Ladies and gentlemen, thank you for standing by and welcome to the Alexander & Baldwin's fourth quarter and full year 2019 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions].

Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker, Mr. Stephen Swett with Investor Relations. Please go ahead, sir..

Thank you. Aloha and welcome to our call to discuss Alexander & Baldwin's fourth quarter and full year 2019 earnings. With me today are A&B's President and CEO, Chris Benjamin and Brett Brown, CFO.

We are also joined today by Lance Parker, A&B's Chief Real Estate Officer and Clayton Chun, Chief Accounting Officer, who 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 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 are 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 the 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 the company's REIT status and the company's business as well as the evaluation of alternatives by the company related to its materials and construction business and by the company's joint venture related the development of Kukui'ula, generally discussed in the company's most recent Form 10-K, Form 10-Q and other filings with the SEC.

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 slide is a statement regarding our use of these non-GAAP 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 and operational update.

He will then turn the presentation over to Brett, who will discuss financial matters. Chris will return for some closing remarks and then we will open it up for your questions. With that, let me turn it over to Chris..

Thanks Steve and good afternoon to our listeners. Today, I will provide an update on our strategic progress and provide high-level comments on our fourth quarter and full year 2019 results. Brett will then review our financial and operational results in more detail, summarize our balance sheet and introduce our guidance for 2020.

I will come back with a few closing remarks and then we will open the call to your questions. In 2019, we made significant progress on our path to refocus and simplify our business model on the ownership and operation of strategic Hawaii commercial real estate assets.

We believe we are well-positioned to create outsized value by capitalizing on our embedded opportunities and deep local market knowledge in a unique geographic market in which developable urban land is scarce and barriers to entry are high. Let me take a few moments to walk through 2019 accomplishments and our priorities for the year ahead.

Our focus is on increasing NOI from our Hawaii real estate portfolio and I am very pleased with our team's results this year. Our fourth quarter total commercial real estate revenue increased by 18.6% over the prior year and cash NOI increased by 27.4% over the same period, primarily driven by our acquisitions earlier in 2019.

Our income-producing portfolio now consists of 3.9 million square feet of operating commercial real estate and 154 acres of ground leases. Further, we now derive all of our $104.2 million of cash NOI exclusively from strategic Hawaii commercial real estate assets, up from just $73.3 million three years ago.

We materially exceeded our stated goal of driving CRE NOI over $100 million this year.

At a time when macro industry trends are impacting other segments of the retail sector and world health concerns raised questions about tourism levels, we are pleased to be focused on a daily needs based retail and light industrial asset base that caters primarily to the local Hawaii population. Within our portfolio, operations continue to be strong.

In the fourth quarter, we signed 52 leases for approximately 124,000 square feet of GLA. On the 43,000 square feet of comparable leases, we recorded an average leasing spread of 8.6%. At December 31, our total commercial real estate portfolio was 93.9% occupied, an increase of 150 basis points over year-end 2018.

Our same-store portfolio was 94.1% occupied, an increase of 190 basis points over the same period in 2018. These results were driven by increased occupancy in our industrial portfolio, particularly at Komohana Industrial Park and the P&L warehouse. In addition to leasing, we continue to execute on our value-add redevelopment program.

During the fourth quarter, we completed planning the demolition at our project at Aikahi Park Shopping Center, where we are repurposing a grocery anchored shopping center into a vibrant community center with dining, grocery and service based retail and a sustainable design.

A significant element of this plan is repurposing the vacant theater space, which will help drive occupancy at completion. Already this year, landlord construction has started on the theater redevelopment portion and the broader refresh work at the center is scheduled to begin shortly in March.

Additionally in July, we celebrated the grand opening of Ho'okele Shopping Center Phase 1 on Maui. A Safeway grocery store, gas station and convenience store are now complete and open for business and exceeding tenant expectations.

Strong leasing activity continues at this well-located center and we look forward to announcing exciting new tenants to serve the Maui community in the near future. Also in November, we celebrated the grand opening of the final tenant at Lau Hala Shops, our sustainable adaptive reuse of a department store. This project is 100% leased.

Suffice it to say, that 2019 was a great year with respect to advancing the strategic growth of our Hawaii income-producing commercial real estate portfolio.

Beyond the organic and redevelopment growth I just summarized, we acquired $218 million of assets, all in our preferred asset classes, funded with 1031 proceeds from sales of non-income-producing agricultural land.

