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What changed in Alexander & Baldwin, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Alexander & Baldwin, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+261 added−235 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in Alexander & Baldwin, Inc.'s 2023 10-K

261 paragraphs added · 235 removed · 165 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

27 edited+48 added−25 removed7 unchanged
Biggest changeThe Company has a social council that is focused on workplace culture and community impact, along with employee resource groups that promote diversity and empowerment and also help to build an inclusive culture through company events, participation in its recruitment efforts and input into its hiring strategies. 4 Community involvement The Company has a long history of giving back to the community and believes that this commitment helps in its efforts to attract and retain employees.
Biggest changeThe Company has a long history of giving back to the communities it serves and that its employees are a part of and it believes that this commitment helps in its efforts to attract and retain talent.
Additionally, the Company is subject to various other regulations such as Occupational Safety and Health Administration regulations; Environmental Protection Agency regulations; and state and county permitting requirements related to its other operations. The Company is also subject to a number of tax laws and regulations that could materially impact its financial condition and results of operations.
Additionally, the Company is subject to various other regulations such as Occupational Safety and Health Administration regulations, Environmental Protection Agency regulations, and state and county permitting requirements related to its other operations. 2 The Company is also subject to a number of tax laws and regulations that could materially impact its financial condition and results of operations.
For example, the Company frequently utilizes §1031 of the Internal Revenue Code of 1986, as amended (the "Code"), to obtain tax-deferral treatment when qualifying real estate assets are sold and the resulting proceeds 3 are reinvested in replacement properties within the required time period.
For example, the Company frequently utilizes §1031 of the Internal Revenue Code of 1986, as amended (the "Code"), to obtain tax-deferral treatment when qualifying real estate assets are sold and the resulting proceeds are reinvested in replacement properties within the required time period.
Compensation and benefits program The Company's compensation and benefits program is designed to attract, reward and retain talented individuals who possess the skills necessary to support its business objectives, assist in the achievement of strategic goals and create long-term value for its shareholders.
The Company's compensation and benefits program is designed to attract, reward, and retain talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of strategic goals, and create long-term value for our shareholders.
The Company provides its employees with competitive total rewards packages that include, in addition to base compensation, meaningful benefits such as health (medical, dental and vision) and life insurance; paid time off; flexible spending reimbursements accounts; a corporate wellness program; gain sharing opportunities; and a 401(k) plan with a generous Company contribution, as well as a Company match.
The Company provides employees with competitive total rewards packages that include, in addition to base compensation, meaningful benefits such as health (medical, dental and vision) and life insurance, paid time off, flexible spending reimbursements account, a corporate wellness program, gain sharing opportunities, and a 401(k) plan with a generous Company contribution and Company match.
The Company’s website address is www.alexanderbaldwin.com. The information found on the Company's website, including the Company's Corporate Responsibility report, is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document filed with the SEC.
The Company’s website address is www.alexanderbaldwin.com. The information found on the Company's website, including the Company's CRR, is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document filed with the SEC.
ITEM 1. BUSINESS Overview Alexander & Baldwin, Inc. ("A&B" or the "Company") is a fully integrated real estate investment trust ("REIT") whose history in Hawai‘i dates back to 1870.
ITEM 1. BUSINESS Overview Alexander & Baldwin, Inc. ("A&B," the "Company," "we," "our," or "us") is a fully integrated real estate investment trust ("REIT") whose history in Hawai‘i dates back to 1870.
The Company believes that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and shareholder interests by incentivizing business and individual performance (i.e., pay for performance), motivating based on long-term company performance and integrating compensation with its business plans.
The Company believes that a fair and competitive compensation and benefits program with both short-term and long-term features aligns employee and shareholder interests by incentivizing business and individual performance (i.e., pay for performance), motivating based on long-term company performance, and integrating compensation with its business plans.
Further, the Company supports its employees' investments in their communities through its matching gifts program (which matches its employees' personal gifts with Company contributions to eligible community non-profit organizations up to a total of $2,000); through its volunteer initiatives (which offers employees paid time off for employee community service, as well as cash grants to such eligible organizations); and through corporate sponsorship of charities supported by its employees.
Further, the Company supports its employees' investments in their communities through its matching gifts program (which matches its employees' personal gifts with Company contributions to eligible community non-profit organizations); through its volunteer initiatives (which offers employees paid time off for employee community service, as well as cash grants to such eligible organizations); and through corporate sponsorship of charities supported by our employees.
Available Information The Company files reports with the Securities and Exchange Commission (the “SEC”). The reports and other information filed include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other reports and information filed under the Securities Exchange Act of 1934 (the “Exchange Act”).
The reports and other information filed include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other reports and information filed under the Securities Exchange Act of 1934 (the “Exchange Act”).
The SEC maintains a website at www.sec.gov, which contains reports, proxy and information statements, and other information regarding the Company and other issuers that file electronically with the SEC. 5 The Company makes available, free of charge, on or through its Internet website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the SEC.
The Company makes available, free of charge, on or through its Internet website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the SEC.
The Company also believes that an equitable and inclusive environment with diverse teams fosters more creativity and produces more opportunities to create value through its assets, people and relationships and is crucial to its efforts to attract and retain key talent. The Company is focused on building an inclusive culture through a variety of diversity and inclusion initiatives.
Diversity, Equity, and Inclusion ("DEI") The Company believes that an equitable and inclusive environment with diverse teams fosters more creativity and produces more opportunities to create value through its assets, people, and relationships, and is crucial to its efforts to attract and retain key talent.
Additional information regarding the Company’s ESG initiatives is available in the Company’s ESG Report, which can be found on the Company’s website. Information on the Company’s website, including its ESG Report, is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document filed with the SEC.
Information on the Company’s website, including its CRR, is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document filed with the SEC.
It also conducts a confidential, annual employee survey to better understand employee perspectives on topics including employee experience, workplace culture, employee engagement and the direction and leadership of the Company.
The Company also conducts a confidential, annual employee survey to better 4 understand employee perspectives on topics including employee experience, workplace culture, employee engagement and the direction and leadership of the Company. In 2023, the Company had an 82% participation rate.
Learning and development The Company provides meaningful learning and development opportunities for its employees; it has a wide variety of formal and informal training programs available and provides professional development stipends to be used towards qualified workshops, conferences, forums and classes.
In addition, the Company provides meaningful learning and development opportunities for employees to encourage both their personal and professional growth, offering a wide variety of formal and informal training programs and professional development stipends to be used towards qualified workshops, conferences, forums, and classes.
The CRE segment must comply with state and local regulations surrounding the brokering of deals and the management of its commercial real estate portfolio.
Compliance with Government Regulations The Company is subject to a number of federal, state and local laws and regulations. The CRE segment must comply with state and local regulations surrounding the brokering of deals and the management of its commercial real estate portfolio.
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.
Its focus within improved retail properties, in particular, is on grocery-anchored neighborhood shopping centers that meet the daily needs of Hawai‘i communities.
As of December 31, 2022, the Company's commercial real estate portfolio resides entirely in Hawai‘i and consists of 22 retail centers, 12 industrial assets and four office properties, representing a total of 3.9 million square feet of gross leasable area ("GLA"), as well as 140.7 acres of land under ground leases.
The Company's commercial real estate portfolio consists of 22 retail centers, 13 industrial assets, and four office properties, representing a total of 3.9 million square feet of gross leasable area ("GLA"), as well as 142.0 acres of commercial land in Hawai‘i, of which substantially all is leased pursuant to urban ground leases.
As of December 31, 2022, the Company has ◦ Converted the common area lighting to LED at 17 properties. ◦ Completed the installation of a 1.3-megawatt PV project at Pearl Highlands Center, the Company's largest retail asset by GLA. ◦ Installed 18 EV charging stations at 10 properties and entered into agreements to add an additional 15 EV charging stations across a collective 12 properties within the next twelve months.
As of December 31, 2023, the Company has converted the common area lighting to LED at 25 properties, installed EV charging stations at 14 properties, and entered into agreements to add EV charging stations at three additional properties within the next twelve months.
The Company also offers a tuition reimbursement program that is available to employees wishing to obtain a qualified higher education degree. Company culture - engagement, diversity, equity and inclusion The Company strives to keep its employees engaged by communicating regularly through various channels, including town halls, an employee intranet, employee newsletters and email updates.
Engagement, Community, and Culture The Company strives to keep its employees engaged by communicating regularly through various channels, including town halls, learning and development trainings, community and social events, and frequent communication through an employee intranet, monthly employee newsletters, and email updates.
Financial results from this segment are principally derived from real estate development and land sales, joint ventures, and other legacy business activities. Discontinued Operations As of December 31, 2022, the Company concluded that the plan to dispose of the Grace Disposal Group met the criteria for classification as held for sale and discontinued operations.
Financial results from this segment are principally derived from real estate development and land sales, joint ventures, and other legacy business activities.
Under this partnership, approximately 22% of the Company's portfolio (based on GLA) has undergone performance updates to lighting, heating and cooling systems. • The Company is implementing measures such as installing energy efficient LED lighting, rooftop photovoltaic (“PV”) systems and electric vehicle (“EV”) charging stations, as well as incorporating the use of cool roofs, water efficient fixtures, pedestrian friendly open spaces, and native Hawaiian and environmentally friendly plants and landscaping, among other initiatives.
These audits provided data identifying feasible short-, mid-, and long-term energy conservation and efficiency opportunities. • The Company continues to implement sustainable energy and conservation features at its properties, to include installing energy efficient LED lighting, rooftop photovoltaic (“PV”) systems and electric vehicle (“EV”) charging stations, as well as incorporating the use of cool roofs, water efficient fixtures and reclaimed water, pedestrian friendly open spaces, ride and bike share transportation options, and native Hawaiian and environmentally friendly plants and 3 landscaping, among other initiatives.
The Company is dedicated to supporting its employees, who are all critical in achieving its mission to serve the community and create value for all stakeholders as "Partners for Hawai‘i." The Company seeks to attract, develop and retain experienced employees by supporting them in the pursuit of their personal and professional goals.
Social Responsibility - Human Capital Resources As "Partners for Hawai‘i," the Company is dedicated to its employees, collectively the A&B family, who are all critical in achieving its mission to serve the communities in which it lives and operates, and create value for all stakeholders.
The Company believes the Hawai‘i market offers high value opportunities for the Company to pursue attractive growth and position itself for long-term stability given its geographic location, high barriers to entry and lack of commercially-entitled lands, and comparatively low square footage per capita of strip-retail gross leasable area on Oahu, Hawai'i's most populous island.
The Company believes the geographic focus on the Hawai‘i market provides a foundation for strong financial and operational performance and future growth, including showing resilience during economic down cycles. • High Barriers to Entry - The Hawai‘i market offers high value opportunities for the Company to pursue attractive growth and position itself for long-term stability given its geographic location, high barriers to entry, and lack of urban-entitled lands (at about 5% of land in the state).
Balance Sheet Management and Financing Strategy The Company strategy is to expand its commercial real estate portfolio by pursuing acquisitions and other growth opportunities in a disciplined manner, while maintaining a moderate leverage profile and flexible balance sheet.
Balance Sheet Management and Financing Strategy Positioned for External Growth - The Company intends to grow its commercial real estate portfolio by pursuing accretive acquisitions in our preferred asset classes and other commercial property investment opportunities when they are strategically consistent with the value creation objectives of the Company and we believe they have attractive risk-adjusted returns relative to the Company’s cost of capital, while maintaining a moderate leverage profile and flexible balance sheet.
Business Objectives and Strategies A&B's business objective is to own and effectively operate a superior portfolio of commercial real estate properties in Hawaii in order to deliver long-term growth and to create value for the Company's shareholders, while also upholding its responsibility as a corporate citizen in the Hawaii community.
Business Objectives and Strategies The Company's business objective is to create long-term shareholder value and sustainable income by strategically acquiring, managing, and enhancing a premier portfolio of commercial real estate properties in Hawai‘i .
Sustainability Initiatives • The Company continues to focus on improving energy efficiency at all of its properties and achieved a 2.2% year-over-year reduction (at Same-Store properties) in energy usage from 2020 to 2021. • The Company has partnered with Carbon Lighthouse to increase energy efficiency and reduce greenhouse gas ("GHG") emissions within the CRE portfolio.
In addition, the Company collaborated with the City & County of Honolulu and other stakeholders to establish a county-wide energy and water building benchmarking program. • The Company partnered with Carbon Lighthouse to increase energy efficiency and reduce GHG emissions within the CRE portfolio.
Removed
Throughout this annual report on Form 10-K, references to "we," "our," "us" and the "Company" refer to Alexander & Baldwin, Inc., together with its consolidated subsidiaries.
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The Company's commercial real estate portfolio is geographically focused in Hawai‘i, where it benefits from its deep local roots, broad experience base, and strong relationships and reputation in the islands.
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The Company intends to achieve this objective through the following: • Commercial Real Estate Portfolio Growth - Increasing recurring income streams by leveraging several sources, including: ◦ Effective leasing and property management; ◦ Repositioning and redevelopment of existing assets; ◦ Ground-up development of new assets; and ◦ Acquisitions of new assets using the Company's balance sheet, equity or tax-deferred exchange funds from non-core asset sales. • Balance Sheet Management and Financing Strategy - Continuing to practice disciplined and prudent financial management and capital allocation to maintain balance sheet strength and financial flexibility. • Complete Strategic Simplification - Completing the Company's strategic simplification initiative by (1) divesting its materials and construction business which includes the Company's wholly-owned subsidiary, Grace Pacific LLC ("Grace Pacific") and Company-owned quarry land on Maui ("Maui Quarries") (collectively, "Grace Disposal Group"), (2) reducing exposure to legacy obligations, and (3) streamlining the Company’s operations. 1 Commercial Real Estate The Company's commercial real estate strategy focuses on Hawai‘i, where it benefits from its broad experience base, deep relationships and strong reputation in the islands.
