image
Real Estate - REIT - Diversified - NYSE - US
$ 19.3
1.15 %
$ 1.4 B
Market Cap
23.54
P/E
EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2018 - Q1
image
Executives

Suzy Hollinger - VP of IR Chris Benjamin - President and CEO Jim Mead - CFO Lance Parker - Chief Real Estate Officer Clayton Chun - Chief Accounting Officer.

Analysts

Sheila McGrath - Evercore Steve O'Hara - Sidoti.

Operator

Good day, ladies and gentlemen, and welcome to the Alexander & Baldwin 2018 First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Ms. Suzy Hollinger, Vice President of Investor Relations. Ms. Hollinger, the floor is yours..

Suzy Hollinger

Thank you, Andrea. Aloha, and welcome to our call to discuss Alexander & Baldwin's first quarter 2018 earnings. With me today are President and CEO, Chris Benjamin; and Jim Mead, CFO. Lance Parker, Chief Real Estate Officer; and Clayton Chun, Chief Accounting Officer, also are here and will participate in the Q&A 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 significant risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements.

These forward-looking statements include, but are not limited to, statements regarding possible or assumed future results of operations, business strategies, growth opportunities and competitive positions. Such forward-looking statements speak only as of the date the statements were made and are not guarantees of future performance.

Forward-looking statements are subject to a number of risks, uncertainties, assumptions, and other factors that could cause actual results and the timing of certain events to differ materially from those expressed in or implied by the forward-looking statements.

These factors include but are not limited to prevailing market conditions and other factors related to Company's REIT status and the Company's business generally discussed in the company's most recent Form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission.

The information in this call and presentation should be evaluated in light of these important risk factors. We do not undertake any obligation to update the Company's forward-looking statements. Management will be referring to non-GAAP financial measures during our call today.

Included in the Appendix of today's presentation slides is a statement regarding our use of these non-GAAP financial measures and reconciliations. Slides from this presentation are available for download at our website, alexanderbaldwin.com.

Chris will open up today's presentation with a strategic update and some context for our operating performance and will then turn the presentation over to Jim, who will discuss financial matters and guidance. Chris will return for some closing remarks and we'll open then for your questions. With that, let me turn the call over to Chris..

Chris Benjamin Consultant

Thanks Suzy, and thanks everybody for being on the call. Our story for this quarter is very consistent with the past several and can be boiled down to three value creation themes.

Continued strong execution of our strategy, excellent performance from our core commercial real estate business, and continued focus on improving and/or monetizing our non-commercial real estate businesses. Let me take these in turn.

I am proud of the great strategic progress we've made on many fronts over the past few years but perhaps nothing has been more important than our Mainland to Hawaii migration which we officially and successfully completed in March with the disposition of our last Mainland commercial properties to fund the previously announced acquisition of three premier neighborhood and community retail centers from Terramar.

That acquisition not only facilitated our entry into two new strategic Hawaii locations but catalyzed the dispositions of our last Mainland commercial properties.

We started the migration process in 2012 shortly after the spinoff of Matson and in just over five years, we have invested nearly $1 billion in highly strategic Hawaii assets funded primarily by Mainland dispositions that in total generated $600 million in sales proceeds.

More importantly, we've grown net operating income by 37% over that time and created a concentrated attractive portfolio. We're now focused on integrating the new assets into the portfolio including leasing up the new space at Pu'unene Shopping Center which is going quite well.

We'll also open Lau Hala shops later this year, advanced leasing and construction of Ho'okele Shopping Center and commence our Aikahi Park Shopping Center repositioning project.

Also in the first quarter we completed the final step in our reconversion with the January special distribution, another important strategic milestone marking the closure of a monumental but value creative endeavor for the company. As I said, the second theme is the continued strong performance of our commercial real estate portfolio.

This is the core business of the company and our results demonstrate the strength of the Hawaii market in the high quality of the assets we purchased and developed.

Operating profit in our commercial real estate segment increased 8.4%, while same-store NOI increased by 2.8% which is in line with our plan and we achieved re-leasing spreads of 10.2% during the first quarter. Based on our leasing schedule, we are reaffirming our full-year same-store NOI growth guidance of 3% to 4%.

Not only was the quarter strong but it follows multiple quarters of strong performance which we expect to continue. Our commercial real estate portfolio's performance is underpinned by solid market and portfolio fundamentals and I want to spend a little time discussing the Hawaii market.