We did not place new capital into acquisitions, but that's consistent with the guidance we provided early last year that once we place the Maui land sale proceeds, we would focus our efforts on deleveraging and dispositions of noncommercial real estate assets, including development inventory and non-core land.

As we have said, the monetization of these assets will help us further improve our balance sheet and ultimately simplify our business model.

For the full year 2019, we closed on the sale of 42 acres of Wailea land on Maui, closed out of Increment 1 of the Kamalani project which consisted of 44 unit sales, closed out of the Kahala project which consisted of five lots, completed the sale of nine acres at Maui Business Park which was a nice pickup in momentum at that property and finally closed the sales of 30 units at the Kukui'ula joint venture project, also a very good outcome for that project.

In total, we generated over $90 million of net cash proceeds helping us to retire $73.5 million of debt. While we are very proud of these results and I am particularly proud of our team's hard work in achieving them, we do recognize that continued progress on this front is critical. Going forward, we expect to monetize additional landholdings.

We no longer have large contiguous parcels like the 41,000 acres we sold in December 2018, but we are actively pursuing sales of both development inventory at our remaining two active developments, Maui Business Park and Kukui'ula and non-core parcels that include both inactive developments, underutilized urban land and agriculture or conservation land.

In the near future and until we achieve the leverage metrics we are targeting, we will use most proceeds from sales to reduce leverage. Regarding Grace Pacific, there is no sugarcoating it. 2019 was a tough year.

However, we did take several positive steps to stabilize the business in the second half of 2019 under new leadership and I believe the modestly positive EBITDA achieved in the fourth quarter is a sign we are making progress. While it's still early, our efforts to shift our operational focus and right size costs are beginning to bear fruit.

It will take some time but the Board and our team are committed to maximizing value for shareholders and we believe stable and improving operations will create the conditions necessary to monetize this business at the appropriate time as we continue to simplify our overall business model.

Next, we continue to focus on streamlining our organization as we transform from a diversified conglomerate into a pure-play commercial real estate company.

That's a gradual process that probably will take two or three more years, but over the past 12 months, we took several steps to reduce our cost structure and G&A and have seen positive results from those efforts. Various cost savings initiatives have resulted in lower software, technology and consulting expenses.

The fourth quarter of 2019 reflected G&A reduction compared to the same quarter in 2018 and we expect continued progress over time as we simplify both our business mix and our processes. We remain a relatively diversified company that faces many legacy issues, but we are committed to transforming and simplifying in a thoughtful manner.

Finally, we remain committed to being good corporate citizens. We significantly expanded the scope of our ESG or environmental, social and governance initiatives in 2019 and continue to ensure ESG is ingrained in our culture.

There is no better time than the occasion our 150th anniversary to both reinforce the socially minded DNA that has guided us through our first 150 years and lay the groundwork for even better engagement with our community, employees, investors and the environment in the future.

As part of the 150th celebration, we are empowering our employees to spend more time in community service and to direct charitable gifts to organizations that are meaningful to them. I was proud to join about 80 of my coworkers with their family members at a day of service on Martin Luther King Jr. Day in January.

We partnered with the Department of Land and Natural Resources, Division of Forestry and Wildlife to plant trees at the Hamakua Marsh which is in Kailua on Oahu, a very important community for the company.

We also took important strides in 2019 to increase our employees and community members roles in setting our priorities for social engagement with our employee-led Pride initiative and increased community engagement, just two of the results. We are very proud of our heritage and history and aim to be partners for Hawaii for the next 150 years.

With that, I will now turn the call over to Brett, who will discuss our operational and financial results in more detail.

Brett?.

Thanks Chris and good afternoon everyone. Let me begin with our financial results. For the fourth quarter, we recorded net income of $5.2 million or $0.07 per share compared to a net loss of $136.6 million or $1.90 loss per share in the same quarter of 2018.

The net loss in the fourth quarter of 2018 included a non-cash impairment charge, totaling $189 million. For the full year 2019, we recorded a net loss of $36.6 million or $0.51 loss per share compared to net loss of $72 million or $1.02 loss per share in 2018.

The net loss in 2019 includes the impact of the $49.7 million non-cash goodwill impairment, an impact of $0.69 per share in 2019. Net income in 2018, again included certain strategic items including non-cash impairments and gains on asset sales. Turning to our commercial real estate segment.