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As of December 31, 2023, the improved portfolio leased occupancy was at 94.7%, which is leased to a mix of national, regional, and local retailers and businesses.
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These attributes, and a geographic focus in Hawai‘i, uniquely position the Company to create value through the acquisition, development, redevelopment and management of commercial real estate in the state.
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The Company intends to achieve its objective through the following strategies: Geographic Focus - The Company's commercial real estate strategy focuses on Hawai‘i, where it benefits from its broad experience base, deep relationships and strong reputation in the islands.
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Based on these factors, the Company believes the Hawai‘i retail market compares favorably with other top-tier retail markets in the U.S. Similarly, given the severe shortage of industrial land supply in Hawai‘i, industrial market rents and per-square-foot values generally exceed those achieved in other U.S. markets, making Hawai‘i a high-performing industrial market.
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The entitlement process is lengthy and complex, taking between 9-15 years to complete. • Stable and Resilient Economy - The Hawai‘i economy benefits both directly and indirectly from stable and consistently high levels of government spending compared to the U.S. Mainland due to Hawai‘i's strategic defense location between the continental U.S. and Asia.
Removed
In addition, the Hawai‘i commercial real estate market has been historically supported by the state's tourism industry (fueled by Hawai‘i's unique brand and appeal), as well as consistently high levels of government spending due to Hawai‘i's strategic defense location between the continental U.S. and Asia.
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The state also benefits from a tourism industry that holds a unique brand that appeals to tourists from varying geographies (e.g., U.S. East Coast, U.S. West Coast, Canada, Asia, Europe). • Market Knowledge and Deep Local Roots - A&B’s management team is physically in the islands which provides direct insight into the needs of the communities we serve.
Removed
Therefore, the Company has strategically concentrated its assets in Hawai‘i, where management is best able to enhance portfolio performance and create value.
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Being geographically focused allows A&B to create and cultivate unique relationships that lead to value creating opportunities in leasing, vendor relationships, and growth.
Removed
To further enhance asset quality and increase the recurring income stream from its commercial portfolio, the Company intends to: • Increase income and optimize returns on its commercial portfolio by: ◦ Being the landlord of choice by providing desirable locations, quality properties, landlord services and community amenities; ◦ Leveraging internal property management and leasing to efficiently manage operations and maximize cash returns over the long term; ◦ Executing effective marketing and leasing strategies that attract quality tenants in the marketplace and new tenants to Hawai‘i by leveraging its position as the largest owner of grocery-anchored neighborhood shopping centers in Hawai‘i; ◦ Investing in the repositioning and redevelopment of existing assets at an appropriate risk-adjusted return on capital; ◦ Developing new commercial properties at an appropriate risk-adjusted return on capital; and ◦ Selectively acquiring commercial real estate assets in Hawai‘i markets to optimize the quality and long-term growth rate of the Company's asset base. • Evaluate other commercial property investment opportunities, such as leased fee assets or other commercial real estate types, when the acquisitions are strategically consistent with the value creation objectives of the Company.
Added
The Company strives to maintain an appropriate debt profile to include well-laddered debt maturities and minimized near-term maturing debt, favorable leverage ratios, a high proportion of fixed-rate debt and longer weighted-average maturity.
Removed
To maintain this desired balance sheet posture, the Company intends to: • Maintain a disciplined capital allocation strategy with a focus on investments that have attractive risk-adjusted returns relative to the Company’s cost of capital; • Target a 5x - 6x net debt to Adjusted EBITDA ratio over the long-term; • Ensure well-laddered debt maturities and minimize near-term maturing debt; • Maintain a high proportion of fixed-rate debt and a longer weighted-average maturity; and • Maintain a large unencumbered portfolio of assets.
Added
Increase Income and Optimize Returns through Internal Growth - The Company strives to be the landlord of choice by providing desirable locations, quality properties, community amenities, and effective leasing and management of our 1 commercial properties; as well as create value through property development and redevelopment in order to increase recurring income streams and optimize returns. • Development and Redevelopment - The Company employs strong investment and asset management teams to capitalize on embedded internal investment opportunities through the repositioning and redevelopment of existing assets, as well as ground-up development of new commercial properties at an appropriate risk-adjusted return on capital. • Leasing - With the Company’s in-house leasing capabilities and tenant demand in submarkets in which A&B operates, the Company is positioned to achieve internal growth through increased rental rates on the renewal of expiring leases or the leasing of space to new tenants at higher rental rates while limiting vacancy and down-time.
Removed
The Company intends to finance acquisitions, property development and redevelopment, and other growth opportunities with sources of capital determined by management to be the most appropriate based on, among other factors, availability in current capital markets, pricing and other commercial and financial terms.
Added
Additionally, the Company is able to drive incremental growth and enhance portfolio returns through attracting high-quality tenants and managing the merchandising mix of our tenant base. • Property Management - The Company oversees all aspects of asset and property management including execution of effective marketing and leasing strategies to attract quality tenants and increase occupancy and the effective and efficient management of property operations focused on reducing operating expenses and maximizing property cash flows over the long term, thereby enhancing the value of our properties.
Removed
Such sources of capital may include unsecured debt, mortgage and construction loans, the issuance of public equity, and other capital alternatives including the issuance of operating partnership units. 2 Simplification Strategy As a REIT focused on Hawaii commercial real estate, the Company has pursued the monetization and disposition of legacy, non-core assets and landholdings in order to simplify its business and allocate its capital resources to commercial real estate.
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Segment Reporting The Company operates two segments: Commercial Real Estate ("CRE") and Land Operations. A description of the Company's reportable segments is as follows: • Commercial Real Estate - This segment functions as a vertically integrated real estate investment company. The Company's preferred asset classes include improved properties in retail and industrial spaces and also urban ground leases.
Removed
The Company’s remaining non-core assets and landholdings primarily includes its land that is not designated for development (e.g., agricultural lands, conservation/watershed lands), and Grace Pacific, the Company’s vertically integrated materials and construction subsidiary.
Added
Revenue Concentration As of December 31, 2023, the Company's three largest tenants by annualized base rent (“ABR”) were Albertsons Companies (including Safeway), Sam's Real Estate Business Trust, and CVS Corporation (including Longs Drugs), and no single tenant accounted for more than 10% of total commercial real estate revenue in any of the three years ended December 31, 2023, 2022, and 2021.
Removed
In December 2022, in connection with the evaluation of strategic alternatives to monetize and dispose of Grace Pacific and the Maui Quarries, the Company's Board of Directors authorized Management to complete a sale of the Grace Disposal Group.
Added
Pearl Highlands Center accounted for approximately 11.6%, 10.9%, and 10.8% of total Commercial Real Estate segment revenues for the three years ended December 31, 2023, 2022, and 2021, respectively. Kailua Retail accounted for approximately 10.4%, 10.7%, and 11.1% of total Commercial Real Estate segment revenues for the three years ended December 31, 2023, 2022, and 2021, respectively.
Removed
The outcome of the sale of the Grace Disposal Group is not certain, as any transaction would be dependent upon various external factors beyond the Company's control, including, among others, market conditions, industry trends, interest of third parties, and the availability of financing to potential buyer(s) on reasonable terms.
Added
Discontinued Operations In November 2023, the Company completed the sale of its interests in Grace Pacific, a materials and construction company, and the Company-owned quarry land on Maui (collectively, the “Grace Disposal Group”).
Removed
Further, there can be no assurance that any potential transaction will result in the Company being able to recover the carrying value of the Grace Disposal Group. Segment Reporting The Company operates two segments: Commercial Real Estate and Land Operations.
Added
Refer to Note 20 – Sale of Business and Note 21 – Held for Sale and Discontinued Operations included within the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information regarding the Grace Disposal Group, including the assets and liabilities divested and income from discontinued operations.
Removed
A description of the Company's reportable segments is as follows: • Commercial Real Estate - This segment functions as a vertically integrated real estate investment company with core competencies in investments and acquisitions (i.e., identifying opportunities and acquiring properties); construction and development (i.e., designing and ground-up development of new properties or repositioning and redevelopment of existing properties); and in-house leasing and property management (i.e., executing new and renegotiating renewal lease arrangements, managing its properties' day-to-day operations and maintaining positive tenant relationships).
Added
Environmental, Social, and Governance While recent years have seen intense focus on Environmental, Social, and Governance topics ("ESG"), these principles have been an integral part of the Company's corporate culture and values since its founding over 150 years ago. The Company's deep Hawai‘i roots offer the obligation and privilege to exceed the baseline of corporate responsibility.
Removed
Through its core competencies and with its experience and relationships in Hawai‘i, the Company seeks to create special places that enhance the lives of Hawai‘i residents and to provide venues and opportunities that enable its tenants to thrive.
Added
The Company believes that doing what is right for its employees and communities is critical in achieving its goal to deliver long-term growth and to create value for shareholders. Additional information regarding the Company’s ESG initiatives is available in the Company’s Corporate Responsibility Report (“CRR”), which can be found on the Company’s website.
Removed
Accordingly, the assets and liabilities associated with the Grace Disposal Group have been classified as held for sale in the consolidated balance sheets, its financial results have been classified as discontinued operations in the consolidated statements of operations and cash flows for all periods presented, and the Company’s former Materials and Construction ("M&C") segment has been eliminated.
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Environmental Stewardship The Company understands the importance of environmental stewardship and throughout its history, has been a leader in generating renewable energy and worked to protect and preserve Hawai‘i's unique and precious land and water resources.
Removed
In conjunction with the elimination of the M&C segment, the Company's remaining equity interest in an unconsolidated materials company was incorporated with the Land Operations reportable segment. Compliance with Government Regulations The Company is subject to a number of federal, state and local laws and regulations.
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Today, the Company recognizes the risks that climate change poses to Hawai‘i's island community and business, and strives to own, operate, and develop properties with integrity, and in ways that are environmentally and socially responsible. Its employee-led environmental council develops and implements strategies to address sustainability and shape the Company's agenda for environmental stewardship.
Removed
Human Capital Resources Through its continuing operations, the Company and its subsidiaries had 144 regular full-time employees as of December 31, 2022, compared to 168 regular full-time employees in the prior year. Fifteen bargaining unit employees at the Company's wholly-owned subsidiary Kahului Trucking & Storage, Inc.
Added
Areas of focus include energy efficiency, climate change, water conservation, waste management, and sustainable transportation. The Company is committed to addressing climate risks and leading the effort to understand and mitigate potential risks and vulnerabilities associated with our real estate portfolio.
Removed
("KT&S") are covered by a collective bargaining agreement with the International Longshore and Warehouse Union ("ILWU") that expires on March 31, 2025. There are two collective bargaining agreements with ten A&B Fleet Services employees on the Big Island and Kauai, represented by the ILWU.
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The Company also recognizes the importance of maintaining outreach to further promote sustainability, as tenant practices beyond the Company's control comprise the vast majority of utility consumption and greenhouse gas ("GHG") emissions at our properties. In an effort to align its sustainability priorities with tenant activity, its leases contain terms that encourage sustainable practices.
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The Big Island agreement expires on August 31, 2024, and the Kauai agreement expires on August 31, 2023.
Added
In 2022, the Company completed the installation of a 1.3-megawatt rooftop photovoltaic system at Pearl Highlands Center, the Company's largest retail asset by GLA. In 2023, the Company completed the installation of a 0.5-megawatt photovoltaic system at Kakaako Commerce Center, the Company's second largest industrial asset by GLA.
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To support these efforts, the Company offers a competitive compensation and benefits program; provides learning and development opportunities that support the advancement of its employees; enhances the Company's culture by keeping employees engaged while fostering a diverse and inclusive environment; and helps employees give back to their communities.
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The Company highlights the following additional achievements related to our environmental sustainability efforts: • Implemented a CRE benchmarking program that compiles energy and water data in ENERGY STAR Portfolio Manager. This enables the Company to better track and understand energy and water consumption throughout the CRE portfolio.
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For more information on human resources initiatives, please see the Company's Corporate Responsibility report which is available at the Company's website address. ESG Highlights In 2022, the Company expanded its long-standing commitment to Hawai‘i and the principles of ESG with two employee councils focused on environmental and social stewardship.
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Under this partnership, approximately 22% of the Company's portfolio (based on GLA) has undergone performance updates to lighting, heating, and cooling systems, driving energy reductions in 2022 of over 1,000 megawatt-hour. • In 2022, the Company conducted comprehensive American Society of Heating, Refrigeration, and Air-Conditioning Engineers (ASHRAE) Level 2 audits on eight properties, representing 1.1 million square feet of GLA, or nearly 30% of our portfolio based on GLA.
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These strategic and cross-functional teams engage a broader and more diverse group of employee perspectives in defining and pursuing the Company’s commitment to each other and the community.
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The Company seeks to attract, develop, and retain employees with diverse backgrounds and perspectives, and to support those employees in their pursuit to further their careers, provide for their families, enjoy their work, and give back.
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Sustainability Reporting • The Company published its third annual Corporate Responsibility Report, with enhanced disclosures on climate-related risks. • The Company reported in line with the Sustainability Accounting Standards Board ("SASB") standards and the Task Force on Climate-related Financial Disclosures (“TCFD”), disclosing information sought by stakeholders.
