Alexander & Baldwin Upgrades 2025 FFO Guidance to $1.36-$1.41 Amid CRE Surge

Earnings Call Insights: Alexander & Baldwin (ALEX) Q3 2025

Management View

Lance Parker, President and CEO, announced that the company's third quarter results exceeded expectations, and he expressed satisfaction with the progress made throughout the year. He noted that the full-year outlook remains positive and that the company is raising its FFO guidance. Parker reported a same-store NOI growth of 0.6% for the quarter and highlighted a renewal with an anchor tenant in Kailua Town at an 11% lease spread. He described momentum in internal growth with ground broken on two new buildings at Komohana Industrial Park in West Oahu, including a 91,000 square foot warehouse pre-leased to Lowe's and a 30,000 square foot speculative build. "We expect both buildings to be placed into service in the fourth quarter of 2026 and generate $2.8 million in annual NOI when they are stabilized in the first quarter of 2027."

Parker detailed that vertical construction at the Maui Business Park build-to-suit project remains on schedule for completion in the first quarter of 2026, expected to add $1 million in annual NOI. He also noted an executed strategic backfill at Kaka'ako Commerce Center, resulting in occupancy reaching 96.3% and a tenant exercising an option to purchase three floors, generating additional capital for acquisitions.

On the external growth front, Parker stated, "we're seeing increased momentum in the Hawaii investment market, including three large portfolios being marketed for sale, and we are actively pursuing acquisition opportunities aligned with our long-term growth strategy."

CFO Clayton Chun reported, "our portfolio generated $32.8 million of NOI in the third quarter, representing an increase of 1.2% over the same period last year." Chun also highlighted, "third quarter CRE and Corporate-related FFO per share of $0.30 grew $0.02 or 7.1% from the same quarter last year. This improvement was attributed to lower G&A and higher portfolio NOI."

Outlook

Chun stated, "we are reaffirming our guidance of full year same-store NOI growth of 3.4% to 3.8%. Implied in this guidance is our estimate for the fourth quarter, where we expect a 4.4% same-store NOI growth at the midpoint."

"We are raising our guidance for CRE and Corporate FFO and expect our full year results to be within a range of $1.13 to $1.17 per share due primarily to the lower-than-expected interest expense in the third quarter. Total FFO is now expected to be $1.36 to $1.41 per share, up $0.01 from our previous guidance."

Parker emphasized, "This is the third consecutive quarter we've raised guidance, reflecting our continued confidence in the full year outlook."

Financial Results

The company reported $32.8 million of NOI for the quarter, up 1.2% year-over-year. Same-store NOI was $31.9 million, representing a 60 basis point increase year-over-year.

FFO per share for CRE and Corporate was $0.30, while total company FFO per share was $0.29, including an operating loss of $298,000 from Land Operations due to no land parcel sales in the quarter.

G&A was $6.1 million for the quarter, approximately $1.4 million lower than the same period last year, attributed to nonrecurring and transaction-related items as well as timing of expenses. The company expects full year G&A to range from flat to $0.01 per share lower than 2024.

Liquidity at quarter end was $284.3 million, with a net debt to adjusted EBITDA ratio of 3.5x. Approximately 89% of debt is at fixed rates with a weighted average interest rate of 4.7%.

Q&A

Robert Stevenson, Janney: Asked when the $6.4 million of ABR from SNO leases will impact earnings. Clayton Chun responded that SNO typically becomes economic over 9 to 12 months, with the Maui build-to-suit expected to come online in Q1 2026 and Komohana in Q4 2026 or Q1 2027.

Stevenson also inquired about the $24 million expected from the Kaka'ako Commerce Center sale and whether the replacement asset has been identified. Parker replied, "No, it has not yet been determined... We feel confident, particularly given the timing that it won't close until Q1 of next year that we'll have sufficient time to identify and close on the uplink."

Stevenson questioned G&A expectations for Q4. Chun answered, "We are expecting an uptick in G&A in the fourth quarter... we did have some timing differences that were part of our Q3 numbers. In addition, we've been pretty open about the fact that we've been actively pursuing opportunities in the market."

Stevenson asked if the entirety of the Sam's Club TI hit in the third quarter. Chun confirmed, "It did. We paid that out, and it was about $19.6 million."