We are very pleased to report that revenues were up 18.6% or $6.6 million over the prior year quarter. Similarly, total portfolio cash NOI increased $5.9 million or 27.4% compared to the same period last year.

This year-over-year growth was driven primarily by new acquisitions as part of the commercial real estate investments we had made in the last 12 months as well as growth in the same-store portfolio. For the full year 2019, revenues were up $20.3 million or 14.5% to $160.6 million.

Total portfolio cash NOI increased by almost 21% or $18 million to $104.2 million, which again was driven primarily by capital recycling into income-producing real estate and same-store growth. Same-store cash NOI for the fourth quarter increased by $890,000 or 4.8% to $19.4 million.

For the full year 2019, same-store cash NOI increased by $3.9 million or 5.2% to $78.6 million. We are pleased with our full year result, which fell at the high-end of our previously stated increased guidance. Moving on to our land operations segment.

This business unit produced revenue of $31.7 million during the fourth quarter of 2019, as a result of sales and distributions related to land and development for sale projects resulting in EBITDA $5.3 million in the quarter.

During the year, monetization activity included the closing out of Kahala as well as a nice uptick in sales of both Maui Business Park with nine acres and Kukui'ula with 30 units closed. For the full year 2019, revenue for land operations was $114.1 million, resulting in EBITDA of $22.4 million.

For the full year, monetization activity resulted in approximately $90 million of total net cash proceeds. Within our materials and construction segment, we continue to work to improve operations despite certain structural challenges.

Having taken a meaningful write-down in the third quarter, fourth quarter adjusted EBITDA was positive $600,000 and negative $6.1 million for the full year 2019. This compares to negative $400,000 in the fourth quarter of 2018 and positive $14.5 million for the full year 2018.

Additionally, as we continue to simplify our company and streamline operations, we should continue to benefit in the form of lower operating expenses.

In the fourth quarter 2019 and excluding the non-cash impairment charge in the fourth quarter of 2018, operating costs and expenses decreased by nearly 28% from the prior quarter due to lower operating expenses in the land operations and materials and construction segments.

For the full year 2019, excluding the non-cash impairment charges in both 2018 and 2019, operating costs and expenses decreased nearly 10% over the prior year. Selling and G&A expenses decreased 16.4% to $13.8 million in the fourth quarter of 2019 compared to $16.5 million in the fourth quarter of 2018.

Similarly, SG&A expenses decreased by 3.8% to $58.9 million for the full year of 2019 versus $61.2 million in the full year of 2018. I would like to take a few moments to update you on our financial priorities as they relate to our overall strategic direction.

As we have previously stated, our intention is to maintain a strong balance sheet that will support the long term growth of the company. Having recycled nearly $1 billion of capital in the past seven years into Hawaii income-producing real estate assets, we have improved the quality and stability of our income stream for shareholders as a REIT.

Our strategy is to balance that capital recycling with debt repayment in order to reduce our leverage to a level more consistent with our REIT peers. In the fourth quarter, we repaid approximately $28 million of debt. Further, we are working with our existing lenders to enhance our covenant structure and extend maturities.

This balance sheet improvement, combined with our ability to issue OP units as acquisition currency, will provide us with access to well-priced capital and position us to grow our CRE business over the long term. At year-end, our total debt was $704.6 million and we had total liquidity of $364.8 million.

Our net debt to consolidated adjusted EBITDA was 7.4 times and our debt to total market capitalization ratio stood at 31.8%. This compares favorably to 37% just one year ago as we continue to reduce leverage to strengthen our balance sheet and support our long term growth objectives.

Finally, with respect to our dividend, yesterday on February 25, our Board declared the first quarter 2020 dividend of $0.19 per share. The dividend is payable on March 24, 2020 to shareholders of record on March 9, 2020. Moving on to guidance for 2020.

We expect same-store NOI of 2% to 3%, leasing spreads from 4% to 5%, maintenance CapEx between $16 million to $20 million and growth CapEx between $17 million and $21 million. Also, our same-store pool includes only properties that were owned and operated for the entirety of the prior calendar year.

In 2020, five properties, Laulani Village, Hokulei Village, Lau Hala Shops, The Collection and Opule Industrial will enter our same-store pool. With that, I will turn the call back to Chris for closing remarks..

Thanks Brett. We are very proud of all that our team has accomplished in 2019. We have made significant strides in our efforts to transform A&B into a focused commercial real estate operating company. Today, the vast majority of our capital is invested in operating real estate that is performing extremely well.

