Alexander & Baldwin Inc.
02/27/2026 | Press release | Distributed by Public on 02/27/2026 05:09
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Statements in this Form 10-K that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and 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 that relate to future events or conditions, including without limitation, the statements in Part I, Item 1. "Business" and Item 1A. "Risk Factors," Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 1 of the Notes to Consolidated Financial Statements included in this Form 10-K, regarding the pending merger (the "Merger") of Alexander & Baldwin, Inc. ("A&B" or the "Company") with and into a wholly owned subsidiary of a joint venture formed by MW Group and funds affiliated with Blackstone Real Estate and DivcoWest (the "Merger"); the likelihood of the satisfaction of the conditions to the completion of the Merger and whether and when the Merger will be consummated; any anticipated effects of the announcement or pendency of the Merger on the Company's business, expenses related to the Merger and any potential future costs; and statements regarding possible or assumed future results of operations, business strategies, growth opportunities and competitive positions. In addition, words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "projects," "forecasts," and future or conditional verbs such as "will," "may," "could," "should," and "would," as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. 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 the Company's REIT status and the Company's business, and those discussed in Part I, Item 1A of this Form 10-K under the heading "Risk Factors." The information in this Form 10-K should be evaluated in light of these important risk factors. The Company does not undertake any obligation to update any forward-looking statements.
The risk factors discussed in "Risk Factors" could cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our financial position, results of operations or cash flows. Any such risks could cause our results to differ materially from those expressed in forward-looking statements.
Introduction and Objective
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part II, Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, our Current Reports on Form 8-K and our other filings with the Securities and Exchange Commission. This section generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024; and provides additional material information about the Company's business, recent developments and financial condition; its results of operations at a consolidated and segment level; its liquidity and capital resources including an evaluation of the amounts and certainty of cash flows from operations and from outside sources; and how certain accounting principles, policies, and estimates affect its financial statements. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024. MD&A is organized as follows:
•Business Overview:This section provides a general description of the Company's business, as well as recent developments that management believes are important in understanding its results of operations and financial condition or in understanding anticipated future trends.
•Consolidated Results of Operations:This section provides an analysis of the Company's consolidated results of operations.
•Analysis of Operating Revenue and Profit by Segment:This section provides an analysis of the Company's results of operations by business segment.
•Liquidity and Capital Resources:This section provides a discussion of the Company's liquidity, financial condition and an analysis of its cash flows, including a discussion of the Company's ability to fund its future commitments and ongoing operating activities in the short-term (i.e., over the next twelve months from the most recent fiscal period end)
and in the long-term (i.e., beyond the next twelve months) through internal and external sources of capital. It includes an evaluation of the amounts and certainty of cash flows from operations and from outside sources.
•Critical Accounting Estimates: This section identifies and summarizes the significant judgments or estimates on the part of management in preparing the Company's consolidated financial statements that may materially impact the Company's reported results of operations and financial condition.
Amounts in the MD&A section are rounded to the nearest thousand. Accordingly, a recalculation of totals and percentages, if based on the reported data, may be slightly different.
Business Overview
Reportable segments
The Company operates two segments: Commercial Real Estate and Land Operations. A description of each of the Company's reportable segments is as follows:
•Commercial Real Estate ("CRE") - This segment functions as a vertically integrated real estate investment company with core competencies in property management and in-house leasing (i.e., executing new and renegotiating renewal lease arrangements, managing its properties' day-to-day operations and maintaining positive tenant relationships); investments and acquisitions (i.e., identifying opportunities and acquiring properties); and construction and development (i.e., designing and ground-up development of new properties or repositioning and redevelopment of existing properties). The Company's preferred asset classes include improved properties in retail and industrial spaces, and also urban ground leases. Its focus within improved retail properties, in particular, is on grocery-anchored neighborhood shopping centers that meet the daily needs of Hawai'i communities. Through its core competencies and with its experience and relationships in Hawai'i, the Company seeks to create places that enhance the lives of Hawai'i residents and to provide venues and opportunities that enable its tenants to thrive. Income from this segment is principally generated by owning, operating, and leasing real estate assets.
•Land Operations - This segment includes the Company's legacy landholdings, joint venture investments, and liabilities that are subject to the Company's simplification and monetization effort. Financial results from this segment are principally derived from real estate development and unimproved land sales and joint venture activity.
Agreement and Plan of Merger
On December 8, 2025, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Tropic Purchaser LLC, a Delaware limited liability company ("Parent"), and Tropic Merger Sub LLC, a Hawaii limited liability company and wholly owned subsidiary of Parent ("Merger Sub"). Parent is a joint venture formed by MW Group and funds affiliated with Blackstone Real Estate and DivcoWest. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company will merge with and into Merger Sub (the "Merger") and the separate existence of the Company will cease and Merger Sub will survive as a wholly owned subsidiary of Parent. The Merger is expected to close in the first quarter of 2026, subject to customary closing conditions, including approval of the Company's shareholders.
At the effective time of the Merger (the "Effective Time"), each share of common stock, without par value, of the Company that is issued and outstanding immediately prior to the Effective Time (other than (i) shares of common stock held by the Company or any subsidiary of the Company or by Parent or Merger Sub immediately prior to the Effective Time and (ii) shares of common stock with respect to which dissenters' rights have been properly exercised in accordance with Part XIV of the Hawaii Business Corporation Act and perfected and not withdrawn) will be automatically cancelled and converted into the right to receive $21.20 in cash, without interest and less any applicable withholding taxes and our fourth quarter 2025 dividend of $0.35 per share (resulting in a net payment at closing of $20.85 less any applicable withholding taxes).
If the Merger is consummated, the shares of the Company's common stock currently listed on the New York Stock Exchange (the "NYSE") will be delisted from the NYSE and will subsequently be deregistered under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The consummation of the Merger is subject to certain customary closing conditions, including, among others, (i) approval of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of the Company common stock entitled to vote on the Merger Agreement, (ii) the absence of a law or order restraining, enjoining, rendering illegal or otherwise prohibiting the consummation of the Merger, and (iii) the absence of a Company Material Adverse Effect (as defined in the Merger Agreement). The Merger is expected to close in the first quarter of 2026.
The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, which has been filed as Exhibit 2.1 to the Current Report on Form 8-K that the Company filed with the SEC on December 8, 2025. For additional information regarding the Merger and the terms of the Merger Agreement, see also the definitive proxy statement on Schedule 14A that the Company filed with the SEC on January 23, 2026 (as it may be amended or supplemented from time to time).