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The Company does the following to support these efforts: • Offers a competitive compensation and benefits program; • Maintains a hybrid onsite/remote work environment with flexible scheduling and incentives for onsite work; • Utilizes leading industry software and other technology to facilitate communication, document management, collaboration, and other business processes; • Brings the A&B family together and foster a diverse and inclusive environment by hosting in-person and virtual engagement activities through employee-led social and environmental councils, and in partnership with the human resources department; • Provides learning and development opportunities that support the advancement of employees; • Launched an employee-led wellness program to support the continued health and wellness of employees.
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Recruitment, Development, and Retention The Company had 104 employees (including 3 part-time employees) as of December 31, 2023, compared to 141 employees (including 1 part-time employee) in its continuing operations in the prior year. Nearly 93.3% of our employees are based in Hawai'i, and the Company has maintained a hybrid onsite/remote work environment.
Added
As a result of the 2023 dispositions of the Grace Disposal Group and the Company's wholly-owned subsidiary Kahului Trucking & Storage, Inc. ("KT&S"), the Company no longer has any employees covered by collective bargaining agreements as of December 31, 2023. The Company recognizes that its employees drive the success of the Company and are one of its most valuable resources.
Added
To expand its reach for talent, the Company utilizes diverse resources to recruit employees that embody A&B's core values of integrity, collaboration, respect, decisiveness, adaptability, and accountability.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

39 edited+5 added−13 removed170 unchanged
Biggest changeSummary of risks related to our business • Changes in economic conditions, particularly in Hawai‘i, may adversely affect our Commercial Real Estate and Land Operations segments. • We may face new or increased competition. 6 • Although we intend to market and sell non-strategic assets, many of the assets are relatively illiquid, and it may not be possible to dispose of such assets in a timely manner or on favorable terms, which could delay our strategic agenda and/or adversely affect our financial condition, operating results, cash flows and may result in additional non-cash impairment charges. • We may be unsuccessful in completing a sale of our assets classified as held for sale or, if we are successful, the assets may be sold for less than our carrying value, which may result in additional non-cash impairment charges. • We may face potential difficulties in obtaining operating and development capital. • We may raise additional capital in the future on terms that are more stringent to us, which could provide holders of new issuances rights, preferences and privileges that are senior to those currently held by our common shareholders, or that could result in dilution of common stock ownership. • Failure to comply with certain restrictive financial covenants contained in our credit facilities could impose restrictions on our business segments, capital availability or the ability to pursue other activities. • Increasing interest rates would increase our overall interest expense. • We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined. • Significant inflation and continuing increases in the inflation rate, could adversely affect our business and financial results. • An increase in fuel prices may adversely affect our operating environment and costs. • Changes to federal, state or local law or regulations, including environmental laws and regulations, may adversely affect our business. • Security breaches through cyber attacks or intrusions, or other significant disruptions of the Company's information technology ("IT") networks, communications, and related systems could impair our ability to operate, adversely affect our financial condition, and damage our reputation. • The Company's business and operations could suffer in the event of system failures or interruptions. • Weather, natural disasters and the impacts of climate change may adversely affect our business. • Political crises, public health crises and other events beyond our control may adversely impact our operations and profitability. • We are subject to, and may in the future be subject to, disputes, legal or other proceedings, or government inquiries or investigations, that could have an adverse effect on us. • Impairment in the carrying value of long-lived assets could negatively affect our operating results.
Biggest changeSummary of risks related to our business • Changes in economic conditions, particularly in Hawai‘i, may adversely affect our Commercial Real Estate and Land Operations segments. • We may face new or increased competition. • Although we intend to market and sell non-strategic assets, many of the assets are relatively illiquid, and it may not be possible to dispose of such assets in a timely manner or on favorable terms, which could delay our strategic agenda and/or adversely affect our financial condition, operating results, cash flows and may result in additional non-cash impairment charges. • We may face potential difficulties in obtaining operating and development capital. • We may raise additional capital in the future on terms that are more stringent to us, which could provide holders of new issuances rights, preferences and privileges that are senior to those currently held by our common shareholders, or that could result in dilution of common stock ownership. • Failure to comply with certain restrictive financial covenants contained in our credit facilities could impose restrictions on our business segments, capital availability or the ability to pursue other activities. • Increasing interest rates would increase our overall interest expense. • Significant inflation and continuing increases in the inflation rate, could adversely affect our business and financial results. • An increase in fuel prices and energy costs may adversely affect our operating environment and costs. • Changes to federal, state or local law or regulations, including environmental laws and regulations, may adversely affect our business. • Security breaches through cyber attacks or intrusions, or other significant disruptions of the Company's information technology ("IT") networks, communications, and related systems could impair our ability to operate, adversely affect our financial condition, and damage our reputation. • The Company's business and operations could suffer in the event of system failures or interruptions. • Weather, natural disasters and the impacts of climate change may adversely affect our business. • Political crises, public health crises and other events beyond our control may adversely impact our operations and profitability. • We are subject to, and may in the future be subject to, disputes, legal or other proceedings, or government inquiries or investigations, that could have an adverse effect on us. • Impairment in the carrying value of long-lived assets could negatively affect our operating results.
Such risks, including, but not limited to, the following summarized risks, should be carefully considered before making an investment in our common stock: Summary of risks related to REIT status • Because qualification as a REIT involves highly technical and complex provisions of the Code, there can be no assurance that we will remain qualified as a REIT for U.S. federal income tax purposes. • U.S. federal, state and local legislative, judicial or regulatory tax changes could have an adverse effect on our shareholders and us. • Complying with the REIT requirements may cause us to sell assets or forgo otherwise attractive investment opportunities. • We may be required to borrow funds, sell assets or raise equity to satisfy our REIT distribution requirements, which could adversely affect our ability to execute our business plan and grow. • Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends. • The REIT ownership limitations and transfer restrictions contained in our articles of incorporation may restrict or prevent certain transfers of our common stock, could have unintended antitakeover effects and may not be successful in preserving our qualification for taxation as a REIT. • Our cash distributions are not guaranteed and may fluctuate. • Certain of our business activities may be subject to corporate-level income tax and other taxes, which would reduce our cash flows, and would cause potential deferred and contingent tax liabilities. • The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions that would be treated as sales for federal income tax purposes. • The ability of our board of directors to revoke our REIT qualification, without shareholder approval, may cause adverse consequences to our shareholders.
Such risks, including, but not limited to, the following summarized risks, should be carefully considered before making an investment in our common stock: Summary of risks related to REIT status • Because qualification as a REIT involves highly technical and complex provisions of the Code, there can be no assurance that we will remain qualified as a REIT for U.S. federal income tax purposes. • U.S. federal, state and local legislative, judicial or regulatory tax changes could have an adverse effect on our shareholders and us. • Complying with the REIT requirements may cause us to sell assets or forgo otherwise attractive investment opportunities. • We may be required to borrow funds, sell assets or raise equity to satisfy our REIT distribution requirements, which could adversely affect our ability to execute our business plan and grow. • Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends. • The REIT ownership limitations and transfer restrictions contained in our articles of incorporation may restrict or prevent certain transfers of our common stock, could have unintended antitakeover effects and may not be successful in preserving our qualification for taxation as a REIT. • Our cash distributions are not guaranteed and may fluctuate. • Certain of our business activities may be subject to corporate-level income tax and other taxes, which would reduce our cash flows, and would cause potential deferred and contingent tax liabilities. • The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions that would be treated as sales for federal income tax purposes. 6 • The ability of our board of directors to revoke our REIT qualification, without shareholder approval, may cause adverse consequences to our shareholders.
Factors that may result in a development project exceeding budget or being prevented from completion include, but are not limited to: (i) our inability to secure sufficient financing or insurance on favorable terms, or at all; (ii) construction delays, defects, or cost overruns, which may increase project development costs; (iii) an increase in commodity or construction costs, including labor costs; (iv) the discovery of hazardous or toxic substances, or other environmental, culturally-sensitive, or related issues; (v) an inability to obtain, or a significant delay in obtaining, zoning, construction, occupancy and other required governmental permits and authorizations; (vi) difficulty in complying with local, city, county and state rules and regulations regarding permitting, zoning, subdivision, utilities, and water quality, as well as federal rules and regulations regarding air and water quality and protection of endangered species and their habitats; (vii) insufficient infrastructure capacity or availability (e.g., water, sewer and roads) to serve the needs of our projects; (viii) an inability to secure tenants necessary to support the project or maintain compliance with debt covenants; (ix) failure to achieve or sustain anticipated occupancy levels; (x) condemnation of all or parts of development or operating properties, which could adversely affect the value or viability of such projects; and (xi) instability in the financial industry could reduce the availability of financing.
Factors that may result in a development project exceeding budget or being prevented from completion include, but are not limited to: (i) our inability to secure sufficient financing or insurance on favorable terms, or at all; (ii) construction delays, defects, or cost overruns, which may increase project development costs; (iii) an increase in commodity or construction costs, including labor costs; (iv) the discovery of hazardous or toxic substances, or other environmental, culturally-sensitive, or related issues; (v) an inability to obtain, or a significant delay in obtaining, zoning, construction, occupancy and other required governmental permits and authorizations; (vi) difficulty in complying with local, city, county and state rules and regulations regarding permitting, zoning, subdivision, utilities, and water quality, as well as federal rules and regulations regarding air and water quality and protection of endangered species and their habitats; (vii) insufficient infrastructure capacity or availability (e.g., water, sewer and roads) to serve the needs of our projects; (viii) an inability to secure tenants necessary to 17 support the project or maintain compliance with debt covenants; (ix) failure to achieve or sustain anticipated occupancy levels; (x) condemnation of all or parts of development or operating properties, which could adversely affect the value or viability of such projects; and (xi) instability in the financial industry could reduce the availability of financing.
At the state level, the Hawai‘i State legislature has repeatedly considered, and could consider in the future, legislation that would (i) eliminate (i.e., repeal) the REIT dividends paid deduction for Hawai‘i State income tax purposes related to 8 income generated in Hawai‘i for a number of years or permanently, and/or (ii) mandate withholding of Hawai‘i State income tax on dividends paid to out-of-state shareholders.
At the state level, the Hawai‘i State legislature has repeatedly considered, and could consider in the future, legislation that would (i) eliminate (i.e., repeal) the REIT dividends paid deduction for Hawai‘i State income tax purposes related to income generated in Hawai‘i for a number of years or permanently, and/or (ii) mandate withholding of Hawai‘i State income tax on dividends paid to out-of-state shareholders.
It is crucial to have access to sufficient, reliable and affordable sources of water in order to conduct sustainable agricultural activity. Water availability is critical to the successful implementation of farming plans on those lands purchased from us by Mahi Pono Holdings LLC ("Mahi Pono") in conjunction with our sale of certain agricultural landholdings on Maui (the "Agricultural Land Sale").
It is crucial to have access to sufficient, reliable and affordable sources of water in order to conduct sustainable agricultural activity. Water availability is critical to the successful implementation of farming plans on those lands purchased from us by Mahi Pono Holdings LLC ("Mahi Pono") in conjunction with our sale of certain agricultural landholdings on Maui.
You are urged to consult with your tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our stock. Complying with the REIT requirements may cause us to sell assets or forgo otherwise attractive investment opportunities.
You are urged to consult with your tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our stock. 8 Complying with the REIT requirements may cause us to sell assets or forgo otherwise attractive investment opportunities.
As a result, we may be unable to realize our strategy to simplify through dispositions, we may be unable to do so on advantageous terms, or we may not be able to execute the strategy in a timely manner, which could adversely affect our financial condition, operating results and/or cash flows and may result in additional non-cash impairment charges.
As a result, we may be unable to realize our strategy through dispositions, we may be unable to do so on advantageous terms, or we may not be able to execute the strategy in a timely manner, which could adversely affect our financial condition, operating results and/or cash flows and may result in additional non-cash impairment charges.
Rising fuel prices also may increase the cost of construction, including delivery costs to Hawai‘i, and the cost of materials that are petroleum-based, thus affecting our real estate development projects and margins. 13 Changes to federal, state or local law or regulations, including environmental laws and regulations, may adversely affect our business.
Rising fuel prices also may increase the cost of construction, including delivery costs to Hawai‘i, and the cost of materials that are petroleum-based, thus affecting our real estate development projects and margins. Changes to federal, state or local law or regulations, including environmental laws and regulations, may adversely affect our business.
Loss of, or a store closure by, an anchor store or major tenant could significantly reduce our occupancy level or the rent that we receive from our retail centers. We may be unable to re-lease vacated space or to re-lease it on comparable or more favorable terms, or at all.
Loss of, or a store closure by, an anchor store or major tenant could significantly reduce our occupancy level or the rent that we receive from our retail centers. We may be unable to re-lease vacated space or to re-lease it on comparable or more favorable 16 terms, or at all.
We may not be able to renew leases, lease vacant space, or re-let space as leases expire. In addition, we may need to offer substantial rent abatements, tenant improvements, early termination rights, or below-market renewal options to retain 16 existing tenants or attract new tenants.
We may not be able to renew leases, lease vacant space, or re-let space as leases expire. In addition, we may need to offer substantial rent abatements, tenant improvements, early termination rights, or below-market renewal options to retain existing tenants or attract new tenants.
Accordingly, we cannot provide any assurance that such coverage will be adequate, available at an acceptable cost, or available at all. The lack of water for agricultural irrigation could adversely affect the financial position and profitability of the Land Operations segment.