We own great assets in a strong and growing market and we have unique competitive advantages that derive from our local market knowledge and deep history. This is our focus into the future and I look forward to communicating our results in 2020 and beyond.

Before we begin our Q&A session, I would like to take a moment to thank Allen Doane, Former Chairman and CEO of Alexander & Baldwin for his 29 years of leadership. Allen is retiring from our Board at our April Annual Meeting consistent with our mandatory retirement age.

Since 1991, Allen been part of A&B's dramatic evolution and accomplishments, bringing his tremendous intelligence and breadth of industry knowledge to bear in helping guide the company as both CEO and longtime director. Personally, I have benefited from that guidance as well as the many opportunities he has given me.

Thank you Allen from all of us here at A&B. We will miss you. With that, we will now open the call for your questions..

[Operator Instructions]. Our first question will come from Sheila McGrath with Evercore..

Yes. Good afternoon. Chris, I was wondering if you could give us a little bit more insight on the drivers of the positive EBITDA from Grace in the fourth quarter.

And is it possible the factors could carry over into 2020? And is the current plan for Grace to try to improve the operations, move it to positive EBITDA and revisit the sale process?.

Yes. Sheila, thanks, all good questions. So first of all, I believe that the positive drivers of performance will continue and hopefully actually build on themselves. One critical component of fourth quarter performance was just getting some of our costs in line and that included both G&A and some operating costs.

Obviously, our book of business and the level of activity had shrunk quite a bit during the year and we were able to get some of our costs more in line with that level of activity. So that was a help.

What we didn't accomplish as much as we would have liked is an increase in the level of activity and that's something that I am hopeful will continue to improve this year where it's early in the year, but we do have an improving book of business. We have won some bids early in the year, tentatively.

We still need to await the official awards but our belief is that we are a low bidder on some attractive work. And with that, I think that we will be able to maintain some of the cost improvements and add on to that some more activity. Now, I don't want to get carried away. It's early in the year.

But I do believe that we should be on a path to a better 2020. Having said that, the sales process is still a process that we are going through. We did initiate that process in the latter part of 2019 and there are a few different assets in the portfolio that we are marketing, the main paving business as well as a couple of smaller subsidiaries.

So we are still going through that process. And I really can't comment on timing other than to say that the process hasn't been terminated, but we do recognize the benefit of getting some positive performance behind us in order to get maximum value for the asset. So I guess I would just summarize by saying, we remain committed to simplification.

We recognize that we are not the right long term owner of Grace, but we do want to extract as much value from the asset which is of course a very valuable asset that's fallen on some hopefully temporary hard times and if we can improve that performance, continue to improve the performance, we think we will be in a better position to accomplish our simplification objectives and get fuller value for the asset.

I hope I answered all your questions..

No. That's helpful. Moving on to Kukui'ula. So that project did turn around meaningfully from where it had been a couple years ago.

I am just wondering if you could talk big picture what you think is driving the improvement of sales at Kukui'ula? And how many units sold this year? And based on the inventory that you have, the backlog of sales, is it possible to achieve similar sales level in 2020?.

Well, starting with your last question. We certainly hope and expect to be at a similar sales level this year. I would say, first of all let me just state some very good news which is that we haven't had to put any operating subsidy into the project for about 18 months, I think. And so that's been a good outcome.

We haven't had to direct any capital for operating subsidy there. We have continued to build out inventory there and that has been probably the biggest single driver.

So it's combination of the fact that we have a wider range of product and price points available at the project, just means that the buyer that comes to the project is more likely to find something that she or he wants to buy. And so that's been very helpful.

At the same time, a byproduct of that is just the project is so much more vibrant and active and when someone comes to see, they see a real thriving community. And for many years, it was a fairly quiet place.

And now, I think we have had and I will let Lance jump in here and maybe elaborate, but I think in general our sales have been as strong as any project in Hawaii in the last year or two and I think that we are really feeling that positive momentum. It does still require having the inventory available.

And so we will be holding out some more lots this coming year. But I think that if were able to do that, which we expect to, we will be able to continue to have the kind of sales performance we have had in the last year-and-a-half to two years.

Lance, is there anything else you would like to add?.

No. I would just add, Sheila, that based on the escrows that we have to-date, through the first two months of the year, we certainly do expect to be where we were last year in terms of sales, if not slightly higher. So the strong activity that we had in terms of buyer interest has continued so far through 2020..

