Q4 2024 Alexander & Baldwin Inc Earnings Call
Operator: Good afternoon, ladies and gentlemen. Welcome to the fourth quarter 2024 Alexander & Baldwin Earnings Conference. At this time, all lines are in listen only mode.
Good afternoon, ladies and gentlemen, welcome to the fourth quarter 'twenty 'twenty for Alexander <unk> Baldwin earnings Conference call.
This time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operation.
At any time during these calls you require immediate assistance. Please press star zero for the operator.
Operator: This call is being recorded on Thursday, February 27, 2025.
Michael: This call is being recorded on Thursday February 27th 2025, I would now like to turn the conference over to Michael <unk> Senior manager on the development team.
Michael Imanaka: I would now like to turn the conference over to Michael Imanaka, Senior Manager on the Development Network. Please go ahead. Thank you, operator.
Speaker Change: Please go ahead.
Speaker Change: Thank you operator.
Michael Imanaka: Aloha and welcome to Alexander and Baldwin's fourth quarter and full year 2024 earnings conference call. My name is Michael Imanaka and I'm a senior manager on the ANB development team.
Michael Monaco: Hello, and welcome to Alexander <unk>, Baldwin's fourth quarter and full year 2024 earnings Conference call. My name is Michael you Monaco and I'm, a senior manager on the N B development team.
Michael Imanaka: With me today are A&B's Chief Executive Officer, Lance Parker, and Chief Financial Officer, Clayton Chun. We are also joined by Kit Millan, Senior Vice President of Asset Management, who is available to participate in the Q&A portion of the call. During our call, please refer to our fourth quarter 2024 financial presentation, available on our website at investors.alexanderbaldwin.com forward slash events.
Lance Parker: With me today are Abb's, Chief Executive Officer, Lance Parker, our Chief Financial Officer, Great insight.
Speaker Change: We're also joined by Kim Milan, Senior Vice President of asset management was available to participate in the Q&A portion of the call.
Speaker Change: Our call. Please refer to our fourth quarter 'twenty 'twenty four but actual presentation available on our website at investors don't Alexander Baldwin Dotcom towards flash events before we commence please note that statements. In this presentation that are not historical facts are forward looking statements within the meaning of the private securities litigation.
Michael Imanaka: Before we commence, please note that statements in this presentation that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and 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. Such forelooking statements speak only as of the date the statements were made and are not guarantees of future performance. Forelooking 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 forelooking statement.
Speaker Change: Reform Act 1995, and 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.
Speaker Change: Competitive positions so.
Speaker Change: Such forward looking statements speak only as of the date. The statements were made and are not guarantees of future performance.
Speaker Change: 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.
Michael Imanaka: These factors include, but are not limited to, prevailing market conditions and other factors related to the company's REIT status and the company's business, evaluation of alternatives by the companies related to its non-core assets, and the risk factors discussed in the company's most recent Form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission. The information in this presentation should be evaluated in light of these important risk factors.
Speaker Change: These factors include but are not limited to prevailing market conditions and other factors related to the company's REIT status and the company's business.
Speaker Change: Sally wasting of alternatives by the company is related to its non core assets and the risk factors discussed in the company's most recent Form 10-K Form 10-Q, and other filings with the Securities and Exchange Commission.
Speaker Change: The information in this presentation should be evaluated in light of these important risk factors.
Michael Imanaka: We do not undertake any obligation to update the company's forward-looking statement.
Speaker Change: 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.
Michael Imanaka: Management will be referring to non-GAAP financial measures during our call today. Please refer to our statement regarding the use of these non-GAAP measures and reconciliations included in our 2024 fourth quarter supplemental information and presentation material.
Speaker Change: Please refer to our statement regarding the use of these non-GAAP measures and reconciliations included in our 2020 for fourth quarter supplemental information and presentation materials.
Michael Imanaka: Last, we'll start today's presentation with an overview, then hand it off to Clayton for a discussion of financial matters.
Speaker Change: Last I'll start today's presentation with an overview then hand, it off to Clayton for a discussion of financial matters to close plants will return for some final remarks, then we'll open it up for your questions.
Michael Imanaka: To close, Lance will return for some final remarks, then we will open it up for your questions.
Lance Parker: With that, let me turn the call over to Lance. Thanks, Michael. Great job.
Lance Parker: With that let me turn the call over to Lance Thanks, Michael Great job, everyone joining us Aloha.
Lance Parker: To everyone joining us, aloha. 2024 was my first year as the CEO of A&B. And I can't help but reflect on the performance of the company over the past several years compared to our retail peers. Since becoming a REIT in 2017, our same-store NOI growth has averaged 3.8% per year, compared to 2.3% for the NARIT Shopping Center subsector. We began presenting FFO in 2020 and achieved a CAGR on CRE and corporate FFO of 20.4% compared to 9.3% for the Nairi Shopping Center subsector. We achieved these impressive results.
Speaker Change: 2024 was my first year as CEO of AMB and.
Speaker Change: And I can't help but reflect on the performance of the company over the past several years compared to our retail peers.
Speaker Change: Since becoming a REIT in 2017, our same store NOI growth has averaged three 8% per year compared to two 3% for the NAREIT shopping center sub sector.
Speaker Change: We began presenting SFO in 2020 and achieved a CAGR on CRE and corporate <unk> of 24% compared to nine 3% for the NAREIT shopping center sub sector.
Speaker Change: We achieved these impressive results, but it really wasn't until last year that we were able to fully concentrate on executing our Hawaii focused commercial real estate strategy.
Lance Parker: But it really wasn't until last year that we were able to fully concentrate on executing our Hawaii focused commercial real estate strategy. Throughout 2024, I emphasized our four priorities related to this execution. Operational excellence.
Speaker Change: Throughout 2024, I emphasized our four priorities related to this execution.
Speaker Change: Operational excellence.
Lance Parker: balance sheet strength and flexibility Streamlining our business and cost structure and growth. Over the course of the year, we grew our FFO and NOI and saw a strong leasing activity in the portfolio. We improved our capital structure by refinancing $130 million of mortgage debt with unsecured debt at fixed rates, extended the maturity date on a revolving credit facility to 2028, and established a new at-the-market share program. We opportunistically sold more than 400 acres of non-core lantoids, enabling us to reduce carrying costs within the land operation segment. And from a growth perspective, thanks to Michael and the rest of our development team, we began construction of our 30,000 square foot industrial asset on the island of Mali.
Speaker Change: Sheet, the strength and flexibility streamlining our business and cost structure and growth.
Speaker Change: Over the course of the year, we grew our <unk>.
Speaker Change: And NOI and saw strong leasing activity in the portfolio.
Speaker Change: We improved our capital structure by refinancing $130 million of mortgage debt with unsecured debt at fixed rates extended the maturity date on our revolving credit facility to 2028 and established a new at the market share program.
Speaker Change: We opportunistically sold more than 400 acres of non core land holdings, enabling us to reduce carrying cost within the land operations segment.
Speaker Change: From a growth perspective, thanks to Michael and the rest of our development team. We began construction of our 30000 square foot industrial asset on the island of Maui.
Lance Parker: Importantly, the team has been busy underwriting other development and redevelopment opportunities. This, of course, is in addition to the 81,500 square foot industrial asset we purchased in the third quarter of last year.