Consolidated Results of Operations
For an understanding of the significant factors that influenced our performance during fiscal 2025 and 2024, the following analysis of the consolidated financial condition and results of operations of the Company and its subsidiaries should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part II, Item 8 of this Annual Report on Form 10-K.
| Favorable (Unfavorable) Change | ||||||||||||||||||||||||||
| (amounts in thousands, except percentage data and per share data) | 2025 | 2024 | $ | % | ||||||||||||||||||||||
| Operating revenue | $ | 206,673 | $ | 236,641 | $ | (29,968) | (12.7) | % | ||||||||||||||||||
| Cost of operations | (110,566) | (128,995) | 18,429 | 14.3 | % | |||||||||||||||||||||
| Selling, general, and administrative | (28,126) | (29,822) | 1,696 | 5.7 | % | |||||||||||||||||||||
| Merger transaction costs | (7,101) | - | (7,101) | 0 | NM | |||||||||||||||||||||
| Impairment of assets | - | (256) | 256 | 0 | 100.0 | % | ||||||||||||||||||||
| Gain (loss) on commercial real estate transactions | 7,454 | 51 | 7,403 | 145X | ||||||||||||||||||||||
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Gain (loss) on disposal of assets and settlements, net
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11,685 | 2,148 | 9,537 | 4X | ||||||||||||||||||||||
| Operating income (loss) | 80,019 | 79,767 | 252 | 0.3 | % | |||||||||||||||||||||
| Income (loss) related to joint ventures and partnerships | 8,288 | 4,556 | 3,732 | 81.9 | % | |||||||||||||||||||||
| Impairment of equity method investment | (406) | - | (406) | NM | ||||||||||||||||||||||
| Interest and other income (expense), net | 416 | 3,023 | (2,607) | (86.2) | % | |||||||||||||||||||||
| Interest expense | (23,801) | (23,169) | (632) | (2.7) | % | |||||||||||||||||||||
| Income tax benefit (expense) | 69 | (174) | 243 | NM | ||||||||||||||||||||||
| Income (loss) from continuing operations | 64,585 | 64,003 | 582 | 0.9 | % | |||||||||||||||||||||
| Income (loss) from discontinued operations (net of income taxes) | 89 | (3,466) | 3,555 | NM | ||||||||||||||||||||||
| Net income (loss) | 64,674 | 60,537 | 4,137 | 6.8 | % | |||||||||||||||||||||
| Earnings per share: | ||||||||||||||||||||||||||
| Basic earnings (loss) per share - continuing operations | $ | 0.89 | $ | 0.88 | $ | 0.01 | 1.1 | % | ||||||||||||||||||
| Basic earnings (loss) per share - discontinued operations | - | (0.05) | 0.05 | 100.0 | % | |||||||||||||||||||||
| Basic earnings (loss) per share of common stock: | $ | 0.89 | $ | 0.83 | $ | 0.06 | 7.2 | % | ||||||||||||||||||
| Diluted earnings (loss) per share - continuing operations | $ | 0.89 | $ | 0.88 | $ | 0.01 | 1.1 | % | ||||||||||||||||||
| Diluted earnings (loss) per share - discontinued operations | - | (0.05) | 0.05 | 100.0 | % | |||||||||||||||||||||
| Diluted earnings (loss) per share of common stock: | $ | 0.89 | $ | 0.83 | $ | 0.06 | 7.2 | % | ||||||||||||||||||
| Continuing operations available to A&B common shareholders | $ | 64,585 | $ | 63,980 | $ | 605 | 0.9 | % | ||||||||||||||||||
| Discontinued operations available to A&B common shareholders | 89 | (3,466) | 3,555 | NM | ||||||||||||||||||||||
| Net income (loss) available to A&B common shareholders | $ | 64,674 | $ | 60,514 | $ | 4,160 | 6.9 | % | ||||||||||||||||||
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Funds From Operations ("FFO")1
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$ | 95,251 | $ | 100,006 | $ | (4,755) | (4.8) | % | ||||||||||||||||||
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Adjusted FFO1
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$ | 75,129 | $ | 80,064 | $ | (4,935) | (6.2) | % | ||||||||||||||||||
| FFO per diluted share | $ | 1.30 | $ | 1.37 | $ | (0.07) | (5.1) | % | ||||||||||||||||||
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Weighted average diluted shares outstanding (FFO)2
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73,047 | 72,752 | ||||||||||||||||||||||||
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1 For definitions of capitalized terms and a discussion of management's use of non-GAAP financial measures and the required reconciliations of non-GAAP measures to GAAP measures, refer to page 39.
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2May differ from figure used in the consolidated statements of operations based on differing dilutive effects for net income (loss) versus FFO.
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The causes of material changes in the consolidated statements of operations for the year ended December 31, 2025, as compared to the year ended December 31, 2024, are described below or in the Analysis of Operating Revenue and Profit by Segment sections below.
Operating revenuefor 2025 decreased 12.7%, or $30.0 million, to $206.7 million primarily due to lower revenues from the Land Operations segment's land sales, partially offset by increases in rental and recovery revenues from the Commercial Real Estate segment. During the current year, the Company sold approximately 130 acres of legacy land holdings on Maui, and no development lots at Maui Business Park, compared to approximately 430 acres of legacy land holdings on Maui and Kauai, including an 81-acre residential-zoned parcel on Maui, as well as six development lots at Maui Business Park and two industrial-zoned development lots on Oahu in the prior year.
Cost of operationsfor 2025 decreased 14.3%, or $18.4 million, to $110.6 million, due primarily to the Land Operations segment's lower cost of sales associated with the reduced land sales activity in the current year.
Selling, general, and administrativecosts for 2025 decreased 5.7%, or $1.7 million, to $28.1 million due primarily to lower software and technology costs, charitable giving, personnel-related expenses, insurance and professional service fees.
Merger transaction costs of $7.1 million for the year ended December 31, 2025, relates to the Merger and consists primarily of legal consulting and financial advisory fees.
Gain (loss) on commercial real estate transactions of $7.5 million for the year ended December 31, 2025, is due primarily to two leases that met the criteria for classification as sales-type leases during the first and third quarters of 2025. Accordingly, the Company derecognized the associated real estate property and recognized $6.7 million in selling profit from sales-type leases. In addition, the Company recognized a gain of $0.8 million from the repossession of a CRE property located in Maui.
Gain (loss) on disposal of assets and settlements, netof $11.7 million for 2025 is primarily related to a contract modification and favorable resolution of the remaining rights and obligations from a land sale in a prior year. Gain (loss) on disposal of assets and settlements, netof $2.1 million for 2024 was related to the favorable resolution of contingent liabilities related to a prior year sale of a legacy business.
Income (loss) related to joint ventures and partnerships of $8.3 million for the year ended December 31, 2025, is primarily composed of earnings from the Company's unconsolidated investment in a materials company and a release of reserves held at a legacy real estate joint venture. The increase of $3.7 million from $4.6 million for the year ended December 31, 2024, is due primarily to the release of reserves.
Interest and other income (expense), net of $3.0 million for the year ended December 31, 2024, was due primarily to a gain on the fair value adjustment for two forward interest rate swaps and interest income related to a note receivable that was collected in 2024, partially offset by a one-time financing-related charge.
Loss from discontinued operations (net of income taxes)of $3.5 million for the year ended December 31, 2024, primarily relates to the resolution of cessation related liabilities associated with the Company's former sugar operations that did not reoccur in the current year.
Analysis of Operating Revenue and Profit by Segment
The following analysis should be read in conjunction with the consolidated financial statements and related notes thereto.
