Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total NOI grew by 1.1%, with same-store NOI increasing by 0.9% and 1.7% excluding collections of prior year reserves.
- Executed 47 leases in the improved property portfolio, achieving blended spreads of 7.3% on a comparable basis.
- Net income available to shareholders was $9.1 million, or $0.13 per diluted share, with income from continuing operations up 8% from last year.
- G&A expenses decreased by $2.7 million or 26.8% to $7.3 million, reflecting achievements in cost reductions.
- Raised guidance for 2024, expecting same-store NOI growth in the range of 1.25% to 2.25% and total company FFO in the range of $1.17 to $1.26 per share.
Negative Points
- Same-store leased occupancy was 94.8%, 50 basis points lower than the same period last year.
- AFFO decreased to $16.9 million or $0.23 per diluted share from $18 million or $0.25 per diluted share in the same period last year.
- Loss from discontinued operations was $2.6 million, reflecting the resolution of a liability related to legacy operations.
- Total debt outstanding was $470 million, with a weighted average interest rate of 4.75%.
- Tourism numbers year-to-date are down, with Maui specifically down almost 25% due to the lingering impact of the Lahaina wildfires.
Q & A Highlights
Q: Your rent spreads are around 8%, which is lower than mainland competitors. Can you explain this difference and how much you get on annual bumps?
A: Our portfolio is resilient with typically 3% annual increases and percentage rent clauses. We don't have as many larger mainland retailers, which means fewer opportunities for low-to-high rent conversions but also fewer bankruptcies.
Q: How does the recent land sale impact your legacy overhead expenses?
A: The land sale allows us to reduce our annualized run rate for carrying costs to $4 million to $5 million. Simplifying the segment remains a priority, but land sales are episodic.
Q: Are you seeing more external investment opportunities, and does this indicate an acceleration in your investment pace?
A: We are seeing more opportunities at the top of the funnel, indicating potential market thawing. However, seller expectations on pricing need to adjust. We might see some opportunities before the end of the year.
Q: How do you view ATM issuance relative to NAV, given the current discount?
A: The ATM is an important tool for both stock repurchases and potential equity issuance. We aim for accretion and would consider issuing equity at or above NAV, focusing on the opportunity's accretive nature.
Q: Can you explain the $0.03 to $0.04 increase in commercial real estate portfolio guidance?
A: The increase is due to improved NOI performance and cost efficiencies in our corporate overhead, separate from land operations.
Q: Any known move-outs of consequence, and how should we think about net FFO addition?
A: No major concerns from a rent roll perspective. The team has done well in laddering out weighted average lease terms, and we are confident in the portfolio's performance.
Q: What's the incremental solar opportunity beyond the five projects in progress?
A: We haven't scaled those yet but are focused on our largest assets for the most economies of scale. The five projects are a priority, and we will provide more visibility as they progress.
Q: Any update on the 40% leased retail property in Kauai?
A: No updates as of the end of Q2, but it remains a priority for us.
Q: What's driving the change in your constructive view on the investment market?
A: There's no lack of buyer interest, and sellers are starting to test the market. The cost of capital remains high, but there's less uncertainty about its availability, leading to more sellers coming off the sidelines.
Q: Why do land sales appear to be accelerating?
A: Recent land sales came together quickly due to existing relationships and opportunistic moves. There's no change in our methodology or pricing expectations, but we remain focused on simplifying this segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