Speaker Change: Importantly, the team has been busy underwriting other development and redevelopment opportunities.
Speaker Change: Of course is in addition to the 81500 square foot industrial asset we purchased in the third quarter of last year.
Lance Parker: Operationally, we ended the year on a high note, with better than expected results in the fourth quarter and for the full year. Same store NOI grew by 2.4% for the quarter and 2.9% for the year. Excluding the impact of collections of prior year reserves, our same store NOI growth was 2.9% for the quarter and 3.3% for the year. We executed 47 leases in our improved property portfolio representing more than 140,000 square feet of GLA and 209 leases or 630,000 square feet of GLA during 2024. Our blended leasing spreads remain strong in the fourth quarter at 14% on a comparable basis and 11.7% for 2024.
Speaker Change: Operationally, we ended the year on a high note with better than expected results in the fourth quarter and for the full year.
Speaker Change: Same store NOI grew by two 4% for the quarter and two 9% for the year.
Excluding the impact of collections of prior year reserves, our same store NOI growth was two 9% for the quarter and three 3% for the year.
Speaker Change: We executed 47 leases in our improved property portfolio, representing more than 140000 square feet of GLA, and 209 leases or 630000 square feet of GLA during 2024.
Speaker Change: Our blended leasing spreads remained strong in the fourth quarter at 14% on a comparable basis and 11, 7% for 2024.
Lance Parker: Our lease occupancy was 94.6%, up 60 basis points sequentially, and 10 basis points lower than last year. The sequential improvement was driven by a 230 basis point increase in our retail portfolio due to the backfill of our large vacancy at Y&I Mall. Economic occupancy at quarter end was 92.9%, down 10 basis points from last quarter, as well as the same period last year. These results were driven by the industrial and office vacancies we previously mentioned.
Speaker Change: Our leased occupancy was 94, 6% up 60 basis points sequentially, and 10 basis points lower than last year.
Speaker Change: The sequential improvement was driven by a 230 basis point increase in our retail portfolio due to the backfill of our large vacancy at <unk> mall.
Speaker Change: Economic occupancy at quarter end was 92, 9%.
Speaker Change: Down 10 basis points from last quarter as well as the same period last year. These.
Speaker Change: These results were driven by the industrial and office vacancies, we previously mentioned.
Lance Parker: We believe that the short term decline in occupancy will provide long term opportunity through repositioning. S&O at Quarter End was $3.4 million and includes rent for the recently announced Marlin Bar by Tommy Bahama, which we look forward to opening at Queens Marketplace later this year, and about $1 million of AVR related to our Build-A-Suit at Maui Business Park, which is expected to become economic at the end of 2025.
Speaker Change: We believe that the short term decline in occupancy will provide long term opportunity through repositioning.
Speaker Change: Ethanol at quarter end was $3 4 million.
Speaker Change: And includes rent for the recently announced Marlin bar by Tommy Bahama, which we look forward to opening at Queens marketplace. Later, this year and about $1 million of ABR related to our build to suit at Maui business Park, which is expected to become economic at the end of 2025.
Lance Parker: We are committed to driving operational results from our CRE portfolio with the mindset that good day-to-day outcomes are the foundation for long-term shareholder value.
Speaker Change: We are committed to driving operational results from our CRE portfolio with the mindset that good day to day outcomes are the foundation for long term shareholder value.
Lance Parker: Looking ahead to 2025, the team will be focused on the following objectives. Improving revenue in our retail assets through timely renewals and new leases. Increasing occupancy with our in our industrial portfolio. Developing our existing land bank of industrial assets. and Sourcing of Creative External Acquisitions and Creative Investment.
Speaker Change: Looking ahead to 2025 the team will be focused on the following objectives.
Speaker Change: Improving revenue in our retail assets through timely renewals and new leases.
Speaker Change: <unk> occupancy with our in our industrial portfolio.
Speaker Change: Developing our existing land bank of industrial assets.
Speaker Change: And sourcing accretive external acquisitions and creative investments.
Clayton Chun: With that, I'll turn the call over to Clayton to discuss our financial results and guidance. Clayton? Thanks, Lance, and aloha, everyone. We closed out 2024 strong with fourth quarter FFO of $0.30 per share, reflecting a $0.03 increase as compared to the same quarter last year, and AFFO of $0.19 per share, $0.02 higher than last year. The year-over-year FFO and AFFO increase was driven primarily by stronger operating results within our commercial real estate portfolio. For the full year, FFO was $1.37 per share, 28 cents higher than the prior year. The higher year over year FFO was primarily attributed to higher land sale margin, stronger commercial real estate performance, and improved GNA in 2024.
Clayton: With that I'll turn the call over to Clayton to discuss our financial results and guidance.
Clayton: Thanks, Lance and Aloha, everyone. We closed out 2024 strong with fourth quarter <unk> of <unk> 30 per share, reflecting a three <unk> increase as compared to the same quarter last year and <unk> of <unk> 19 per share <unk> <unk> higher than last year, the year over year <unk> and <unk>.
<unk> increase was driven primarily by stronger operating results within our commercial real estate portfolio.
Clayton: For the full year <unk> was $1 37 per share 28 cents higher than the prior year.
Clayton: The higher year over year, <unk> was primarily attributed to higher landfill margin stronger commercial real estate performance and improved G&A in 2024.
Clayton Chun: Full year 2024 FFO also reflects certain net favorable non cash swap and financing related adjustments that occurred in the first quarter. 2024 AFFO was $1.10 per share, or 23 cents higher than the prior year, due primarily to higher land sale margins, CRE performance, and G&A improvements. Each of these metrics benefited from collections of prior year reserves of approximately $1.7 million or $0.02 per share in 2024 versus $2.1 million of collection or $0.03 per share in 2023.
Clayton: Full year 2024, <unk> also reflects certain net favorable noncash swap and financing related adjustments that occurred in the first quarter 2024, <unk> was $1 10 per share or <unk> 23 higher than the prior year due primarily to higher landfill margins.
Clayton: <unk> performance and G&A improvements.
Clayton: Each of these metrics benefited from collections of prior year reserves of approximately $1 7 million or <unk> <unk> per share in 2024 versus $2 1 million.
Clayton: Collection or <unk> <unk> per share in 2023. During 2024, we continued our efforts to streamline the business and made meaningful progress to improve our cost structure, we decreased G&A expenses by $4 2 million.
Clayton Chun: During 2024, we continued our efforts to streamline the business and made meaningful progress to improve our cost structure. We decreased G&A expenses by $4.2 million or 12.4% in 2024 as compared to 2023. We also made significant progress in reducing carrying costs for land operations during the year. We entered 2024 with a carrying cost run rate of $6 to $7 million. Based upon activity during the year, however, we simplified our cost structure and ended 2024 incurring carrying costs totaling $5.8 million for the year and a run rate ranging from $4 to $5 million.
Or 12, 4% in 2024 as compared to 2023.
Clayton: We also made significant progress in reducing carrying cost for land operations during the year.
We entered 2024 with a carrying cost run rate of $6 million to $7 million based upon activity. During the year. However, we simplified our cost structure and ended 2024 incurring carrying costs totaling $5 8 million for the year and our run rate ranging from four to 5 million.