Before I begin my comments about the market, let me just say that we're thinking of the people in Kauai and the Big Island who have been impacted most by the recent rains and volcanic activity.

While the impacts have been significant, they have been geographically isolated and we're fortunate that our real estate assets and employees have not been directly impacted.

But as a member of this tightly-knit community we are committed to supporting the recovery efforts and are working with the local residents and agencies on those islands to determine how best to do so. Turning now to the commercial market.

Hawaii, while often categorized as a secondary or tertiary market, actually has similar characteristics to a Gateway or Tier 1 market. By many measures, median household income, retail spending per capita, personal income growth and unemployment, Hawaii is right there with California and New York.

Strip retail in Hawaii is further characterized by low supply per capita which is kept relatively low due to the complexity and length of time to complete the zoning and permitting process. We also have lower Internet sales penetration than Mainland markets principally because of the high cost of shipping to-and-from Hawaii.

Demographics within the portfolio are even stronger than the Hawaii market generally and are above average when compared with several strip retail peer companies. As a result, annualized base rents for our portfolio of $29.05, an average grocer sales of $789 per square foot are among the highest in the nation.

In addition, because we own predominately neighborhood centers our exposure to the retailers that Greenstreet deems at risk particularly big and mid -box retailers is low as a low percentage of our total rent as compared to the average for the Greenstreet strip center coverage universe.

We're forecasting continued strong performance from our commercial real estate business this year and as I said are reaffirming our guidance of 3% to 4% increase in same-store NOI. The third theme I referenced above relates to our non-commercial real estate businesses.

We're making a concerted effort to improve the performance of our materials and construction business and to minimize capital going into and/or to pull capital out of our development for sale projects.

These are objectives that we talked about previously only in general terms primarily because our highest priority until now was on completing the reconversion and migrating the portfolio but now that those efforts are complete, we're increasingly focused on improving and simplifying the non-REIT parts of the business.

We know this is the part that investors struggle with the most and so we need to address it. Let's start with the materials and construction business which I know has been a frustration for our investors.

Since our acquisition, we've had shifts in commodity pricing unusually wet and sporadic whether, competitive pressure, permitting challenges and other operational headwinds.

We're not where we like to be but Grace remains a fundamentally strong business platform with tremendous assets and people and we're focused on how to get it back to and beyond its earlier levels of profitability. We made some positive progress in the quarter but it obviously is not reflected in our financial results which were very poor.

Among the steps taken of late are management realignment both with internal promotions and a few outside hires, the completion of a year-long operational review that has triggered several recent and pending changes to operational practices, and an upgrade of financial systems to facilitate greater transparency in decision-making.

The new President of the Operation, Pike Riegert who assumed the role in March has expanded our sales initiatives to increase the amount of aggregate and hot mix asphalt we sell. As I've told many of you, we are a material company not just a construction company and expanded material sales can help boost revenue and margins.

With these positive initiatives underway in the business, I’m actually quite optimistic about the direction we're going about our financial prospects for the medium and long term and even for much better performance over the balance of this year.

I'll let Jim give more of details on the quarter and the outlook but suffice it to say that our first quarter results are not our run rate for the balance of the year. Performance should improve dramatically in the coming quarters.

In land operations the focus is not so much on improving operations which are going quite well as it is on continuing efforts to sell through existing retail inventory, condos, town homes, residential lots and industrial lots and to either sell or attract third-party capital into various for-sale developments builder parcels and undeveloped urban zoned lands.

In addition, we continue to advance our diversified ag efforts and are in advanced lease discussions with several tenants. Finally, we’re progressing toward the sales of a couple of ag parcels on Maui including land for an airport expansion in Kahului and an expansion of the Maui agricultural park.

Let me provide a little more color on all of this activity. First we had several sales of residential inventory in the first quarter that together generated $28 million in net cash proceeds including Kahala Avenue oceanfront parcel and several units at Kamalani, Keala O Wailea, Ka Milo and Kukui'ula.

We hope and expect to continue selling through our residential inventory this year including about 40 more units at Kamalani and the entire balance of the collection and Keala O Wailea units. One of our strategic objectives has been to reduce our for-sale development activity while we shift to more development for hold activity.