Accordingly, we cannot provide any assurance that such coverage will be adequate, available at an acceptable cost, or available at all. 18 The lack of water for agricultural irrigation could adversely affect the financial position and profitability of the Land Operations segment.
However, unreimbursed increased operating expenses may adversely affect the Company’s operating results and cash flows. An increase in fuel prices may adversely affect our operating environment and costs. Fuel prices have a direct impact on the health of the Hawai‘i economy.
However, unreimbursed increased operating expenses may adversely affect the Company’s operating results and cash flows. An increase in fuel prices and energy costs may adversely affect our operating environment and costs. Fuel prices have a direct impact on the health of the Hawai‘i economy.
Identification of compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, discovery of additional sites, human exposure to the contamination or changes in cleanup or compliance requirements could result in significant costs to the Company.
Identification of compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of 13 contamination, discovery of additional sites, human exposure to the contamination or changes in cleanup or compliance requirements could result in significant costs to the Company.
A security breach or other significant disruption involving our systems could result in improper uses of our systems and interruptions in our operations, which in turn could have a material adverse effect on our income, cash flow, results of operations, financial condition, liquidity, the ability to service debt obligations, the market price of our common stock and our ability to pay dividends and other distributions to stockholders.
A security breach or other significant disruption involving our systems could result in improper uses of our systems and interruptions in our operations, which in turn could have a material adverse effect on our income, cash flow, results of operations, financial condition, liquidity, the ability to service debt obligations, the market price of our common stock and our ability to pay dividends and other distributions to shareholders.
Drought, greater than normal rainfall, hurricanes, earthquakes, tsunamis, floods, sea level rise, fires, other natural disasters, agricultural pestilence, or negligence or intentional malfeasance by individuals, may also adversely impact the conditions of the land and thereby harm the prospects for the Land Operations segment and our land infrastructure and facilities, including dams and reservoirs.
Drought, greater than normal rainfall, hurricanes, earthquakes, tsunamis, floods, sea level rise, wildfires, other natural disasters, agricultural pestilence, or negligence or intentional malfeasance by individuals, may also adversely impact the conditions of the land and thereby harm the prospects for the Land Operations segment and our land infrastructure and facilities, including dams and reservoirs.
It is possible that current or future requirements imposed on landowners and dam owners/operators may require that we satisfy additional administrative and regulatory requirements and thereby increase the holding costs to us and/or decrease the operational utility of the subject facilities. 19 ITEM 1B. UNRESOLVED STAFF COMMENTS None. 20
It is possible that current or future requirements imposed on landowners and dam owners/operators may require that we satisfy additional administrative and regulatory requirements and thereby increase the holding costs to us and/or decrease the operational utility of the subject facilities. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Dividends 9 payable by REITs, however, generally are not eligible for the reduced rates applicable to qualified dividends.
Dividends payable by REITs, however, generally are not eligible for the reduced rates applicable to qualified dividends.
The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a TRS) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a taxable REIT subsidiary ("TRS")) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
To the extent co-tenancy or go-dark provisions in our leases result in lower revenue or tenant sales, tenants’ rights to terminate their leases early, or to a reduction of their rent, our performance and/or the value of the applicable retail center could be adversely affected.
To the extent co-tenancy or go-dark provisions in our leases result in lower revenue or tenant sales, tenants’ rights to terminate their leases early, or to a reduction of their rent, our performance and/or the value of the applicable retail center could be adversely affected. The value of our commercial properties is affected by a number of factors.
Our credit facilities and term debt contain certain restrictive financial covenants. If we breach any of the covenants and such breach is not cured in a timely manner or waived by the lenders, and such event results in default, our access to credit may be limited or terminated and the lenders could declare any outstanding amounts immediately due and payable.
If we breach any of the covenants and such breach is not cured in a timely manner or waived by the lenders, and such event results in default, our access to credit may be limited or terminated and the lenders could declare any outstanding amounts immediately due and payable.
Summary of risks related to our Commercial Real Estate segment • We are subject to a number of factors that could cause leasing rental income to decline. • The bankruptcy or loss of key tenants in our commercial real estate portfolio may adversely affect our cash flows and profitability. • A shift in retail shopping from brick and mortar stores to online shopping may have an adverse impact on our cash flow, financial condition and results of operations. • We may be unable to renew leases, lease vacant space, or re-lease space as leases expire, thereby increasing or prolonging vacancies, which would adversely affect our financial condition, results of operations and cash flows. • Increases in operating expenses would adversely affect our operating results. • Our retail centers may depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of, or a store closure by, one or more of these tenants. 7 • Certain of our leases at our retail centers contain “co-tenancy” or “go-dark” provisions, which, if triggered, may allow tenants to pay reduced rent, cease operations, or terminate their leases, which could adversely affect our performance or the value of the applicable retail property. • The value of our development-for-hold projects and commercial properties is affected by a number of factors. • We may be unable to identify and complete acquisitions of properties that meet our criteria, which may impede our growth. • We face competition for the acquisition and development of real estate properties, which may impede our ability to grow our operations or may increase the cost of these activities. • We are subject to risks associated with real estate construction and development. • Commercial real estate investments are relatively illiquid.
Summary of risks related to our Commercial Real Estate segment • We are subject to a number of factors that could cause CRE segment profitability to decline. • The bankruptcy or loss of key tenants in our commercial real estate portfolio may adversely affect our cash flows and profitability. • A shift in retail shopping from brick and mortar stores to online shopping may have an adverse impact on our cash flow, financial condition and results of operations. • We may be unable to renew leases, lease vacant space, or re-lease space as leases expire, thereby increasing or prolonging vacancies, which would adversely affect our financial condition, results of operations and cash flows. • Increases in operating expenses would adversely affect our operating results. • Our retail centers may depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of, or a store closure by, one or more of these tenants. • Certain of our leases at our retail centers contain “co-tenancy” or “go-dark” provisions, which, if triggered, may allow tenants to pay reduced rent, cease operations, or terminate their leases, which could adversely affect our performance or the value of the applicable retail property. • The value of our commercial properties is affected by a number of factors. • We may be unable to identify and complete acquisitions of properties that meet our criteria, which may impede our growth. • We face competition for the acquisition and development of real estate properties, which may impede our ability to grow our operations or may increase the cost of these activities. • We are subject to risks associated with real estate construction and development. • Commercial real estate investments are relatively illiquid. 7 Risks Related to REIT Status Because qualification as a REIT involves highly technical and complex provisions of the Code, there can be no assurance that we will remain qualified as a REIT for U.S. federal income tax purposes.
Events and conditions that could result in further impairment in the value of our long-lived assets include changes in the industries in which we operate, particularly the impact of a downturn in the global or Hawai‘i economy, as well as competition and advances in technology, adverse changes in the regulatory environment, or other factors leading to reduction in expected long-term sales or profitability.
Events and conditions that could result in further impairment in the value of our long-lived assets include changes in the industries in which we operate, particularly the impact of a downturn in the global or Hawai‘i economy, as well as competition and advances in technology, adverse changes in the regulatory environment, or other factors leading to reduction in expected long-term sales or profitability. 15 Risks Related to Our Commercial Real Estate Segment We are subject to a number of factors that could cause CRE segment profitability to decline.
We may also incur significant costs to remedy damages caused by security breaches. 14 These risks require continuous and likely increasing attention and other resources to identify and quantify these risks, upgrade, and expand the Company’s technologies, systems and processes to adequately address them and provide periodic training for the Company’s employees to assist them in detecting phishing, malware and other schemes.
These risks require continuous and likely increasing attention and other resources to identify and quantify these risks, upgrade, and expand the Company’s technologies, systems and processes to adequately address them and provide periodic training for the Company’s employees to assist them in detecting phishing, malware and other schemes.
The successful execution of our strategy requires substantial amounts of operating and development capital. Sources of such capital could include banks, life insurance companies, public and private offerings of debt or equity, including rights offerings, sale of certain assets and joint venture partners.
Sources of such capital could include banks, life insurance companies, public and private offerings of debt or equity, including rights offerings, sale of certain assets and joint venture partners.
Weakness in the real estate sector, especially in Hawai‘i, difficulty in obtaining or renewing project-level financing, and changes in our investment and redevelopment and development-for-hold strategy, among other factors, may affect the fair value of these real estate assets.
We have significant investments in various commercial real estate properties. Weakness in the real estate sector, especially in Hawai‘i, difficulty in obtaining or renewing financing, and changes in our investment and redevelopment strategy, among other factors, may affect the fair value of these real estate assets.
Further, as our business is concentrated in Hawai‘i, an attack on Hawai‘i as a result of war or terrorism may severely or irreparably harm the Company. 15 Such events beyond our control could adversely affect trade and global and local economies and may lead to actions limiting trade and population movement and the movement of goods through the supply chain, as well as other impacts to business and consumer demand, which may adversely affect the Company’s business, operating results and financial condition.
Such events beyond our control could adversely affect trade and global and local economies and may lead to actions limiting trade and population movement and the movement of goods through the supply chain, as well as other impacts to business and consumer demand, which may adversely affect the Company’s business, operating results and financial condition.
If the undiscounted cash flows of our commercial properties, or redevelopment or development-for-hold projects, were to decline below the carrying value of those assets, we would be required to recognize an impairment loss if the fair value of those assets were below their carrying value. 17 We may be unable to identify and complete acquisitions of properties that meet our criteria, which may impede our growth.
If the undiscounted cash flows of our commercial properties, or redevelopment projects, were to decline below the carrying value of those assets, we would be required to recognize an impairment loss if the fair value of those assets were below their carrying value.
Our business strategy involves the acquisition of retail, office, industrial, and other properties. These activities require us to identify suitable acquisition candidates or investment opportunities that meet our criteria. We evaluate the market of available properties and may attempt to acquire properties when strategic opportunities exist.
We may be unable to identify and complete acquisitions of properties that meet our criteria, which may impede our growth. Our business strategy involves the acquisition of retail, industrial, and other properties. These activities require us to identify suitable acquisition candidates or investment opportunities that meet our criteria.
Our Commercial Real Estate and Land Operations segments are vulnerable to natural disasters, such as hurricanes, earthquakes, tsunamis, floods, sea level rise, fires, tornadoes and unusually heavy or prolonged rain, which could cause personal injury and loss of life.
Should the impact of climate change be significant or occur for lengthy periods of time, our financial condition or results of operations would be adversely affected. 14 Our Commercial Real Estate and Land Operations segments are vulnerable to natural disasters, such as hurricanes, earthquakes, tsunamis, floods, sea level rise, wildfires, tornadoes and unusually heavy or prolonged rain, which could cause personal injury and loss of life.
As a result, we may record additional non-cash impairment charges and/or realize significantly less than the value at which we have previously recorded such assets.
As a result, we may record additional non-cash impairment charges and/or realize significantly less than the value at which we have previously recorded such assets. We may face potential difficulties in obtaining operating and development capital. The successful execution of our strategy requires substantial amounts of operating and development capital.
Weather, natural disasters and the impacts of climate change may adversely affect our business. As a result of climate change, we may experience extreme weather and changes in precipitation and temperature, including natural disasters. Should the impact of climate change be significant or occur for lengthy periods of time, our financial condition or results of operations would be adversely affected.
Weather, natural disasters and the impacts of climate change may adversely affect our business. As a result of climate change, we may experience extreme weather and changes in precipitation and temperature, including natural disasters.
We also cannot estimate with certainty the length of time needed to find a willing purchaser and to complete the sale of a property.
We also cannot estimate with certainty the length of time needed to find a willing purchaser and to complete the sale of a property. Factors that impede our ability to dispose of properties could adversely affect our financial condition and operating results.
However, for taxable years that begin before January 1, 2026, shareholders that are individuals, trusts or estates are generally entitled to a deduction equal to 20% of the aggregate amount of ordinary income dividends received from a REIT, subject to certain limitations.
However, for taxable years that begin before January 1, 2026, shareholders that are individuals, trusts or estates are generally entitled to a deduction equal to 20% of the aggregate amount of ordinary income dividends received from a REIT, subject to certain limitations. 9 The REIT ownership limitations and transfer restrictions contained in our articles of incorporation may restrict or prevent certain transfers of our common stock, could have unintended antitakeover effects and may not be successful in preserving our qualification for taxation as a REIT.
Furthermore, the value of our commercial real estate portfolio and the market price of our stock could decline if market interest rates increase and investors seek alternative investments with higher distribution rates. We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.
Furthermore, the value of our commercial real estate portfolio and the market price of our stock could decline if market interest rates increase and investors seek alternative investments with higher distribution rates. Significant inflation and continuing increases in the inflation rate, could adversely affect our business and financial results.
If we issue additional common equity, either through public or private offerings or rights offerings, existing common shareholders' percentage ownership in us would decline if they do not participate on a ratable basis. 12 Failure to comply with certain restrictive financial covenants contained in our credit facilities could impose restrictions on our business segments, capital availability or the ability to pursue other activities.
If we issue additional common equity, either through public or private offerings or rights offerings, existing common shareholders' percentage ownership in us would decline if they do not participate on a ratable basis.
We further may be limited in our ability to make distributions to our shareholders in event of default. Increasing interest rates would increase our overall interest expense. Interest expense on our floating-rate debt would increase if interest rates rise. Additionally, the interest expense associated with fixed-rate debt could rise in future periods when the debt matures and is refinanced.
Interest expense on our floating-rate debt increases as interest rates rise. Additionally, the interest expense associated with fixed-rate debt could rise in future periods when the debt matures and is refinanced.
