Suzy Hollinger - Director, IR Stan Kuriyama - Chief Executive Officer Chris Benjamin - President and Chief Operating Officer George Morvis - VP, Corporate Development Paul Ito - Chief Financial Officer David Haverly - SVP of Leasing, A&B Property.

Sheila McGrath - Evercore ISI Rick Faulkner - Oppenheimer & Co. Wilkes Graham - Compass Point Research and Trading Steve O'Hara - Sidoti & Company Young Ku - Wells Fargo Securities.

Operator Good day, ladies and gentlemen, and welcome to the First Quarter 2015 Alexander & Baldwin Earnings Conference Call. My name is Jasmine, and I will be your operator for today. At this time, all participants in a listen-only mode. Later we will conduct a question-and-answer session.

[Operator Instructions] As reminder this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Miss Suzy Hollinger, Director of Investor Relations. Please proceed..

Thank you, Jasmine. Hello and welcome to Alexander & Baldwin's first quarter 2015 earnings call. On the call with me today are Stan Kuriyama, Chairman and CEO; Chris Benjamin, President and COO; George Morvis, Vice President, Corporate Development; and Paul Ito, Senior Vice President and CFO.

Also with us today is David Haverly, A&B Property's Senior Vice President of Leasing, who will participate in the question-and-answer portion of the call.

Before we commence, please note that statements in this call and presentation that are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements.

Factors that could cause actual results to differ materially from those contemplated statements include with out limitation those described on Page 17 through 30 of the company’s 2014 Form 10-K. These forward-looking statements are not guarantees of future performance and we do not undertake any obligation to update our forward-looking statements.

Management will be referring to non-GAAP financial measures when discussing results. In particular, we will be referring to NOI when discussing leasing segment results and EBITDA when discussing the performance of the Materials & Construction segment.

Included in the appendix of today's presentation slides is a statement regarding our use of these non-GAAP measures and required reconciliation. Slides from this presentation are available for download at our website, www.alexanderbaldwin.com. Slide 3 provides an agenda for today's presentation, after which we will take your questions.

We'll start with Stan, who will comment on results and review highlights..

strong development sales, including the closeout of our Waihonua condominium project, and the sale of a four-acre Maui Business Park parcel, and two Kahala Avenue properties; a 12% improvement in Leasing due to improved same-store performance and the acquisition of Kaka'ako Commerce Center in December of 2014; and improved results from the Materials & Construction segment.

Earnings for the quarter were $0.20 lower than last year due to the sale of large commercial property that closed in January of 2014. Turning to recent highlights. I am pleased to report that our Waihonua project closed on time and on budget.

Buyer interest in at our next Kaka'ako condominium project, called The Collection, has been highly positive, and we've now sold 95% of 450 units that we released to-date 94% under binding contracts. Three sales were closed at Kukui'ula in the first quarter, and we currently have binding contracts for 14 units in escrow.

Sales at Kukui'ula have nearly depleted available built inventory and as result, we are expanding our home construction program, as Chris will be describing shortly. At Maui Business Park we closed a four-acre parcel sale in January at $47 per square foot and have another 13 acres under binding contract.

Maui Business Park is an important long-term project for us and we are very pleased by the pricing absorption we are seeing at that project Leasing continues to perform well. Besides the 12% increase in operating profit NOI was $21 million in nearly 6.5% improvement over last year.

Finally, we had a good quarter in materials and construction segment while we generate at $9.5 million of EBITDA compared to $7 million last year due primarily to increased material sales and paving activity. Hawaii's economy continues to provide a positive operating environment for our businesses.

Visitor arrivals were up 1% through February, although expenditures were 3% lower, due in part to the impact of the strong dollar. Construction continues its positive upward trend. The value of statewide private sector construction permits was up 71% for the first quarter compared to last year, led by an increase in commercial and residential permits.

Tourism and the strengthening construction sector are driving improved performance across the broader Hawaii economy. Unemployment, for example, was 4.1% at the end of March, compared to 4.6% last year.

Hawaii's labor force continues to grow, increasing 2% compared to March of last year, to record a 676,000 employees, the highest in the state's history.