Commercial Real Estate
Financial results
Results of operations for the years ended December 31, 2025 and 2024, were as follows:
| Favorable (Unfavorable) Change | ||||||||||||||||||||||||||
| (amounts in thousands, except percentage data and acres; unaudited) | 2025 | 2024 | $ | % | ||||||||||||||||||||||
| Commercial Real Estate operating revenue | $ | 202,861 | $ | 197,365 | $ | 5,496 | 2.8 | % | ||||||||||||||||||
| Commercial Real Estate operating costs and expenses | (106,030) | (102,535) | (3,495) | (3.4) | % | |||||||||||||||||||||
| Selling, general and administrative | (5,997) | (5,372) | (625) | (11.6) | % | |||||||||||||||||||||
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Intersegment operating revenue1
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- | 25 | (25) | (100.0) | % | |||||||||||||||||||||
| Impairment of assets | - | (256) | 256 | 100.0 | % | |||||||||||||||||||||
| Interest and other income (expense), net | 95 | 184 | (89) | (48.4) | % | |||||||||||||||||||||
| Commercial Real Estate operating profit (loss) | $ | 90,929 | $ | 89,411 | $ | 1,518 | 1.7 | % | ||||||||||||||||||
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Net Operating Income ("NOI")2
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$ | 132,529 | $ | 127,478 | $ | 5,051 | 4.0 | % | ||||||||||||||||||
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Same-Store Net Operating Income ("Same-Store NOI")2
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$ | 129,183 | $ | 124,707 | $ | 4,476 | 3.6 | % | ||||||||||||||||||
| Gross Leasable Area ("GLA") in square feet ("SF") for improved properties at end of period | 3,961 | 3,957 | 4 | 0.1 | % | |||||||||||||||||||||
| Ground leases (acres at end of period) | 145.0 | 142.0 | 3.0 | 2.1 | % | |||||||||||||||||||||
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1 Intersegment operating revenue for Commercial Real Estate is primarily from the Land Operations segment and is eliminated in the consolidated results of operations.
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2 For a discussion of management's use of non-GAAP financial measures and the required reconciliations of non-GAAP measures to GAAP measures, refer to page 39.
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Commercial Real Estate operating revenue increased 2.8% or $5.5 million, to $202.9 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. Operating profit increased 1.7%, or $1.5 million, to $90.9 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase in operating revenue from the prior year was due primarily to higher rental revenue, largely driven by the acquisition of Waihona Industrial in September 2024, the sales-type leases entered into in the first and third quarters of 2025 and increased overall occupancy, partially offset by higher depreciation expense primarily due to the Waihona Industrial acquisition, a $19.7 million anchor tenant improvement that was placed in service in first quarter of 2025, and accelerated depreciation that resulted from a revised economic life for an industrial asset identified for redevelopment.
Commercial Real Estate portfolio transactions
During the year ended December 31, 2025, the Company's commercial real estate transactions were as follows (dollars in millions):
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Transactions
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| Property | Location |
Transaction Type
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Date (Month/Year) |
Purchase Price | GLA (SF) | |||||||||||||||||||||||||||
| Maui Business Park - 4.7-acre parcel subject to ground lease | Maui |
Transfer-in
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3/25 |
N/A1
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N/A2
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22 Hana Highway3
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Maui
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Repossession | 12/25 |
N/A3
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4,500 | |||||||||||||||||||||||||||
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1 Represents an intercompany transaction. Land and land improvements transferred from the Land Operations segment. During the year ended December 31, 2025, the Company entered into a ground lease agreement for the transferred land, and the agreement was determined to meet the classification as a sales-type lease.
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2 Transfer of land and land improvements only.
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3 In December 2025, the Company took possession of a 4,500 square foot retail building for which the ground lease tenant was in default. In conjunction with the repossession, the Company recognized a gain on commercial real estate transactions equal to the fair value of the building of $0.8 million. Additionally, the ground asset was moved from the ground lease portfolio to the retail asset class within the Company's improved portfolio.
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The Company made no acquisitions or dispositions of CRE improved properties or ground lease interests in land during the year ended December 31, 2025.
Leasing activity
During the year ended December 31, 2025, the Company signed 64 new leases and 136 renewal leases for its improved properties across its three asset classes, covering 722,700 square feet of GLA. The 64 new leases consist of 249,300 square feet with an average annual base rent of $27.16 per-square-foot. Of the 64 new leases, 28 leases with a total GLA of 45,600 square feet were considered comparable (i.e., leases executed for units that have been vacated in the previous 12 months for comparable space and comparable lease terms) and, for these 28 leases, resulted in a 10.2% average base rent increase over comparable expiring leases. The 136 renewal leases consist of 473,400 square feet with an average annual base rent of $29.29 per square foot. Of the 136 renewal leases, 115 leases with a total GLA of 329,600 were considered comparable and resulted in a 6.3% average base rent increase over comparable expiring leases. The Company signed three new ground lease renewals during the year ended December 31, 2025, of which two were considered comparable and resulted in a 3.4% base rent increase over the comparable expiring lease.
Leasing activity summarized by asset class for the year ended December 31, 2025, was as follows:
| Year Ended December 31, 2025 | ||||||||||||||
| Leases | GLA (SF) |
ABR2,4/SF
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Rent Spread3
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| Retail | 133 | 295,419 | $40.69 | 7.6% | ||||||||||
| Industrial | 55 | 397,130 | $17.98 | 7.1% | ||||||||||
| Office | 12 | 30,176 | $48.90 | 2.1% | ||||||||||
| Subtotal - Improved | 200 | 722,725 | $28.55 | 6.8% | ||||||||||
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Ground4,5
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3 |
N/A1
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$637 | 3.4% | ||||||||||
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1 Not applicable for ground leases as such leases would not be comparable from a GLA (SF) perspective.
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2Annualized Base Rent ("ABR") as is relates to new and renewal leases is the first monthly contractual base rent multiplied by 12. Base rent is presented without consideration of percentage rent that may, in some cases, be significant.
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3 Rent spread is calculated for comparable leases, a subset of the total population of leases for the period presented (described above).
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4 Current ABR, in thousands, is presented for ground leases.
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5 During the year ended December 31, 2025, the Company entered into a non-comparable ground lease for a 4.7 acre land parcel located within Maui Business Park. As rent has not yet commenced for the lease, the ABR presented is the expected economic ABR.
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Occupancy
The Company reports three types of occupancy: "Leased Occupancy," "Physical Occupancy," and "Economic Occupancy."
The Leased Occupancy percentage calculates the square footage leased (i.e., the space has been committed to by a lessee under a signed lease agreement) as a percentage of total available improved property square footage as of the end of the period reported.
The Physical Occupancy percentage calculates the square footage leased and commenced (i.e., measured when the lessee has physical access to the space) as a percentage of total available improved property space at the end of the period reported.
The Economic Occupancy percentage calculates the square footage under leases for which the lessee is contractually obligated to make lease-related payments (i.e., subsequent to the rent commencement date) to total available improved property square footage as of the end of the period reported.