Clayton Chun: We will continue to prioritize simplifying land operations and will provide updates as we make progress throughout the year.
Clayton: We will continue to prioritize simplifying land operations and will provide updates as we make progress throughout the year.
Clayton Chun: Turning to our balance We continue to maintain a strong and flexible balance sheet, and during the fourth quarter, we took additional steps to further enhance it. In October, we recast our revolving credit facility, extending the maturity to October of 2028, while maintaining the spread on our borrowing. In December, we also paid off our $73 million mortgage, which was secured by Pearl Highlands Center. As of 2024 year end, our net debt to adjusted EBITDA ratio stood at 3.6 times. Approximately 96% of our debt was at fixed rates, and our debt maturity profile remains solid with no significant maturities in 2025.
Clayton: Turning to our balance sheet.
Clayton: We continue to maintain a strong and flexible balance sheet and during the fourth quarter, we took additional steps to further enhance it.
Clayton: In October we recast our revolving credit facility extending the maturity to October of 2028, while maintaining the spread on our borrowings in.
Clayton: In December we also paid off our $73 million mortgage which was secured by Pearl Highlands Center.
Clayton: As of 2024 year end, our net debt to adjusted EBITDA ratio stood at three six times.
Clayton: Approximately 96% of our debt was at fixed rate and our debt maturity profile remains solid with no significant maturities in 2025.
Clayton Chun: With respect to our dividend, we paid a fourth quarter dividend of 22.5 cents per share on January 8, and our board declared a first quarter 2025 dividend of 22.5 cents payable on April 7.
Clayton: With respect to our dividend, we paid a fourth quarter dividend of $22 five per share on January eight and our board declared a first quarter of 2025 dividend of $22.05 payable on April seven.
Clayton Chun: Moving on to 2025. We are issuing guidance as follows. We expect same store NOI growth of 2.4% to 3.2%. FFO between $1.13 and $1.20 per share and CRE and corporate related FFO of $1.11 to $1.16 per share. While we are not providing quarterly guidance, it should be noted that our quarterly metrics may vary due to the timing of certain items throughout the year.
Clayton: Moving on to 2025.
Clayton: We are issuing guidance as follows.
Clayton: We expect same store NOI growth of two 4% to three 2%.
Clayton: <unk> between $1 13, and $1 20 per share.
Clayton: And CRE and corporate related <unk> of $1 11 to $1 16 per share.
Clayton: While we are not providing quarterly guidance. It should be noted that our quarterly metrics may vary due to the timing of certain items throughout the year.
Clayton Chun: I'd now like to provide some context and highlight important assumptions related to our guidance. First, our CRE and corporate FFO guidance reflects a 4.1% increase at the midpoint when normalizing 2024 for the $0.02 of FFO attributed to the swap and financing related adjustments. The increase reflected in the 2025 FFO is primarily driven by core CRE performance. Second, our guidance takes into account the approximately 50,000 square feet of vacancy within our industrial portfolio and 13,000 square feet within our office portfolio that we mentioned last quarter. We have both near-term and long-term opportunities that we're pursuing for these spaces and we'll provide information in the future.
Clayton: I would now like to provide some context and highlight important assumptions related to our guidance.
Clayton: First our theory and corporate <unk> guidance reflects a four 1% increase at the midpoint when normalizing 2024 for the <unk> <unk> attributed to the swap and financing related adjustments.
Clayton: The increase reflected in the 2025 <unk> is primarily driven by core CRE performance.
Clayton: Second our guidance takes into account the approximately 50000 square feet of vacancy within our industrial portfolio and 13000 square feet within our office portfolio that we mentioned last quarter.
Clayton: We have both near term and long term opportunities that we're pursuing for these spaces and we will provide information in the future.
Clayton Chun: Our FFO guidance also includes a penny of contribution related to external acquisitions programmed for the second half of 2025. With respect to GNA, on the heels of achieving a 12.4% reduction in costs in 2024, we will continue to actively pursue opportunities to further simplify our cost structure. But we expect the trajectory of our GNA level to moderate in 2025, ranging from a flat to a penny per share improvement from 2024. Finally, our total FFO guidance also assumes contributions from land operations ranging from $0.02 to $0.04 per share in 2025, reflecting a modest amount of assumed land sales margin in joint venture income.
Clayton: Our <unk> guidance also includes a.
Clayton: Penny of contribution related to external acquisitions program for the second half of 2025.
Clayton: With respect to G&A on the heels of achieving a 12, 4% reduction in costs. In 2024, we will continue to actively pursue opportunities to further simplify our cost structure.
Clayton: But we expect the trajectory of our G&A level to moderate in 2025, ranging from a flat to a penny per share improvement from 2024.
Clayton: Finally.
Clayton: Our total <unk> guidance also assumes contributions from land operations ranging from <unk> to <unk> <unk> per share in 2025, reflecting a modest amount of assumed land sales margin and joint venture income.
Lance Parker: With that, I will turn the call over to Lance for his closing remarks. Thank you, Clayton. I'm pleased with the strategic accomplishments and operating results we achieved last year. I'm also excited about the prospects for 2025, and I'm confident in our ability to continue executing on our strategy to ultimately drive consistent growth and returns for our shareholders.
Lance Parker: With that I will turn the call over to Lance for his closing remarks.
Lance Parker: Thank you Clayton.
Lance Parker: I am pleased with the strategic accomplishments and operating results. We achieved last year I'm also excited about the prospects for 2025 and I am confident in our ability to continue executing on our strategy to ultimately drive consistent growth and returns for our shareholders.
Lance Parker: For the remainder of this year, I will report on our progress in the context of the following three priorities. Improving our CRE Portfolio Performance Internal and external growth and streamlining our business and cost structure.
Lance Parker: For the remainder of this year.
Lance Parker: Our progress in the context of the following three priorities.
Lance Parker: Improving our CRE portfolio performance.
Lance Parker: Internal and external growth and streamlining our business and cost structure.
Lance Parker: With that, we'll conclude our formal remarks and open the call up to questions. Thank you.
Lance Parker: With that we'll conclude our formal remarks and open the call up to questions.
Lance Parker: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone you will hear a prompt Mr. Han has been rates should you wish to decline from the polling process.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2.
Lance Parker: Please press star followed by the number too.
Operator: If you are using a speakerphone, please lift the handset before pressing any One moment, please, for your first question.
Speaker Change: We are using a speaker phone please lift the handset before pressing entities.
Lance Parker: Moment for your first question.
Gaurav Mehta: Your first question comes from Gaurav Mehta of Alliance Global Partners, please go ahead. Yes, thank you. I wanted to go back to your comments about your 2025 priorities around external growth. I think you mentioned that you're looking at underwriting more development and redevelopment opportunities within your portfolio. I was hoping to get some more color on what you guys are looking at.
Speaker Change: Your first question comes from Gaurav Mehta of Alliance Global Partners. Please go ahead.
Lance Parker: Yes.
Speaker Change: Thank you.
Lance Parker: I wanted to go back to your comments about.
Speaker Change: 2025 priorities around external growth I think you mentioned that youre.
Speaker Change: Youre looking at underwriting more development and redevelopment opportunities within your portfolio I was hoping to get some more color on what you guys are looking at.