Bankruptcy filings were down 7% for the first quarter compared to the prior year, foreclosures declined by 38% and First Hawaiian Bank reported that their debit and credit card same-store sales activity increased 5% for the quarter compared to last year. Residential real estate remained strong, particular on Oahu.

The median resale prices for Oahu homes and condos in March were $700,000 and $380,000 up 7% and 9% respectively compared to March 2014. Low levels of available inventory are supporting these record prices. At the end of March, housing supply on Oahu stood at 2.7 months of available inventory for single-family homes and 3.4 months for condos.

Average days on market also were very low at 21 days for both homes and condos. Oahu’s commercial real-estate markets are also performing well. Retail asking rents climbed 9% in the first quarter compared to last year, and vacancy remained low at 4.3%.

Vacancy for industrial space was 2.1% and asking rents increased 7% in the first quarter compared to last year, although office occupancy slipped slightly in the first quarter rents improved by 5%. And with that, I'd like to now ask Chris to update you on our real-estate and agribusiness segments..

Thanks, Stan, and aloha to our listeners. Just to provide a little more context on the Hawaii market as it relates to the real estate business.

As you can tell from Stan's description it's very strong, but we still see it as rational and believe it will present select investment opportunities for us, even as our development sales activity is picking up.

On that note, we had another very good quarter in real estate with strong sales at a number of our projects across the state, and with growth in same-store performance at our commercial properties.

As I mentioned on our last call, by the end of January, all 340 units in our Waihonua Condominium project in Kaka'ako were closed and delivered to owners, bringing this very successful project to completion.

Waihonua is a good example of how investing during the recession, and bringing a project to market early in the current real estate cycle, has benefited A&B and it's shareholders. We continue to see opportunities to invest for the current cycle, but also are preparing for the next cycle.

In urban Honolulu, for instance, we are evaluating potential investments in current high-rise developments, akin to our prior investment at one Ala Moana. We also see select opportunities to secure strategically located Honolulu income properties with redevelopment potential that might position us well for residential development in the next cycle.

We'll keep you posted on our progress in these areas. On the heels of the closeout of Waihonua, construction kicked into high gear at The Collection. The project is experiencing strong presales, with 421 binding sales contracts out of the 450 units released for sale, and we're still a year-and-a-half from expected closings in late 2016.

The average price per square foot of the units we've released is $770. We also have 14 attractive townhome units that we will release for sale early this summer. At our Kahala Avenue portfolio on Oahu, two properties closed in the first quarter, continuing the steady pace of sales we've experienced since acquiring the properties in late 2013.

The two properties we closed in the quarter comprised a 1.2-acre street-to-beach parcel, that was sold for $15.2 million. Another two properties, a 1.2-acre oceanfront lot, and a 27,000 square foot lot on the mountainside of the street, will close in May and bring the total properties sold to date to 20, and total gross revenues to $120 million.

Of the remaining 10 properties, four lots representing nearly 70% of the portfolios remaining square footage, are the higher value oceanfront properties. Moving on to Kukui'ula on Slide 14, two vacant lots closed during the quarter for $3 million and $2.3 million, and one club cottage closed for $2.9 million.

In addition, and not included in this table, two of our original buyers have traded their lots for larger home sites. One of these lots set a new high water mark for a vacant lot at a sales price of $3.8 million.

This increasing activity on lot sales is a very positive sign, as it means more and more buyers are willing to design and build custom homes, something we did not see for several years. In fact, 18 members are currently planning, permitting or building homes at Kukui'ula.

I'm also pleased to report that binding contracts totaling $41 million for 14 units are in escrow, consisting of seven club villas ranging in price from $4.1 million to $4.9 million, two club bungalows for $1.2 million and $2.3 million, and one club cottage at $2.95 million and four lots at $52 per square foot on average.

With the exception of one of the club villas units, all of these contracts are expected to close in 2015. In addition to the member driven building activity I just referenced, we now have 15 homes under construction through our various building initiatives.

To further expand the range of our product offerings at Kukui'ula, mass grading is underway on a 26-acre site that will be home to 24 custom lots, and a planned 20 unit condominium project.

Moving to Maui now, as Stan mentioned, we're seeing continued sales interest at Maui Business Park, driven in part by the opening of Maui's first Target store in March. In January, we closed a four-acre parcel at $47 per square foot and we have 13.4 acres in escrow under binding contracts.

