better than we initially forecasted.
We're optimistic for improved performance as the year progresses based on anticipated timing of projects as I noted earlier paving activity has already picked up significantly in the month of April.
Finally, we have a robust ESG program in place of which we're very proud and on which we have made considerable disclosures, including our inaugural corporate responsibility report in August 2020 I.
I am proud that our ESG initiatives in 2020, and early 2021 have not been a case of hopping on a bandwagon, but rather expanding many existing programs that I believe are consistent with the DNA of our company and our commitment to be partners for Hawaii.
I'll now turn the call over to Brett for financial details Brett.
Thanks, Chris and good afternoon, everyone.
I'll start with our financial results for the first quarter. We recorded net income of $9 9 million or <unk> 14 per share compared to net income of $6 2 million or <unk> <unk> per share in the same quarter of 2020.
First quarter funds from operations was $19 2 million or 26 per share compared to $15 $9 million or <unk> 22 per share in the same quarter of the prior year.
Core <unk> was $15 4 million or 21 per share compared with $18 $3 million or <unk> 25 per share respectively.
In the same quarter of the prior year. This decrease was driven primarily by COVID-19 related tenant rent relief or first quarter 2021 core <unk> comp.
<unk> favorably with last quarter fourth quarter, 2020, which was $12 1 million or <unk> 17 per share. This demonstrates the continued improvement we're seeing in our CRE business.
Let me now turn to our commercial real estate segment.
Sorry revenues of $39 $9 million was $3 5 million or eight 1% less than the pre COVID-19 results in the same quarter of 2020, but up eight 1% or $3 million from last quarter.
NOI of $25 $3 million was $3 6 million or 12, 4% less than the pre COVID-19 results in the same quarter of 2020, but again up 17, 1% or $3 7 million from fourth quarter 2020.
The decrease to the year ago quarter was mainly driven by reduced retail rental revenue due to COVID-19 and the increase compared to last quarter is primarily due to lower net bad debt charges as we had strong receipts from cash basis tenants along with the reversal of some tenant reserves.
Continuing with the positive trend, we have now collected more than half of the $5 $95 9 million of total rent we deferred in 2020.
With the majority of the remaining balance still due by the end of the year.
Early in the first quarter, we granted a limited number of additional rent relief deferrals totaling $1 $2 million per which the balance is also due by the end of this year.
During the period, we had collections of $1 $4 million of previously reserved.
From a leasing perspective, we continue to see increased leasing volume and interest as Hawaii Reopens, we completed 51 leases in the first quarter totaling approximately 122000 square feet.
Per comparable leases spreads were one 5% portfolio wide and 3% per retail spaces.
Included within the completed leases this quarter were 15 COVID-19 related lease modification extensions totaling approximately 28000 square feet and at a weighted average term of six months.
Our land operations business produced revenue of $17 1 million during the first quarter of 2021 and generated EBITDA of 11 $7 million in the quarter as a result of sales and other operating revenue.
Our sales activity. This quarter included 12 units at our cuckoo ULA joint venture projects and a bulk sale of a large developer parcel plus about 134 acres of non core land on Maui for total cash proceeds of approximately $29 million.
As Chris mentioned due to the sales activity at Coca Cola reserved approximately received approximately $17 million of cash proceeds in the quarter, including our first ever capital distributions of $10 million from the main partnership at Coca Cola.
Our materials and construction segment generated adjusted EBITDA of negative $1 4 million for the first quarter compared to positive $100000 on the same quarter of the prior year.
Results were largely impacted by lower paving volumes this year compared to the year ago quarter.
On a trailing 12 month basis, our adjusted EBITDA was positive $4 8 million compared.
Compared to the prior 12 months adjusted EBITDA of negative $3 1 million.
We are optimistic for improving performance as we move through the year and commenced paving jobs based on the backlog we have built.
Finally, with respect to our G&A, we continue to work to reduce expenses across our businesses.
G&A expenses decreased 11, 6% to $12 2 million in the first quarter of 2021 compared to $13 $8 million on the first quarter of 2020, due primarily to reduced G&A in our CRE and materials and construction segments.
