Major Hawaii retail landlord A&B takes hit on unpaid rent

Hawaii’s second-largest retail property owner, Alexander & Baldwin Inc., is facing challenges collecting tenant rent that contributed to a recent financial loss for the local company.

Honolulu-based A&B on Thursday reported a $4.7 million net loss for the three months ended June 30, up from a $1.2 million loss in the same period last year.

Much of the loss was due to rent not paid by tenants that have struggled with operations or remain closed amid the coronavirus pandemic, though some of the loss also was related to A&B’s ownership of a road paving business.

“Our core commercial real estate business experienced material impacts from the COVID-19 pandemic in the second quarter,” Chris Benjamin, A&B president and CEO, said in a statement.

Benjamin added that improvements are also happening — with the share of A&B tenants open for business rising from 62% in April to 75% in June and 93% in July — but he also cautioned that challenges lie ahead.

“We do expect to see continued improvement in rent collections,” Benjamin said on a conference call with stock analysts. “That said, the economic environment right now has many unknowns and remains difficult for many of our tenants. We do expect reduced occupancy in the future, but are doing what we can to keep tenants going until the economy picks up again.”

During the second quarter, A&B managed to collect about 70% of the rent due, followed by 77% in July.

A&B has been making arrangements with tenants to resolve rent delinquencies, mainly by deferring unpaid rent until later this year, next year or beyond. Because of that, the company took an $8.8 million charge in the second quarter for uncollected rent that hurt A&B’s bottom line.

Revenue from A&B’s commercial real estate leasing operations fell 13% to $34 million in the April- June period from $39 million in the same quarter last year, and operating profit for this core business fell 48% to about $9 million from $17 million in the same comparable period.

A&B owns more than a dozen retail centers primarily anchored by grocery stores serving local residents, including Manoa Marketplace, Pearl Highlands Center, Kaneohe Bay Shopping Center, Waianae Mall and Kahului Shopping Center.

The company also owns two retail properties focused on tourists, the Shops at Kukui‘ula on Kauai and Queens’ Marketplace on Hawaii island, along with most of the commercial core of Kailua and a collection of industrial and office properties around the state.

A&B also has some Hawaii real estate development projects, and property sales in this business segment produced an operating profit of $4.7 million in the second quarter, compared with $500,000 a year earlier.

The recent sales included a parcel at Maui Business Park and seven residential units at Kukui‘ula resort on Kauai. However, the increased operating profit was due to conditional extra proceeds related to A&B’s sale of 41,000 acres of farmland on Maui in 2018.

A&B’s third major business segment, road paving firm Grace Pacific, produced a $7.6 million operating loss in the second quarter, up from a $4.3 million loss a year earlier.

The $7.6 million operating loss included a $5.6 million write-down of the value of Grace in connection with A&B selling a Grace subsidiary for about $5 million in June. The subsidiary sold was GPRM Prestress LLC, which precasts concrete in Kapolei and had been struggling.

Second-Quarter loss

$4.7 million

Year-earlier loss

$1.2 million