However, some of our best landholdings are already entitled for residential development and we want to realize value from that land over time while also ensuring that much-needed housing is developed for our local communities.

So this leads us to seek capital and development partners for completion of these projects and in some cases sell land third parties rather than develop it ourselves.

Examples of joint ventures where our land is developed using partners capital are Ka Milo and Keala O Wailea, and we also have sold a number of Wailea and other parcels to developers in the past. So as we look to shift our focus and reduce our leverage, we have several assets that are candidates from JVs, recapitalization or even sale.

Among the properties for which we're seeking outside capital are O Wailea and some urban parcels in Kahului.

In addition, we're initiating a process to seek significant investment in the further buildout of Kukui'ula where we believe accelerated vertical development could greatly enhance the projects absorption but don't feel that this investment is consistent with our shareholders priorities for capital deployment.

We're early in the process of testing the market for interest in most of these assets but this is the primary focus for our team now that our Mainland migration is done. Success on these efforts will support our de-levering process but the timing and impact is difficult to predict.

With that strategic and economic background, let me turn the call over to Jim to discuss our first quarter earnings in more detail..

Jim Mead

Thanks Chris, good afternoon. Before I go into the results to give you better context, we feel good about our ability to achieve our overall plan for the year.

Our core commercial real estate performance is generating very good results and we completed the acquisition Terramar Hawaii properties and the sale of the remainder of our Mainland portfolio ahead of plan.

Land and development sales were slow but that is consistent with our plan and development plan which has few material transactions in the schedule for the first half of the year.

And although materials and construction was impacted by weather and a few other items that I will speak to later, we are working hard to make back the lost ground from the first quarter. So when we get to guidance there won’t be any surprises as we are generally on track for the year.

Turning to earnings, our diluted earnings of $0.66 per share included $0.69 per share of gains from the properties we sold to fund the Terramar acquisition. So without those gains we had a loss of $0.03.

So loss was due to seasonality of land sales, a loss at a builder joint venture at Kukui'ula and the underperformance in our materials and construction segment. In total, the sales of the last seven mainland assets that started in the fourth quarter and ended in Q1 had gains net of impairments taken at the end of last year totaling $7.8 million.

We got better sales prices then we had underwritten and we also closed the transaction ahead of our expected schedule. In other words, we feel like the execution was great. Turning to Slide 18 as Chris discussed in our commercial real estate portfolio continues to show well underpin results and in particular retail continues to perform very well.

In total, we are on pace to achieve our full-year guidance metrics. Leasing volume was strong with over 300,000 square feet in Q1. We had a 10.2% same-store leasing spread overall that included 7.5% on our 100% Hawaii retail portfolio.

Occupancy was down in the industrial portfolio with the previously anticipated move-out of 45,000 square foot tenant at Komohana Industrial Park. Hawaii industrial continues to enjoy very low availability so we anticipate releasing vacancy in the next couple of quarters and achieving an uptick in the rents.

Our portfolio is relatively small so individual vacancies affect our overall occupancy. Retail vacancy held at the same at 93% and we are also on plan here especially considering the excellent pace of our leasing activities and 2.8% same-store NOI growth was on plan for the quarter.

The land operation segment produced net operating loss in the first quarter of $5.4 million, a large contributor to the quarter was up $4.2 million loss due to construction remediation issues at a builder joint venture on the coil of property. I should point out that this is a discrete event and are only activity with this one development partner.

During the quarter, we generated $28 million in cash from sales activities that included the closing of a sale in Kahala for a net $15.5 million $6.4 million from the closings at our Kamalani for housing development in Maui and distribution from our joint venture development including Kukui'ula totaling $6.1 million.

Chris described a very full-some pipeline of land and development related activities. And we believe this will translate into a very active 2018. However, the activities in our plan are back ended for the year and so we had normal operating profit from the land operation segment in Q1 and we would also expect the same in Q2.

Our plan to reduce company debt by year-end depends upon the success of our efforts to both monetize assets and bring in capital partners to reduce our future capital requirements. So execution of our land and development strategy is important to us and a big focus of our team.

Turning to our materials and construction segment we reported $0.2 million of operating profit versus $5.6 million last year and $3.1 million in adjusted EBITDA in comparison to $7.9 million last year. The result was substantially lower than our plan for the quarter.

The largest contributors were reduced paving volumes and higher material costs, poor weather reduced our available paving day by 26%.