The Company's improved portfolio occupancy metrics as of December 31, 2025 and 2024, were as follows:
| As of | Basis Point Change | |||||||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||
| Leased Occupancy | 95.6% | 94.6% | 100 | |||||||||||||||||
| Physical Occupancy | 95.2% | 93.7% | 150 | |||||||||||||||||
| Economic Occupancy | 94.7% | 92.9% | 180 | |||||||||||||||||
For further context, the Company's Leased Occupancy and Economic Occupancy metrics for its improved portfolio summarized by asset class - and the corresponding occupancy metrics for a category of properties that were owned and operated for the entirety of the prior calendar year and current period, to date ("Same-Store" as more fully described below) - as of December 31, 2025 and 2024, were as follows:
| Leased Occupancy | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | Basis Point Change | ||||||||||||||||||
| Retail | 95.4% | 95.2% | 20 | |||||||||||||||||
| Industrial | 97.6% | 95.2% | 240 | |||||||||||||||||
| Office | 80.8% | 79.8% | 100 | |||||||||||||||||
| Total Leased Occupancy | 95.6% | 94.6% | 100 | |||||||||||||||||
| Economic Occupancy | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | Basis Point Change | ||||||||||||||||||
| Retail | 94.0% | 92.8% | 120 | |||||||||||||||||
| Industrial | 97.4% | 95.0% | 240 | |||||||||||||||||
| Office | 79.7% | 74.7% | 500 | |||||||||||||||||
| Total Economic Occupancy | 94.7% | 92.9% | 180 | |||||||||||||||||
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Same-Store Leased Occupancy1
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| As of | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | Basis Point Change | ||||||||||||||||||
| Retail | 95.7% | 95.4% | 30 | |||||||||||||||||
| Industrial | 98.9% | 95.1% | 380 | |||||||||||||||||
| Office | 97.1% | 94.4% | 270 | |||||||||||||||||
| Total Same-Store Leased Occupancy | 96.8% | 95.3% | 150 | |||||||||||||||||
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Same-Store Economic Occupancy1
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| As of | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | Basis Point Change | ||||||||||||||||||
| Retail | 94.2% | 93.0% | 120 | |||||||||||||||||
| Industrial | 98.7% | 94.8% | 390 | |||||||||||||||||
| Office | 96.2% | 94.4% | 180 | |||||||||||||||||
| Total Same-Store Economic Occupancy | 95.8% | 93.6% | 220 | |||||||||||||||||
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1The Same-Store pool excludes properties under development, and properties acquired or sold during either of the comparable reporting periods. The Same-Store pool may also exclude properties that are fully or partially taken out of service for the purpose of redevelopment or repositioning. Management judgment is involved in the classification of properties for exclusion from the Same-Store pool when they are no longer considered stabilized due to redevelopment or other factors. Properties are moved into the Same-Store pool after one full calendar year of stabilized operation.
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Land Operations
Trends, events and uncertainties
The asset class mix of real estate sales in any given period can be diverse and may include developable subdivision lots, undeveloped land or property sold under threat of condemnation. Further, the timing of property or parcel sales can significantly affect operating results in a given period.
Operating profit reported in each period for the Land Operations segment does not necessarily follow a percentage of sales trend because the cost basis of property sold can differ significantly between transactions. For example, the sale of undeveloped land and vacant parcels in Hawai'i may result in higher margins than the sale of developed property due to the low historical cost basis of the Company's Hawai'i landholdings.
As a result, direct year-over-year comparison of the Land Operations segment results may not provide a consistent, measurable indicator of future performance. Further, Land Operations revenue trends, cash flows from the sales of real estate, and the amount of real estate available for sale on the Company's consolidated balance sheet do not necessarily indicate future profitability trends for this segment.
Financial results
Results of operations for the years ended December 31, 2025 and 2024, were as follows:
| (amounts in thousands; unaudited) | 2025 | 2024 | ||||||||||||
| Development sales revenue | $ | - | $ | 18,328 | ||||||||||
| Unimproved/other property sales revenue | 3,362 | 20,265 | ||||||||||||
|
Other operating revenue1
|
450 | 683 | ||||||||||||
| Total Land Operations operating revenue | 3,812 | 39,276 | ||||||||||||
|
Land Operations operating costs and expenses2
|
(4,536) | (26,490) | ||||||||||||
| Selling, general, and administrative | (1,056) | (1,310) | ||||||||||||
|
Gain (loss) on disposal of assets and settlements, net
|
11,748 | 2,148 | ||||||||||||
| Impairment of equity method investment | (406) | - | ||||||||||||
| Income (loss) related to joint ventures and partnerships | 8,288 | 4,556 | ||||||||||||
| Interest and other income (expense), net | (23) | 742 | ||||||||||||
| Total Land Operations operating profit (loss) | $ | 17,827 | $ | 18,922 | ||||||||||
|
1 Other operating revenue primarily includes revenue related to licensing and leasing of legacy agricultural lands during the twelve months ended December 31, 2025 and 2024.
|
||||||||||||||
|
2 Includes intersegment operating charges for Land Operations that are from the Commercial Real Estate segment and are eliminated in the consolidated results of operations.
|
||||||||||||||
2025: Land Operations operating revenue of $3.8 million for the year ended December 31, 2025, is primarily related to the sale of unimproved and other land holdings on the island of Maui.
Land Operations operating profit of $17.8 million during the year ended December 31, 2025, is primarily composed of the gain related to a contract modification and favorable resolution of remaining rights and obligations from a land sale in a prior year, equity earnings from joint ventures driven by earnings from the Company's unconsolidated investment in a materials company and a release of reserves held at a legacy real estate joint venture, and the margins resulting from unimproved land sales in the current year.
2024: Land Operations operating revenue of $39.3 million and related costs of sales of $26.5 million for the year ended December 31, 2024, are primarily related to the sale of approximately 430 acres of unimproved and other land holdings on Maui and Kauai for $20.3 million, including an 81-acre residential-zoned parcel on Maui, as well as six development lots at Maui Business Park for $10.2 million and two industrial-zoned development lots on Oahu for $8.1 million.
Land Operations operating profit of $18.9 million for the year ended December 31, 2024, is primarily composed of the margins resulting from land sales noted above, equity in earnings from joint ventures of $4.6 million primarily related to the Company's unconsolidated investment in a materials company, and the gain from disposals of assets of $2.1 million due to the favorable resolution of contingent liabilities related to the sale of a legacy business in a prior year, and charges related to legacy business environmental remediation activities.
Use of Non-GAAP Financial Measures
The Company uses non-GAAP measures when evaluating operating performance because management believes that they provide additional insight into the Company's and segments' operating results, and/or the underlying business trends affecting performance on a consistent and comparable basis from period to period. These measures generally are provided to investors as an additional means of evaluating the performance of ongoing operations. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.
Funds from Operations and Adjusted Funds From Operations
FFO is presented by the Company as a widely used non-GAAP measure of operating performance for real estate companies. FFO is computed in accordance with standards established by the National Association of Real Estate Investment Trusts ("Nareit") and is calculated as follows: net income (loss) available to A&B common shareholders (calculated in accordance with GAAP), excluding (1) depreciation and amortization related to real estate, (2) gains and losses from the sale of certain real estate assets and selling profit or loss recognized on sales-type leases, (3) gains and losses from change in control, (4) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, and (5) income (loss) from discontinued operations related to legacy business operations.