Lance Parker: Hey, Gaurav. It's Lance. Nice to hear from you. Thanks for the question. You know, I've started to, I would say, be a little bit more optimistic in my remarks over the last couple of quarters with regards to, certainly with regards to external growth. And I would say as we look ahead to 2025, that continues to be consistent. Pricing remains challenging, but we are seeing opportunities in the marketplace, and so I am encouraged by that. But specific to your question, we will continue to look and mind opportunities on internal growth. And so specifically on the development front, you know, we talked about, um, the Build-A-Suit at Maui Business Park, and that's going to contribute about a million dollars to our S&O pipeline.
Speaker Change: Hey, Gaurav, it's Lance nice to hear from you. Thanks for the question.
Speaker Change: I've started to I would say it'd be a little bit more optimistic in my remarks over the last couple of quarters with regards to certainly with regards to external growth.
Speaker Change: And I would say as we look ahead to 2025 that continues to be consistent.
Speaker Change: <unk>.
Speaker Change: Pricing remains challenging, but we are seeing opportunities in the marketplace and so I'm encouraged by that but specific to your question. We will continue to look and mind opportunities on internal growth and so specifically on the development front.
Speaker Change: We talked about.
Speaker Change: The build to suit at Maui business Park, and Thats going to contribute about $1 million to our ethanol pipeline.
Lance Parker: So something like that, we're seeing similar opportunities within the Maui Business Park for potential Build-A-Suits, potentially even some speculative development. The industrial market here in Hawai'i remains very strong. And I would say similarly to some of our land bank with industrial properties on O'ahu, we've started to see some interest there as well. So I'm hopeful that we'll be able to make some announcements later in the year with regard to those initiatives.
Speaker Change: So something like that were seeing similar opportunities within the Maui business Park for a potential build to suits potentially even some speculative development.
Speaker Change: Dr Real market here in Hawaii remains very strong and I would say similarly to some of our land bank.
Speaker Change: With industrial properties on Oahu, we started to see.
Speaker Change: Some interest there as well so I.
Speaker Change: I'm hopeful that we'll be able to make some announcements later in the year with regard to those initiatives.
Gaurav Mehta: And then I guess I would just add, you know, this really is sort of the first time we're being transparent about the fact that we are carrying a penny of FFO in our guidance for the full year, and that would be for growth initiatives. OK.
And then I guess I would just add this really is for the first time.
Speaker Change: We're being transparent about the fact that we are carrying a penny of <unk>.
Speaker Change: Therefore in our guidance for the full year and that would be for growth initiatives.
Speaker Change: Okay.
Rob Stevenson: Second question on on your lease expirations for 2025. Do you have any known move-outs for the leases that are expiring this year? Do we have any known move-outs?
Speaker Change: Second question on on your lease expirations for 2025.
Speaker Change: Do you have any known move outs for the leases that are expiring this year.
Speaker Change: Okay.
Speaker Change: Do we have any known move outs I just want to make sure I understand the question.
Kit Millan: I just want to make sure I understand the question. Yeah, are you expecting like any known, any move-outs within the explorations that you have this year? Yeah, Kit, you want to take a stab at that? Sure. Last quarter, we signaled that there was about 50,000 square feet of industrial move outs for that was going to occur in the fourth quarter. We were pleased that 33,000 square feet of that actually stayed in and is actually still there. And we do have backfill opportunities for that that we're actively pursuing.
Speaker Change: Are you expecting like any known move outs within the expirations that you have this year.
Keith: Yes, Keith do you want to add.
Keith: Yes, I'll take a stab at it sure last quarter, we signaled that there was about 50000 square feet of industrial move outs for that was going to occur in the fourth quarter. We are pleased at 33000 square feet of that actually stayed in and is actually still there and we do have backfill opportunities.
Keith: <unk> for that that we're actively pursuing.
Kit Millan: We did have one tenant bankruptcy and that was Liberated Brands. Very low exposure overall, about $450,000 of ABR and only about 7,000 square feet in total between one retail asset and one industrial asset. And then I would just add, Gaurav, for some additional color, we do provide our lease expiration schedule in our supplement. And given our WALT on any given year, you know, I would expect to see somewhere in the low double digits, you know, low teens in terms of role. Our role on an ABR basis for 2025 is just over 8%.
Keith: We did have one tenant bankruptcy and that was liberated brands.
Keith: Very low exposure overall about $450000 of ABR and only about 7000 square feet in total between one retail asset and one industrial asset.
Speaker Change: And then I would just add gaurav for some additional color, we do provide our lease exploration schedule and our supplement and given our Walt on in any given year.
Speaker Change: Expect to see somewhere in the low double digits low teens in terms of roll or roll on.
Speaker Change: On ABR basis for 2025 is just over 8% so kudos to our leasing team for really getting ahead of a lot of the renewals and mitigating that risk for us this year.
Kit Millan: So kudos to our leasing team for really getting ahead of a lot of the renewals and mitigating that risk for us this year.
Rob Stevenson: Okay, thank you.
Speaker Change: Okay. Thank you that's all I had.
Rob Stevenson: That's all I have.
Speaker Change: Yeah.
Rob Stevenson: Your next question comes from Rob Stevenson of Cheney. Please go ahead. Hey Rob, you there? Operator, can you check? Rob may not, I'm not sure if his volume is working. If not, maybe we can put him back in the queue and tee up somebody else. Do you guys hear me? Oh, yeah, no. Hey, Rob. Okay. Finally unmuted me.
Speaker Change: Your next question comes from Rob Stevenson of Janney. Please go ahead.
Speaker Change: Hey, Rob you there.
Speaker Change: Operator can you check Rob may not I'm not sure. If he is volume is working if not maybe we can put them back in the queue and tee up somebody else.
Speaker Change: Okay.
Speaker Change: Can you guys hear me.
Speaker Change: Hey, Rob no okay.
Rob Stevenson: The bankrupt tenant, Liberty Brands, you said, do you have that space back? Or is that still in the bankruptcy process? We do not have the space back, they are actually still open and operating and doing their liquidation sale. Okay. Do you have any expected timing? Is that sort of mid-year, late-year, 2026 before you get that space back? I know it's not a lot of ABR or space, but just curious as to, you know, your ability to start marketing that space to another tenant in the interim. So, we expect it around mid-year and the good news is that we actually already have some prospects for the space at Queens Marketplace.
Speaker Change: Finally on mute.
Speaker Change: The bankrupt tenants liberating brands you said do you have that space back or is that still in the bankruptcy process.
Speaker Change: We did not have the space back there actually still open and operating and doing there.
Speaker Change: Liquidation sale.
Speaker Change: Okay.
Speaker Change: You have any expected timing is that sort of mid year late year 2026, before you get that space back I know, it's not a lot of ABR, but our space, but just curious as to your ability to start marketing that space to another tenant in the interim.
So we expected around mid year and the good news is that we actually already have some prospects for the space at Queens marketplace.
Rob Stevenson: Okay, that's great.
Speaker Change: Okay.
Rob Stevenson: And then in the supplemental, there was a big jump quarter recorder in the least occupancy in the retail portfolio. What I think it was like 230 basis points. What drove that?
That's great and then.
Speaker Change: In the supplemental there was a big jump quarter over quarter in the leased occupancy in the retail portfolio I think it was like 230 basis points what drove that.