We have fixed costs in running the business so reduced paving volumes also compresses margins and related to business improvement initiatives we spoken about in prior calls we incurred highest SG&A largely as a result of management reorganization.

On the positive side though we're already seeing results from our new Grace management team and its execution of the strategy we articulated recently to expand third-party material sales which is a high margin activity and a large driver of profitability.

With the increased focus on sales we already have more than half of our year’s budget under firm contractor verbal commitments. These are encouraging third-party sales results and we're working hard to catch up on weather delayed paving activities.

We don't know yet how much improvement we can make during the remainder of the year but are cautiously optimistic that we can regain much of the lost first quarter profit. The funding stat for Terramar was completed ahead of our schedule.

We financed the acquisition through 1031 exchanges sourced by mainland asset sales, three noncore Hawaii sales, a land sale and the assumption of a $62 million mortgage. You will recall that in the fourth quarter we closed on a $100 million in term financing to prefund the $156 million cash portion of the special distribution this January.

We supplemented that with a $50 million five year bank term facility in Q1. This bank financing is low cost and unlike institutional fixed rate term loans carries no prepayment penalties. And so provides a part of our capital structure that we can repay to the extent we have proceeds from monetization activities.

We closed a refinancing of our $62 million Series E debt in April.

We selected this piece of debt because it had a short average life due to its large annual amortization payments by fixing the debt in three financings with an average maturity of nine years we were able to increase our average debt maturity and reduce our cash requirements over the next few years.

Our average debt maturity pro forma for the refinancing increases from 5.6 years to six years and 72% of our debt is fixed rate because our plan includes paying offloading debt during the year I would expect the fixed rate percentage to increase by year end.

Slide 22 recaps the balance sheet changes during the quarter, the most significant of which was the impact of the special distribution. You will recall that at year end we had some nonintuitive accounting that included treatment of the special distribution as all equity for share count purposes and all debt for balance sheet purposes.

You can see in this schedule that the balance sheet and number of outstanding shares now accurately reflect the 8020 stock and cash composition of the $783 million special distribution.

We presented guidance on certain key metrics in last quarter’s call none of our guidance is changing from the year particularly the commercial real estate segment of our business is anticipated to perform very well this year and achieve the guidance we presented at year end.

Although we did not give specific guidance on land sales expectations because of its episodic and generally difficult to calculate profit forecast. We are comfortable with the progress we’ve made to meet our internal execution plans and should be able to provide more clarity as the year progresses.

Q2 is not expected to have material profits from land sales which will be weighted towards the second half of the year.

As I said earlier in the call achieving our debt reduction goal depends upon successful execution of our land and development strategy you will recall that I would said we are targeting a mid-five times debt to EBITDA by the end of the year and we're still on track for that result.

As for materials and construction while we did not provide formal guidance because of uncertainties in the business such as whether we are starting the second quarter behind plan but feel there is still good opportunity gain back ground during the remainder of the year. Let me turn the call back to Chris..

Chris Benjamin Consultant

Thanks Jim. We’ve continually made strong progress in advancing our strategies over the past several years. Most recently with vision of the REIT conversion and the Mainland migration, of course we’re disappointed this hasn’t translated into a stock price that reflects our true value.

But we can only stay the course and continue to simplify and tell our story. Our commercial portfolio continues to perform well and we’re fortunate that the fundamentals of our operating environment and the portfolio our strong.

We’re on track to meet the full year financial guidance for our commercial real estate and expect to significantly advance major projects to grow future net operating income.

We will remain diligent in building out our commercial real estate portfolio tenanting our spaces and renewing our leases, but our strategic focus has incrementally turned toward executing priorities in our other two business segments, land operations and materials and construction.

I'm pleased with the headway we've made on several of our priorities for these segments. Executing on these priorities is critical to achieving the guidance that Jim just discussed and to creating long-term shareholder value. I look forward to updating you on our progress on future call. That concludes our formal comments.

And we're happy to take your questions..

Operator

[Operator Instructions] Our first question comes from the line of Sheila McGrath with Evercore. Your line is open..

Sheila McGrath

The leasing spreads were strong in the quarter, I was wondering if you could give a little bit more detail on those results.

In the release you mentioned some industrial and I wasn’t able to glean if that was after the quarter the strong industrial leasing spreads?.