FFO serves as a supplemental measure to net income calculated in accordance with GAAP and management believes is useful for comparing the Company's performance and operations to those of other REITs because it excludes items included in net income that do not relate to or are not indicative of its operating and financial performance, such as depreciation and amortization related to real estate, which assumes that the value of real estate assets diminishes predictably over time instead of fluctuating with market conditions, and items that can make periodic or peer analysis more difficult, such as gains and losses from the sale of CRE properties, impairment losses related to CRE properties, and income (loss) from discontinued operations. Management believes that FFO more accurately provides an investor an indication of the Company's ability to incur and service debt, make capital expenditures and fund other needs.
FFO related to CRE and Corporate is a supplemental non-GAAP measure that refines FFO to reflect the operating performance of the Company's commercial real estate business. FFO related to CRE and Corporate is calculated by adjusting FFO to exclude the operating performance of the Company's Land Operations segment. The Company also provides a reconciliation from CRE Operating Profit to FFO related to CRE and Corporate by including corporate, interest, and income tax expenses attributable to its commercial real estate business, and by excluding gains or losses on and depreciation and amortization of CRE properties, as well as distributions to participating securities. Management believes that FFO related to CRE and Corporate provides an additional measure to compare the Company's performance by excluding legacy items from the Land Operations segment.
Adjusted FFO serves as a supplemental measure to net income calculated in accordance with GAAP and management believes may be more useful than FFO in evaluating the operating performance of the Company's properties over the long term because it excludes from FFO the effects of certain items that do not relate to or are not indicative of the Company's ongoing property operations, and by enhancing comparability to other REITs by enabling investors and analysts to assess property operating performance in comparison to other real estate companies.
Adjusted FFO is calculated by excluding from FFO certain items not related to ongoing property operations including share-based compensation, Merger transaction costs, straight-line lease adjustments and other non-cash adjustments, such as amortization of market lease adjustments, non-cash income related to sales-type leases, debt premium or discount and deferred financing cost amortization, maintenance capital expenditures, leasing commissions, provision for current expected credit losses and other non-comparable and non-operating items, including certain gains, losses, income, and expenses related to the Company's legacy business operations and assets.
FFO, FFO related to CRE and Corporate, and Adjusted FFO do not represent alternatives to net income calculated in accordance with GAAP and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. In addition, FFO, FFO related to CRE and Corporate, and Adjusted FFO do not represent and should not be considered alternatives to cash generated from operating activities determined in accordance with GAAP, nor should they be used as measures of the Company's liquidity, or cash available to fund the Company's needs or pay distributions. FFO, FFO related to CRE and Corporate, and Adjusted FFO should be considered only as supplements to net income as a measure of the Company's performance.
The Company reconciles FFO, FFO related to CRE and Corporate and Adjusted FFO to the most directly-comparable GAAP measure, Net Income (Loss) available to A&B common shareholders. The Company's FFO, FFO related to CRE and Corporate and Adjusted FFO may not be comparable to such metrics reported by other REITs due to possible differences in the
interpretation of the current Nareit definition used by such REITs. Reconciliations of net income (loss) available to A&B common shareholders to FFO, FFO related to CRE and Corporate, and Adjusted FFO for the years ended December 31, 2025 and 2024, are as follows (in thousands):
| 2025 | 2024 | |||||||||||||
| Net Income (Loss) available to A&B common shareholders | $ | 64,674 | $ | 60,514 | ||||||||||
| Depreciation and amortization of commercial real estate properties | 38,120 | 36,077 | ||||||||||||
|
(Gain) loss on commercial real estate transactions1
|
(7,454) | (51) | ||||||||||||
| (Income) loss from discontinued operations, net of income taxes | (89) | 3,466 | ||||||||||||
| FFO | 95,251 | 100,006 | ||||||||||||
| Add (deduct) Adjusted FFO defined adjustments | ||||||||||||||
| Impairment losses - abandoned development costs | - | 256 | ||||||||||||
|
(Gain) loss on sale of legacy business2
|
- | (2,125) | ||||||||||||
|
Non-cash changes to liabilities related to legacy operations3
|
(10,957) | 2,028 | ||||||||||||
| Provision for (reversal of) current expected credit losses | 45 | (628) | ||||||||||||
| Impairment of equity method investment | 406 | - | ||||||||||||
|
Legacy joint venture (income) loss4
|
(8,466) | (4,556) | ||||||||||||
| (Gain) loss on fair value adjustments related to interest rate swaps | - | (3,675) | ||||||||||||
|
Non-recurring financing and Merger transaction-related charges
|
7,101 | 2,350 | ||||||||||||
| Amortization of share-based compensation | 5,912 | 4,795 | ||||||||||||
|
Maintenance capital expenditures5
|
(12,716) | (15,103) | ||||||||||||
| Leasing commissions paid | (1,328) | (1,272) | ||||||||||||
|
Sales-type lease interest income adjustments
|
(701) | - | ||||||||||||
| Straight-line lease adjustments | (757) | (2,736) | ||||||||||||
| Amortization of net debt premiums or discounts and deferred financing costs | 1,694 | 1,095 | ||||||||||||
| Favorable (unfavorable) lease amortization | (355) | (371) | ||||||||||||
| Adjusted FFO | $ | 75,129 | $ | 80,064 | ||||||||||
|
1 Includes selling profits from sales-type leases.
|
||||||||||||||
|
2 Amounts in 2024 are primarily due to the favorable resolution of contingent liabilities related to the prior year sale of a legacy business.
|
||||||||||||||
|
3 Amounts in 2025 are mainly related to the favorable resolution of rights and obligations from a land sale in a prior year, partially offset by transfer of the Company's interest in a joint venture of $2.7 million. Amounts in 2024 are primarily related to environmental reserves associated with legacy business activities in the Land Operations segment.
|
||||||||||||||
|
4 Includes joint ventures engaged in legacy business activities within the Land Operations segment.
|
||||||||||||||
|
5 Includes ongoing maintenance capital expenditures only.
|
||||||||||||||
| 2025 | 2024 | |||||||||||||
| Net Income (Loss) available to A&B common shareholders | $ | 64,674 | $ | 60,514 | ||||||||||
| Depreciation and amortization of commercial real estate properties | 38,120 | 36,077 | ||||||||||||
|
(Gain) loss on commercial real estate transactions1
|
(7,454) | (51) | ||||||||||||
| (Income) loss from discontinued operations, net of income taxes | (89) | 3,466 | ||||||||||||