Factors that impede our ability to dispose of properties could adversely affect our financial condition and operating results. 18 Risks Related to Our Land Operations Segment We are subject to risks associated with real estate construction and development.
Risks Related to Our Land Operations Segment We are subject to risks associated with real estate construction and development.
Risks Related to REIT Status Because qualification as a REIT involves highly technical and complex provisions of the Code, there can be no assurance that we will remain qualified as a REIT for U.S. federal income tax purposes. We have determined that we operated in compliance with the REIT requirements commencing with the taxable year ended December 31, 2017.
We have determined that we operated in compliance with the REIT requirements commencing with the taxable year ended December 31, 2017.
Risks Related to Our Commercial Real Estate Segment We are subject to a number of factors that could cause leasing rental income to decline. We own a portfolio of commercial real estate assets.
We own a portfolio of commercial real estate assets.
Removed
The REIT ownership limitations and transfer restrictions contained in our articles of incorporation may restrict or prevent certain transfers of our common stock, could have unintended antitakeover effects and may not be successful in preserving our qualification for taxation as a REIT.
Added
Failure to comply with certain restrictive financial covenants contained in our credit facilities could impose restrictions on our business segments, capital availability or the ability to pursue other activities. Our credit facilities and term debt contain certain restrictive financial covenants.
Removed
We may be unsuccessful in completing a sale of our assets classified as held for sale or, if we are successful, the assets may be sold for less than our carrying value, which may result in additional non-cash impairment charges.
Added
We further may be limited in our ability to make distributions to our shareholders in event of default. 12 Increasing interest rates would increase our overall interest expense. Although a significant amount of our outstanding debt has fixed interest rates, we borrow funds at variable interest rates under our credit facility.
Removed
We can provide no assurances that we will successfully sell Grace Pacific and the Maui Quarries, that we will do so in accordance with our expected timeline or that we will recover the carrying value of the disposal group.
Added
We may also incur significant costs to remedy damages caused by security breaches.
Removed
The process of pursuing the plan to sell may be time consuming and disruptive to our business operations, and if we are unable to effectively manage the process, our businesses, financial condition, and results of operations could be adversely affected and may result in additional non-cash impairment charges.
Added
Further, as our business is concentrated in Hawai‘i, an attack on Hawai‘i as a result of war or terrorism may severely or irreparably harm the Company.
Removed
Any potential transactions, and the related valuations, would be dependent upon various external factors beyond the Company's control, including, among others, market conditions, industry trends, interest of third parties, and the availability of financing to potential buyer(s) on reasonable terms. We may face potential difficulties in obtaining operating and development capital.
Added
We evaluate the market of available properties and may attempt to acquire properties when strategic opportunities exist.
Removed
We have a number of financial instruments (refer to Note 8 – Notes Payable and Other Debt of Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report) which bear interest at a floating rate based on the London Interbank Offered Rate (“LIBOR”) plus an applicable margin (certain of these financial instruments are subject to interest rate swaps through maturity at fixed rates).
Removed
The United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
Removed
The ICE Benchmark Administration (the administrator of LIBOR) ceased the publication of all GBP, EUR, CHF and JPY LIBOR settings, as well as the one-week and two-month USD LIBOR tenors after December 31, 2021. Publication of the remaining USD LIBOR tenors will cease after June 30, 2023.
Removed
In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New York. The Alternative Reference Rate Committee has identified the Secured Overnight Financing Rate, or SOFR, as its preferred alternative rate for LIBOR.
Removed
At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates in connection with the LIBOR phase-out. We may need to amend certain agreements related to financial instruments and agree upon a benchmark replacement index with the bank and, as a result, the interest rate on our financial instruments may change.
Removed
The new rate may not be as favorable as those in effect prior to any LIBOR phase-out. Furthermore, the transition process may result in delays in funding, higher interest expense, additional expenses and increased volatility in markets for instruments that currently rely on LIBOR.
Removed
Although the full impact of such reforms and actions together with any transition away from LIBOR remains unclear, these changes may have a material adverse impact on the availability of financing, including LIBOR-based loans, and on our financing costs. Significant inflation and continuing increases in the inflation rate, could adversely affect our business and financial results.
Removed
The value of our development-for-hold projects and commercial properties is affected by a number of factors. We have significant investments in various commercial real estate properties and development-for-hold projects.

Item 2. Properties

Properties — owned and leased real estate

9 edited+3 added−3 removed3 unchanged
Biggest changeFor properties in the portfolio, the Company presents annualized base rent ("ABR") for each of its improved properties on a total and per-square-foot ("PSF") basis; ABR is calculated by multiplying the current month's contractual base rent by twelve. 21 As of December 31, 2022, the Company's commercial real estate improved property assets were as follows (dollars in thousands, except PSF data): Property Island Year Built/ Renovated Current GLA (SF) Leased/Economic Occupancy ABR ABR PSF Retail: 1 Pearl Highlands Center Oahu 1992-1994 411,400 99.4% 98.2% $ 10,845 $ 26.85 2 Kailua Retail Oahu 1947-2014 326,400 95.4% 94.6% 11,779 38.61 3 Laulani Village Oahu 2012 175,600 96.5% 96.5% 6,650 39.23 4 Waianae Mall Oahu 1975 170,800 96.2% 95.5% 3,782 23.74 5 Manoa Marketplace Oahu 1977 142,000 97.8% 91.7% 4,559 35.02 6 Queens' MarketPlace Hawai‘i Island 2007 134,000 84.5% 83.6% 4,421 47.59 7 Kaneohe Bay Shopping Center (Leasehold) Oahu 1971 125,400 97.8% 97.8% 3,212 26.19 8 Hokulei Village Kauai 2015 119,000 100.0% 100.0% 4,288 36.77 9 Pu‘unene Shopping Center Maui 2017 118,000 78.4% 70.9% 4,038 48.96 10 Waipio Shopping Center Oahu 1986, 2004 113,800 97.4% 97.4% 3,426 30.89 11 Aikahi Park Shopping Center Oahu 1971, 2022 97,300 88.8% 84.9% 3,083 37.33 12 Lanihau Marketplace Hawai‘i Island 1987 88,300 97.7% 92.4% 1,585 19.43 13 The Shops at Kukui‘ula Kauai 2009 85,900 95.6% 87.5% 3,427 48.03 14 Ho‘okele Shopping Center Maui 2019 71,400 96.1% 91.2% 2,688 41.30 15 Kunia Shopping Center Oahu 2004 60,600 90.1% 90.1% 2,171 40.52 16 Waipouli Town Center Kauai 1980 56,600 39.7% 37.6% 451 21.20 17 Kahului Shopping Center (2) Maui 1951 50,900 94.3% 94.3% 935 19.46 18 Lau Hala Shops Oahu 2018 46,300 100.0% 95.0% 2,487 56.55 19 Napili Plaza Maui 1991 45,600 90.3% 90.3% 1,271 31.83 20 Gateway at Mililani Mauka Oahu 2008, 2013 34,900 93.7% 90.3% 1,882 59.79 21 Port Allen Marina Center Kauai 2002 23,600 92.0% 92.0% 648 29.90 22 The Collection Oahu 2017 5,900 100.0% 100.0% 339 57.46 Subtotal – Retail 2,503,700 93.8% 91.7% $ 77,967 $ 34.50 Industrial: 23 Komohana Industrial Park Oahu 1990 238,300 100.0% 100.0% $ 3,516 $ 14.76 24 Kaka‘ako Commerce Center Oahu 1969 202,200 95.5% 95.5% 2,759 14.64 25 Waipio Industrial Oahu 1988-1989 158,400 99.0% 99.0% 2,640 16.84 26 Opule Industrial Oahu 2005-2006, 2018 151,500 100.0% 100.0% 2,550 16.83 27 P&L Warehouse Maui 1970 104,100 100.0% 100.0% 1,610 15.46 28 Kapolei Enterprise Center Oahu 2019 93,000 100.0% 100.0% 1,618 17.39 29 Honokohau Industrial Hawai‘i Island 2004-2006, 2008 86,700 98.0% 96.0% 1,263 15.18 30 Kailua Industrial/Other Oahu 1951-1974 69,000 92.6% 91.4% 1,106 17.95 31 Port Allen Kauai 1983, 1993 64,600 95.6% 95.6% 736 12.64 32 Harbor Industrial (2) Maui 1930 51,100 100.0% 100.0% 626 12.26 33 Kahai Street Industrial (1) Oahu 1973 27,900 100.0% 100.0% 354 12.70 34 Maui Lani Industrial (1) Maui 2010 8,400 100.0% 100.0% 151 17.98 Subtotal – Industrial 1,255,200 98.4% 98.2% $ 18,929 $ 15.48 Office: 35 Kahului Office Building Maui 1974 59,100 86.6% 86.6% $ 1,490 $ 29.90 36 Gateway at Mililani Mauka South Oahu 1992, 2006 37,100 98.4% 96.2% 1,696 47.48 37 Kahului Office Center (2) Maui 1991 35,800 90.5% 90.5% 1,012 31.21 38 Lono Center Maui 1973 13,700 61.7% 61.7% 281 33.34 Subtotal – Office 145,700 88.2% 87.7% $ 4,479 $ 35.43 Total – Hawai‘i Improved Portfolio 3,904,600 95.0% 93.6% $ 101,375 $ 28.09 (1) Property is currently not included in the same-store ("Same-Store") pool, which management uses in the calculation of certain non-GAAP metrics at an improved property or ground lease level.
Biggest changeFor properties in the portfolio, the Company presents annualized base rent ("ABR") for each of its improved properties on a total and per-square-foot ("PSF") basis; ABR is calculated by multiplying the current month's contractual base rent by twelve. 21 As of December 31, 2023, the Company's commercial real estate improved property assets were as follows (dollars in thousands, except PSF data): Property Island Year Built/ Renovated Current GLA (SF) Leased/Economic Occupancy ABR ABR PSF Retail: 1 Pearl Highlands Center Oahu 1992-1994 412,200 99.8% 99.5% $ 10,993 $ 26.78 2 Kailua Retail Oahu 1947-2014 326,100 95.8% 94.9% 12,534 41.04 3 Laulani Village Oahu 2012 175,300 98.3% 97.5% 6,844 40.04 4 Waianae Mall Oahu 1975 170,800 93.0% 91.9% 3,893 25.09 5 Manoa Marketplace Oahu 1977, 2023 142,000 97.4% 92.3% 4,646 36.12 6 Queens' MarketPlace Hawai‘i Island 2007 134,000 90.3% 82.9% 4,684 48.81 7 Kaneohe Bay Shopping Center (Leasehold) Oahu 1971 125,500 98.0% 97.2% 3,194 26.18 8 Hokulei Village Kauai 2015 119,000 99.2% 99.2% 4,259 37.12 9 Pu`unene Shopping Center Maui 2017 118,000 78.4% 72.1% 4,323 51.55 10 Waipio Shopping Center Oahu 1986, 2004 113,800 98.4% 98.4% 3,574 32.56 11 Aikahi Park Shopping Center Oahu 1971, 2022 97,300 92.5% 88.6% 3,487 40.94 12 Lanihau Marketplace Hawai‘i Island 1987 88,300 97.2% 92.1% 1,500 18.45 13 The Shops at Kukui`ula Kauai 2009 85,900 98.5% 86.3% 3,488 48.07 14 Ho`okele Shopping Center Maui 2019 71,400 96.1% 96.1% 2,861 41.72 15 Kunia Shopping Center Oahu 2004 60,600 93.4% 91.7% 2,259 40.66 16 Waipouli Town Center (1) Kauai 1980 56,600 39.8% 36.6% 449 21.72 17 Kahului Shopping Center Maui 1951 50,900 84.5% 84.5% 777 18.05 18 Lau Hala Shops Oahu 2018 46,300 100.0% 100.0% 2,690 58.14 19 Napili Plaza Maui 1991 45,600 100.0% 98.7% 1,398 31.96 20 Gateway Mililani Mauka Oahu 2008, 2013 34,900 90.5% 88.8% 1,823 60.58 21 Port Allen Marina Center Kauai 2002 23,600 91.9% 91.9% 593 31.28 22 The Collection Oahu 2017 5,900 100.0% 100.0% 348 58.98 Subtotal – Retail 2,504,000 94.3% 92.1% $ 80,617 $ 35.53 Industrial: 23 Komohana Industrial Park Oahu 1990 238,300 100.0% 100.0% $ 3,602 $ 15.12 24 Kaka`ako Commerce Center Oahu 1969 197,900 83.3% 82.8% 2,428 14.98 25 Waipio Industrial Oahu 1988-1989 158,400 100.0% 99.4% 2,860 18.17 26 Opule Industrial Oahu 2005-2006, 2018 151,500 100.0% 100.0% 2,627 17.34 27 P&L Warehouse Maui 1970 104,100 100.0% 100.0% 1,663 15.97 28 Kapolei Enterprise Center Oahu 2019 93,100 100.0% 100.0% 1,657 17.81 29 Honokohau Industrial Hawai‘i Island 2004-2006, 2008 86,700 100.0% 98.0% 1,355 15.95 30 Kailua Industrial / Other Oahu 1951-1974 69,000 98.0% 89.3% 1,256 20.39 31 Port Allen Center Kauai 1983, 1993 64,600 93.3% 93.3% 802 13.29 32 Harbor Industrial Maui 1930 51,100 94.9% 94.9% 634 13.08 33 Kaomi Loop Industrial (1) Oahu 2005 33,200 100.0% 100.0% 527 15.85 34 Kahai Street Industrial Oahu 1973 27,900 100.0% 100.0% 365 13.09 35 Maui Lani Industrial (1) Maui 2010 8,400 100.0% 100.0% 156 18.57 Subtotal – Industrial 1,284,200 96.8% 96.0% $ 19,932 $ 16.19 Office: 36 Kahului Office Building Maui 1974 59,100 79.7% 77.0% $ 1,553 $ 34.15 37 Gateway at Mililani Mauka South Oahu 1992, 2006 37,100 100.0% 100.0% 1,816 48.89 38 Kahului Office Center Maui 1991 35,800 88.5% 87.2% 998 31.97 39 Lono Center Maui 1973 13,700 49.6% 49.6% 190 33.32 Subtotal – Office 145,700 84.2% 82.8% $ 4,557 $ 38.12 Total – Hawai‘i Improved Portfolio 3,933,900 94.7% 93.0% $ 105,106 $ 29.04 (1) Property is currently not included in the same-store ("Same-Store") pool, which management uses in the calculation of certain non-GAAP metrics at an improved property or ground lease level.