Lance Parker President, Chief Executive Officer & Director

So with regard to those industrial spreads that was from Honokohau, that's the 77,000 square foot industrial park that we bought in the middle of last year over on the big island of Hawaii.

And when we purchased that I think we talked about the investment thesis there, one of opportunities was the fact that almost half of the tenants were on month-to-month rents or leases and our ability to convert them to long-term. So we've been systematically working through that process [indiscernible] get good leasing spreads as a result..

Sheila McGrath

So did that leasing happen within the first quarter?.

Lance Parker President, Chief Executive Officer & Director

That did happen within the first quarter, correct..

Sheila McGrath

And then Jim you mentioned getting down to mid 5s on net debt to EBITDA with the source of the capital primarily from land sales. I am just wondering if JV is more tax efficient or is there a lot of leakage - by tax leakage by using land sales as a source of debt paydown..

Jim Mead

Yes right now - so it’s difficult to predict what tax leakage there will be. There is always the possibility for taxes as we transact. And when we sell things out right, we generally transact out of the TRS. So they are potentially taxable transactions.

So I would say that there could be some tax leakage, but that’s kind of in our plan against the assets that we’re looking to sell through the year. I don't think though that I am trying to get to what is….

Chris Benjamin Consultant

I guess maybe I could jump in for a second.

I think that in terms of generating cash first of all some of these assets such as Kahala, Wailea some of the assets and of course a lot of our development assets, while they will certainly be some margin and some profit that would be taxable there is also the return of capital that is very important to helping delever.

So the return of capital obviously would not have any tax implications. And then within as far as the tax hit goes, tax reform does reduce it somewhat. So I think it would be the reality is that we would - the vast majority of the proceeds would be available to pay down debt..

Sheila McGrath

And then Chris maybe on acquisitions obviously first quarter was super active, I’m just wondering if there is anything in the pipeline that you're looking at and how you would think about sourcing capital to fund new opportunities?.

Chris Benjamin Consultant

And I let either Jim or Lance chime in as well. But we certainly have an active pipeline but I would say that with our primary focus this year being on delevering, we’re not really looking actively to put new cash to work or to acquire additional assets with debt.

That would leave the most attractive - that would mean that the most attractive capital source for new deals would be either 1031 proceeds if we were to have some eligible land sales. And I did reference a couple of ag parcels that we're looking to sell on Maui.

That could generate some proceeds and then of course we talked also about the possibility of an upgrade transaction.

But I'd say right now for a variety of reasons most of our teams focus is a little bit more on the disposition or recapitalization side working on some of these deals that we referenced to try to delever get ourselves into a better balance sheet situation by the end of the year.

And then I would think if we've done that we would be in a much better place to look be more acquisitive perhaps next year. So Lance is not in agreement I guess the way to paraphrase all that is we've got a good pipeline, but I think given our balance sheet right now we’re focused a little bit more on disposition side than the acquisition side..

Operator

[Operator Instructions] Our next question comes from the line of Steve O'Hara with Sidoti. Your line is open..

Steve O'Hara

Hi, could you just talk about the - about Grace so what’s you’re saying you’re talking about improving - are you talking about improving off of what seems like a pretty rough first or you’re talking about improving of last year’s numbers?.

Chris Benjamin Consultant

Well the first point that I wanted to make is that certainly the 3 million and change of EBITDA this quarter is not a run rate to the balance of the year.

We had talked on the last call about EBITDA result for the year in the range of $30 million and while I can't say that we're – it’s very difficult right now given where we are to handicap whether we’ll hit that and be within a couple million dollars of it or maybe even exceeded it.

What I can say is that we’re going to be a lot closer to that number than we would be to four times our first quarter number. So that's the main point I want to make we do expect much better performance as the year goes on. Even however at $30 million as you know that would still be where we had been when we purchased the business.

And it's been trending down for the last few years for some of the reasons that I referenced earlier. And look we got to accept that environments change, markets change, commodity pricing changes competitive environment change, there are a lot of changes that are outside of our control.

But what I'm trying to convey is that we are very proactively rolling up our sleeves and addressing a number of issues in that business that I think are going to help drive better performance over the next couple years to some extent that has been some management changes, but also it's been a number of process changes, it’s new financial systems that I think are going to give us much better insight into the drivers of performance in that business.