|
Land Operations operating (profit) loss
|
(17,827) | (18,922) | ||||||||||||
| FFO related to CRE and Corporate | $ | 77,424 | $ | 81,084 | ||||||||||
|
1 Includes selling profits from sales-type leases.
|
||||||||||||||
| 2025 | 2024 | |||||||||||||
| CRE Operating Profit | $ | 90,929 | $ | 89,411 | ||||||||||
| Corporate and other expense | (27,893) | (21,038) | ||||||||||||
| CRE properties depreciation and amortization | 38,120 | 36,077 | ||||||||||||
| Interest expense | (23,801) | (23,169) | ||||||||||||
| Income tax benefit (expense) | 69 | (174) | ||||||||||||
| Distributions to participating securities | - | (23) | ||||||||||||
| FFO related to CRE and Corporate | $ | 77,424 | $ | 81,084 | ||||||||||
Net Operating Income and Same-Store Net Operating Income
NOI is a non-GAAP measure used internally in evaluating the unlevered performance of the Company's Commercial Real Estate portfolio. Management believes NOI provides useful information to investors regarding the Company's financial condition and results of operations because it reflects only the contract-based income that is realizable (i.e., assuming collectability is deemed probable) and direct property-related expenses paid or payable in cash that are incurred at the property level, as well as trends in occupancy rates, rental rates and operating costs. When compared across periods, NOI can be used to determine trends in earnings of the Company's properties as this measure is not affected by non-contract-based revenue (e.g., straight-line lease adjustments required under GAAP and amortization of lease incentives and favorable/unfavorable lease assets/liabilities); by non-cash expense recognition items (e.g., the impact of depreciation related to capitalized costs for improved properties and building/tenant space improvements, amortization of leasing commissions, or impairments); by non-cash income related to sales-type leases; or by other income, expenses, gains, or losses that do not directly relate to the Company's ownership and operations of the properties (e.g., indirect selling, general, administrative and other expenses, as well as lease termination income and interest and other income (expense), net). Management believes the exclusion of these items from Commercial Real Estate operating profit (loss) is useful because it provides a performance measure of the revenue and expenses directly involved in owning and operation real estate assets. NOI should not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
The Company reports NOI and Occupancy on a Same-Store basis, which includes the results of properties that were owned, operated, and stabilized for the entirety of the prior calendar year and current reporting period, year-to-date. The Same-Store pool excludes properties under development, and properties acquired or sold during either of the comparable reporting periods. The Same-Store pool may also exclude properties that are fully or partially taken out of service for the purpose of redevelopment or repositioning. Management judgment is involved in the classification of properties for exclusion from the Same-Store pool when they are no longer considered stabilized due to redevelopment or other factors. Properties are moved into the Same-Store pool after one full calendar year of stabilized operation.
Management believes that reporting on a Same-Store basis provides investors with additional information regarding the operating performance of comparable assets separate from other factors (such as the effect of developments, redevelopments, acquisitions or dispositions).
The Company's methods of calculating non-GAAP measures may differ from methods employed by other companies and thus may not be comparable to such other companies. Reconciliations of CRE operating profit (loss) to NOI for the years ended December 31, 2025 and 2024, are as follows (in thousands):
| 2025 | 2024 | |||||||||||||
| CRE Operating Profit | $ | 90,929 | $ | 89,411 | ||||||||||
| Depreciation and amortization | 38,133 | 36,093 | ||||||||||||
| Straight-line lease adjustments | (757) | (2,736) | ||||||||||||
| Favorable (unfavorable) lease amortization | (355) | (371) | ||||||||||||
| Sales-type lease adjustments | (656) | - | ||||||||||||
| Termination fees and other | (654) | (347) | ||||||||||||
| Interest and other (income) expense, net | (95) | (184) | ||||||||||||
| Impairment of assets | - | 256 | ||||||||||||
| Selling, general and administrative | 5,984 | 5,356 | ||||||||||||
| NOI | $ | 132,529 | $ | 127,478 | ||||||||||
| Less: NOI from acquisitions, dispositions and other adjustments | (3,346) | (2,771) | ||||||||||||
| Same-store NOI | $ | 129,183 | $ | 124,707 | ||||||||||
Liquidity and Capital Resources
Overview
The Company's principal sources of liquidity to meet its business requirements and plans, both in the short-term (i.e., the next twelve months from December 31, 2025) and long-term (i.e., beyond the next twelve months), have generally been cash provided by operating activities; available cash and cash equivalents; and borrowing capacity under its credit facility. The Company's primary liquidity needs for its business requirements and plans have generally been funding shareholder distributions, known contractual obligations, and capital expenditures (including recent commercial real estate acquisitions and real estate developments); and supporting working capital needs.
The Company's ability to retain outstanding borrowings and utilize remaining amounts available under its revolving credit facility will depend on its continued compliance with the applicable financial covenants and other terms of the Company's notes payable and other debt arrangements. The Company was in compliance with its financial covenants for all outstanding balances as of December 31, 2025, and intends to operate in compliance with these covenants or seek to obtain waivers or modifications to these financial covenants to enable the Company to maintain compliance in the future. However, due to various uncertainties and factors outside of Management's control, the Company may be unable to continue to maintain compliance with certain of its financial covenants. Failure to maintain compliance with its financial covenants or obtain waivers or agree to modifications with its lenders would have a material adverse impact on the Company's financial condition.
Based on its current outlook, the Company believes that funds generated from cash provided by operating activities; available cash and cash equivalent balances; and borrowing capacity under its credit facility will be sufficient to meet the needs of the Company's business requirements and plans both in the short-term (i.e., the next twelve months from December 31, 2025) and long-term (i.e., beyond the next twelve months). There can be no assurance, however, that the Company will continue to generate cash flows at or above current levels or that it will be able to maintain its ability to borrow under its available credit facilities. As the circumstances underlying its current outlook may change, the Company will continue to actively monitor the situation and may take further actions that it determines is in the best interest of its business, financial condition and liquidity and capital resources.
Known contractual obligations
A description of material contractual commitments as of December 31, 2025, is included in Note 8 - Notes Payable and Other Debt, Note 9 - Derivative Instruments, Note 11 - Revenue and Contract Balances, Note 13 - Leases - The Company as a Lessee, and Note 15 - Employee Benefit Plans of the Notes to Consolidated Financial Statements and Part II, Item 8 of this report, and is herein incorporated by reference.
In addition, contractual interest payments for Notes payable and other debt in the short-term (i.e., over the next twelve months from December 31, 2025) and long-term (i.e., beyond the next twelve months) is estimated to be $22.8 million and $69.8 million, respectively (includes amounts based on contractual/fixed swap interest rates applied to future principal balances based on repayment schedules for secured and unsecured debt and also estimated interest on the revolving credit facility based on the outstanding balance and the rates in effect as of December 31, 2025).
In June 2025, the Company and certain of its subsidiaries entered into a termination agreement with Mahi Pono Holdings, LLC ("Mahi Pono") and certain of its related entities ("the Termination Agreement") in which both parties mutually agreed to generally terminate the remaining rights and performance obligations related to a 2018 sale of approximately 41,000 acres of agricultural land on Maui. Under the Termination Agreement, the Company became obligated to pay $55.3 million to Mahi Pono in installments over a period of four years with $10.0 million paid upon execution of the Termination Agreement, $12.7 million payable on each of the first and second anniversaries of the Termination Agreement, and $10.0 million payable on each of the third and fourth anniversaries of the Termination Agreement. As of December 31, 2025, the remaining $45.3 million payable under the Termination Agreement is included in Refund liabilityin the consolidated balance sheets.