Sale of Business In connection with the Company's simplification efforts, during the quarter ended June 30, 2022, the Company completed the disposal of approximately 18,900 acres of primarily conservation and agricultural land on the island of Kauai and 100% of the Company's ownership interest in McBryde Resources, Inc., the operator of hydroelectric power facilities on Kauai, to an unrelated third party.
Sale of Legacy Businesses In connection with the Company's simplification efforts, during the quarter ended June 30, 2022, the Company completed the disposal of approximately 18,900 acres of primarily conservation and agricultural land on the island of Kauai and 100% of the Company's ownership interest in McBryde Resources, Inc., the operator of hydroelectric power facilities on Kauai, to an unrelated third party.
The occupancy for the improved properties portfolio (i.e., the percentage of square footage leased and commenced to gross leasable space at the end of the period reported, "Leased Occupancy") was 95.0% as of December 31, 2022, and 94.3% as of December 31, 2021.
The occupancy for the improved properties portfolio (i.e., the percentage of square footage leased and commenced to gross leasable space at the end of the period reported, "Leased Occupancy") was 94.7% as of December 31, 2023, and 95.0% as of December 31, 2022.
Real Estate Investments At December 31, 2022, the Company's real estate investments related to its Land Operations segment were as follows: (amounts in millions, except acres data) Acres Carrying Value Real estate investments Core real estate investments Kapolei Business Park West 3 $ 6.2 Maui Business Park II 53 22.1 Non-core real estate investments Other real estate development 192 37.8 Agricultural land 3,123 0.4 Urban land, not in active development 20 0.6 Conservation & preservation 777 0.9 Investments in real estate joint ventures and partnerships 7.5 Total real estate investments, net 4,168 $ 75.5 23 Core Real Estate Development-for-sale Projects As of December 31, 2022, the Company's Land Operations segment has one remaining active, core real estate development-for-sale project, Maui Business Park II, which encompasses light industrial lots located in Kahului, Maui.
Real Estate Investments At December 31, 2023, the Company's real estate investments related to its Land Operations segment were as follows: (amounts in millions, except acres data) Acres Carrying Value Real estate investments Core real estate investments Kapolei Business Park West 3 $ 6.2 Maui Business Park II 1 50 20.4 Non-core real estate investments Other real estate development 192 37.7 Agricultural land 2,680 0.2 Urban land, not in active development 16 — Conservation & preservation 764 0.9 Investments in real estate joint ventures and partnerships N/A 6.9 Total real estate investments, net 3,705 $ 72.3 1 Includes 12.5 acres which is currently under contract with a delayed closing pending subdivision completion. 23 Core Real Estate Development-for-sale Projects As of December 31, 2023, the Company's Land Operations segment has one remaining active, core real estate development-for-sale project, Maui Business Park (Phase II) ("MBP II").
Year Current ABR 1 Owner/Operator Kapolei, Oahu 36.4 Industrial 2025 $ 3,203 2 Windward City Shopping Center Kaneohe, Oahu 15.4 Retail 2035 2,800 3 Owner/Operator Honolulu, Oahu 9.0 Retail 2045 2,075 4 Kaimuki Shopping Center Honolulu, Oahu 2.8 Retail 2040 2,039 5 S&F Industrial Pu'unene, Maui 52.0 Heavy Industrial 2059 1,275 6 Pali Palms Plaza Kailua, Oahu 3.3 Office 2037 992 7 Owner/Operator Kaneohe, Oahu 3.7 Retail 2048 990 8 Windward Town and Country Plaza I Kailua, Oahu 3.4 Retail 2062 963 9 Windward Town and Country Plaza II Kailua, Oahu 2.2 Retail 2062 621 10 Owner/Operator Kailua, Oahu 1.9 Retail 2034 450 11 Owner/Operator Honolulu, Oahu 0.5 Retail 2028 375 12 Owner/Operator Honolulu, Oahu 0.5 Parking 2028 349 13 Owner/Operator Kahului, Maui 0.8 Retail 2026 264 14 Seven-Eleven Kailua Center Kailua, Oahu 0.9 Retail 2033 258 15 Owner/Operator (1) Honolulu, Oahu 0.7 Industrial 2027 245 16 Owner/Operator Kailua, Oahu 1.2 Retail 2023 237 17 Owner/Operator Kahului, Maui 0.8 Industrial 2025 228 18 Owner/Operator Kahului, Maui 0.4 Retail 2027 181 19 Owner/Operator Kailua, Oahu 0.4 Retail 2025 174 20 Owner/Operator Kahului, Maui 0.9 Retail 2025 142 Remainder Various 3.5 Various Various 891 Total - Ground Leases 2 140.7 $ 18,752 (1) Ground lease is currently not included in the Same-Store pool, which management uses in the calculation of certain non-GAAP metrics at an improved property or ground lease level.
Year Current ABR 1 Windward City Shopping Center Kaneohe, Oahu 15.4 Retail 2035 $ 3,886 2 Owner/Operator Kapolei, Oahu 36.4 Industrial 2025 3,300 3 Owner/Operator Honolulu, Oahu 9.0 Retail 2045 2,075 4 Kaimuki Shopping Center Honolulu, Oahu 2.8 Retail 2040 2,039 5 S&F Industrial Pu'unene, Maui 52.0 Heavy Industrial 2059 1,275 6 Owner/Operator Kaneohe, Oahu 3.7 Retail 2048 1,059 7 Pali Palms Plaza Kailua, Oahu 3.3 Office 2037 992 8 Windward Town and Country Plaza I Kailua, Oahu 3.4 Retail 2062 963 9 Windward Town and Country Plaza II Kailua, Oahu 2.2 Retail 2062 621 10 Kailua Post Office Kailua, Oahu 1.2 Retail MTM 1 555 11 Owner/Operator Kailua, Oahu 1.9 Retail 2034 450 12 Owner/Operator Honolulu, Oahu 0.5 Retail 2028 385 13 Owner/Operator Honolulu, Oahu 0.5 Parking 2028 359 14 Owner/Operator Kahului, Maui 0.8 Retail 2026 272 15 Seven-Eleven Kailua Center Kailua, Oahu 0.9 Retail 2033 263 16 Owner/Operator Honolulu, Oahu 0.7 Industrial 2027 252 17 Owner/Operator Kahului, Maui 0.8 Industrial 2025 238 18 Owner/Operator Kahului, Maui 0.4 Retail 2027 186 19 Owner/Operator Kailua, Oahu 0.4 Retail 2025 183 20 Owner/Operator Kahului, Maui 0.9 Retail 2025 146 Remainder 2 Various 4.8 Various Various 875 Total - Ground Leases 142.0 $ 20,374 (1) Lease is currently month-to-month.
Total Project Cost A&B Gross Investment (Life to Date) Maui Business Park (Phase II) Kahului, Maui Light industrial lots 116.7 64.2 $ 89 $ 65 Maui Business Park II: Maui Business Park (Phase II) (“MBP II”) represents the second phase of the Company's Maui Business Park project in Kahului, Maui, and is zoned for light industrial, retail and office use.
MBP II represents the second phase of the Company's Maui Business Park project in Kahului, Maui, and is zoned for light industrial, retail, and office use.
(2) Includes leases that were previously classified as ground leases and presented in the table on page 23 . 22 Ground leases The Company's portfolio of commercial ground leases at December 31, 2022, was as follows (dollars in thousands): Property Name Location (City, Island) Acres Property Type Exp.
Refer to page 35 for a discussion of non-GAAP financial measures and the required reconciliations of non-GAAP measures to GAAP measures. 22 Ground leases The Company's portfolio of commercial ground leases at December 31, 2023, was as follows (dollars in thousands): Property Name Location (City, Island) Acres Property Type Exp.
The following table presents a summary of GLA square footage ("SF") by the improved property asset class as of December 31, 2022: Current GLA (SF) Retail 2,503,700 Industrial 1,255,200 Office 145,700 Total 3,904,600 As noted above, the Company also owns 140.7 acres of land under urban ground leases in Hawai‘i as of December 31, 2022.
The following table presents a summary of GLA square footage ("SF") by the improved property asset class and location as of December 31, 2023: Oahu Maui Kauai Hawai‘i Island Total Retail 1,710,700 285,900 285,100 222,300 2,504,000 Industrial 969,300 163,600 64,600 86,700 1,284,200 Office 37,100 108,600 — — 145,700 Total 2,717,100 558,100 349,700 309,000 3,933,900 The Company also owns 142.0 acres of land in Hawai‘i, of which substantially all is leased pursuant to urban ground leases as of December 31, 2023.
Refer to page 37 for a discussion of non-GAAP financial measures and the required reconciliations of non-GAAP measures to GAAP measures. (2) Leases previously classified as ground leases as of December 31, 2021, are now included and presented in the table of improved properties on page 21 .
(2) A portion of these properties is currently not included in the Same-Store pool, which management uses in the calculation of certain non-GAAP metrics at an improved property or ground lease level. Refer to page 35 for a discussion of non-GAAP financial measures and the required reconciliations of non-GAAP measures to GAAP measures.
Removed
Refer to page 37 for a discussion of non-GAAP financial measures and the required reconciliations of non-GAAP measures to GAAP measures.
Added
A summary of the Company's MBP II project as of December 31, 2023, is as follows: (in millions) Project Location Product Type Total Acres Remaining Sellable Acres 1 Acres Under Contract 2 Estimated Total Project Cost Total Project Costs Incurred to Date Maui Business Park (Phase II) Kahului, Maui Light industrial lots 46.7 34.2 12.5 $ 91 $ 65 1 Remaining sellable acres may change due to updates in overall development plan that results in modification of planned roads and easements. 2 The Company has entered into an agreement with a third party for the sale of 12.5 acres which will close upon subdivision completion and is therefore excluded from remaining sellable acres.
Removed
A summary of the Company's Maui Business Park II project as of December 31, 2022 is as follows: (in millions) Project Location Product Type Planned Saleable Acres Acres Closed Est.
Added
MBP II activity during the year ended December 31, 2023 , included the transfer of 2.4 acres slated for a build-to-suit development to the Commercial Real Estate segment.
Removed
During the year ended December 31, 2022 , the Company successfully closed on the sale of 4.9 acres at MBP Phase II.
Added
Additionally, during the quarter ended March 31, 2023, the Company completed the sale of its ownership interest in KT&S, a legacy trucking and storage business on Maui.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−2 removed5 unchanged
Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share¹ Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) October 1-31, 2022 80,960 $ 16.95 277,010 $ 145,400 November 1-30, 2022 — $ — 277,010 $ 145,400 December 1-31, 2022 — $ — 277,010 $ 145,400 Total 80,960 $ 16.95 277,010 $ 145,400 1 The average price paid per share includes $0.02 commission fee per share. 25 There were no unregistered equity securities sold by the Company during 2022 or 2021.
Biggest changeIssuer Purchases of Equity Securities Execution Date Total Number of Shares Purchased Average Price Paid per Share¹ Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 2 (in thousands) October 1-31, 2023 89,781 $ 16.34 458,501 $ 142,400 November 1-30, 2023 — $ — 458,501 $ 142,400 December 1-31, 2023 — $ — 458,501 $ — Total 89,781 16.34 458,501 $ — 1 The average price paid per share includes $0.02 commission fee per share. 2 The share repurchase plan beginning on January 1, 2022, expired on December 31, 2023.
The Company elected to be taxed as a real estate investment trust ("REIT") for US federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 2017.
Dividends The Company elected to be taxed as a real estate investment trust ("REIT") for US federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 2017.
The graph below compares the cumulative total return on the Company’s common stock with that of the Standard & Poor's 500 Stock Index (“S&P 500”) and two industry peer group indices, FTSE Nareit All Equity REITs and FTSE Nareit Equity Shopping Centers, from December 31, 2017, through December 31, 2022.
The graph below compares the cumulative total return on the Company’s common stock with that of the Standard & Poor's 500 Stock Index (“S&P 500”) and two industry peer group indices, FTSE Nareit All Equity REITs and FTSE Nareit Equity Shopping Centers, from December 31, 2018, through December 31, 2023.
In October 2021, the Company's Board of Directors reauthorized the Company to repurchase up to $150 million of its common stock beginning on January 1, 2022, and ending on December 31, 2023.
Issuer Purchases of Equity Securities In October 2021, the Company's Board of Directors reauthorized the Company to repurchase up to $150 million of its common stock beginning on January 1, 2022, and ending on December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The common stock of Alexander & Baldwin, Inc. ("A&B" or the "Company") is listed on the New York Stock Exchange under the ticker symbol ALEX. As of February 15, 2023, there were approximately 1,825 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The common stock of Alexander & Baldwin, Inc. ("A&B" or the "Company") is listed on the New York Stock Exchange under the ticker symbol ALEX. As of February 14, 2024, there were approximately 1,771 shareholders of record.