We expect total G&A to be in the range of 53 million to $6 to $56 million this year.
Included in the range on certain expenses coming back on line as we shift away from COVID-19 and as previously mentioned last quarter. Also included in this year are one time charges of approximately $4 million related to implementing a new ERP system and preparing to shift our pension obligations to a third party.
<unk> on a net basis, our expenses should be well below our 2019 run rate, which is consistent with the progress. We've made since then and our simplification effort.
Let me now turn to our balance sheet on liquidity metrics.
We continue to work to reduce leverage to our long term target range of five to six times EBITDA.
And have made meaningful improvement over the past few years at quarter end net debt to trailing 12 months consolidated adjusted EBITDA was six four times down from six seven times last quarter and down from seven five times one year ago.
At March 31.
Total debt outstanding was $655 million and we had total liquidity of $401 million income.
Including $32 million of cash and $369 million.
Of remaining capacity on our credit facility.
We have no material debt maturities until September 22022, and our debt to total market capitalization stood at 35%.
With respect to our dividend, we're very pleased to be able to declare our second quarter dividend at <unk> 16 per share.
Which is a 7% increase from our 15, 7% for the first quarter.
This reflects our improved visibility on growing conviction that Hawaii is on stronger footing. We will continue to work with our board to align our dividend with REIT taxable income.
With respect to guidance, we are raising core <unk> per share guidance for 2021 to a range of 69 to 77 per share from the initial range of 67 to 77 per share.
This guidance reflects our improved outlook and incorporates our expectations on tenant retention for the coming year as our tenants recover from COVID-19 and is supported by our updated same store NOI guidance range of 1% to 4% from zero to 4% offset by the increased G&A expense as referenced earlier.
With that I'll turn the call over to Christopher his closing remarks.
Thanks, Brett with the steady reopening of Hawaii and the resurgence we've experienced in tourism, we feel confident that Hawaii is starting to put COVID-19 in the rearview mirror having.
Having closed our state to protect ourselves from the worst health impacts of COVID-19, we experienced an outsized economic downturn, we believe our tenant tenant centric approach preserved occupancy and has positioned us to benefit disproportionately from the reopening as demonstrated by our 17% sequential increase in NOI in the first quarter.
Further as we said on our last call. We continue to focus on selling non core assets and believe our progress. This quarter reflects both our level of focus on this effort and the strength of buyer demand. We will continue to push forward and we believe success here will result in meaningful value creation to A&P shareholders and a much simpler.
<unk> model with every passing quarter.
After an acquisition hiatus to allow us to sell non core assets and strengthen our balance sheet, we're turning our attention back to growth through acquisitions and hope to identify opportunities to expand our portfolio later this year and into next even as we continue our non core disposition process.
With that we'll now open the call for your questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
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At this time, we will pause momentarily to assemble our roster.
Yeah.
Our first question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Hey.
I would want you would try to do the time change so I'll just say.
Good day out there.
Thanks, Alex.
No problem.
It, especially at the end of a great the earnings week.
Two questions first I mean, I guess, Chris we'll go to the acquisition part I'll work backwards.
You know clearly.
Small market.
And you guys, presumably now all the all the potential sellers in all the owners.
What is the transaction market like today for your target assets meeting industrial and retail and you know what makes you hopeful that you'll be able to get product.
Versus either a people may not want to transact or be others bidding aggressively forward as as cap rates seem to once again be on a downward trajectory.
Yeah.
Yes. Thanks for the question Alex I'll also let lance jump in here with some specific thoughts on the market. Let me just start by kind of reiterating where I think we are in terms of our appetite for acquisitions as you may recall, even before COVID-19, we announced kind of late 2019 that we would be.
Kind of putting a hold on our acquisition activity because our primary focus was on strengthening our balance sheet and focusing our investments team more on the disposition side and I think the numbers that Brett just reported in terms of the success that we had even through COVID-19 and big NOI hit that we took.