It increased sales activity that I think is going to increase revenue and margin in the higher margin part of our business because we make more money in material sales.

So it’s a lot of things and there's an energy out of Grace and there is a focus on our part at Grace that I'm very encouraged by but I realize at this point you're going to wait and see. But I personally feel very good about the steps we're taking and the direction we’re going with the business..

Steve O'Hara

And then just maybe sticking with that real quick can you remind me I mean it seems like there's - it has performed I guess up to expectations or your expectations I don’t think for a while now. So it’s been weather so it’s been free hedge competition I think in terms of the bidding process.

I mean within the organization was there - kind of the management change that was unexpected or anything like that that maybe left you guys without the right team in place or was it more just market forces and everybody's kind of going through the same issues?.

Chris Benjamin Consultant

Yes, it’s a tough question to answer Steve. I think there were a number of I think it’s a combination of a few things there were a number of environmental changes that happened very shortly after we acquired the business.

And by environmental I don't just mean weather although that was one of them, commodity pricing changes, competitive changes there are a number of things that fairly soon after our acquisition impacted performance.

There was in general there was a feeling that these issues would pass and I think that we certainly hope that some of them would pass more quickly they did not.

And what we have more recently decided is that while certainly there are some improvements that could happen in the external environment we've got to be more proactive about controlling our own destiny here.

And so that has led us to take a number of actions including engaging some consultants to come in and really take an independent hard look at the way we operate.

Making some management changes getting some fresh blood and also getting some folks into new positions and importantly I referenced it very briefly really digging in and improving our financial systems in order to make sure that we have the most complete view of the drivers of profitability in the business.

So while it's really been a combination of both externally and internally driven factors the only thing that we can control are the internally driven ones. And I feel that we are now doing that in a very proactive way..

Steve O'Hara

And then just on the I think you may have answered this but [indiscernible] question the release in spread in the quarter full year guide is I think lower than that was it one property or is it just mix of things coming up is maybe expect it trend down or maybe a little bit of conservatism on your part?.

Lance Parker President, Chief Executive Officer & Director

So it’s really just as we look out for the next three quarters comfortable with reaffirming our guidance but just recognizing the opportunity that we have coming up in the portfolio are not going to be as high as we've seen in the first quarter.

That said, I would say that we do feel very good just about the leasing environment in general, obviously we had good strong leasing spreads for the quarter, but also in terms of volume and other things that we've been able to accomplish we’re feeling good about the rest of 2017 or 2018 rather..

Steve O'Hara

And then just lastly I mean in the press release you talk about a number of projects that are ongoing and I think it sounds like they’re going to come online soon or starting to come online I guess the shops and kind of lower.

But I mean if you talked about what type of impact you expect that to have on NOI maybe recent spreads in 2019 or how that might look going forward?.

Chris Benjamin Consultant

So we have had a schedule and I don't think we had any slides today, it’s in the supplement. It’s a schedule of our development for hold projects that’s not only ground-up development like Ho'okele, but also our repositioning projects.

And so that gives detail on not only what sort of NOI, I believe we expect to generate but also the general timing of when we expect those projects to stabilize. So Lance and Clayton feel free to jump in..

Lance Parker President, Chief Executive Officer & Director

So Steve in the supplemental we referenced incremental stabilized cash NOI for Lau Hala which is the kind of little property you were referencing and then we stated 2.2% to 2.7% as far as the incremental impact..

Chris Benjamin Consultant

Did you have another part to that question that I missed?.

Steve O'Hara

I guess just there is a number projects going on and maybe they are all laid out in that schedule, I have to go back and look but I mean it would seem that assuming the leasing environment stays healthy and you bring these projects online.

And we talked about any type of NOI growth rate that you're targeting for 2019 or maybe that you could expect just based on the project you have here..

Chris Benjamin Consultant

So Steve first of all we have not yet projected or talked about NOI growth for 2019, but we have reaffirmed our 2018 same-store growth expectations.

What I would say just as a high-level summary of the stuff in our pipeline that you're referring to, we've got about a $69 million total project cost on four different projects that we’re building out and we expect that to generate about $5.5 million to $6.5 million of NOI.

Those assets and those projects are expected to come online and reach stabilization anywhere from - in the case of Pearl Hilands middle of this year out till 2021 in the case of [indiscernible].