11 of these acres are being sold to Lowe's, which will be moving from its current location in Kahului to a parcel adjacent to Target's. Lowe's will be building a 167,000 square foot store at Maui Business Park another 2.4 acres are being sold to Pacific Pipe Company, a local distributor of irrigation and landscape supplies.

Shifting now to our commercial portfolio on Slide 19, increases in same-store performance and the addition of the 200,000 square foot Kaka'ako Commerce Center to the portfolio in December 2014 driven a 11.9% increase in operating profit and a 6.6% improvement in NOI in the first quarter compared to the first quarter of 2014.

We expect the positive trend in same-store performance to continue through 2015, and we feel good about our full year 2015 projection for NOI growth of between 6% and 8%. First quarter 2015 occupancy for both the Hawaii and Mainland portfolios was 94%, compared to 94% and 93% respectively for the first quarter of 2014.

We've now essentially completed the reverse 1031 funding for the Kaka'ako Commerce Center with the March sale of a 46,500 square foot retail property in Colorado, and the sale, which is expected to close today, of the San Pedro Plaza, a 172,000 square foot office complex in San Antonio, Texas.

Following these transactions, about 80% of our total portfolio NOI will now be derived from Hawaii assets. Remarkable in light of the fact that only 40% of NOI came from Hawaii assets in 2012.

Additionally, NOI has grown, and the quality of that income has improved considerably with the attractive Hawaii retail and ground leased assets we added in 2013. Retail comprises 60% of our Hawaii portfolio GLA, making A&B the second largest retail property owner in Hawaii.

Ground leases, which are among the most secure sources of rental income in our portfolio, generated roughly 16% of total NOI. As we previously mentioned, one of the attractive features of our ground lease assets is the potential to acquire, over time, the ground lessee's interest in the improvements.

This is usually prompted by upcoming lease expiration. On our last call I told you about the pending acquisition of the ground lessee's interest in 100,000 square foot Safeway-anchored neighborhood center in Kailua. I'm pleased to report that this transaction closed last Friday for $1.6 million.

Not only were we able to acquire the property nine years prior to the ground lease's termination date, thereby accelerating the financial benefits associated with ownership of the improvements, but we are now able to manage the center for long center for long-term success.

The incremental NOI from this purchase has been factored into our NOI growth projections for the year. Finally, turning to Agribusiness on Slide 23, the segment earned about $2 million of operating profit in the first quarter compared to $3 million last year.

The decline was due to lower power margins that were partially offset by higher sugar and molasses margins. First quarter earnings are rarely indicative of full year trends since little sugar is produced in the first quarter. Full-year performance is primarily determined by price-per-ton of sugar compared to the cost-per-ton of production.

While total cost can projected fairly accurately because of the fixed nature of most costs, production levels can not and therefore cost per ton is very difficult to predict. Particularly at this early stage when we were only about 20% of the way through our schedule harvest season.

Unfortunately significant weather challenges year-to-date have us well behind where we thought we would be at this point in harvest. So even with 28% of the crop priced above last years levels its unclear weather we will be able to improve on last years Agribusiness performance.

With that, let me turn the call over to George to discuss our materials and construction results..

Thanks Chris and good afternoon everyone. Our materials and construction segment had a good first quarter, reporting $7.2 million of operating profit and $9.5 million of EBITDA our earnings before interest, taxes, depreciation and amortization; compared to $3.4 million of operating profit and $7.2 million of EBITDA for the first quarter of 2014.

The improvement and results was primarily due to increases and construction material savings and paving volumes. Growth in statewide construction activity, as well as improved weather, contributed to the increase in year-over-year results.

Grace's backlog at the end of March 2015 was $206.1 million, 6.1% lower than $219.4 million at the end of 2014 due to the timing of government bid award activity.

The pace of City and County of Honolulu bid activity has recently picked up, and anticipated state highways and federal military and transportation projects, are expected to provide additional opportunities to build the backlog as the year progresses. At the end of April 2015, our consolidated backlog stood at $243.1 million.

Performance for the balance of this year we will largely be dictated by the percentage of this backlog we can complete in the coming year; by the amount of additional bids issued, won and completed; and, as always, by prevailing weather conditions.