Being able to strengthen our balance sheet through that timeframe is a great Testament to the success of the team and the monetization of assets and so now that we're in.
The low six times debt to EBITDA range, obviously, we want to be between five and six but we look forward and we think we're going to continue to monetize assets and we're going to continue to strengthen our balance sheet. So it is time to look back to two acquisitions.
So the team is out there more actively looking.
Louis has been connected we're always connected to the market, but they havent been actively looking for the last 18 months or so.
And maybe Lance do you want to elaborate a little bit on kind of where theyre looking on what you think about.
The market for acquisitions right now, yes, absolutely thanks, Chris.
Hey, Alex.
So obviously in addition to our confidence on the balance sheet side I will say that the market is starting to fall a little bit here in terms of acquisition opportunities we've seen.
More specific opportunities in the marketplace that we feel confident at some point in this year.
The right sort of match in terms of the asset class the type of properties that we want to own and pricing that makes sense. So that's what's really fueling our optimism. The fact that we've already seen some of these opportunities and thats been a shift I would say this quarter versus last quarter.
And then as far as the product side are you seeing sort of even balance of industrial versus retail or do you think it's going to be more one versus the other.
And in terms of I don't want to go too deep just because it's a little early in terms of our pursuit of opportunities.
We've talked in the past about the industrial market as a general statement is typically a little tighter and acquisition opportunities tend to be a little smaller and that's just.
A fact of our market here.
So that would be representative of kind of what we're seeing now and maybe more bite size opportunities on the retail front.
Okay and then the second question is.
Chris I mean, your comments on the overall state of Hawaii or just.
Night and day versus prior quarters, So one that's wonderful, but a strong rebound.
Curious you know what does this mean for tenant demand both from <unk> perspective.
Tenant health recovery, meaning all the people who were deferred paying it back and then finally, a resumption of mainland tenant.
To come to the islands I think you guys had pointed out like even people like trader Joe's or something <unk> already been out there yet so.
Still a lot of room to go so maybe if you could just talk about the demand.
And the tenant health recovery from three perspectives.
Yeah.
So Alex I'll go ahead, and take that and I'll sort of walk down the list of of the question here, so starting with rent.
We did have positive rent spreads for the quarter, we feel very good about prospects going forward both in terms of activity.
As well as the rents I think it's.
It's fair to say that we haven't seen a lot of degradation in terms of pre COVID-19 rental rates.
We did have some pretty healthy spreads on a few new leases, although the GLA there was relatively small and so our overall number was was a little low but we feel we feel good about the fact that rents have effectively held in.
In terms of prospective deals versus where we were pre pandemic.
In terms of payback just generally tenant health.
Chris had hit on collections in his remarks, and so we're just seeing a lot of positive trends.
Sales figures for our tenants are are increasing.
We are not dependent on tourism for the performance of our portfolio, but we do have the two centers that we've talked about in the past.
With daily visitor accounts improving for both.
<unk> Island.
Almost 90% of pre COVID-19 rates.
And what you know opting into the safe travels program, we're starting to see the benefit there in terms of tenant performance and those have really been the outliers of our portfolio our collections.
It's really not reflective of the portfolio as a whole it's really been those two assets are just a handful of tenants so feeling good about debt as well.
And then lastly, with regard to mainland.
We still do have mainland companies that don't have representation here in terms of any store accounts that are active in the market.
Continue to look.
We do have a few that we've been able to strike deals with on the <unk> side. That's obviously, a very hot segment of the market for the national as they continue to be interested and then there are a couple of mid box players like I said that don't have a presence here that have been exploring opportunities.
Okay, great. Thank you.
Okay.
Our next question comes from Steve O'hara with Sidoti <unk> Company. Please go ahead.
Hi, Thanks for taking the question I think this morning, so good morning.
Thank you. Thank you.
Yeah.
Yes, just.
Maybe first on <unk>.
Turning to Grace.
Can you just talk about the maybe the I mean, it sounded like activity would pick up this year based on the bid you won.
In 2020.
And then maybe what's in the pipeline going forward it yet in that chart I mean, it looks like the paving market has declined pretty soon.
