Alexander & Baldwin Reports Third Quarter 2015 Results
Earnings for the third quarter of 2014 were $10.2 million, or $0.21 per diluted share. Revenue for the third quarter of 2015 was $144.7 million, compared to revenue of $153.4 million for the third quarter of last year.
Operating profit for the third quarter of 2015 from the Company's real estate operations (Leasing and Development) was $23.7 million, and the Materials & Construction segment contributed an additional $7.5 million of operating profit. These results were partially offset by an Agribusiness operating loss of $9.0 million.
"With the exception of our Agribusiness segment, operating performance in the third quarter was solid," said Stanley M. Kuriyama, chairman and chief executive officer. "Development & Sales revenue of $20 million for the quarter reflects the closing of an 11-acre Maui Business Park parcel to Lowe's for a 167,000-square-foot store on Maui, which will be a great complementary anchor to the Target store that opened earlier in the year. Leasing NOI increased 7% in the third quarter to $20 million1, compared to last year, and the Materials & Construction segment generated $10 million of EBITDA1."
"We continue to make investments to build our development pipeline, as well as continue to seek new investments in Hawaii," said Kuriyama. "For example, we are pursuing the acquisition of Hawaii commercial assets to complement our retail portfolio, which is the second largest in the state, and are planning for the repositioning of the Kailua Macy's leasehold improvements that we expect will be turned over to us early next year. We are the owner of or primary investor in two of the largest solar farms in Hawaii, and are actively pursuing investments in other renewable energy projects, a number of which have been proposed for development in 2016 due to the state's mandate for renewable energy expansion."
Operating Performance
In addition to the parcel sale to Lowe's, third quarter 2015 Development & Sales operating profit included five sales at Kukui'ula, A&B's resort residential joint venture project on Kauai. Another three sales closed in October, bringing year-to-date sales to 17 units. An additional 12 units are under binding contract, with four of those expected to close this year. This positive momentum at Kukui'ula is carrying over to The Shops, A&B's 89,000-square-foot resort retail center adjacent to Kukui'ula, which is now 99% leased, compared to 88% at this time last year. NOI at The Shops increased 26% year to date through October, compared to the same period last year. In October, a 10,000-square-foot CVS drugstore opened at The Shops, which is expected to draw additional traffic to the center.
Presales at the Company's 70-unit Keala 'O Wailea project, located at the Wailea Resort on Maui, also have been positive. Twenty-one of 30 units released for presale in July are under binding contract, and this success prompted the subsequent release of another 20 units for presale, seven of which have already been sold under binding contract. Construction is expected to begin late this year. Also on Maui, the A&B board recently approved the development of a 630-unit master planned residential community on 95 acres in Kihei, comprising a mix of market and affordable townhomes and single-family homes. The project is expected to break ground in early 2016, with delivery of the first units in late 2017.
On Oahu, A&B is completely sold out of the 450 tower and mid-rise units at The Collection, more than a year prior to the delivery of units, and five of the 14 townhome units are under contract. Given the strong sales results experienced at The Collection, the Company remains positive on the urban Honolulu high-rise market and recently announced a $35 million investment in the form of B-note financing provided for the development of Keauhou Place, a 423-unit high-rise project located in urban Honolulu, two blocks from The Collection. The project is 81% sold under binding contract and broke ground at the end of October.
Maui experienced extremely heavy rainfall in the third quarter, with Central Maui receiving 300% of the normal average rainfall. Muddy fields made harvesting and milling at the sugar plantation difficult if not impossible, and resulted in losses for the Agribusiness segment that were greater than expected.
The Materials & Construction segment's third quarter operating profit increased 27% to $8 million, and its EBITDA increased 13% to $10 million1, compared to the third quarter of 2014, primarily due to increased aggregate and other construction-related material sales and lower depreciation and amortization. The segment's outlook continues to be positive with $243 million of construction backlog2 at the end of the third quarter, an 11% increase since the beginning of the year.
Year-to-Date Financial Results
Net income for the first nine months of 2015, was $41.8 million, or $0.82 per diluted share, compared to $54.4 million, or $1.11 per diluted share, for the same period last year, due to a large commercial property sale that occurred in the first quarter of 2014. Revenue for the first nine months of 2015 was $449.1 million, compared to revenue of $395.0 million for the same period of last year, as revenue from the aforementioned 2014 commercial property sale was included in discontinued operations.
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