Q4 2024 Earnings Summary
- Strong retail leasing in 2024 leads to expectations of significant same-store growth in 2025 as new leases become economic and renewal spreads kick in. Customer traffic on Oahu was up year-over-year, and tenant sales have remained strong.
- The company is confident in its ability to place capital and is prioritizing growth through acquisitions, expecting to add $0.01 of FFO per share from acquisitions in 2025.
- Effective management of land assets by selling non-core parcels at compelling prices and reinvesting the proceeds into accretive acquisitions, such as the 81,000 square foot industrial building purchased in 2024. Additionally, they are strategically retaining and developing key assets like Maui Business Park to build long-term value in their portfolio.
- Anemic growth expected in the industrial segment due to lease terminations at Kaka'ako Commerce Center and Komohana Industrial Park, leading to slower same-store NOI growth. While management has prospects for these spaces, the vacancies could negatively impact results if backfilling is delayed.
- FFO guidance includes $0.01 per share from unspecified acquisitions planned for the second half of 2025, indicating reliance on uncertain external growth opportunities that may not materialize. This dependence on acquisitions to meet growth targets introduces potential risk if suitable investments are not found or completed.
- The recent backfill of the anchor space at Waianae Mall involves a community use tenant on a relatively short-term lease, which may not provide long-term stability. This temporary solution could lead to future occupancy and revenue challenges if a long-term tenant is not secured.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Up ~18% (from $52.9M in Q4 2023 to $62.45M in Q4 2024) | Total Revenue increased primarily due to the surge in the Land Operations segment, which boosted overall revenue, along with modest growth in the Commercial Real Estate segment. The strong performance in land sales (notably, the jump from $4.5M to $12.56M) was the key driver behind achieving an 18% increase, illustrating a shift from prior period sales figures. |
Commercial Real Estate | ~3% growth (from $48.4M in Q4 2023 to $49.89M in Q4 2024) | The CRE segment only showed modest improvement, growing by approximately 3% YoY. This reflects stable rental and recovery incomes without major fluctuations compared to previous period values, indicating steady but not transformative performance. |
Land Operations | +179% increase (from $4.5M in Q4 2023 to $12.56M in Q4 2024) | Land Operations revenue exploded primarily due to significantly higher unimproved land and development lot sales, including high-value transactions like the sale of an 81-acre parcel on Maui and a development lot at Maui Business Park. This dramatic increase compared to last year’s $4.5M emphasizes a strong shift in asset disposition strategy. |
Operating Income | Improved slightly (from $17.2M in Q4 2023 to $17.69M in Q4 2024) | Despite a marked increase in revenue, Operating Income only saw a modest improvement, suggesting that increased operating costs or expenses, possibly due to higher costs associated with processing larger sales, partially offset the revenue gains, maintaining a narrow margin relative to the previous period. |
Net Income & EPS | Turned positive from a loss (-$3.2M and -$0.05 EPS in Q4 2023 to $12.44M and +$0.17 EPS in Q4 2024) | Net Income and EPS reversed sharply as the company moved from a loss to strong profitability. This turnaround is largely driven by the robust revenue and margin improvements from the Land Operations segment combined with better overall cost control measures, as evidenced by previous period challenges now overcome. |
Interest Expense | Increased significantly (from ~$6.0M in Q4 2023 to $11.16M in Q4 2024) | The Interest Expense almost doubled, rising sharply to $11.16M from approximately $6.0M. This suggests a significant increase in financing costs, which could result from higher borrowings or refinancing activities, and serves as a cautionary note even amidst revenue and net income gains. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Same-Store NOI Growth | FY 2024 | Including: 1.75%-2.75%, Excluding: 2.25%-3.15% | no current guidance | no current guidance |
FFO | FY 2024 | $1.27 to $1.35 per share | no current guidance | no current guidance |
AFFO | FY 2024 | $1.05 to $1.12 per share | no current guidance | no current guidance |
G&A Expenses | FY 2024 | $29M to $30.5M | no current guidance | no current guidance |
Vacancy Expectations | FY 2024 | 50,000 sqft industrial; 13,000 sqft office | no current guidance | no current guidance |
Same-Store NOI Growth | FY 2025 | no prior guidance | 2.4% to 3.2% | no prior guidance |
FFO | FY 2025 | no prior guidance | $1.13 to $1.20 per share | no prior guidance |
CRE and Corporate-related FFO | FY 2025 | no prior guidance | $1.11 to $1.16 per share | no prior guidance |
G&A Expenses | FY 2025 | no prior guidance | flat to $0.01 per share improvement | no prior guidance |
Land Operations contributions | FY 2025 | no prior guidance | $0.02 to $0.04 per share | no prior guidance |
External acquisitions contribution | FY 2025 | no prior guidance | $0.01 to FFO | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
General & Administrative (G&A) Expenses | FY 2024 | $29M to $30.5M | $29.82M [(7.239 [31]) + (7.252) + (7.436) + (7.895)] | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Acquisition Strategy | Opportunistic, asset-class agnostic acquisitions with off‐market deals, capital recycling and a focus on risk‐adjusted returns were emphasized in Q1 , Q2 and Q3. | Q4 maintained an opportunistic approach with strategic external acquisition targets (e.g., expecting $0.01 FFO per share from acquisitions in 2025) with continued focus on capital recycling. | Consistent approach with a slightly heightened emphasis on external acquisitions for future growth. |