I guess 2015.
I would think it would be somewhat cyclical.
Kind of moving back towards a more positive part of that cycle or is there anything else going on.
Well.
This is Chris this is a continuation of what we've been talking about for the past year that.
A combination of more.
More bids in the market.
I don't remember the exact statistics, but last year's level of bids that were available in the market was significantly higher than the prior few years. So theres that second of all our bid win percentage was better last year.
Than it had been in the prior few years and third we believe that we have won those jobs at embedded margins that should be more favorable than the most competitive years, when we were really having to.
Be extremely aggressive to win jobs. So all of that has been very positive the one chat.
Challenge that we've had and the reason that we did not have a profit in the first quarter is that it takes a while from the time of contract winning these jobs to get them contracted and the reason that we've got more optimism as we look to balance of the year is that we now have contracts and we have these jobs scheduled and we are feeling.
And better about the pipeline not just being out there someday, but actually being imminent and being able to.
To actually get this paving work done on as to the market strength.
There have been a lot of indications that there is a lot of pent up demand that both the counties account.
<unk> levels and the state for more work. So we're hoping that this will be another active year of bidding, which will then help support.
<unk> of the momentum next year.
But.
Ultimately, we just we're at the mercy of the government entities and when they put the bids out and when they contract. So the indications are good.
We always have to wait and actually see them materialize.
Okay. That's helpful and then.
Just I'm just kind of curious.
Talk about Illumina.
Eliminating.
Some of the 10 31 exchanges and things like that I think the most recent two trillion dollar spending.
Can you just talk about how that would impact you guys and if it would at all and maybe how you could offset any impact or attempt to do so.
Yeah, Steve So just as background for anyone who may not be aware, we have historically made good use of the 10 31 exchange rules as we've sold for example sold assets on the U S mainland and brought them back to Hawaii, we've been able to do that through tax efficient transactions when we sold the <unk>.
OE land the Maui AG land back from 2018, we were able to invest in quarter $1 billion.
Of proceeds through 2031 exchanges. So it has been historically, a very important tool for us.
And we would.
As really any real estate company in any commercial real estate company would we would continue to benefit from that going forward.
If it stayed in place having said that it has been a target off and on in Washington over the years for repeal.
Efforts have never really gotten much traction and theres no way to predict whether it would happen this time.
Would be a negative for us, but the main thing that I think we feel good about is the fact that we have completed that mainland migration, we have reinvested those AG land proceeds.
So I think that the impact for us going forward would be.
Far less than if we hadn't gotten those things done so I think.
The silver lining is that at least we've gotten those transactions done, but we'll just have to wait and see how it plays out.
And.
I think theres a lot of uncertainty in terms of the various bills that are being presented in the legislative packages that are being presented right now.
Okay, and then just maybe lastly, I mean just.
On the guidance.
For core <unk>.
Is there something else.
Turning later in the year debt.
Is kind of dragging.
Core from slowed down from the current quarter's level, maybe it seem like things are improving more or less in Hawaii, you'll get the air travel numbers are pretty strong or recovering nicely.
But is there anything I guess you have.
The E positive coming online. So I think that was going to be a benefit but what else is happening there that's potential.
Detract or.
Maybe later in the year.
Sure Steve This is Brett.
So as we look at the core of the year I should say in the first quarter, obviously very strong.
Included also good receipts on a cash basis tenants as well as reverse some of the reserves that we took on tenants in 2020. So that was a good lift in some of that may occur in the future, but you can't really count on that and so we do have other good positive things going forward as well on the current quarter, we had certain expenses that we will incur.
Later in the year there were about a timing basis not included in the current quarter. So those two items really the cash basis tenant receipts over strong the.
Reserves that we reversed from prior year and then the timing of certain expenses that we expect to incur later in the year.
What caused the run rate not to remain at the current level.
Okay, Okay and did you say what the reversal was in the quarter in terms of.
Either core four core flow per share.
So it was $1 $4 million reversal of reserves and that would be approximately <unk> <unk> per share.