During the quarter ended December 31, 2022, the Company repurchased 80,960 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $1.4 million. These shares were retired upon repurchase. As of December 31, 2022, $145.4 million remains available under the stock repurchase program.
During the quarter ended December 31, 2023, the Company repurchased 89,781 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $1.5 million. These shares were retired upon repurchase. On December 31, 2023, $142.4 million expired under the stock repurchase program.
In February 2020, the Company's Board of Directors authorized the Company to repurchase up to $150 million of its common stock beginning on February 25, 2020, and ending on December 31, 2021.
In October 2023, the Company's Board of Directors authorized the Company to repurchase up to $100.0 million of its common stock beginning on January 1, 2024, and ending on December 31, 2025. The following summarizes the Company's purchases of equity securities and use of proceeds for the fourth quarter of fiscal year 2023.
Removed
Securities authorized for issuance under equity compensation plans at December 31, 2022, included: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) 1 Equity compensation plans approved by security holders — $0.00 3,359,277 1 Under the 2022 Incentive Compensation Plan, 3,359,277 shares may be issued either as restricted stock grants, restricted stock unit grants, or stock option grants.
Added
A new plan authorizing the Company to repurchase up to $100.0 million of its common stock began on January 1, 2024. 25 There were no unregistered equity securities sold by the Company during 2023 or 2022.
Removed
The following summarizes the Company's purchases of equity securities and use of proceeds for the fourth quarter of fiscal year 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

78 edited+35 added−26 removed51 unchanged
Biggest changeIn addition, the Company recorded an income tax benefit of $18.3 million during the year ended December 31, 2022, to reclassify the tax effects in accumulated other comprehensive loss upon completion of the termination of the Defined Benefit Plans. 29 Consolidated Results of Operations 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 thereto. 2022 vs 2021 2021 vs 2020 (amounts in millions, except percentage data and per share data) 2022 2021 2020 $ % $ % Operating revenue $ 230.5 $ 254.0 $ 190.3 $ (23.5) (9.3) % $ 63.7 33.5 % Cost of operations (132.9) (134.9) (126.2) 2.0 1.5 % (8.7) (6.9) % Selling, general and administrative (35.9) (36.6) (31.1) 0.7 1.9 % (5.5) (17.7) % Gain (loss) on disposal of assets, net 54.0 2.9 9.4 51.1 18X (6.5) (69.1) % Operating income (loss) 115.7 85.4 42.4 30.3 35.5 % 43.0 101.4 % Income (loss) related to joint ventures 1.6 17.9 6.8 (16.3) (91.1) % 11.1 163.2 % Pension termination (76.9) — — (76.9) — % — — % Interest and other income (expense), net 0.4 (1.7) (0.1) 2.1 NM (1.6) 16X Interest expense (22.0) (26.2) (30.2) 4.2 16.0 % 4.0 13.2 % Income tax benefit (expense) 18.3 — 0.4 18.3 — % (0.4) (100.0) % Income (loss) from continuing operations 37.1 75.4 19.3 (38.3) (50.8) % 56.1 3X Discontinued operations (net of income taxes) (86.6) (39.6) (14.1) (47.0) (118.7) % (25.5) (180.9) % Net income (loss) (49.5) 35.8 5.2 (85.3) NM 30.6 6X (Income) loss attributable to discontinued noncontrolling interest (1.1) (0.4) 0.4 (0.7) (175.0) % (0.8) NM Net income (loss) attributable to A&B $ (50.6) $ 35.4 $ 5.6 $ (86.0) NM $ 29.8 5X Basic Earnings (Loss) Per Share of Common Stock: Basic earnings (loss) per share - continuing operations $ 0.51 $ 1.03 $ 0.27 $ (0.52) (50.5) % $ 0.76 3X Basic earnings (loss) per share - discontinued operations (1.21) (0.55) (0.19) (0.66) (120.0) % (0.36) (189.5) % $ (0.70) $ 0.48 $ 0.08 $ (1.18) NM $ 0.40 5X Diluted Earnings (Loss) Per Share of Common Stock: Diluted earnings (loss) per share - continuing operations $ 0.50 $ 1.03 $ 0.27 $ (0.53) (51.5) % $ 0.76 3X Diluted earnings (loss) per share - discontinued operations (1.20) (0.55) (0.19) (0.65) (118.2) % (0.36) (189.5) % $ (0.70) $ 0.48 $ 0.08 $ (1.18) NM $ 0.40 5X Continuing operations available to A&B common shareholders $ 36.9 $ 75.1 $ 19.2 $ (38.2) (50.9) % $ 55.9 3X Discontinued operations available to A&B common shareholders (87.7) (40.0) (13.7) (47.7) (119.3) % (26.3) (192.0) % Net income (loss) available to A&B common shareholders $ (50.8) $ 35.1 $ 5.5 $ (85.9) NM $ 29.6 5X Funds From Operations ("FFO") 1 $ 73.4 $ 110.0 $ 58.8 $ (36.6) (33.3) % $ 51.2 87.1 % Core FFO 1 $ 82.2 $ 69.5 $ 55.3 $ 12.7 18.3 % $ 14.2 25.7 % FFO per diluted share $ 1.01 $ 1.52 $ 0.81 $ (0.51) (33.6) % $ 0.71 87.7 % Core FFO per diluted share $ 1.13 $ 0.96 $ 0.76 $ 0.17 17.7 % $ 0.20 26.3 % Weighted average diluted shares outstanding (FFO/Core FFO) 2 72.8 72.6 72.4 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 37 . 2 May differ from figure used in the consolidated statements of operations based on differing dilutive effects for net income (loss) versus FFO/Core FFO. 30 2022 compared to 2021 The causes of material changes in the consolidated statements of operations for the year ended December 31, 2022, as compared to the year ended December 31, 2021, are described below or in the Analysis of Operating Revenue and Profit by Segment sections below.
Biggest changeFavorable (Unfavorable) Change (amounts in millions, except percentage data and per share data) 2023 2022 $ % Operating revenue $ 208.9 $ 230.5 $ (21.6) (9.4) % Cost of operations (106.6) (132.9) 26.3 19.8 % Selling, general and administrative (34.0) (35.9) 1.9 5.3 % Impairment of assets (4.8) — (4.8) — % Gain (loss) on disposal of non-core assets, net 1.1 54.0 (52.9) (98.0) % Operating income (loss) 64.6 115.7 (51.1) (44.2) % Income (loss) related to joint ventures 1.9 1.6 0.3 18.8 % Pension termination — (76.9) 76.9 100.0 % Interest and other income (expense), net (2.7) 0.4 (3.1) NM Interest expense (23.0) (22.0) (1.0) (4.5) % Income tax benefit (expense) — 18.3 (18.3) (100.0) % Income (loss) from continuing operations 40.8 37.1 3.7 10.0 % Income (loss) from discontinued operations (net of income taxes) (7.8) (86.6) 78.8 91.0 % Net income (loss) 33.0 (49.5) 82.5 NM (Income) loss attributable to discontinued noncontrolling interest (3.2) (1.1) (2.1) (190.9) % Net income (loss) attributable to A&B $ 29.8 $ (50.6) $ 80.4 NM Earnings per share: Basic earnings (loss) per share - continuing operations $ 0.56 $ 0.51 $ 0.05 9.8 % Basic earnings (loss) per share - discontinued operations (0.15) (1.21) 1.06 87.6 % Basic earnings (loss) per share of common stock: $ 0.41 $ (0.70) $ 1.11 NM Diluted earnings (loss) per share - continuing operations $ 0.56 $ 0.50 $ 0.06 12.0 % Diluted earnings (loss) per share - discontinued operations (0.15) (1.20) 1.05 87.5 % Diluted earnings (loss) per share of common stock: $ 0.41 $ (0.70) $ 1.11 NM Continuing operations available to A&B common shareholders $ 40.7 $ 36.9 $ 3.8 10.3 % Discontinued operations available to A&B common shareholders (11.0) (87.7) 76.7 87.5 % Net income (loss) available to A&B common shareholders $ 29.7 $ (50.8) $ 80.5 NM Funds From Operations ("FFO") 1 $ 79.4 $ 73.4 $ 6.0 8.2 % Core FFO 1 $ 85.3 $ 82.2 $ 3.1 3.8 % FFO per diluted share $ 1.09 $ 1.01 $ 0.08 7.9 % Core FFO per diluted share $ 1.17 $ 1.13 $ 0.04 3.5 % Weighted average diluted shares outstanding (FFO/Core FFO) 2 72.8 72.8 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 35 . 2 May differ from figure used in the consolidated statements of operations based on differing dilutive effects for net income (loss) versus FFO/Core FFO. 29 The causes of material changes in the consolidated statements of operations for the year ended December 31, 2023, as compared to the year ended December 31, 2022, are described below or in the Analysis of Operating Revenue and Profit by Segment sections below.
Gain (loss) on disposal of assets, net of $54.0 million for 2022 was primarily due to the sale of approximately 18,900 acres of primarily agricultural and conservation land on the island of Kauai and 100% of the Company's ownership interest in McBryde Resources, Inc., the operator of hydroelectric power facilities on Kauai.
Gain (loss) on disposal of assets, net of $54.0 million for 2022 was due to the sale of approximately 18,900 acres of primarily agricultural and conservation land on the island of Kauai and 100% of the Company's ownership interest in McBryde Resources, Inc., the operator of hydroelectric power facilities on Kauai.
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 square footage at 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.
Revenue also included other operating revenue related to the Company's legacy business activities in the Land Operations segment (primarily licensing and leasing of non-core legacy agricultural lands, trucking service, and renewable energy).
Revenue also included other operating revenue related to the Company's legacy business activities in the Land Operations segment (primarily trucking service, licensing and leasing of non-core legacy agricultural lands, and renewable energy).
NOI should not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP. NOI represents total Commercial Real Estate contract-based operating revenue that is realizable (i.e., assuming collectability is deemed probable) less the direct property-related operating expenses paid or payable in cash.
NOI should not be viewed as a substitute for, or superior to, financial measures calculated in accordance with GAAP. 35 NOI represents total Commercial Real Estate contract-based operating revenue that is realizable (i.e., assuming collectability is deemed probable) less the direct property-related operating expenses paid or payable in cash.
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.
For example, the sale of undeveloped 33 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.
The Company's calculation refers to net income (loss) available to A&B common shareholders as its starting point in the calculation of FFO. 37 The Company presents both non-GAAP measures and reconciles each to the most directly-comparable GAAP measure as well as reconciling FFO to Core FFO.
The Company's calculation refers to net income (loss) available to A&B common shareholders as its starting point in the calculation of FFO. The Company presents both non-GAAP measures and reconciles each to the most directly-comparable GAAP measure as well as reconciling FFO to Core FFO.
The Company's primary liquidity needs for its business requirements and plans have generally been supporting its known contractual obligations and also funding capital expenditures (including recent commercial real estate acquisitions and real estate developments); shareholder distributions; and working capital needs.
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.
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, 2022) and long-term (i.e., beyond the next twelve months).
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, 2023) and long-term (i.e., beyond the next twelve months).
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. 43
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. 42
Known contractual obligations A description of material contractual commitments as of December 31, 2022, is included in Note 8 – Notes Payable and Other Debt, 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.
Known contractual obligations A description of material contractual commitments as of December 31, 2023, is included in Note 8 – Notes Payable and Other Debt, 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.
As of December 31, 2022, 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.
As of December 31, 2023, 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.
A description of other commitments, contingencies and off-balance sheet arrangements as of December 31, 2022, 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.
A description of other commitments, contingencies and off-balance sheet arrangements as of December 31, 2023, 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.
The Company was in compliance with its financial covenants for all outstanding balances as of December 31, 2022, 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.
The Company was in compliance with its financial covenants for all outstanding balances as of December 31, 2023, 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.
Income tax benefit (expense) of $18.3 million for 2022, was due primarily to the termination of the Company’s Defined Benefit Plan and the reclassification of the tax effects in accumulated other comprehensive loss upon completion of the termination of the Defined Benefit Plans.
Income tax benefit of $18.3 million for 2022, was due primarily to the termination of the Company’s Defined Benefit Plans and the reclassification of the tax effects in accumulated other comprehensive loss upon completion of the termination of the Defined Benefit Plans.
During the year ended December 31, 2022, the Company recorded aggregate long-lived asset and finite-lived intangible asset impairment charges of $5.0 million related to its Land Operations segment and included in continuing operations.
Also during year ended December 31, 2022, the Company recorded aggregate long-lived asset and finite-lived intangible asset impairment charges of $5.0 million related to its Land Operations segment, which is included in continuing operations.
Related to the Land Operations segment, during the year ended December 31, 2022, the Company completed the sale of approximately 18,900 acres of primarily conservation and agricultural land on the island of Kauai and 100% of the Company's ownership interest in McBryde Resources, Inc., the operator of hydroelectric power facilities on Kauai, for $76.0 million.
During the year ended December 31, 2022, the Company completed the sale of approximately 18,900 acres of primarily conservation and agricultural land on the island of Kauai and 100% of the Company's ownership interest in McBryde Resources, Inc., the operator of hydroelectric power facilities on Kauai, for $76.0 million.