So by using the table which is table 17 in our supplement, I think they can get a pretty good sense of how that new development or repositioning will help the additive to NOI, but we have not provided any guidance on the same-store NOI from the existing portfolio. And we would probably not expect to do that until late in the year..

Operator

And we have a follow up question from Sheila McGrath with Evercore. Your line is open..

Sheila McGrath

Just on Lau Hala shops at 88% leased what left to leased and that will open late in the year when will it open and I'm assuming not everything opens all at once it's just kind of more phase into stabilization next year is that right?.

Lance Parker President, Chief Executive Officer & Director

That’s correct Sheila. So right now we have just the in line spaces that are available. So we have a total of six phase and these are in between our two restaurants which are Maui Green Company as well as Roy's which we would expect to open toward the end of the year. The first tenant that we expect to open will be actually U.S.

Seagem and they have got the entire second floor space. They’re already in there doing some work and then the last tenant at least for deals that we inked will be down to earth and that won’t be for about another year and half they have another existing location in Kailua and the deal is time to be sort of coterminous with their expiration..

Sheila McGrath

And is there a decent amount of activity on the remaining space to lease?.

Lance Parker President, Chief Executive Officer & Director

We're starting to see a pickup in activity I think, particularly for the inline base we really expected that those were going to be more local tenants and for those types of users we’d have to be closer to the completion of construction.

We just took the dust screens down last week so if you look in the slide deck there was a really nice shot that we’re able to provide that was literally the day that we took the screens down. So with us now at that point in the project, we do expect activity to pick up..

Sheila McGrath

And then Chris you did change the operation some with the reconversion bringing in leasing and management in-house. I was just wondering if you could talk about how that process is going strategically do you see benefits for that.

And how is that cost savings or kind of a push just talk about how you view that change?.

Chris Benjamin Consultant

Yes, let me talk broadly and then let Lance jump specifically with respect to property management. But broadly speaking the company has changed dramatically in the last few years and it's been a huge undertaking from our employees, it’s been a lot of work, it’s been a lot of stress and they’ve done an amazing job.

I would say - I wish I could say that it's all done and everything stabilized, but we’re still transitioning we’re still bringing on - it still a couple of property management positions we’re looking to fill some leasing positions.

We still got a few accounting positions open so we’re still in transition, but overall I'd say it's really a remarkable effort that people have undertaken and we’re very different company today and that can be a dramatic thing.

With respect to property management, I absolutely think it's both it's very strategic and Lance can elaborate on some of the reasons for that, but I think both leasing and property management and property accounting bringing all of those things in-house really is very strategic and Lance can talk a little bit more about how it’s going..

Lance Parker President, Chief Executive Officer & Director

So I would just add to that Sheila I mean I think cost aside which I think we’re still ways away from being able to truly measure what the savings benefit is going to be of that.

It’s really just number one being closer to our tenants and being able to provide better customer service to them which in turn will lead to hopefully quicker deal times, higher retention which of course ultimately leaves into better retention in our properties and higher rents.

But if you look at our ability to take down the Terramar portfolio, we did that really for the first time with all of these services in-house from property management and leasing and our investment team all being able to underwrite. And I really do think it gave us the competitive advantage at the end of the day to win the project.

So those to me are sort of the harder to measure benefits right away that we’re seeing of bringing that in-house. And as Chris mentioned, we still have some additional positions that we need to fill out and we’ll continue to do that throughout 2018..

Operator

Thank you. And this concludes today’s Q&A session. I’d now like to turn the call back over to Suzy Hollinger for any closing remarks..

Suzy Hollinger

Thank you everyone for being on the call today. If you have further questions regarding earnings, please call me at area code (808) 525-8422. Thanks..

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may now disconnect. Everyone, have a great day..

ALL TRANSCRIPTS
2024 Q-3 Q-2 Q-1
2023 Q-4 Q-3 Q-2 Q-1
2022 Q-4 Q-3 Q-2 Q-1
2021 Q-4 Q-3 Q-2 Q-1
2020 Q-4 Q-3 Q-2 Q-1
2019 Q-4 Q-3 Q-2 Q-1
2018 Q-4 Q-3 Q-2 Q-1
2017 Q-4 Q-3 Q-2 Q-1
2016 Q-4 Q-3 Q-2 Q-1
2015 Q-4 Q-3 Q-2 Q-1
2014 Q-4 Q-3 Q-2 Q-1