Okay. Great. And one last one and I will get back in the queue. But leasing spreads, specifically for retail, were pretty strong at 11.5%.

If you could just give us a little bit more information if there were specific one or two leases driving that? And then if you could talk about the tenant watchlist? Well, I know that Pier 1 is closing some stores in Hawaii..

Yes. Lance, do you mind? I am sorry..

So with regard to retail re-leasing spreads, it was really just a single tenant that drove the majority of that.

And I won't get into the specifics of the deal itself, but suffice it to say that it was a renewal where we were able to convert a meaningful part of -- it was a step-up in rent as well as converting percentage rent into contract rent and as we were able to do that, we get the benefit of increased leasing spreads..

And then with regard to the tenant watchlist, you are correct. We do have a Pier 1 in our portfolio at Pearl Highlands Center. So Pearl Highlands was the center that we repositioned last year. We got almost up to 100% occupancy. We did receive the space back just this week.

So the loss in NOI has been factored into the guidance that Brett presented earlier. And from an occupancy standpoint, it's probably going to be about 31 bips on the entire portfolio. So we would expect to see that next quarter. But our leasing team is actively pursuing backfill opportunities..

Okay. Thank you..

Thank you. Our next question will come from Alexander Goldfarb with Piper Sandler..

Hi. I think it's still good morning out there. So good morning..

It's actually just afternoon..

Just afternoon. Okay. Great. Excellent. So just a few questions from our side. One, just picking up on Sheila's question on the materials business. It looks like you guys had about $600,000 of EBITDA in the fourth quarter. So I mean it was positive, but it wasn't like a big number.

But I am assuming based, Chris, on your comments on what you guys are trying to do that this business is capable of more than just $600,000 of EBITDA a quarter.

So I guess can you frame it as, what do you think is an EBITDA number that would be more representative? Or two, as you guys assess all the hard work that you need to do relative to the impact that it has to you guys as a public company, is it worth your time focusing on it and maybe just sort of whatever price you get, move on, let someone else deal with it, but focus your energy on the stuff that really is what people looked out in Baldwin for which is the retail, the residential, being that Hawaii entity?.

Yes. Alex, it's a good question. And first of all, I want to make it very clear, you can rest assured that our real estate team is singularly focused on the performance of the portfolio.

There is no doubt that for me and for Brett and some of the other senior executives at the corporate level, we are doing everything we can to make sure that we continue the simplification with Grace, the sale of Grace being an important part of that, but it really is not distracting the team that is managing the portfolio.

And I think that's evident in the performance of the portfolio. Now to the very important question of timing of Grace, it's more than just management distraction. As you know, it's the simplification of our story. And so we do place a lot of importance on that. And all things being equal, we would like to monetize it sooner rather than later.

I do think though that the timing of when we got to market and really the nadir of our performance there were coincident and that meant that it was very difficult to get deep buyer interest.

The process is still ongoing and we do have some continued buyer interest, but I believe that getting a couple quarters of improving performance under our belt could be very positive.

So I don't want to give anyone the impression that we have changed your mind about our long term direction with Grace, but I do want to make sure that we can realize optimal value. I won't say highest value, because highest value could take a multi-year turnaround and that may not be in our best interest.

But getting a couple quarters, few quarters a year. I just don't know what exactly it will take. But back to your question about EBITDA, I don't want to make a projection of EBITDA this year because there still are a lot of unknowns but we do expect to have positive earnings.

We do expect to have demonstrated that we have corrected a lot of the operational challenges that we have had and hopefully have some more positive momentum and we think that will position us to try to realize better value for the assets.

So I am balancing a lot of things here but just suffice it to say that we remain focused on monetization, but we want to do it at the right value and at the right time and that's going to be a judgment call. But we will be thoughtful about that judgment..

And then on prior calls, you had referenced going back after uncollected jobs, either because like the job hadn't been fully wrapped up or the money never collected.

How is that process going? Have you wrapped that up? Or that's another thing that will take several quarters or maybe longer to actually get all those prior jobs fully paid for?.

I am proud of the team's efforts on that front. I think we have made some good progress in that. So even though our EBITDA was well, well below our expectations last year, our cash flow was not significantly below our expectations because we were able to accelerate some of our collection activity. And it's an ongoing process. We are not done.

We still have some receivables that we would like to collect and it requires closing our some jobs. So we should continue to see the benefits of that but there is also some more work to do on that front.

