Alexander & Baldwin's Q3 2025 Earnings Call: Contradictions on Market Conditions, Rent Spreads, and Share Buybacks

Guidance:

• Reaffirm same-store NOI growth 3.4%–3.8% for 2025; implied Q4 growth ~4.4% at midpoint.
• Raise CRE & Corporate FFO guidance to $1.13–$1.17 per share.
• Total FFO now expected $1.36–$1.41 per share, up $0.01 vs prior guidance.
• Full-year G&A expected flat to $0.01 per share lower vs 2024.
• Kaka'ako sale expected to close Q1 2026, generating $24.1M to recycle via 10/31 exchange.
• Komohana and Maui projects: Maui adds ~ $1M NOI on completion Q1 2026; Komohana in-service Q4 2026 and stabilized Q1 2027 adding ~ $2.8M NOI.

Business Commentary:

• Strong Financial Performance and Guidance:
• Alexander & Baldwin, Inc. reported CRE and Corporate-related FFO per share of $0.30 for Q3 2025, growing $0.02 or 7.1% from the same quarter last year.
• The growth was attributed to lower G&A and higher portfolio NOI.

• The company raised its full-year guidance for CRE and Corporate FFO to a range of $1.13 to $1.17 per share due to lower-than-expected interest expense.

• Internal and External Growth Initiatives:

• The company broke ground on two new buildings at Komohana Industrial Park, expected to generate $2.8 million in annual NOI when stabilized.
• The vertical construction at a build-to-suit project on Maui remains on schedule, expected to add $1 million in annual NOI upon completion.

• External growth prospects are strong, with multiple portfolios being marketed for sale, and the company is actively pursuing acquisition opportunities.

• Tenant Activity and Leasing Spreads:

• The company executed 49 leases in the improved-property portfolio, representing 164,000 square feet of GLA and $3.3 million of ABR.

• Blended leasing spreads increased by 4.4% on a comparable basis, driven by strong leasing activity and strategic tenant renewals.

• Operating Expenses and Liquidity:

• Total company G&A was $6.1 million for the quarter, approximately $1.4 million lower than the same period last year.
• The company had total liquidity of $284.3 million at quarter-end, with a net debt to adjusted EBITDA ratio of 3.5x.

Sentiment Analysis:

Overall Tone: Positive

• Management said Q3 results "exceeded expectations," announced a raise to FFO guidance and noted this is the "third consecutive quarter we've raised guidance." Leadership reiterated confidence in the portfolio and the ability to recycle proceeds into acquisitions, and highlighted internal developments and near-term NOI contributions.

Q&A:

• Question from Robert Stevenson (Janney Montgomery Scott LLC): Either Lance or Clayton, can you talk about when the $6.4 million of ABR from the SNO leases start to impact earnings or the bulk of that as we start thinking about 2026 in our model? Is that like halfway through the year? Is that towards the end of the year? How should we be thinking about when that $6.4 million comes online?
  Response: SNO typically phases in over 9–12 months: Maui build-to-suit (~$1M) expected economic Q1 2026; Komohana (Lowe's) timing more toward Q4 2026/Q1 2027 for the larger portion.

• Question from Robert Stevenson (Janney Montgomery Scott LLC): The $24 million that you're getting on the purchase option that you're going to 10/31 — has the asset that that's going to be rolled into been identified yet? Or is that still to be determined?
  Response: Not yet identified; management expects to have time to source an acquisition before the expected Q1 2026 close.

• Question from Robert Stevenson (Janney Montgomery Scott LLC): You're still expecting sort of flat to $0.01 a share lower G&A versus '24 — if I look at '24 you were just under $30M and you're at about $20M year-to-date — so is Q4 going to be around $9M to $10M of G&A?
  Response: Yes — expect an uptick in Q4 (~$9M range) reflecting timing differences and some transaction-related costs, though management is taking steps to mitigate.

• Question from Robert Stevenson (Janney Montgomery Scott LLC): Did the entirety of the Sam's Club TI hit in the third quarter? And if so, what was that?
  Response: Yes — the Sam's Club TI was paid in Q3 and totaled about $19.6 million.

• Question from Alexander Goldfarb (Piper Sandler & Co.): Kaka'ako, the two-floor sale in that asset — is that something common that you have in other properties? And do you have it in the rest of this building? Could we see more of this as a way to extract value?
  Response: It's unique to that 6-story building; management used a condo/CPR structure to subdivide floors and it's not common elsewhere in the portfolio.

• Question from Alexander Goldfarb (Piper Sandler & Co.): On Land Operations overhead, should we model a negative $0.01 per quarter absent land sales for 2026?
  Response: The run rate for Land Operations is $3.75M–$4.5M annually, so absent land sales you should expect a modest drag (on the order of ~$0.01 per quarter); they'll provide more detail when guiding 2026.

• Question from Alexander Goldfarb (Piper Sandler & Co.): Why have new rent spreads been slightly negative while renewals are positive?
  Response: It was driven by a single, idiosyncratic small deal (Kailua, ~2,000 sq ft, ~$33k ABR) where the prior tenant was above market; not reflective of portfolio-wide trend.