Rob Stevenson: Sure. So the primary driver is actually really good news. It was backfill of the Y&I Mall anchor space that we talked about that terminated in January of last year. So the tenant that we did put in there is a community use. The lease is relatively short term, which provides us with future optionality. And it was really capital efficient. It didn't require very little capital outlay. So the good news overall is that we backfilled it very quickly.
Speaker Change: Sure. So the primary driver is actually really good news it was back fill of the why in a mall anchor space that we talked about that.
Speaker Change: Terminate in January of last year. So the tenant that we did put in there is a community as the leases relatively short term, which provides us with future Optionality and it was really capital efficient it didn't require very little capital outlay. So the good news overall is that we backfill it very quickly.
Clayton Chun: Okay, and then last one for me, Clayton, beyond the sort of two to four cents of land operations, what's the biggest lever that causes you to go to either the low end or the high end of the guidance? What's the biggest swing factors in the guidance range for 25 at this point in the year for you? Yeah, hi, Rob. So for us, I would say that the low end, it's going to involve delayed tenant occupancy or unplanned vacancies. I think bad debt could also come into play in terms of the low end of it. And then on in terms of the high end of our guidance, it's effectively the inverse of that.
Speaker Change: Okay, and then last one for me Clayton beyond the sort of two to four of land operations. What's the biggest lever that causes you to go to either the low end or the high end of the guidance. What's the biggest swing factors in the guidance range for 25% at this point of the year for you.
Rob May: Yes, Hi, Rob.
Rob May: For us I would say that the low end, it's going to involve delayed tenant occupancy or unplanned vacancies I think bad debt could also come into play in terms of the low end of it and then on in terms of the high end of our guidance.
Rob May: Effectively the inverse of that so to the extent that we're able to have our tenants take possession of spaces earlier than that that could certainly be helpful for our <unk>.
Clayton Chun: So to the extent that we're able to have our tenants take possession of spaces earlier than that, that could certainly be helpful for FFO. And the same could be said with respect to bad debt to the extent that we have, you know, stronger bad debt collections and just overall tenant health continues to improve then that that would be accretive from us from for us from an FFO perspective. Ok, that's helpful. Thanks guys, appreciate the time tonight. All right. Thanks, Rob.
Rob May: And the same could be said with respect to bad debt to the extent that we have.
Rob May: Stronger.
Bad debt collections and just overall.
Rob May: Tenant health continues to improve then that would be accretive from us from for us from a <unk> perspective.
Rob May: Okay. That's helpful. Thanks, guys I appreciate the time Tonight.
Rob May: Alright, Thanks, Rob.
Alexander Goldfarb: Your next question comes from Alexander Goldfarb of Piper Sandler. Please go ahead. Hey, morning out there. So, a few questions. Just following up on Rob's tenant credit question, you know, your bankruptcies are obviously very low and credit for you guys tends to be good. Are you expecting that to continue this year?
Speaker Change: Your next question comes from Alexander Goldfarb.
Speaker Change: Piper Sandler. Please go ahead.
Alexander Goldfarb: Hey, good.
Speaker Change: Good morning, good morning out there.
Speaker Change: So a few questions.
Speaker Change: Just following up on robs tenant credit question.
Speaker Change: Bankruptcies are obviously very low.
Speaker Change: Credit for you guys tends to be to be good.
Speaker Change: Alright are you expecting that to continue this year.
Alexander Goldfarb: So, one, curious your bad debt reserve, and two, is there something specific about the retailers on Hawaii such that, you know, maybe they're, you know, when there are tenant credit issues, sort of the Hawaiian outposts are the sort of the last to be affected? Just sort of curious about, you know, the tenant health out in Hawaii versus, you know, the sister locations on the mainland.
Speaker Change: I'm curious your bad debt reserve in Q.
Speaker Change: There something specific about the retailers on Hawaii.
Speaker Change: That may be there when there are tenant credit issues sort of the Hawaiian.
Speaker Change: Posts or the sort of the last to be affected just sort of curious.
Speaker Change: About the tenant health.
Speaker Change: Hawaii versus history.
Speaker Change: Mr locations on the mainland.
Lance Parker: Sure. Aloha, Alex. How are you doing? So what I'll tell you is that, good, good, so collections have remained really strong. We're not seeing any signs of overall trouble. Customer traffic on Oahu was actually up year over year, and that's where we have most of our centers, even though it was flat elsewhere in the portfolio. And tenant sales have remained strong. We exceeded our percentage wrinkle for the quarter and the year. Now in terms of bad debt itself, the opportunity set for prior year reserve recoveries has decreased dramatically. In fact, it was down about 40% in Q4 2024 versus 2023.
Speaker Change: Sure Hi, Alex how are you doing.
Speaker Change: Yes.
Speaker Change: So what I will tell you is that okay.
Speaker Change: So collections have remained really strong we're not seeing any signs of overall treble up customer traffic on Oahu was actually up year over year, and that's where we have most of our centers, even though it was flat elsewhere in the portfolio and tenant sales remained strong we exceeded our percentage rent growth for the quarter and the year now in terms.
Speaker Change: A bad debt itself the opportunity set for prior year reserve recoveries has decreased dramatically in fact, it was down about 40% in Q4 2024 versus 2023.
Lance Parker: So, obviously, that opportunity set going down is a good thing. It means that we're seeing less and less bad debt as we go forward. We don't have a lot of exposure to Green Street's tenant watch list, and we have no real exposure to big bankrupt tenants other than the liberated brands that we just mentioned. And in terms of your question about retailers, you know, one of the – I think pharmacy is on everybody's mind right now, and I'll give the example of Long's. So, Long's is a CVS tenant, and in Hawaii, that Long's banner is more seen like a local retailer.
Speaker Change: So obviously that opportunity set going down is a good thing it means that we're seeing less and less bad debt as we go forward.
Speaker Change: We don't have a lot of exposure to Green Street's tenant watch list and we have no real exposure to big bankrupt tenants other than deliberated brands that we just mentioned and in terms of your question about retailers.
Speaker Change: One of the I think pharmacy is on everybody's mind right now and I'll give the example of longs, so long as Cvs tenant and in Hawaii that longs banner is more seen like a local retailer and all of those stores are very strong and in fact, we just renewed one of those store.
Lance Parker: And all of those stores are very strong, and in fact, we just renewed one of those stores at Manoa Marketplace because the sales are so high there. So I think there's a little bit of insulation for some of the national brands overall.
Speaker Change: <unk> App minoa marketplace because of the sales are so high there. So I think theres a little bit of insulation for some of the national brands overall.
Alexander Goldfarb: Okay, that's helpful.
Speaker Change: Okay.
Clayton Chun: And then the second question is legacy overhead from the land business. Maybe it was a year or two ago, you guys discussed as you exit the land business, there were certain costs. I think they were more pension related and sort of disconnected from the actual business, but that were harder to reduce over time. When I look in your presentation, you talk about pretty healthy reduction, both in corporate and the land business on overhead expense. So just wanted to revisit some of these stickier legacy land costs. Are you able to accelerate, you know, the unwind of some of these legacy pension costs?
Speaker Change: Helpful.
Speaker Change: And then the second question is.
Speaker Change: Legacy overhead from the land business.
Speaker Change: Maybe it was a year or two ago you guys discussed as you exit the land business. There were certain costs I think there are more pension related sort of disconnected from the actual business, but that were harder to reduce over time.