Leasing Performance | Consistent strong leasing activity with solid GLA execution and blended spreads were reported in Q1 , Q2 and Q3. | Q4 reported robust leasing (47 leases covering 140,000 square feet of GLA) and increased retail occupancy, yet highlighted challenges in industrial and office occupancy. | Retail leasing remains robust while industrial/office segments continue to face occupancy challenges. |
Industrial Segment Performance | Earlier periods conveyed strong industrial market performance with low vacancies in Q1 , Q2 and proactive leasing initiatives in Q3. | Q4 signaled a more cautious tone with expectations of anemic growth in 2025 due to lease terminations at key properties and persistent industrial vacancies. | A shift toward cautious sentiment as lease terminations and vacancy risks raise concerns for future industrial performance. |
Land Asset Monetization | A continuous focus on monetizing noncore land was evident in Q1 and Q2 and further reinforced in Q3. | Q4 emphasized the monetization of approximately 3,000 acres of noncore land while strategically retaining core assets like Maui Business Park, and highlighted cost reductions in Land Operations. | Steady commitment to streamline the portfolio through land asset sales while improving cost structures; outlook remains stable. |
FFO Guidance and Financial Sustainability | Guidance was progressively raised in Q1 , Q2 and Q3 with strong balance sheet updates, liquidity measures, and improved adjusted EBITDA ratios. | In Q4, robust FFO guidance for 2025 (with contributions from CRE, acquisitions, and Land Operations) was maintained along with solid leverage (net debt-to-EBITDA of 3.6x) and positive refinancing actions. | Consistently positive guidance and financial management reinforce the company’s sustainability and growth potential. |
Cost Reduction and Operational Efficiencies | Each quarter (Q1 , Q2 , Q3 ) reported progressive G&A cost reductions and operational streamlining through process improvements and simplification measures. | Q4 reported a 12.4% reduction in G&A expenses (a $4.2 million decrease) and further progress in reducing Land Operations carrying costs, affirming the drive for operational efficiency. | A continuous and effective effort to reduce costs and streamline operations, supporting improved margins. |
Emerging Solar Projects | Only discussed in Q2 where five photovoltaic projects were expected to deliver $400,000–$600,000 incremental NOI over 18 months. | Not mentioned in the Q4 discussions. | A new topic that emerged in Q2 but was not referenced in Q4, suggesting it may have been deprioritized or fully integrated into other initiatives. |
Financial Health and Leverage | Consistently reported strong financial metrics across Q1 , Q2 and Q3 with stable debt ratios, liquidity figures and proactive refinancing and hedging strategies. | Q4 maintained a strong balance sheet with a net debt-to-EBITDA ratio of 3.6x, a predominantly fixed-rate debt profile and successful extension of credit facilities, ensuring robust financial health. | Steady and robust financial management has been maintained across all periods, reinforcing investor confidence and supporting long-term stability. |
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Guidance Levers
Q: What's impacting the high or low end of 2025 guidance?
A: Management indicated that the low end of guidance could be affected by delayed tenant occupancy, unplanned vacancies, and bad debt. Conversely, the high end would benefit from earlier tenant occupancy and stronger bad debt collections. -
Tenant Health
Q: Are you expecting tenant bankruptcies to remain low?
A: The company expects tenant health to remain strong, with robust collections and no significant exposure to major bankrupt tenants aside from Liberated Brands. Customer traffic on Oahu is up year-over-year, and tenant sales remain strong. -
G&A Cost Reduction
Q: What's driving the $4 million decline in G&A expenses?
A: Through streamlining processes, automation, and leadership changes, the company achieved over $4 million in cost efficiencies in 2024. They anticipate G&A levels to remain flat or improve by $0.01 per share in 2025. -
Land Sales Strategy
Q: What's the buyer appetite for land sales?
A: Management reports strong interest in their noncore land holdings, though financing can be challenging for smaller agricultural lots. For Maui Business Park, demand remains strong, but they plan to retain lots for long-term portfolio development rather than selling. -
Rent Spreads
Q: Were any one-off items driving Q4 rent spreads?
A: The significant rent spread of 14% in Q4 was boosted by strong leasing activity, notably a substantial ABR increase from the CVS/Longs renewal at Manoa Marketplace. -
2025 Rent Outlook
Q: Will 2025 rent spreads remain elevated?
A: While not providing specific figures, management expects leasing interest to remain strong in 2025, consistent with levels seen in 2024. -
Same-Store Growth
Q: What's guiding the outlook for same-store growth?
A: In retail, they expect significant growth due to strong 2024 leasing and renewal spreads. Industrial growth will be minimal due to prior lease terminations, though backfill prospects are promising. Ground leases have minimal growth expected in 2025. -
Office Assets Plan
Q: What are the plans for office assets?
A: Office assets represent about 4% of NOI and are considered nonstrategic. Management is exploring capital recycling opportunities for the three Maui office properties while retaining the Oahu asset integrated within a shopping center. -
Acquisition FFO Contribution
Q: Details on the $0.01 FFO from acquisitions?
A: The $0.01 per share FFO included in guidance is from unspecified growth initiatives, expected through capital deployment in both external and internal opportunities during the year. -
Tenant Move-Outs
Q: Any expected tenant move-outs in 2025?
A: They have mitigated much of the risk for 2025, with lease expirations representing just over 8% of ABR. One tenant bankruptcy, Liberated Brands, has a low exposure of about $450,000 in ABR and 7,000 square feet. -
Retail Occupancy Increase
Q: What drove the increase in retail leased occupancy?
A: The primary driver was the quick backfill of the Waianae Mall anchor space with a community use tenant on a capital-efficient, short-term lease, improving leased occupancy by 230 basis points.