Okay, great. Thank you very much I'll jump back in queue.
Of course, thanks, Steve.
Our next question comes from Sheila Mcgrath with Evercore. Please go ahead.
I guess good afternoon I was wondering if you could give us a little bit more detail on.
The sales at <unk>.
On what you think is driving that demand and in order to cash.
Continue to satisfy that demand do you have to put more on incremental capital to.
Into that project to finish more lots.
Thanks, Joe I'll take that this is Chris and then Lance can chime in if there is any team wants to add but.
It's really been amazing to see what has happened to demand for residential.
Land and homes in Hawaii.
Particularly at the high end, if you look at <unk>.
<unk> on similar projects.
The sales activity is just saw it and I think it is.
Really for the reasons I cited earlier, which is that.
On.
People can live where they want to live now that's just kind of one of the realities of the virtual world we're living in and it's such a it's been such a safe environment to be.
And that's not only driving what I would call retail sales, which is sales of individual lots, but as I mentioned, we sold a builder parcel and we've got discussions going on with other builders.
There so it's been a great cash infusion into the project some of that cash we were able to pull out some of that cash we have left in for the infrastructure work that we need to do now to deliver more lots. Our current projections are that we will not have to put more capital in that the sales themselves are.
Fueling and providing the capital to build out additional inventory.
So it's not our expectation that we'll have to put more capital in and if anything.
This provides the prospect for either on a go forward basis pulling more capital out or as we've talked about in the past potentially even.
On monetizing the project and reducing our exposure to that part of our business. So it opens up a lot of possibilities.
They are all positive.
Theyre going to be most likely pulling capital out, but we're probably going to be pulling capital out one way or the other whether it's incrementally over time or.
More significantly in.
On the near term.
Okay, and then you did mention that there was like a 10 million dollar distribution or something what how does that run through the income statement.
It doesn't it's just <unk>.
Distribution of cash and so that resulted in our our investment.
Balance for that joint venture being reduced.
Okay. So it doesn't impact income, Okay and then.
Ugh.
E shopping center.
Is there much at least leasing to be done prior to completion of that project or will it.
Open pretty much pre leased.
The majority of our well I would say all of our anchors are are there. They are pre leased Safeway was an existing tenant and we extended the term with them we.
We did lease to Starbucks and we mentioned we were able to turn the improvements over to them actually ahead of schedule and then we have a few other larger tenants that retained.
There are some smaller base shop space that will be available and.
Actually we just had our first letter of intent executed for one of those space. So we do have that on the market and we're excited about the prospects for filling that space up.
Okay, Great and last question from me looking back at your strategy of working with tenants for proactive deferrals I think had a bigger impact than maybe some other shopping centers on same store NOI.
But you held up occupancy.
Arguably better so I'm just wondering looking back at it how you how you feel about that strategy. If you think it was the right one and just the economics of that.
Driving that decision.
Decision.
Yes, Thanks, Sheila I think we feel good about for two different but complementary reasons. One is we truly believe it was the right thing and consistent with our focus on the local community and being partners for Hawaii and trying to help our tenants survive, but as you've pointed out it also position.
US to have a much better recovery because we have the tenants in place. While we are pleased to be back filling some of the spaces that did go dark during the pandemic, we're much happier having most of our tenants in place and not having to re lease the spaces because of course inevitably you've got downtime.
So we're very pleased with the strategy.
Im very proud of and I'm pleased with the team's execution of that strategy because it is very easy to come up with that strategy. It is a lot tougher to be on the front lines working with tenants day in and day out.
<unk> through these these issues and the team did a fabulous job under Lance's leadership so.
Very very proud of the approach and very pleased with the early returns on on.
How it worked for us.
Okay. Thank you.
Thanks Sheila.
This concludes our question and answer session I would like to turn the conference back over to Karen Smith for any closing remarks.
Okay.
Thank you operator, and thank you all for joining us today.
You have any follow up questions. Please feel free to call us at 80852584, 75 or E Mail us at Investor Relations at AEP, Hei, Dotcom Aloha and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.