• Question from Mitch Germain (Citizens JMP Securities, LLC): If you remove the one-time reimbursement and related items from last year, where would same-store NOI have been for the quarter?
  Response: Excluding the bad debt, prior-year real property tax one-time items and known move-outs, the collective impact is ~370 basis points — which would have aligned Q3 with H1 same-store growth.

• Question from Mitch Germain (Citizens JMP Securities, LLC): Regarding acquisitions, are you seeing private/mainland capital return and how competitive is the landscape?
  Response: The market is opening with more mainland/private capital on larger portfolios; A&B believes its local presence and asset knowledge give it a competitive edge.

• Question from Brendan Michael McCarthy (Sidoti & Company, LLC): On the 36-acre ground lease (HART yard), how should we think about the renewal process and potential development?
  Response: Renewal of the ground lease is viewed as highly likely but negotiations are early; any internal development would be longer-term and follow renewal, likely years out.

• Question from Brendan Michael McCarthy (Sidoti & Company, LLC): Any detail on potential ABR step-up with that renewal?
  Response: Too early and premature to provide detail on step-up economics.

• Question from Brendan Michael McCarthy (Sidoti & Company, LLC): Given opportunities and internal development, are share buybacks something you're increasingly considering?
  Response: Yes — share repurchases are an active tool in the capital allocation toolbox and will be considered alongside acquisitions and development based on risk-adjusted returns.

• Question from Gaurav Mehta (Alliance Global Partners): On the portfolios being marketed (two retail, one industrial), what pricing and cap rates are you seeing and are these being considered for your own acquisition?
  Response: Management won't comment on live deals; general market pricing is roughly 5%–6% cap rates with variability by asset quality and type.

• Question from Gaurav Mehta (Alliance Global Partners): Regarding Lono Center (37% occupancy) and the office portfolio, do you intend to hold or recycle those assets?
  Response: The 19-acre Kahului block (including Lono Center) is listed for sale as a nonstrategic asset class and management is pursuing disposition to recycle capital.

Contradiction Point 1

Market Conditions and Acquisition Opportunities

It involves the company's assessment of market conditions and its ability to capitalize on new acquisition opportunities, which could impact its growth strategy.

Are you seeing significant private capital re-entering the market as lending markets become more efficient? - Mitch Germain(Citizens JMP Securities, LLC)

2025Q3: We are seeing the investment market open up with several portfolios being marketed. Mainland capital is exploring the Hawaii market, similar to past trends. Our competitive advantage comes from being local, and we are optimistic about pursuing these opportunities. - Lance Parker(CEO)

Where are the opportunities in the improved transaction market? - Gaurav Mehta(Alliance Global Partners)

2025Q2: We're starting to see the market open up, with more opportunities at the top of the funnel across asset classes. While we're optimistic about placing additional capital by year-end, it won't have a material earnings impact for 2025. - Lance K. Parker(CEO)

Contradiction Point 2

Leasing Performance and Rent Spreads

It pertains to the company's leasing performance and rent spreads, which are crucial metrics for understanding its revenue growth and market competitiveness.

Why are new rents slightly negative while renewals are positive? - Alexander Goldfarb(Piper Sandler & Co.)

2025Q3: In Q3, one tenant moving from residential to a studio in Kailua mainly impacted the spread. This was an adjustment from a market rate to a more appropriate rate, rather than a reflection of broader trends. - Lance Parker(CEO)

Can you explain the 6.8% comparable leasing spreads, which are lower than previous quarters? - Robert Chapman Stevenson(Janney Montgomery Scott LLC)

2025Q2: We had a strong quarter in terms of lease activity, with comparable GLA and ABR volumes. The difference in spread is due to the absence of major outliers driving spread one way or another. We remain optimistic about leasing performance. - Lance K. Parker(CEO)

Contradiction Point 3

Rent Spreads and Market Conditions

It reflects differing perspectives on the rental market dynamics, which can impact revenue projections and investor views on the company's financial health.

Should we consider the Land Operations loss for 2026? - Alexander Goldfarb (Piper Sandler & Co., Research Division)

2025Q3: In Q3, one tenant moving from residential to a studio in Kailua mainly impacted the spread. This was an adjustment from a market rate to a more appropriate rate, rather than a reflection of broader trends. - Lance Parker(CEO)

Can you provide details on the rent roll and explain the tenant that wasn't renewed and why? - Alexander Goldfarb (Piper Sandler & Co., Research Division)

2025Q1: On the negative renewal spreads, it was nearly 40 basis points, positively influenced by a few localized market-rate renewals in Oahu and Kauai. - Lance Parker(CEO)

Contradiction Point 4

Share Buybacks and Capital Allocation

It involves differing statements on the company's approach to share buybacks, which is a key aspect of capital allocation strategy and investor relations.

Are you increasingly considering share buybacks? - Brendan McCarthy (Sidoti & Company, LLC)

2025Q3: We have a share repurchase program and consider it along with other capital allocation options. The stock price is a factor, but we evaluate decisions based on risk-adjusted returns. - Clayton Chun(CFO)

Will there be further shareholder returns, including share buybacks, given the strong balance sheet and recent dividend increase? - Judson Clark (Societe Generale)

2025Q1: We also continue to evaluate opportunities for share buybacks. We have a solid balance sheet and access to capital. And as we continue to grow our dividend, we remain committed to further returning capital to shareholders. - Clayton Chun(CFO)