So I would say, I don't know if we are halfway through it or what, but we certainly made meaningful progress and we still have a little more work to do on that front..

Okay. And then looking at your guidance, cash same-store 2% to 3%. This year you had cash same-store 5%.

So what's the delta? Was it just you picked up some occupancy last year? Or there was some backfill? Or what's the difference between last year versus this year?.

Yes. I am going to ask Lance to comment on that, but I would say the short answer is probably what you pointed to. It was certainly helped by occupancy. I would only say before Lance provides more color that we feel good about continued growth off of what was a very good number this year.

So we see the 2% to 3%, while it's a lower number, it's a lower number off of a really good year. And maybe Lance can add a little more color..

Yes. I would just reiterate those points. A portion of our 5.2% was occupancy driven. And then I would point to the other thing for us in 2021, while not on the same-store number, we expect meaningful growth in our total NOI as we get the benefit of our acquisitions from last year and full year performance..

Okay. And then just one final thing from us. Thoughts on FFO, on reporting FFO? You have $0.19 of dividends, which is great but $0.07 of earnings makes it a little, doesn't tell the full story, if you will.

So what are the thoughts on moving towards an FFO? Is that something, may be not this year, but may be for 2021 or something, for us to think about?.

Hi Alex. This is Brett. We are always committed to providing good disclosure and obviously want to responsive to your feedback on that and we will continue to monitor that and start reporting when we feel love appropriate there. So we will let you know..

Thank you Brett. Thank you Chris..

All right. Thanks Alex..

Thank you Alex..

Thank you. Our next question will come from Steve O'Hara with Sidoti..

Hi. Thanks for taking the question..

Hi Steve..

Hi. Just I guess quickly on the growth CapEx of $17 million to $21 million.

Is that CRE additions in your growth CapEx? Or is that something else for Grace? Or something else like Kukui'ula -- no it wouldn't be Kukui'ula, but any of your other projects?.

I will let Lance jump in, Lance or Brett. But I believe it's almost entirely, if not entirely commercial real estate, but not acquisitions. It would be more development, I believe..

It's maintenance CapEx for the core CRE portfolio, majority of that number..

And then the growth CapEx, I mean? I am sorry.

So growth CapEx of $17 million to $21 million?.

Yes. The growth CapEx, the majority of that is going to be redevelopment in the portfolio. So Aikahi Shopping Center, which we have commenced, is going to take up the majority of that capital.

And then we do have a couple of smaller repositioning redevelopment opportunities that will commence in the first half of this year that will take up some of that capital where we expect to get similar recurrence to what we have done on other prospects in the high single digit range..

Okay. And then what's the best way to think the distraction from acquisitions, dispositions for 2020? It was, I think, $25.8 million in 2019.

I mean is there a way to think about, I assume some of that dropped off because of what you own, but what's the l right way to think about that number?.

Brett, do you --? I am not sure I understand the question, perhaps maybe you can jump in there..

I guess what I am trying to do is back into your cash NOI expectation. I mean is there kind of a, you said meaningful growth, I guess, in terms of NOI.

Is there a way to bracket that in terms of what that means? Low single digits, high single digits, et cetera?.

Yes. I am going to ask if either Clayton or someone else has insight on it. The components, of course, are going to be the same-store growth of 2% to 3% on little less than $100 million of the portfolio and then really the realization of the full year impact from those assets that are not in same-store.

So I don't know, Clayton or Brett, if you have got thoughts on what that overall number would be. But we can maybe provide that breakdown later..

Okay..

Yes. I think you hit the nail on the head. As far as cash NOI goes, the non-same-store component is going to be most impacted by the acquisitions that we had in 2019 and the full year impact for 2020. We did not provide guidance on that, though, as you mentioned..

But the vast majority of the portfolio is now in same-store. So that would apply the 2% to 3% to that. And then we could provide more guidance later on what the balance would be..

Right. The five acquisitions that occurred in the other early half of 2019, would then have a full year impact in the current year. So it would that delta between the full year compared to whatever fraction they were in for 2019..

Okay. And then I guess just in terms of the commentary around using cash for debt repayments and things like that. I don't know, the last time you had any issues in Hawaii with SARS maybe. I know it sounded like Japanese travelers were down pretty significantly through February.

And I am just wondering, what you guys are seeing right now? Is there any ability or potential desire to be more aggressive on acquisitions if things kind of trade at a dislocated price? Os it that not typically the way things move? They move a little more slowly than other asset classes? Thanks..