Alexander Goldfarb, Piper Sandler: Asked about tenant purchase options in buildings like Kaka'ako. Parker explained, "It is unique to the space. It's a unique building. We don't have anything else like it in the portfolio."

Goldfarb asked about the ongoing Land Operations run rate and possible losses absent land sales. Chun and Parker indicated a run rate of $3.75 million to $4.5 million annually, with modest losses expected without land sales.

Goldfarb questioned new rent spreads being slightly negative. Parker attributed this to one tenant in Kailua impacting numbers, noting the impact was more about the prior tenant being above market.

Mitch Germain, Citizens JMP: Asked about same-store NOI excluding one-time items. Chun said removing these factors would have aligned same-store NOI growth with the first half of the year, with Millan adding that all move-outs have been backfilled and will be economic in Q1.

Germain asked about the acquisition landscape and competition from private capital. Parker described increased market activity, with local and Mainland capital participating, and emphasized the company's local advantage.

Brendan McCarthy, Sidoti: Asked about the ground lease portfolio renewal and development prospects. Parker said renewal is highly likely and that the longer-term focus is on internal growth once renewal is complete.

McCarthy inquired about share buybacks. Chun replied, "we do have a program that is in effect, and that is one of the tools that we have in our capital allocation toolkit."

Gaurav Mehta, Alliance Global Partners: Asked about cap rates and acquisition targets. Parker said expected market pricing is generally "5 to 6 cap type deals," but specifics depend on asset type and quality.

Mehta asked about the Lono Center office property with low occupancy. Parker stated it is being actively marketed for sale as part of a plan to recycle capital into more strategic investments.

Sentiment Analysis

Analysts' tone was neutral, focusing on timing of SNO revenue, capital deployment, expense management, and portfolio strategy. Follow-up questions on acquisition pipeline, unusual transaction structures, and recurring G&A costs indicated a pragmatic, fact-seeking approach.

Management maintained a confident and slightly optimistic tone throughout the call. Parker stated, "This is the third consecutive quarter we've raised guidance, reflecting our continued confidence in the full year outlook." Chun highlighted improvements in expense management and portfolio performance, and responses to analyst questions were generally direct and detailed.

Compared to the previous quarter, analysts' tone remained neutral, while management’s tone shifted from confident to more optimistic, reflecting the third consecutive guidance increase.

Quarter-over-Quarter Comparison

Guidance for total FFO per share was raised to $1.36 to $1.41 from the prior range of $1.35 to $1.40. Same-store NOI growth guidance was reaffirmed at 3.4% to 3.8%.

The company reported a decrease in G&A expenses compared to the prior year, whereas the previous quarter focused on a reduction in the Land Operations annual run rate.

Occupancy metrics were largely stable, with leased occupancy at 95.6% (down 20 basis points sequentially) and economic occupancy at 94.3% (down 50 basis points sequentially).

Management’s tone became more confident, emphasizing guidance increases, while analysts continued to probe on capital allocation and operational details.

Strategic focus shifted slightly toward external growth via acquisitions, with management referencing three large portfolios being marketed for sale in Hawaii, compared to broad optimism and internal growth focus in the previous quarter.

Risks and Concerns

Management cited higher bad debt expense related to a few isolated tenants, impacting same-store NOI growth.

G&A is expected to increase in Q4 due to timing differences and transaction-related costs from pursuing acquisitions, but management is "taking steps to mitigate these items and control costs to the extent that we're able to."

No land parcel sales occurred in the quarter, resulting in an operating loss for Land Operations and continued annual carrying costs.

Analysts questioned the sustainability of Land Operations, renewal risk in the ground lease portfolio, and the potential impact of negative new rent spreads, with management providing explanations and mitigation strategies.

Final Takeaway

Management highlighted another quarter of exceeding expectations, reflected in a raised FFO guidance and continued confidence in the outlook for 2025. The company emphasized solid leasing momentum, successful internal and external growth initiatives, cost controls, and a strong balance sheet. With ongoing development projects, active pursuit of acquisitions, and a focus on driving long-term value, Alexander & Baldwin remains optimistic about closing the year on a high note.