The segment's longer-term prospects remain very positive, and will benefit when construction commences on major residential projects planned for West and Central Oahu over the next several years. With that, I will turn it over Paul to talk about financial matters..

Thank you, George. On Slide 27 we compare our balance sheet at the end of the quarter to year end. Proceeds from Waihonua and other development sales allowed us to reduce our debt levels in the first quarter, from a debt to debt-plus-equity ratio of 37% at the end of 2014 to below 35% at the end of the quarter.

On Slide 28, regarding $20 million in total capital expenditures in the first quarter, $13 million went to investment capital, the majority of which was for active real estate projects in joint ventures. Another $7 million was for maintenance capital.

For the balance of the year we are projecting $113 million in investment capital primarily for investment in ongoing development projects and undesignated investment in new project. We also have $50 million as a place holder for commercial property acquisition which we anticipate will be funded through 1031 exchanges.

As in past years, our budget includes capital for opportunistic investments the size and timing of which is of course unpredictable. So with that, let me turn the call over to Stan for closing remarks..

Thank you, Paul. Earnings this quarter we are strong and were driven by our core businesses. Sales momentum continues at many of our key projects and we continue to build our development pipeline to take advantage of the current upturn in the Hawaii real estate cycle.

Our commercial portfolio is performing well posted by solid same-store performance we, therefore, continue to expect full year 2015 NOI growth of 6% to 8%. Sugar pricing and production will be the primary determinants of how we perform in Agribusiness this year, but as you heard from Chris, meeting our 2015 production goals will be a challenge.

We will update you on our progress on the next call. With $9.5 million of EBITDA for the quarter our Materials & Construction segment contributed positively to our first quarter, and the segment is well positioned to capitalize over the long run with the further growth in Hawaii's economy and real estate markets.

That concludes our presentation this afternoon, we'd now be happy to answer your questions..

[Operator Instructions] And our first question comes from the line of Sheila McGrath with Evercore. Please proceed..

Yes. Good afternoon. Stan, I was wondering if you could give us your thoughts on - I saw where DR Horton go an approval, a zoning approval, for their project in West Oahu.

Is that one of the projects that you often refer to that could potentially help Grace Pacific in demand at their quarry?.

Yes, those are the types of projects, Shelia, that we're referring to. There are number of larger projects planned for Central and West Oahu, and the Hoopili one is actually the largest of those projects.

These projects are located in close proximity to Grace's quarry out there, so this - the movement of these types of projects going forward would definitely benefit Grace..

Okay and then Chris, I was just wondering on Kukui'ula, it seems like you have increased activity, if you could just frame it for us, maybe this year anticipating closings versus last year, or how it's tracking versus last year? Both in terms of number of closings and if there's any similar lots that you could point to a year-over-year price increase?.

Yes, so Sheila, thanks for the question. We are definitely seeing a pickup in activity. Just doing some quick math, we've sold three to-date, we've got 13 more that will close this year. So that will be at least 16 sales this year, so even if that's all we did, that would be a pickup from last year, although a modest one.

However, we have a lot of good prospects in the pipeline, and I actually think that we should do much better. I don't know if we’ll - where we'll get, but I would think that our total this year will at least have a two on the front, and maybe - so that's good momentum. As far as price increases, we are seeing very good pricing.

I'd say the biggest uplift has really just been in velocity. We did not discount our lots coming out of the recession, so it's not as if we have to claw back pricing. We really kept our pricing at pretty attractive levels.

We're seeing modest increases, as you may recall, that our early cottages we were selling at $2.7 million, the most recent one we're selling at $2.95 million, so we're seeing some pick-up but I'd say the best news there has just been the velocity..

Okay, and one more question for Stan. Just on Maui Business Park, over time it's been really hard to identify income-producing assets for Alex to acquire at attractive pricing.

I'm just wondering if strategically, if you would rethink the selling of those entitled acres, because in the public market it's just a short term return rather - I think you would - the company would maybe benefit from more recurring income stream.

I am just wondering if there's any opportunity at Maui Business Park to develop and own the assets for the long-term?.

Yes, Sheila, we are definitely interesting in pursuing build-to-suits, or other development projects with retail tenants, that we can add to our commercial portfolio. I think, conceptually, that's something very attractive to us, and I think there will be opportunities at Maui Business Park.

But I think, as you know, in the Hawaii market, many of our lessees, owner occupants prefer to own fee simple. In fact that's why Lowe's, that's one reason Lowe's is moving to Maui Business Park, because it does give them the opportunity to own the property fee simple.

Having said that, I think there will be attractive opportunities down the road and, as I mentioned, that's something we definitely would be interested in pursuing..

Okay, great. Thank you..

And our next question comes from the line of Ian Zaffino with Oppenheimer. Please proceed..

Hi guys, this is Rick Faulkner for Ian..

Hi Rick..

Hey, how are you doing? I apologize if this is in your slides because I don't have them in front of me.

Have you disclosed your footprint, Hawaii versus the mainland?.

In terms of, say, NOI.

NOI or GLA?.

Yes, I'm just wondering if your views have changed about just sort of being opportunistic about exiting the mainland in general..

Okay, yes. So to recap kind of the progress we've made on our migration from the Mainland to Hawaii, when we started the process about 60% of our NOI came from Mainland assets and 40% from Hawaii assets. Those numbers are now 20% from the Mainland and 80% from Hawaii, so we've shifted a significant portion of the portfolio back.

We do have an interest in shifting most or all of it back over time, but as we said from the start, we are going to be patient in doing that and look for the right opportunities. However, because we are a buyer and seller at the same time, seller on the Mainland and a buyer in Hawaii, we can do that really at any point in the cycle.

We're not necessarily looking to wait for cheap opportunities in Hawaii because, of course, at the same time, things are pricier in Hawaii that we also can get better value on a Mainland.

So really it's all about what can we create value in, in Hawaii, and so we will look for unique repositioning opportunities, other ways that we can create value on a Hawaii asset, and if we find it, we will pursue it.

So we have some things that we're actively looking at right now, but the timing is always hard to predict, it just depends on seller interest in Hawaii, and then once we find an interested seller and secure a deal, then we'll go and look to monetize the Mainland asset.

And the just one last data point for you, Rick, as far as GLA goes, our GLA is roughly 50/50 split between Mainland and Hawaii..

Okay, that's all I've got..

And our next question comes from the line of Wilkes Graham with Compass Point. Please proceed..

Hi, good afternoon. I had a couple questions. One, maybe for you, Chris, I noticed that the operating margin on the real estate sales was 99%, almost 100%.

Is that just a function of the delivery of the Waihonua units and the Maui Business Park land sales, and that there was just no cost against those? Can you just walk me through how that worked?.

Yes, I’m going to tee it up for Paul to walk you through it, but basically what happens on the Waihonua was a joint venture so the revenues – you want to take over, Paul?.

Yes, so essentially for an investment like Waihonua, in the segment reporting all of that profit is shown as, just as a gain or operating profit, it doesn't show up in revenue and so that will skew the margin number..

Okay..

There's no revenue for Waihonua, there's obviously the profit from that appears in operating profit, but there's no revenue in the revenue line for Waihonua..

I see, okay.

Stan, I think I heard you say that despite the fact that visitor arrivals are up year-to-date, you say expenditures down, I think it was 3% because the strong dollar, can you just share your thoughts on how the market out there looks with the strong dollar effects, as well as the cheaper oil prices?.

So the main dollar impact to us, of course, would be for Japanese tourists. Last year, Japanese tourists in Hawaii spend about – comprised about 16% of total visitor expenditures, so you can assume some daily drop-off in spending for the Japanese based upon the higher exchange for them. But let's say their spending declined by 10%, right.

So what that would really represent is 10% or 16%. So that in and of itself, is not all that material. We have to track a little more carefully what happens – what’s happening on the Mainland. I think West Coast visitors were strong spenders to date, but we'll have take a look at the East Coast numbers.

Unfortunately, the numbers have not yet been published for the quarter, but they'll be coming out shortly and we'll get a better insight into how tourism is doing based on that report..

Okay, thanks. Just last question. Chris, I think I might have missed part of what you said about the ongoing underwriting of acquisitions in Hawaii. Historically, we've talked about either potentially entering the single family market, and you've always got the acquisition of additional retail in Hawaii.

But with the Kaka'ako Commerce Center being industrial, I'm curious if there's anything going in Hawaii that is making other property types and commercial real estate more attractive than maybe there were in years past?.

Yes, so I think, first of all, as a general rule we're very pleased with our migration into grocery-anchored retail in Hawaii as our primary asset class that we have been investing in. Of course, Kaka'ako Commerce Center is an obvious exception to that, and there were other things that made that very attractive.

It's in part of town where there's a lot of industrial supply being eliminated because of redevelopment for residential use. While that's not an asset that we intend to redevelop for residential, the supply around it is being depleted so it's becoming a more attractive asset. So that's the story behind that one.

But there are other assets that we are looking at with a view towards redevelopment, and those are both industrial and office assets in the urban core where we see the potential to buy an asset now, generate income from it over the next number of years, and then potentially position it for redevelopment in the current cycle.

So that would be an example where we might look at something that we might not otherwise look at, for example office, but with a view towards redevelopment.

Beyond that, I would say our criteria and what we're looking at in commercial acquisitions in Hawaii, is relatively similar to what it has been and continues to be, probably a little bit more on the retail and industrial side than office or other assets..

Great. Thank you..

And our next question comes from the line of Steve O'Hara with Sidoti & Company. Please proceed..

Hi, good morning..

Hey, Steve..

Good morning, Steve..

I was just wondering if you could just talk about what CAP rates have been recently, maybe in the three portions of your portfolio? Maybe how much room you see for either growth or current trends, or where you see those going? That would be great..

Hi, Steve, it's David Haverly. We're continuing to see CAP rates continue at relatively the same levels. On the retail front we're seeing CAP rates in the sub-five range, and there's been a lot of activity in the past on that - it's been slowing down a little but first quarter, but there's still a lot of interest in retail in Hawaii.

On the office market, you'll see the CAP rates a little bit higher than that in Hawaii. Some are probably six-plus, probably six to eight range depending on the asset in the opportunity it presents. Industrial has been a little bit stronger, again, they were probably sub-six that you've been seeing overall for industrial interest..

Okay, and then just moving to Grace Pacific.

Can you just I mean, in terms of the capital expenditure needs, how much – what's the current flexibility in the business? So in terms of the ability to generate revenue, or activity that happens on the island, and these potential real estate projects that are kind of I think long-term targets of yours, how much additional capital spending would that need to kind of take those projects on at some point in the future, or do you kind of have that all set the way it needs to be right now? Thank you..

Yes, Steve this is George. In terms of the additional capital required for those type of projects above and beyond what we've got in our schedule already, it would be relatively modest.

We have Grace, in the period before we purchased them, had come off a pretty substantial period of heavy capital investments, and that's sort of drawing to a close here, and so they've got new plants in their quarry, a substantial portion of which is in service already, the rest of which will go into service by the end of this year.

So in terms of scaling up, it really would be just the sort of the rolling stock associated with putting more crews, or boots, on the street. And so we feel pretty good about Grace’s ability to take advantage of an increased market opportunity, and really without major additional capital investments..

Okay, thank you..

And our next question comes from the line of Young Ku with Wells Fargo. Please proceed..

Great, thank you. I just want to go back to Waihonua for a little bit.

So the JB earnings contribution to EPS this quarter, you said there wasn't a margin associated with it, so if you were to put a margin on those sales, what would it be?.

Well, we typically talk in terms of returns on projects like this, and so, I think the best guidance I can give you is that we – our return on investment on the project, from of the land through construction, was about 20% in line with our expectations..

I see, got it, thanks, Chris. Just a quick follow-up, on real estate leasing portfolio, it looked like the same-store NOI was up pretty meaningfully sequentially I think it's around 6%.

Was there something that's seasonal in that number, because I did see the occupancy move meaningfully either, so I was just wondering what that jump was related to?.

No Young, it’s really the same-store revenue, or same-store performance, is growing at roughly over 5% year-over-year and you contributed most of it to rent growth we're seeing on the retail portfolio..

Okay, so it wasn't just now, so that run rate is pretty good to start with?.

Yes..

Okay, got it, thank you. End of Q&A.

And there are no further questions at this time. I would now like to turn the call over to the management for closing remarks..

Thanks everybody for being on the call today. If you have further questions please call me at 808-525-8422. Thanks again..