Okay. Well, let me try to take that one, Steve. There was a lot implied and expressed in that. So let me, I think you are basically saying, is Coronavirus going to destabilize the market and create opportunities? So let me start with the Coronavirus answer which is first of all the good news.

The state put out an announcement today that there are no cases of Coronavirus in Hawaii. At this point, there are no cases being investigated. So that's good news. Having said that, you know, it is conceivable that it could come to Hawaii.

And even if it doesn't, there is likely to be, as you suggest, a slowdown in Japanese tourism and potentially from other countries. But that has, with SARS as an example, since you raised it, that was a fairly short-lived phenomenon and it didn't lead to any kind of protracted downturn that we would expect would drive property values down.

So I certainly don't expect great buying opportunities as a result of the virus. But the good news there is, I also don't expect any permanent degradation of value in our portfolio. We can't really predict what the impact of a drop in tourism would be on our portfolio but we can say that our portfolio is not geared towards the tourist trade.

It is much more a grocery anchored community-based, needs based retail and then industrial portfolio. And so we are not heavily exposed to the tourist trade and therefore while we are obviously, from a human standpoint, we are very concerned about the virus, we hope that our portfolio is relatively resilient..

Okay. All right. Thank you very much..

Thanks Steve..

[Operator Instructions]. We do have a follow-up question from Sheila McGrath with Evercore..

Yes. Chris, you mentioned in your deck, in the future using OP units, which I am sure at the current stock price you wouldn't be that bullish on doing.

But just curious if you have started the process of trying to educate sellers that have low basis in their property about a potential like tax-efficient transaction?.

We have, Sheila. And as you are aware, it's our belief that in the Hawaii market because there is a lot of family ownership, multigenerational family ownership of assets and a lot of non-institutional ownership, we think that there are potentially a lot of asset owners, potential sellers that could be interested in OP unit deal.

And we have begun, Jeff Pauker and his team have been working with the banks, with some of the asset owners to try to educate them about OP units. And we have had good reception to that.

So while you are absolutely on point as far as the stock price needing to be right and focus of our team's efforts right now are a little bit more toward the disposition side. I fully expect that OP unit will be a currency that we use over the next several years to help grow our portfolio. I welcome Lance to jump in, if he wants to add anything..

No. I would just echo your comments, Chris..

Okay..

Okay. Thank you..

Thank you..

[Operator Instructions]. We do have a follow-up question from Alexander Goldfarb with Piper Sandler..

Hi. Thank you. Just quickly, I don't think you mentioned, but may be I missed it. Chris, you said about reducing leverage and you wanting to use the disposition proceeds to pay off debt.

Is there a certain amount of debt you looking to pay off? And then as we think about dispositions, much income would be going away, meaning if you are selling assets and losing income, that's sort of a neutral transaction versus if you are selling non-income-producing, that's efficient deleveraging.

So just want to sort of get a sense of how much debt you are looking to pay down? And then if it's the balance between income-producing assets involved there versus non-income-producing assets?.

Yes. I will let Brett jump in a moment on kind of debt reduction targets. But what I will say is that in all of our monetization efforts, we are being very mindful of the relationship of the debt and the EBITDA. So our goal is to improve our debt to EBITDA ratio and we have indicated our goal of about five to six times.

And so we would, obviously if you can sell something at a good price that is generating no income, that's a no-brainer. But in selling any income-producing assets, we would be very mindful of the relationship there and make sure that it is accretive to our leverage metrics.

Anything else, Brett, you want to add in terms of total debt reduction targets?.

We continue to target our debt to EBITDA number, Alex, to be in the five to six range. By year-end, we were at 7.4. And so we will continue with monetization, as we mentioned, to pay that down and we believe that over time here, we will be able to get it done in that range with the combination of debt reduction but also with earnings increase.

You are right. We do sell some. We have to be mindful of what the income that goes away with that. But we are also improving income in various areas, specifically with Grace and then with the improvements at the CRE level.

So we are attacking it on both fronts, reducing the numerator as well as the increasing the dominator and getting us to those levels..

Okay. Thank you..

All right. Thanks Alex..

Thank you. I am showing no further questions in the queue at this time. I would like to turn the call back over to our host for any closing remarks..

Thank you Sherry and thank you all for joining us today. If you have any follow-up questions, please feel free to call us at 808-525-8475 or email us at investorrelations@abhi.com. Aloha and have a great day..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect..