Alexander & Baldwin, Inc. Reports Fourth Quarter and Full-year 2017 Results

HONOLULU, Feb. 28, 2018

"I'm very pleased with A&B's strong operational performance and all we were able to accomplish in 2017," said Chris Benjamin, A&B president and chief executive officer. "Our fourth quarter and year-end financial picture was more complex than usual as a result of our recent Special Distribution and some important strategic moves made late in 2017. However, we continued to make significant strides in executing our strategy of becoming a Hawai`i-focused commercial real estate company, including transitioning property management and leasing functions in house, negotiating the recently announced Terramar Hawai`i asset acquisition, and marketing our remaining mainland assets for sale. We also enhanced our leasing processes, which enabled us to achieve re-leasing spreads of 13.9% in 2017, and achieve an increase in same-store cash net operating income from our commercial portfolio that exceeded our guidance of 3-4%."

Mr. Benjamin continued, "The Terramar acquisition does far more than just add three premier Hawai`i retail centers to A&B's portfolio; it facilitates the completion of our mainland-to-Hawai`i migration strategy. In just the past five years, we have migrated over $400 million of commercial real estate capital from assets across the U.S. mainland to highly strategic assets in Hawai`i. While the Company's fourth quarter earnings included a net charge of $16.1 million related to four mainland property dispositions, we expect to realize gains on the sales of three other mainland properties in 2018 that will more than offset that impact. The execution of this series of exchanges—similar to the exchanges that led to our ownership of our Kailua portfolio and Manoa Marketplace—solidifies A&B's position as the owner of the largest grocery-anchored retail portfolio in Hawai`i and brings three important Hawai`i assets under local ownership."

Corporate Highlights

• Fourth quarter and full-year 2017 basic EPS from continuing operations available to A&B shareholders were $4.31 and $4.63 per share, respectively. Both periods included income tax adjustments of $4.47 per share. In addition, fourth quarter and full-year 2017 basic EPS were each reduced by $0.33 per share as a result of impairments related to three mainland commercial properties that were classified as held for sale at the end of 2017, partially offset by a gain on a mainland commercial property sold during the fourth quarter 2017. Proceeds from the sales of these mainland commercial properties will be used in the financing of the Terramar Hawai`i asset acquisition ("TRC Asset Acquisition").
• In the first quarter of 2018, the Company completed a Special Distribution totaling $783.0 million, or approximately $15.92 per share, comprising $626.4 million of stock, and $156.6 million of cash. The 22.6 million shares of stock distributed was determined using a volume weighted average share price of $27.73 per share during the January 16 to January 18, 2018 period. As of February 27, 2018, the Company had 72.0 million shares outstanding.

Commercial Real Estate "CRE" Highlights

• CRE operating loss was $6.9 million in the fourth quarter 2017, as compared to a $13.5 million operating profit in the prior year fourth quarter. Operating profit in the fourth quarter included impairments of $22.4 million related to certain mainland commercial properties that were under contract for sale at December 31, 2017 (see CRE Acquisition Highlights below). Operating profit was $34.4 million for the year ended December 31, 2017, as compared to $54.8 million for the prior year.
• Same store cash NOI¹ increased 5.5% in the fourth quarter 2017, as compared to the prior year fourth quarter, and increased 4.8% for the year ended December 31, 2017, as compared to the prior year.
• Signed 65 leases covering 141,000 square feet of gross leasable area ("GLA") in the fourth quarter and 211 leases covering 909,000 square feet or 23% of the total portfolio during the year ended December 31, 2017. Leasing spreads of signed leases when compared to previously escalated rents on the same spaces were 6.9% for the fourth quarter of 2017, and 13.9% for the year ended December 31, 2017. Leasing spreads on Hawai`i retail spaces were 5.5% for the fourth quarter of 2017 and 19.9% for the year ended December 31, 2017.
• Occupancy increased by 140 basis points to 93.6% as of December 31, 2017, as compared to the prior yearend.
• Major strategic lease transactions during the year included:
• Safeway as the anchor tenant for the 94,000-square-foot, Ho`okele Shopping Center, bringing total pre-leasing to 64%. Construction is scheduled to begin in the first quarter of 2018;
• ULTA Beauty for locations in Kailua Town and Pearl Highlands Center, two of the first leases executed by ULTA in Hawai`i;
• Renewal of the 47,000-square-foot Regal Cinema lease at Pearl Highlands Center;
• Down-to-Earth, a small-format organic grocer at Lau Hala Shops in Kailua; and
• UFC Gym for the second floor of Lau Hala Shops.
• Completed landlord construction for the Pearl Highlands food court, which is 83% leased and is expected to open in the second quarter of 2018.
• The Company is nearing completion of landlord construction of the redevelopment of the former Macy's Kailua space into the 50,500-square-foot Lau Hala Shops retail center, which is 88% pre-leased as of December 31, 2017 and is scheduled to open in late 2018.

CRE Acquisition Highlights