Aloha Means Hello! Analysts Just Upgraded This Hawaii-Based REIT

Hawaii has scenic beauty, a vibrant local culture, and a tropical climate with year-round sunshine. Together, these attributes make Hawaii real estate a great investment. That helps explain why Hawaii-based real estate investment trust (REIT) Alexander and Baldwin posted rock-solid earnings for Q2 2024. Benzinga looks at this REIT, why it's hot, and whether it's a good addition to your portfolio. 

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A REIT Based in Paradise

Alexander and Baldwin (NYSE: ALEX) is one of the most recognized names in Hawaii real estate. This REIT can trace its history in Hawaii back over 150 years to its origins as one of the original "Big 5" companies that owned and operated most of Hawaii's real estate. Today, Alexander and Baldwin delivers investor returns through owning and operating premier retail and industrial facilities throughout the Hawaii resident Islands.

Alexander and Baldwin has a diverse operation split into two separate wings. The first wing, Commercial Real Estate, accounts for most of the company's revenue. This wing operates premium shopping centers anchored by nationally recognized grocery stores like Safeway and Whole Foods. Their portfolio also includes industrial and office real estate in prime Hawaii locations.

Alexander and Baldwin's second wing, Commercial Real Estate and Land Operations, handles multiple functions, which include land development, leasing land to large agricultural operations, and expanding renewable energy infrastructure. The long-term, triple net leases in Alexander and Baldwin's commercial portfolio generate consistent returns for investors. Alexander and Baldwin have 3.9 million square feet of commercial space spread across nearly 40 properties. Their market cap is $1.41 billion and shares are currently trading at $19.51.

Alexander and Baldwin's Q2 2024 Earnings

Alexander and Baldwin managed to hit the trifecta with their Q2 2024 earnings. That means the company's leadership, investors, and analysts were very impressed with Alexander and Baldwin's Q2 2024 earnings. The REIT reported an operating profit of $22.6 million, with $9.1 million going to shareholders ($0.13/share) and funds from operation (FFO) of $20.6 million ($0.28/share).

The quarterly occupancy rate was 93.9% and same-store net operating income (NOI) for the commercial real estate portfolio grew by 0.9%. Alexander and Baldwin will also pay Q3 shareholder dividends of $0.2225/share on Oct. 7, 2024, which matches the Q2 2024 dividend it paid on July 7, 2023.

Additionally, Alexander and Baldwin raised its FFO per diluted share estimates from $1.05-$1.16 to $1.17-$1.26. The REIT also raised its estimates for same-store NOI growth from 1.10%-2.10% to 1.25%-2.25%. Earnings per share of $1.28 is another area where this REIT performed strongly. Alexander and Baldwin's 4.56% dividend will lead to investors earning $0.89/share.

There Are Other High-Yield Opportunities Beyond Hawaii

While Alexander and Baldwin's dividend is attractive, it isn't the only game in town.  For investors seeking returns, the current "once-in-a-cycle" situation offers unique opportunities. 

For diversification beyond Hawaii, one option is the Ascent Income Fund from EquityMultiple. It invests in senior loans across various geographies, borrowers, property type/sectors, and business plans has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000. Benzinga Readers: Earn a 1% return boost on your first EquityMultiple investment when you sign up here (accredited investors only).

Alexander and Baldwin CEO's Take On The REIT's Performance

CEO and President Lance Parker spoke highly of his REIT's performance in a news release, which read in part, "I am encouraged by our performance during the second quarter. Our portfolio continued to demonstrate organic growth and the leasing demand was healthy. We took steps to fully fix the interest rate of our debt, strengthening our balance sheet and providing ample liquidity to pursue investment opportunities as they arise."

Analysts Give Alexander and Baldwin an Upgrade

It's not unusual for CEOs to praise their REIT's performance in a news release accompanying their quarterly earnings report. However, it would appear that some analysts were also impressed with Alexander and Baldwin's Q2 efforts. According to Fintel, Piper Sandler upgraded its share price outlook for Alexander and Baldwin. This upgrade was likely based (at least in part) on the strength of Alexander and Baldwin's quarterly earnings. 

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 Is Alexander and Baldwin Right For You?

Alexander and Baldwin certainly make a compelling case for investor interest. They occupy lucrative commercial space in an island market. Simple geography and land scarcity mean the retail and commercial spaces in the Alexander and Baldwin portfolio would stay in high demand for the near future. The fact that Alexander and Baldwin's roots in Hawaii go back over a century would also seem to indicate their staying power.

That doesn't mean an investment would be without risk. Tourism is an essential part of Hawaii's economy, and if America goes into recession, consumers will spend less on luxuries like Hawaii’s resident vacations. Natural disasters like volcanic eruptions, tsunamis, and wildfires constantly threaten Hawaii. Investors may endure sustained periods of increased insurance premiums and decreased revenues after a major incident. So, keep these risks in mind before you take the plunge.