More than 300 condominium sales in a new Kakaako high-rise bolstered first-quarter profit for Alexander & Baldwin Inc., though an even bigger real estate sale early last year made the recent earnings look comparatively unexceptional.
Honolulu-based A&B reported Thursday that it earned $25.3 million in the first three months of this year, down 40 percent from $35.4 million in the same period last year.
A&B noted that its year-ago profit was boosted by selling the Maui Mall for $53 million in a deal that drove most of the net income in that period.
Two years ago A&B’s first-quarter profit was $5 million.
In this year’s first quarter, A&B said it sold 328 units at its Waihonua at Kewalo tower, which was completed late last year. A&B also sold a Kahala Avenue residential lot — one of about 30 acquired from Japanese billionaire Genshiro Kawamoto — for $15.2 million in the quarter.
Outside of real estate sales, A&B earnings were driven by better results from commercial property leasing and its road paving and quarry subsidiary Grace Pacific, along with positive but lower operating income from its Maui sugar plantation Hawaiian Commercial & Sugar Co.
"Earnings this quarter were strong and were driven by our core businesses," Stan Kuriyama, A&B chairman and CEO, said in a conference call with stock analysts. "Hawaii’s economy continues to provide a positive operating environment for our businesses."
Waihonua, which A&B developed with a partner, was completed late last year with 12 of the 340 units closing in December. The rest of the unit sales closed in January to produce the bulk of A&B’s first-quarter operating profit.
Waihonua units were priced between $375,000 and $1.9 million.
Because the tower was structured as a joint venture, A&B did not report total sales from Waihonua. The joint venture took in all the revenue, subtracted expenses and paid A&B a portion of the profit.
A&B also did not recognize revenue a year earlier for the Maui Mall sale because that property was classified as a discontinued operation.
A&B said total revenue was $150.7 million in the recent quarter, up 59 percent from $94.8 million a year earlier.
The biggest revenue contribution for A&B in the recent quarter was $56.9 million from Grace, which generated $50.1 million in revenue a year earlier.
A&B said Grace supplied more than twice as much operating profit — $7.2 million compared with $3.4 million in the year-over-year period — due to more material sales and paving work.
In A&B’s commercial property leasing division, operating profit rose to $13.2 million from $11.8 million in the period. The company said 94 percent of its portfolio, which includes shopping centers, offices and warehouses in Hawaii and on the mainland, is occupied.
One recent addition to the portfolio is Aikahi Park Shopping Center in Kailua, which A&B acquired May 1 by purchasing the property’s ground lease from the center operator for $1.6 million. The deal allows A&B to take over management of the retail complex nine years early, which was the remaining term of the lease. A&B already owned the land under the center.
Agricultural operations for A&B, which primarily involve producing sugar and electricity at HC&S, generated more than twice as much revenue in the first quarter, $28.9 million compared with $12.9 million a year earlier.
This increase, A&B said, was due to the timing of a bulk raw sugar shipment. However, agriculture operating profit fell to $1.9 million from $3 million largely because A&B sold less power to Maui Electric Co. and at lower prices. Lower rainfall in the first quarter also reduced electricity sales on Kauai, where A&B produces hydroelectric power.
Looking ahead, A&B said it expects real estate sales to continue to drive earnings. The company noted that it has 14 home or residential lot sales in escrow at its Kauai resort subdivision Kukui‘ula. All but one of these pending sales worth $41 million are expected to close this year, the company said.
A&B also disclosed that it has binding contracts to sell two parcels at Maui Business Park, a partially developed complex largely occupied by big-box retailers including Target, Home Depot, Costco, Walmart and Kmart. The pending sales are expected to close later this year and include 11 acres for Lowes, which plans to relocate its existing Kahului store.
"Maui Business Park is an important and long-term project for us," Kuriyama said on the conference call.
One other major A&B development project is a Kakaako condo tower called The Collection. The tower, which is under construction, has binding sales for 423 of 450 units for an average $651,000. A&B would not recognize any income from these sales until the tower is complete and sales close in late 2016.
Shares of A&B stock closed Thursday at $40.07 before the earnings announcement. That’s a little above a 52-week low of $39.41 on Oct. 15. The 52-week high was $43.52 on April 6.
