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Hawaiian Landowner Alexander & Baldwin Evaluating REIT Conversion

Believes Move Could Help it Compete Against Out-of-State Investors for Prime Hawaiian Commercial Properties
November 1, 2016
Hawaii’s fourth largest private landowner, Alexander & Baldwin Inc. (NYSE:ALEX) has begun an in-depth exploration of converting its land holdings business to a REIT as a way to finance its plans pursue additional investments in other Hawaii property assets and communities.

Besides owning 87,500 acres in the Aloha State, Alexander & Baldwin is an increasingly active real estate investor, managing a portfolio of 4.7 million square feet of leasable space in Hawaii and several mainland U.S. markets, including Dallas, Salt Lake City, and Reno NV.

A&B also ranks as the largest owner of grocery-anchored retail assets in Hawaii. Its retail portfolio in the state totals some 60 properties totaling about 1.5 million square feet.

Over the last four years, A&B has been shifting its real estate investment from the mainland back to Hawaii. The company said more than 85% its portfolio NOI now comes from properties in Hawaii compared to 40% at the beginning of 2012.

“As we strategically grow our commercial portfolio in Hawaii, it’s important that we assess the optimal structure for the company going forward and take a serious look at organizing our company like other large commercial real estate owner/operators,” said Chris Benjamin, A&B president and CEO.

“As a major developer, quarry operator, infrastructure firm and agricultural enterprise in Hawaii, we also want to ensure that a REIT conversion would not adversely impact these (other) operations,” Benjamin added.

Currently structured as a C-corporation, A&B has a large number of non-REIT qualifying businesses, such as its sugar growing operations. However, its growing commercial real estate holdings has prompted its consideration of qualifying as a REIT with a taxable REIT subsidiary housing its operating businesses.

The firm said it believes converting to a REIT could help it compete against out-of-state investors for Hawaii’s commercial properties, Benjamin said, before adding the firm still has a lot of work ahead to assess the viability and attractiveness of a REIT conversion.

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