Speaker Change: In your presentation, you talk about pretty healthy reduction both in corporate and it will add business on overhead expense. So just wanted to revisit some of the stickier.
Speaker Change: Our legacy land costs are you able to accelerate.
Speaker Change: Unwinding some of these legacy pension costs or.
Clayton Chun: Or, you know, there's a certain level that's always going to be there, even after you sell the last acreage of land?
Speaker Change: Yes, there is a certain level, that's always going to be there even after you sell the Alaska acreage of land.
Clayton Chun: Hi, Alex, Clayton. So yeah, with respect to the holding costs for land operations, we have made quite a bit of progress in in simplifying the cost structure there. And that's really corresponded with our ability to just simplify that segment overall. The composition of the remaining costs, it is a combination of, of, you have personnel costs as well as just what I characterize as stewardship. So with the land that we have there, there's just natural costs that are associated with owning the land. And so to the extent that we're able to monetize the remaining non-core lands, there will be variable costs that come out of the system by virtue of that.
Alex: Hi, Alex question, so with respect to the holding costs for land operations.
Alex: We have made quite a bit of progress in simplifying.
Alex: The cost structure there.
Alex: Really corresponded with our ability to just simplify that segment overall.
Alex: The composition of the remaining cost it is a combination of.
Alex: You have personnel costs as well as just.
Alex: What I'd characterize as stewardship, so with the land that we have there there's just natural.
Alex: Costs that are associated with owning <unk>.
Alex: The land and so to the extent that we're able to.
Alex: Monetize the remaining noncore land, there will be variable costs that come out of the system.
Alex: By virtue of that.
Lance Parker: It should be noted, though, that within land operations, we do have some aspects of what we deem to be core land holdings. And so that would be namely Maui Business Park. And so we expect to keep a hold of those assets for a longer period of time. So I think it's important to point that out. People seem to like real estate these days. But, you know, what's the buyer appetite? And as you whittle the holdings down, you know, is it are you ending up with small pockets here and there? Or is the remaining still sort of large chunks that are sort of efficient to sell?
Alex: It should be noted, though that within land operations, we do have some.
Alex: Some aspects of what we deem to be core landholdings, and so that would be namely Maui business Park and so we expect.
Alex: To keep.
Alex: A holder of those assets for a longer period of time, So I think it's important to point that out.
Speaker Change: Okay. Okay, and then just a final question on the landfill specifically.
Speaker Change: What is the what's your what's the buyer appetite out there for land I have to believe it's only getting stronger.
Speaker Change: People seem to like real estate these days.
Speaker Change: But what's the buyer appetite and as you will.
Speaker Change: The holdings down.
Speaker Change: Are you ending up with smallpox European air or is the remaining still sort of large chunks.
Speaker Change: Efficient to to sell.
Lance Parker: Hey, Alex, it's Lance. So I'll answer the question in sort of two buckets. One is our true sort of non-core land bucket, which represents, you know, call it about 3000 acres left in the portfolio. Those are mostly smaller acreages that are disaggregated, unlike the large contiguous swaths of land that we used to have that we sold in our two, actually three big chunks, two in Maui and one on Kauai. So these would be, you know, a little bit more opportunistic. I would say in general, land interest remains high, although financing for, you know, smaller agricultural lots, you know, isn't, I wouldn't, not that it's not plentiful, but that can be challenging from time to time.
Lance Parker: Hey, Alex it's Lance.
Michael Monaco: So I'll answer the question in sort of two buckets. One is our true sort of non core land bucket, which represents call. It about 3000 acres left in the portfolio.
Michael Monaco: Those are mostly smaller acreage is that our disaggregated. Unlike the large contiguous swaps of land that we used to have that we sold at our two.
Michael Monaco: Actually three big chunks to in Maui, and one on <unk>.
Michael Monaco: So these would be.
Michael Monaco: A little bit more opportunistic I would say in general land interest remains high although.
Michael Monaco: Financing for smaller agricultural lots.
Michael Monaco: It's not that it's not plentiful.
Michael Monaco: But that can be challenging from time to time, so thats sort of our noncore bucket and then as Clinton mentioned within Latin operations. We do have Maui business Park, we do consider that core and Theyre, specifically I will say that interest remains strong. So this is.
Lance Parker: So that's sort of our non-core bucket. And then as Clayton mentioned, within land operations, we do have Maui Business Park. We do consider that core. And there specifically, I will say that interest remains strong. So this is, you know, immediately adjacent to the airport, fully entitled, fully offsite infrastructure. And we are continuing to see strong demand to buy. So that said, I think it's important to note that as we continue to either build out or sell out, we will be taking a much more strategic perspective with regard to Maui Business Park, meaning a stronger likelihood of us retaining lots to build long-term for our portfolio, as opposed to just selling out the remainder of the business park.
Michael Monaco: Italy adjacent to the airport fully entitled fully off site infrastructure, and we are continuing to see strong demand to buy so that said I think it's important to note that as we continue to either build out or sell out we will be taking a much more strategic perspective with regard to Maui business Park.
Michael Monaco: Meaning a stronger likelihood of us retaining lots to build long term for our portfolio as opposed to just selling out the remainder of the business Park.
Alexander Goldfarb: I'm happy to hear that. I know we've discussed that over the years, but given they're not making more Hawaii looks, I guess, except for, you know, beach erosion or whatever, good to hear that you're keeping more than Maui Business Park for selling. Thank you. Okay, thanks, Alex.
Speaker Change: Happy to hear that I know, we've discussed that over the years, given they're not making more Hawaii looks I guess et cetera.
Michael Monaco: Each erosion or whatever.
Michael Monaco: Good to hear that you are keeping more of that Maui business park for selling.
Michael Monaco: Thank you.
Speaker Change: Okay. Thanks, Alex Thanks, Alex.
Unknown Executive: Thanks, Alan.
Mitch Germain: Your next question comes from Mitch Germain of Citizens. Please go ahead. Hey guys, how are you? So I want to ask Alex's question differently. I mean, obviously you talked about cost containment and there's a couple buckets there, right? There's obviously, you know, what's happening on the land side, right? As you sell more, there's also probably some staff utilization changes that are happening there. Is there anything else that is driving, you know, that $4 million plus decline?
Speaker Change: Your next question comes from Mitch Germain of citizens. Please go ahead.
Mitch Germain: Hey, guys how are you.
Speaker Change: So I wanted to ask out thanks, guys I just wanted to ask Alex question differently. I mean, obviously, you talked about cost containment.
Speaker Change: And there's a couple of buckets there right. There is there is obviously whats happening on the land side right as U S.
Speaker Change: As you sell more but there is also probably some staff utilization changes that are happening. There is there anything else that is driving that $4 million plus decline year over year.
Clayton Chun: Hey Mitch, it's Clayton. Yeah, so with respect to the $4 million G&A reduction that you're referring to, that was outside of land operations, we have obviously our corporate overhead, there's some aspects of commercial real estate that also has G&A, but that's really been a considerable focus of ours over the past few years. And as we've transformed the company and become a pure play REIT, we've been able to streamline processes, we've focused on ways in which we can automate what we've done, and as well as just from a personnel standpoint, we've had our leadership changes and the like.