The Company expects that its short-term capital expenditures for contractual commitments related to development projects and building and tenant improvements (i.e., over the next twelve months from December 31, 2025) is estimated to be $37.1 million. The largest of such amounts pertain to contracts for two commercial real estate development and redevelopment projects for $26.6 million. The Company expects that its long-term capital expenditures for contractual commitments related to development projects and building and tenant improvements (i.e., beyond the next twelve months from December 31, 2025) is not material. Refer to Other uses (or sources) of liquidity below for additional discussion of the Company's total anticipated capital expenditures for 2026.
A description of other commitments, contingencies and off-balance sheet arrangements as of December 31, 2025, is included in Note 10 - Commitments and Contingencies of Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report, and is herein incorporated by reference.
Sources of liquidity
As noted above, the Company's principal sources of liquidity are operating cash flows from continuing operations, which were $79.6 million for the year ended December 31, 2025, primarily driven by cash generated from CRE operations. The Company's cash flows from continuing operations provided by operating activities for the year ended December 31, 2025, reflects an decrease of $22.5 million from the prior year amount of $102.1 million, due primarily to lower cash proceeds of $19.1 million from unimproved and development land sales in 2025 as compared to 2024, compounded by a $10.0 million refund liability payment during the year ended December 31, 2025. These were partially offset by $6.3 million more cash collections of financing receivables related to prior years' unimproved and development land sales, higher operating cash distributions from joint ventures, and lower carrying costs associated with legacy landholdings for the year ended December 31, 2025. Total cash flows in future periods may be subject to variation from the Land Operations segment due to, among other factors, the varying activity in completing development and unimproved/other property sales.
During the term of the Merger Agreement, the Company may not pay dividends, except as reasonably necessary to avoid incurring entity-level income or excise taxes or to maintain its tax status as a real estate investment trust, and any such dividends would result in an offsetting decrease to the per-share merger consideration paid to our shareholders under the Merger Agreement at the closing of the Merger.
The Company's other primary sources of liquidity include its cash and cash equivalents of $11.3 million as of December 31, 2025, and the Company's revolving credit facility, which provides liquidity and flexibility on a short-term (i.e., the next twelve months from December 31, 2025), as well as long-term basis. With respect to the revolving credit facility, as of December 31, 2025, the Company had $8.0 million of borrowings outstanding, no letters of credit issued against, and $442.0 million of available capacity (with a term through October 17, 2028, and two six-month extension options).
On August 13, 2024, the Company entered into an at-the-market equity distribution agreement, or ATM Agreement, pursuant to which it may sell common stock up to an aggregate sales price of $200.0 million. Sales of common stock, if any, made pursuant to the ATM Agreement may be sold in negotiated transactions or transactions that are deemed to be "at the market" offerings, as defined in Rule 415 of the Securities Act of 1933, as amended. Actual sales will depend on a variety of factors including market conditions, the trading price of the Company's common stock, capital needs, and the Company's determination of the appropriate sources of funding to meet such needs. As of December 31, 2025, the Company has not sold any shares under the at-the-market offering program, nor has any obligation to sell the shares under the at-the-market offering program.
Other uses (or sources) of liquidity
The Company may use (or, in some periods, generate) cash through various investing activities or financing activities. Cash used in investing activities from continuing operations was $45.5 million for the year ended December 31, 2025, as compared to cash used in investing activities from continuing operations of $31.1 million for the year ended December 31, 2024. The year ended December 31, 2025, included capital expenditures for continuing operations of $52.2 million, which included non-recurring major renovations and charges for initial build-outs of previously unoccupied shell space of $21.5 million, partially
offset by $3.4 million in cash proceeds from the collection of a note related to the disposal of an improved Commercial Real Estate property in 2024. The year ended December 31, 2024, included capital expenditures for continuing operations of $50.8 million, which included the purchase of a Commercial Real Estate property for $29.8 million, partially offset by $19.0 million in cash proceeds from the disposal of assets. The 2024 acquisition was structured as a partial like-kind exchange in accordance with Code §1031.
The Company primarily uses cash in investing activities for capital expenditures related to its CRE segment. For the year ended December 31, 2025, nearly all of the Company's capital expenditures for property, plant and equipment of $52.2 million related to the CRE segment. The Company further differentiates capital expenditures as follows (based on management's perspective on discretionary versus non-discretionary areas of spending for its CRE business):
•Ongoing Maintenance Capital Expenditures:Costs necessary to maintain building value, the current income stream, and position in the market.
•Discretionary Capital Expenditures:Property acquisition, development and redevelopment activity, and tenant improvements to generate income and cash flow growth.
•Capitalized Indirect Costs:Certain costs related to the development and redevelopment of real estate properties, including: pre-construction costs; real estate taxes; insurance; construction costs; attributable interest expense; and salaries and related costs of personnel directly involved.
Capital expenditures for continuing operations are summarized as follows for the years ended:
| (in thousands, unaudited) |
2025
|
2024
|
||||||||||||
| Capital expenditures for real estate | ||||||||||||||
| Ongoing maintenance capital expenditures | ||||||||||||||
| Building/area improvements | $ | 9,633 | $ | 10,193 | ||||||||||
| Tenant space improvements | 3,083 | 4,910 | ||||||||||||
| Total ongoing maintenance capital expenditures for real estate | 12,716 | 15,103 | ||||||||||||
| Discretionary capital expenditures | ||||||||||||||
| Property acquisitions | - | 29,826 | ||||||||||||
|
Development and redevelopment1
|
14,413 | 2,518 | ||||||||||||
|
Tenant space improvements - nonrecurring2
|
21,541 | 449 | ||||||||||||
| Total discretionary capital expenditures for real estate | 35,954 | 32,793 | ||||||||||||
| Capitalized indirect costs | 3,359 | 2,784 | ||||||||||||
|
Total capital expenditures for real estate1
|
52,029 | 50,680 | ||||||||||||
| Corporate and other capital expenditures | 201 | 97 | ||||||||||||
|
Total Capital Expenditures1
|
$ | 52,230 | $ | 50,777 | ||||||||||
1 Excludes capital expenditures for real estate developments to be held and sold as real estate development inventory, which are classified in the consolidated statement of cash flows as operating activities and are excluded from the tables above.
2 Includes non-recurring major renovations and first-time space build outs.
The Company regularly evaluates investment opportunities, including development-for-hold projects, commercial real estate acquisitions, joint venture investments, share repurchases, business acquisitions, and other strategic transactions to increase shareholder value. In 2026, the Company expects that its capital expenditures, not including potential commercial real estate property acquisitions, will be approximately $75.0 million - $85.0 million. The projected increase in capital expenditures for 2026 from the actual capital expenditures for the years ended December 31, 2025 and 2024, is primarily related to two development and redevelopment projects currently under construction and that are expected to be completed in 2026 and 2027. Should investment opportunities in excess of the amounts budgeted arise, the Company believes it has adequate sources of liquidity to fund these investments.
Cash used in financing activities for continuing operations was $56.1 million for the year ended December 31, 2025, a decrease from cash used in financing activities for continuing operations of $62.0 million for the year ended December 31, 2024. Cash used in financing activities is primarily composed of cash dividends paid, net payments on the Company line-of-credit agreement, and payments of notes payable and other debt which totaled $65.7 million, $142.0 million, and $40.5 million, respectively, during the year ended December 31, 2025. Partially offsetting these cash outflows were proceeds from issuance of notes payable and other debt of $198.0 million during the year ended December 31, 2025.
