Star-Advertiser: “A&B profit soars after tax benefit”

A&B profit soars after tax benefit

A $225 million tax benefit in the fourth quarter helped major Hawaii retail property owner Alexander & Baldwin Inc. earn $231 million last year that grossly overshadowed an $8 million loss the year before.

Honolulu-based A&B announced its latest financial results Wednesday and said the tax benefit mainly related to its conversion last year to a real estate investment trust. The recent federal tax overhaul also would have had a similar effect.

As a REIT, A&B was able to erase about $220 million in deferred tax obligations that it incurred from selling mainly commercial real estate over many years. A&B deferred paying taxes on gains from the sales by using proceeds to buy other properties, though the company could have had to pay the taxes one day if it sold the properties without reinvesting proceeds in more real estate. Continue reading “Star-Advertiser: “A&B profit soars after tax benefit””

Star Advertiser: “Kauai ranch sale helps Alexander & Baldwin turn a profit”

Kauai ranch sale helps Alexander & Baldwin turn a profit


A stone house on a Kauai ranch Alexander & Baldwin Inc. sold for $8.1 million in the third quarter.

Selling 566 acres of land on Kauai and Maui helped Alexander & Baldwin Inc. earn $6.6 million in the third quarter and reverse a year- earlier $1.4 million loss that included heavy costs to close Hawaii’s last sugar cane plantation.

Honolulu-based A&B reported the financial results Tuesday for the three months ended Sept. 30.

Revenue rose 8 percent to $111.5 million in the quarter from $102.9 million in the same period last year.

The company’s three major operating segments — land, commercial real estate leasing and road construction subsidiary Grace Pacific — all contributed to the improved revenue and profit performance.

A&B also said it continues to make strong progress converting itself to a real estate investment trust, reducing mainland real estate holdings in favor of investing more in Hawaii and finding agricultural tenants for its former 36,000-acre Maui plantation Hawaiian Commercial & Sugar Co.



$1.4 million

“I’m incredibly excited about where the company is going,” Chris Benjamin, A&B president and CEO, said in a conference call with stock analysts. “This is a long road we’re on.”

During the third quarter, A&B’s biggest source of profit was property leases largely involving retail space that includes several Hawaii shopping centers and the commercial core of Kailua. This segment’s operating profit was $13.6 million in the third quarter, up slightly from $13.5 million in the same period last year.

The biggest improvement among A&B’s divisions was in land development and sale operations. Operating profit for this part of A&B rose to $10.4 million in the recent quarter from $7.8 million a year earlier.

This gain came primarily from selling a 273-acre ranch on Kauai for $8.1 million and 293 acres of vacant land on Maui for $7.9 million. A&B also earned $2.9 million from sales of two town homes next to its Kakaako condominium tower The Collection, three residential properties at its Kauai vacation community Kukuiula and four residential properties at a similar project on the Big Island called Ka Milo.

The Kauai ranch several years ago was subdivided and marketed for sale by A&B as 24 farm or home lots. But more recently A&B sought a single buyer for the property, which was once the family estate of Kauai sugar pioneer Walter Duncan McBryde and features a 4,200-square-foot stone house from 1860 that used to be a plantation manager’s residence.

A&B’s third primary business segment, rock quarry and road paving firm Grace Pacific, produced a $6.5 million operating profit in the recent quarter. That was up from $5.6 million a year earlier and benefited from laying down 31 percent more asphalt, though competitive pricing pressures cut into the gain.

Previously, A&B had another business segment for agriculture, but that was folded into land operations after the sugar plantation shutdown in December. In the third quarter A&B still had some expenses related to discontinued HC&S operations, resulting in an $800,000 after-tax loss. However, that compared with a $13.6 million after-tax loss for HC&S operations in last year’s third quarter.

Benjamin said A&B is making quicker-than-expected progress finding new uses for its former plantation land, with negotiations to lease 15,000 acres that could bring total use up to roughly 20,000 acres in a few months if negotiations are successful.

A&B since January has converted 4,500 acres into active farming and ranching, and is working to add 900 acres to a Maui County ag park, the company said.

The other big ongoing transition at A&B is converting itself from a regular corporation to a real estate investment trust, or REIT. This initiative is expected to attract more investment capital for A&B to buy Hawaii commercial property, and will also provide the company with tax advantages.

A&B spent $4.4 million on the conversion in the third quarter, up from $1.9 million a year earlier. In total, A&B expects the change to cost $25 million to $27 million.

Shares of A&B stock closed at $45.19 Tuesday before the earnings announcement, closer to the upper end of a 52-week range between $40.02 on May 31 and $46.87 on Oct. 3.