Speaker Change: He mentioned equation, yes, so with respect to the four 4 million G&A reduction that youre, referring to that was.
Speaker Change: Outside of land operations, we have obviously, our corporate overhead there's some aspects of of.
Speaker Change: Commercial real estate that also has G&A, but that's really been a considerable focus of ours over the past few years and as we've.
Speaker Change: Transform the company and become a pure play REIT, we've been able to streamline processes. We've.
Speaker Change: <unk> focused on on ways in which we can automate what we've done and as well as just from a personnel standpoint, we've had.
Speaker Change: Our leadership changes and alike, and so through all of that we've been able to.
Mitch Germain: And so through all of that, we've been able to reap some of the benefits of cost efficiencies that we're now seeing play out. And so that's really what the four plus million dollar efficiency was this past year. So as we look ahead, we're going to continue to focus on identifying ways in which we can be more efficient and streamline our operations further. But as I said in the prepared remarks, for 2025, we're expecting to have that trajectory moderate. by moderate you mean you're going to have about a Possibly a tad more DNA. I just want to make sure what I understand that terminology moderate.
To reap some of the benefits of cost efficiencies that we're now seeing play out and so that's really what the.
Speaker Change: Four plus million dollar efficiency was this past year. So as we look ahead, we're going to continue to focus on identifying ways in which we can.
Speaker Change: Be more efficient and streamlined our operations further but.
Speaker Change: As I said in the prepared remarks.
Speaker Change: For 2025, we are expecting to have that trajectory moderate.
Speaker Change: And by moderate you mean, you can have a better.
Speaker Change: Possibly a tad more G&A I just wanted to make sure what I understand from.
Speaker Change: Yes.
Clayton Chun: Yeah. So we're expecting to the G&A level overall to be flat to a penny per share improvement as compared to 2024. And the word improvement means better, lower G&A. Better, lower G&A, yes. Okay, that's what I get, that's what I'm trying to get. Okay, great. That's correct. Great, okay, great.
Speaker Change: Moderate yes, yes, so we're expecting to.
Speaker Change: The G&A level overall to be flat to a penny per share improvement as compared to 2024.
Speaker Change: And the word improvement means better lower G&A January sure that then lower G&A, yes.
Speaker Change: Great.
Speaker Change: Thats correct, Okay, great on.
Mitch Germain: On the land slide, you know, I never can say these right, but Kapolei Business Park, it was carved out previously, it's no longer there. Is that what was driving the... The land activity in the fourth quarter. We did have a couple of parcels in Kapolei Business Park that we did sell, Mitch.
Speaker Change: On the land.
Speaker Change: On slide.
Speaker Change: I never can say these right but.
Speaker Change: <unk> business Park.
Speaker Change: It was carved out previously it's no longer there or is that what was driving the.
Speaker Change: The land activity in the fourth quarter.
Mitch Germain: We did have a couple of parcels and Coppola business Park that we did sell Mitch So maybe somewhat contrary to my comments about now a business park in long term strategic for building within our portfolio.
Lance Parker: So, you know, maybe somewhat contrary to my comments about Maui Business Park and long-term strategic for building within our portfolio, we are very much focused on that. But we did get some pretty compelling pricing to sell two lots that we did have, two smaller lots that from a development standpoint could have been done, but on a net present value, we determined that the best use was really to kind of recycle that capital. And so we used that as part of the capital stack in our acquisition of that 81,000 square foot industrial building that we purchased in October of last year.
Speaker Change: We are very much focused on that.
Speaker Change: But we did get some pretty compelling pricing to sell two lots that we did have two smaller lots that from a development standpoint could have been done but on a net present value. We determined that the best use or was really to kind of recycle that capital and so we use that as part of the capital stack and our acquisition of that.
Speaker Change: 81000 square foot industrial building that we that we purchased in October of last year. So that did drive part of the activity that was reported in Q4.
Mitch Germain: So that did drive part of the activity that was reported in Q4. Gotcha. That's good to know.
Got you that's good to know.
Mitch Germain: Last question for me, same store. I think you've got a little bit of a deceleration that is being implied by your guidance.
Speaker Change: Last question for me same store.
Speaker Change: I think you've got a little bit of a deceleration.
Speaker Change: That is being implied by your guidance I'm, just trying to understand some of the variables that are kind of.
Lance Parker: I'm just trying to understand some of the variables that are kind of, you know, principles that are guiding, you know, kind of where your outlook is, is being based on. So I'll talk about it in terms of asset classes. So first and foremost, on the retail front, we had really strong retail leasing in 2024. And as a result, we expect same store growth in 25 to be significant as those spaces continue to go economic and renewal spreads kick in. On the industrial side, growth will be somewhat anemic due to that lease terminations we referenced before at Kaka'ako Commerce Center in Komahana Industrial Park.
Speaker Change:
Speaker Change: The principles that are guiding kind of where your outlook is being based on for for next year obviously.
Speaker Change: Yeah.
Speaker Change: So I'll talk about it in terms of asset classes. So first of all first and foremost on the retail front, we had really strong retail leasing in 2024.
Speaker Change: And as a result, we expect same store growth and 25 to be significant as those spaces continue to go economic and renewal spreads kick in.
Speaker Change: On the industrial side growth will be somewhat anemic due to that lease terminations, we referenced before at <unk> Commerce Center and comment on our come on an industrial park, but the good news is that we do have prospects for both of those assets. So we expect the rent to turn on quicker than what we originally expected and then on the ground.
Mitch Germain: But the good news is that we do have prospects for both of those assets. So we expect the rent to turn on quicker than what we originally expected. And then on the ground side, we don't have any meaningful resets or rent steps in 2025. So growth will be minimal this year. Thank you. Thanks, Mitch.
Speaker Change: Side, we don't have any meaningful resets or rent steps in 2025, so growth will be minimal this year.
Speaker Change: Thank you.
Rich: Thanks Rich.
Brendan Mccarthy: Your next question comes from Brendan McCarthy of CIDATI. Please go ahead. Hey, good afternoon, everybody. Hey Brendan. I just want to touch on, follow up to rent spread, I think last quarter, they saw a nice jump, kind of above that seven to 8% blended comparable spread level that we saw in the first half of this year. But it looks like it stayed pretty elevated for the fourth quarter of 24. I guess, were there any one off items that drove that? Or is that it's what's kind of baked into that 14% number? Yeah, kind of building off of some of Kit's earlier comments, you know, we did see strong leasing activity in 2024.
Speaker Change: Your next question comes from and then Carty up Sidoti. Please go ahead.
Rich: Hey, good afternoon everybody.
Speaker Change: Hey, Brian Hey, Brad.
Speaker Change: Hey, just wanted to touch on follow up to rent spreads I think last quarter. They saw a nice jump kind of above that 7% to 8% blended comparable spread level that we saw in the first half of this year, but it looks like it's a pretty elevated for the fourth quarter of 2004, I guess were there any one off items that drove that or is that okay.
Speaker Change: So what's kind of baked into that 14% number.
Yes kind of building off of some of Keith's earlier comments, we did see strong leasing activity in 2024, So I would say baseline.