Other capital resource matters
The Company utilizes §1031 or §1033 of the Code to obtain tax-deferral treatment when qualifying real estate assets are sold or become subject to involuntary conversion and the resulting proceeds are reinvested in replacement properties within the required time period. Proceeds from potential tax-deferred sales under §1031 of the Code are held in escrow (and presented as part of Restricted cash on the consolidated balance sheets) pending future reinvestment or are returned to the Company for general use if eligibility for tax-deferral treatment based on the required time period lapses. The proceeds from involuntary conversions under §1033 of the Code are held by the Company until the funds are redeployed. As of December 31, 2025, the Company has no funds from tax-deferred sales or involuntary conversions that are available for use and have not been reinvested under §1031 or §1033 of the Code.
Trends, events and uncertainties
General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties, including market volatility, supply chain and labor constraints, inflationary pressures, travel restrictions, war, natural disasters or effects of climate change, or a prolonged economic downturn could adversely affect our business. The impact of an elevated federal funds rate for a prolonged period resulted in a tightening of credit and contributed to volatility in the banking, technology, and housing industries. In an effort to improve the labor market and price stability, the Federal Reserve lowered the federal funds target rate range by 0.25% in December 2025 to a range of 3.5% to 3.75%, and is considering additional adjustments to the target rate range. The ultimate extent of the impact that these trends and events will have on the Company's business, financial condition, results of operations and liquidity and capital resources will largely depend on future developments, including the resulting impact on economic growth/recession, the impact on travel and tourism behavior and the impact on consumer confidence and discretionary and non-discretionary spending, all of which are highly uncertain and cannot be reasonably predicted.
There are a number of uncertainties related to the Merger, including that it may not be completed within the expected timeframe, or at all, as a result of various factors and conditions, some of which are beyond management's control. The Company has incurred and expects to incur non-recurring costs associated with the Merger that are payable by the Company regardless of whether or not the Merger is completed and for which it will receive little or no benefit if the Merger is not completed. These costs include financial advisory, legal, accounting, consulting and other advisory fees, severance/employee benefit-related costs, financing-related fees and costs, public company filing fees and other regulatory fees, printing costs, and other related costs. In addition, if the Merger is not completed, the Company may be required to pay a cash termination fee of $50.5 million, as required under the Merger Agreement under certain circumstances. The ultimate extent of the impact that this uncertainty could have on the Company's business, financial condition, results of operations and liquidity and capital resources will largely depend on future developments, including obtaining shareholder approvals and satisfying all other required closing conditions, which cannot be reasonably predicted.
Critical Accounting Estimates
The Company's significant accounting policies are described in Note 2 - Significant Accounting Policies of Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report. The preparation of financial statements in conformity with accounting principles generally accepted in the United States, upon which the MD&A is based, requires that management exercise judgment when making estimates and assumptions about future events that may affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with certainty and actual results may differ from those critical accounting estimates. These differences could be material.
Management considers an accounting estimate to be critical if: (i) it requires assumptions to be made that were uncertain at the time the estimate was made; and (ii) changes in the estimate, or the use of different estimating methods that could have been selected and could have a material impact on the Company's consolidated results of operations or financial condition. The critical accounting estimates inherent in the preparation of the Company's financial statements are described below.
Purchase Price Allocation of Acquired Real Estate
In accordance with Accounting Standards Codification 805, Business Combinations, acquisitions of real estate properties generally do not meet the definition of a business and are treated as asset acquisitions. Upon the acquisition of a property, management assesses the fair value of acquired tangible and intangible assets and liabilities (including land, buildings, tenant improvements, above-market and below-market leases, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocates the purchase price to the acquired assets and assumed liabilities on a relative fair value basis. All expenses related to an acquisition are capitalized and allocated among the identified assets. Generally, the most significant portion of the allocation is to building and land, and requires the use of market-based estimates and assumptions.
In estimating the fair value of tangible and intangible assets acquired and liabilities assumed, management uses various valuation methods, such as estimated cash flow projections using appropriate discount and capitalization rates, analysis of recent comparable sales transactions, estimates of replacement costs net of depreciation, and other available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known trends, and market and economic conditions. Management determines capitalization rates based on recent transactions and other market data and adjusts, if necessary, based on a property's specific characteristics. The fair value of land is generally based on relevant market data, such as a comparison of a property's site to similar parcels that have recently been sold or are available on the market for sale.
Acquired above-market and below-market leases are recorded at their fair values (using a discount rate that reflects the risks associated with the leases acquired) equal to the difference between (1) the contractual amounts to be paid pursuant to each in-place lease and (2) management's estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. Acquired in-place lease values are recorded based on an evaluation of the specific characteristics of each tenant's lease. Factors to be considered include estimates of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods are included in the estimate, as appropriate. In estimating costs to execute similar leases, leasing commissions, legal and other related expenses are included, as appropriate. Management also considers an allocation of purchase price of other acquired intangibles, including acquired in-place leases that may have a customer relationship intangible value, including, but not limited to, the nature and extent of the existing relationship with the tenants, the tenants' credit quality and expectations of lease renewals.
Impairment
Long-lived assets held and used, including finite-lived intangible assets, are reviewed for possible impairment when events or circumstances indicate that the carrying value may not be recoverable. In such an evaluation, the estimated future undiscounted cash flows generated by the asset are compared with the amount recorded for the asset to determine if its carrying value is not recoverable. If this review determines that the recorded value will not be recovered, the amount recorded for the asset is reduced to estimated fair value. These asset impairment analyses are highly subjective because they require management to make assumptions and apply considerable judgments to, among other things, estimates of the timing and amount of future cash flows, the cash flow projection period, uncertainty about future events, including changes in economic conditions, changes in operating performance, discount rates, changes in the use of the assets and ongoing costs of maintenance and improvements of the assets, and thus, the accounting estimates may change from period to period. If management uses different assumptions or if different conditions occur in future periods, the Company's financial condition or its future financial results could be materially impacted.
Assets held for sale are carried at the lower of their carrying values or estimated fair values less costs to sell. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value. The estimates of fair value consider matters such as contracts, the results of negotiations with prospective purchasers, broker quotes, or recent comparable sales. These estimates are subject to revision as market conditions, and our assessment of such conditions, change.
As of December 31, 2025, one subdivided unit at a CRE improved property and an office building that houses the Company's regional office on Maui met the criteria to be classified as held for sale. Management measured the assets at their fair values less costs to sell and found them to be in excess of their carrying values. Consequently, no fair value adjustment related to the assets held for sale was required. During the year ended December 31, 2024, the Company recorded an impairment charge of $0.3 million related to the abandonment of potential CRE development projects.
New Accounting Pronouncements
See Note 2 - Significant Accounting Policies of Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report, for a full description of the impact of recently issued accounting standards, which is incorporated herein by reference, including the expected dates of adoption and estimated effects on the Company's results of operations and financial condition.
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