Brendan Mccarthy: So I would say baseline remained strong. But that said, I'm really sort of exactly to your point, we did have a couple of individual leases that that really sort of drove the performance for the quarter. And I would say the one specifically, you know, in Kit's earlier example of the CVS longs renewal, you know, that was an example where we got a pretty significant lift in in ABR. It was an anchor space in our Manoa marketplace shopping center. And so that was a contributor to to the spread that we received in the quarter. Great, great.
Speaker Change: Remainder remained strong but that said really sort of exactly to your point, we did have a couple of individual leases that.
Speaker Change: That really sort of drove that performance for the quarter and I would say the one specifically and kits earlier example of the Cvs longs renewal.
Speaker Change: An example, where we got a pretty significant lift in in ABR.
Speaker Change: It was an anchor space in our manure marketplace shopping center and so that was a contributor too.
Speaker Change: To the spread that we received in the quarter.
Speaker Change: Great Great and just to clarify are you optimistic or confident that the yearend spreads of 11, 7%.
Brendan Mccarthy: And just to clarify, are you optimistic or confident that you know, the year end spreads of that 11.7% percent? Do you think 2025 we'll see a kind of level similar to that?
Speaker Change: Do you think 2025, we will see.
Speaker Change: Level similar to that.
Brendan Mccarthy: You know, I'm going to stop short of providing a number or sort of guidance on the spread itself. But what I can say is that based on what we're seeing in the beginning of the year, we do expect leasing interest to remain strong, consistent with the type of interest that we saw in 2024. Great, that's helpful.
Speaker Change: I'm going to stop short of providing.
Speaker Change: Our sort of guidance on the spread itself, but what I can say is that based on what we're seeing in the beginning of the year, we do expect leasing interest to remain strong.
Speaker Change: Consistent with the type of interest that we saw in 2024.
Speaker Change: Great. That's helpful. And then one more question from me just curious on the office exposure in the portfolio I know, it's obviously, a small percentage of NOI, but how can we kind of think about that that often those office assets and I think at one point you mentioned they were non core in general, but can we think those.
Lance Parker: And then one more question for me, just curious on the office exposure in the portfolio. I know it's obviously a small percentage of NOI, but how can we kind of think about that office, those office assets? And, you know, I think at one point, you mentioned they were non-core in general, but can we think those assets may be repurposed or sold altogether? Yeah, so just to provide, you know, a little bit more context, just in terms of relative scale to the overall portfolio, you know, we're talking about 4% ish of NOI, so relatively small, therefore non-core, or non-strategic, I should say, small in its impact and non-strategic in that that's not an asset class that we view us owning long term.
Speaker Change: <unk> assets may be repurposed or sold altogether.
Speaker Change: Yes, so just to provide a little bit more context, just in terms of relative scale to the overall portfolio, we're talking about 4% ish of NOI. So relatively small therefore, non core or non strategic I should say small in its impact and non strategic and thats done.
Speaker Change: On an asset class that we view us owning long term.
Lance Parker: So with that in mind, you know, we do have four assets, three of which are on Maui, I would say the one in Oahu is is strategic and core because it sits within a shopping center. And so it really acts more like a retail asset than a standalone office building. And then the three on Maui, you know, we've talked in the past, and I think, to the extent that we find appropriate investments, those would be good opportunities for capital recycling. And so we'll certainly keep it in mind as, as an opportunity as part of our capital that we look to either deploy or redeploy into new investments.
Speaker Change: With that in mind, we do have four assets three of which are on Maui I would say the one on Oahu is.
Speaker Change: His strategic and core because it sits within a shopping center and so it really acts more like a retail asset in a standalone office building.
Speaker Change: And then the three on Maui.
Speaker Change: <unk> talked in the past and I think to the extent that we find appropriate investments those would be good opportunities for capital recycling and so we'll certainly keep it in mind as as an opportunity as part of our capital that we look to either deploy or redeploy into new investments.
Brendan Mccarthy: Great, thanks. Thanks, Lance.
Speaker Change: Great. Thanks, Thanks, Nathan I'll ask you just one quick follow up question here I think Clayton you mentioned that growth expectations.
Clayton Chun: And actually, just one quick follow up question here. I think Clayton, you mentioned that growth expectations, you know, kind of incorporate about a penny in FFO per share on acquisitions for the upcoming year. Just curious if you could provide some more color or detail on that outlook. So, effectively, that's just reflecting or we've been signaling the fact that we're encouraged with what we're seeing overall and the fact that we have been prioritizing growth. And so, in terms of what the composition actually is, we're not in a position to comment on specifics of what that would entail, but it could be a combination of external as well as internal opportunities.
Speaker Change: You kind of incorporate about a penny in <unk> per share on acquisitions for the upcoming year. Just curious if you could provide some more color or detail on that outlook.
Speaker Change: Okay.
Speaker Change: So.
Speaker Change: Effectively that's just reflecting our.
Speaker Change: We've been signaling the fact that we're encouraged with what we're seeing overall and the fact that we have been prioritizing growth.
Speaker Change: And so in terms of what the composition actually is we're not in a position to.
Speaker Change: Comment on specifics of what that would entail.
Speaker Change: But it could be a combination of external as well as internal opportunities. So.
Clayton Chun: So I would just add, so effectively, it's unspecified growth. So we expect to be able to place the capital and receive that penny throughout the year, but it is not ascribed to anything specific. We did talk about the million dollars of ABR in our S&O pipeline, attributed to the Build a Suit at Maui Business Park. We do expect that to come online at the end of the year and go economic. So it won't have, it'll be a de minimis impact to FFO just because of timing. So this really is, to Clayton's point, just our confidence in the market and our ability to place capital.
Speaker Change: So I would just add so effectively it's unspecified growth. So we expect to be able to place the capital and receive that pending throughout the year, but it is not ascribe to anything specific we did talk about the million dollars of ABR in our <unk> pipeline attributed to the build to suit at Maui business Park.
Speaker Change: <unk>, we do expect that to come online at the end of the year and go economics.
Speaker Change: So it won't have it'll be a de minimis impact to <unk>, just because of timing.
Speaker Change: This really is to clayton's point, just our confidence in the market and our ability to place capital.
Operator: That makes sense. That's all from me. Thanks, everybody. All right, Brandon. As a reminder, if you wish to ask a question, please press star followed by the number. Thank you ladies and gentlemen. That concludes our question and answer session.
Speaker Change: That makes sense, that's all for me thanks, everybody.
Brian: Alright, Brian.
Speaker Change: As a reminder, if you wish to ask a question. Please press star followed by the number one.
Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session. I will now turn the conference back over to Cleveland, Chen Chief Financial Officer.
Clayton Chun: I will now turn the conference back over to Clayton Chun, Chief Financial Officer. Thank you, operator. And thank you all for joining us today.
Cleveland Chen: Thank you operator, and thank you all for joining US today. If you have any follow up questions feel free to call us at 80852, $584 75 or E Mail us at Investor Relations at <unk> Dot Com Aloha and have a great day.
Clayton Chun: If you have any follow up questions, feel free to call us at 808-525-8475 or email us at InvestorRelations at abhi.com. Aloha and have a great day.
Speaker Change: Yeah.
Operator: This concludes today's conference. Thank you for attending. You may now disconnect your line.
Speaker Change: This concludes today's conference. Thank you for attending you may now disconnect your lines.
Unknown Executive: Thank You For Watching
Speaker Change: Okay.
Yes.