Pension termination loss of $76.9 million in 2022 resulted from the termination of the Defined Benefit Plans and represents the acceleration of deferred charges previously included within Accumulated Other Comprehensive Loss in the Company's balance sheet and the impact of remeasuring the plan assets and obligations at termination.
Pension termination loss of $76.9 million in 2022 resulted from the termination of the Defined Benefit Plans and represents the acceleration of deferred charges previously included within Accumulated other comprehensive income (loss) in the Company's consolidated balance sheets and the impact of remeasuring the plan assets and obligations at termination.
Total amounts to be spent on contractual non-cancellable purchase obligations (that specifies all significant terms, including fixed or minimum quantities to be purchased, pricing structure and approximate timing of the transaction that are not recorded as liabilities in the consolidated balance sheet) over the next twelve months from December 31, 2022, is $10.1 million; such amounts beyond the next twelve months are not material.
Total amounts to be spent on contractual non-cancellable purchase obligations (that specifies all significant terms, including fixed or minimum quantities to be purchased, pricing structure and approximate timing of the transaction that are not recorded as liabilities in the consolidated balance sheet) over the next twelve months from December 31, 2023, is $28.8 million; such amounts beyond the next twelve months are not material.
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, 2022) and long-term (i.e., beyond the next twelve months) is estimated to be $19.8 million and $48.6 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 rate in effect as of December 31, 2022).
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, 2023) and long-term (i.e., beyond the next twelve months) is estimated to be $19.0 million and $32.9 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 rate in effect as of December 31, 2023).
Of this amount, the Company expects to spend approximately $48.0 million - $57.0 million for growth and maintenance capital for the Commercial Real Estate segment and the remaining $2.0 million - $3.0 million for Land Operations and general Corporate purposes.
Of this amount, the Company expects to spend approximately $48.0 million - $56.0 million for growth and maintenance capital for the Commercial Real Estate segment and the remaining $1.0 million - $2.0 million for Land Operations and general Corporate purposes.
Sources of liquidity As noted above, one of the Company's principal sources of liquidity has been operating cash flows from continuing operations, which were $67.2 million for the year ended December 31, 2022, primarily driven by cash generated from the CRE operations (the Company's core business) and monetization of assets within the Land Operations segment.
Sources of liquidity As noted above, one of the Company's principal sources of liquidity has been operating cash flows from continuing operations, which were $75.5 million for the year ended December 31, 2023, primarily driven by cash generated from the CRE operations (the Company's core business) and monetization of assets within the Land Operations segment.
As it relates to the CRE segment (i.e., its core business), the Company differentiates capital expenditures as follows (based on management's perspective on discretionary versus non-discretionary areas of spending for its CRE business): • Growth Capital Expenditures: Property acquisition, development and redevelopment activity to generate income and cash flow growth. • Maintenance Capital Expenditures: Activity necessary to maintain building value, the current income stream and position in the market.
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): • Growth Capital Expenditures: Property acquisition, development and redevelopment activity to generate income and cash flow growth. • Maintenance Capital Expenditures: Activity necessary to maintain building value, the current income stream and position in the market.
The Company's other primary sources of liquidity include its cash and cash equivalents of $33.3 million as of December 31, 2022, and the Company's revolving credit and term facilities, which provide liquidity and flexibility on a short-term (i.e., the next twelve months from December 31, 2022), as well as long-term basis.
The Company's other primary sources of liquidity include its cash and cash equivalents of $13.5 million as of December 31, 2023, and the Company's revolving credit and term facilities, which provide liquidity and flexibility on a short-term (i.e., the next twelve months from December 31, 2023), as well as long-term basis.
Revenue also included other operating revenue related to the Company's legacy business activities in the Land Operations segment (primarily licensing and leasing of non-core legacy agricultural lands, trucking service, and renewable energy).
Revenue also included other operating revenue related to the Company's legacy business activities in the Land Operations segment (primarily trucking services and licensing and leasing of non-core legacy lands).
FFO is defined by the National Association of Real Estate Investment Trusts ("Nareit") December 2018 Financial Standards White Paper 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, (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, (5) gains and losses from the sale of assets or businesses that are incidental to CRE, and (6) impairment write-downs of assets that are incidental to CRE.
National Association of Real Estate Investment Trusts ("Nareit") defines FFO 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, (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 that are incidental to CRE.
Of the 84 new leases, 22 leases with a total GLA of 42,000 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 22 leases, resulted in a 8.8% average base rent increase over comparable expiring leases.
Of the 83 new leases, 35 leases with a total GLA of 67,400 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 35 leases, resulted in a 8.0% average base rent increase over comparable expiring leases.
Many of the Company's leases require tenants to pay an allocable portion of operating expenses, including common area maintenance, real estate taxes and insurance, resulting in a mitigating impact on increased costs and operating expenses due to inflation. 42 In response to persistent concerns over inflation, the Federal Reserve increased the federal funds rate to 4.50% as of December 31, 2022, up from 0.25% on January 1, 2022, and signaled its intent for additional increases into 2023.
Many of the Company's leases require tenants to pay an allocable portion of operating expenses, including common area maintenance, real estate taxes and insurance, resulting in a mitigating impact on increased costs and operating expenses due to inflation. 40 In response to persistent concerns over inflation, the Federal Reserve increased the federal funds rate to 5.25% as of December 31, 2023, up from 0.25% on January 1, 2022.
Capital expenditures for continuing operations are summarized as follows for the years ended: (in millions, unaudited) 2022 2021 2020 CRE property acquisitions, development and redevelopment $ 6.8 $ 27.2 $ 9.7 Building/area improvements (Maintenance Capital Expenditures) 10.7 9.9 6.0 Tenant space improvements (Maintenance Capital Expenditures) 3.9 2.5 3.1 Land Operations and Corporate 0.3 7.6 1.8 Total capital expenditures for continuing operations 1 $ 21.7 $ 47.2 $ 20.6 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. 41 The year ended December 31, 2022, included cash outlays of $21.7 million related to capital expenditures for property, plant and equipment improvements.
Capital expenditures for continuing operations are summarized as follows for the years ended: (in millions, unaudited) 2023 2022 CRE property acquisitions, development and redevelopment $ 16.4 $ 6.8 Building/area improvements (Maintenance Capital Expenditures) 11.4 10.7 Tenant space improvements (Maintenance Capital Expenditures) 3.3 3.9 Tenant space improvements - nonrecurring (Maintenance Capital Expenditures) 0.1 — Land Operations and Corporate — 0.3 Total capital expenditures for continuing operations 1 $ 31.2 $ 21.7 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. 39 The year ended December 31, 2023, included cash outlays of $21.7 million related to capital expenditures for property, plant and equipment, and $9.5 million related to the Company's acquisition of a commercial real estate asset.
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.
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.
As a result of the Grace Disposal Group's classification as held for sale as of December 31, 2022, the Company measured the disposal group at its fair value less costs to sell and accordingly recorded impairment of $89.8 million in 2022.
During the year ended December 31, 2022, as a result of its classification as held for sale as of December 31, 2022, the Company measured the Grace Disposal Group at its fair value less costs to sell and accordingly recorded impairment of $89.8 million, which is included in discontinued operations.
Cash used in financing activities for continuing operations was $126.2 million for the year ended December 31, 2022, a decrease from cash used in financing activities for continuing operations of $205.7 million for the year ended December 31, 2021.
Cash used in financing activities for continuing operations was $79.8 million for the year ended December 31, 2023, a decrease from cash used in financing activities for continuing operations of $126.2 million for the year ended December 31, 2022.
In 2023, the Company expects that its capital expenditures, not including potential commercial real estate acquisitions, will be approximately $50.0 million - $60.0 million.
In 2024, the Company expects that its capital expenditures, not including potential commercial real estate acquisitions, will be approximately $49.0 million - $58.0 million.
Accordingly, a recalculation of totals and percentages, if based on the reported data, may be slightly different. 27 Business Overview Reportable segments The Company operates two segments: Commercial Real Estate and Land Operations.
Amounts in the MD&A section are rounded to the nearest tenth of a million. Accordingly, a recalculation of totals and percentages, if based on the reported data, may be slightly different. 27 Business Overview Reportable segments The Company operates two segments: Commercial Real Estate and Land Operations.
Cash provided by investing activities from continuing operations was $51.0 million for the year ended December 31, 2022, as compared to cash provided by investing activities from continuing operations of $104.1 million for the year ended December 31, 2021.
Cash used in investing activities from continuing operations was $27.6 million for the year ended December 31, 2023, as compared to cash provided by investing activities from continuing operations of $51.0 million for the year ended December 31, 2022.
Operating costs and expenses for this segment decreased primarily due to lower cost of sales associated with the unimproved and other landholdings and Maui Business Park II lot sales.
Operating costs and expenses for this segment decreased primarily due to lower cost of sales associated with unimproved and other landholdings and Maui Business Park II lot sales, the favorable resolution of contingent liabilities related to prior year land sales, and lower costs related to legacy business activities.
Introduction and Objective Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") 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.
This section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022; 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.
To emphasize, 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. 38 Reconciliations of net income (loss) to FFO and Core FFO for the years ended December 31, 2022, 2021 and 2020, are as follows (in millions): 2022 2021 2020 Net income (loss) available to A&B common shareholders $ (50.8) $ 35.1 $ 5.5 Depreciation and amortization of commercial real estate properties 36.5 37.7 40.1 Gain on the disposal of commercial real estate properties, net — (2.8) (0.5) Loss from discontinued operations, net of income taxes 86.6 39.6 14.1 Income (loss) attributable to discontinued noncontrolling interest 1.1 0.4 (0.4) FFO $ 73.4 $ 110.0 $ 58.8 Exclude items not related to core business: Land Operations operating (profit) loss 1.4 (53.2) (18.0) Income tax expense (benefit) (18.3) — (0.4) Pension termination - CRE and Corporate 14.7 — — Non-core business interest expense 11.0 12.7 14.9 Core FFO $ 82.2 $ 69.5 $ 55.3 Reconciliations of Core FFO starting from CRE operating profit for the years ended December 31, 2022, 2021 and 2020, are as follows (in millions): 2022 2021 2020 CRE Operating Profit $ 81.5 $ 72.6 $ 49.8 Depreciation and amortization of commercial real estate properties 36.5 37.7 40.1 Corporate and other expense (39.3) (27.0) (19.2) Core business interest expense (11.0) (13.5) (15.3) Distributions to participating securities (0.2) (0.3) $ (0.1) Pension termination - CRE and Corporate 14.7 — $ — Core FFO $ 82.2 $ 69.5 $ 55.3 Reconciliations of CRE operating profit (loss) to NOI for the years ended December 31, 2022, 2021 and 2020, are as follows (in millions): 2022 2021 2020 CRE Operating Profit (Loss) $ 81.5 $ 72.6 $ 49.8 Plus: Depreciation and amortization 36.5 37.7 40.1 Less: Straight-line lease adjustments (6.3) (4.4) 1.3 Less: Favorable/(unfavorable) lease amortization (1.1) (0.9) (1.2) Less: Termination income (0.1) (0.2) (2.3) Plus: Other (income)/expense, net 0.5 (0.6) (0.9) Plus: Selling, general, administrative and other expenses 6.8 6.5 7.5 NOI 117.8 110.7 94.3 Less: NOI from acquisitions and dispositions (0.7) (0.2) (2.4) Same-Store NOI $ 117.1 $ 110.5 $ 91.9 39 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, 2022) 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.
Reconciliations of net income (loss) to FFO and Core FFO for the years ended December 31, 2023 and 2022, are as follows (in millions): 2023 2022 Net income (loss) available to A&B common shareholders $ 29.7 $ (50.8) Depreciation and amortization of commercial real estate properties 36.5 36.5 Impairment losses - CRE properties 2.2 — Loss from discontinued operations, net of income taxes 7.8 86.6 Income (loss) attributable to discontinued noncontrolling interest 3.2 1.1 FFO $ 79.4 $ 73.4 Exclude items not related to core business: Land Operations operating (profit) loss (10.8) 1.4 Income tax expense (benefit) — (18.3) Pension termination - CRE and Corporate — 14.7 Impairment losses - abandoned development costs 2.6 — Interest rate derivative fair value adjustment 2.7 — Non-core business interest expense 11.4 11.0 Core FFO $ 85.3 $ 82.2 36 Reconciliations of Core FFO starting from CRE operating profit for the years ended December 31, 2023 and 2022, are as follows (in millions): 2023 2022 CRE Operating Profit $ 81.2 $ 81.5 Depreciation and amortization of commercial real estate properties 36.5 36.5 Corporate and other expense (28.2) (39.3) Core business interest expense (11.6) (11.0) Impairment losses - CRE properties 2.2 — Impairment losses - abandoned development costs 2.6 — Interest rate derivative fair value adjustment 2.7 — Distributions to participating securities (0.1) (0.2) Pension termination - CRE and Corporate — 14.7 Core FFO $ 85.3 $ 82.2 Reconciliations of CRE operating profit (loss) to NOI for the years ended December 31, 2023 and 2022, are as follows (in millions): 2023 2022 CRE Operating Profit (Loss) $ 81.2 $ 81.5 Plus: Depreciation and amortization 36.5 36.5 Less: Straight-line lease adjustments (5.1) (6.3) Less: Favorable/(unfavorable) lease amortization (1.1) (1.1) Less: Termination income (0.1) (0.1) Plus: Other (income)/expense, net 0.1 0.5 Plus: Impairment of assets 4.8 — Plus: Selling, general, administrative and other expenses 7.0 6.8 NOI 123.3 117.8 Less: NOI from acquisitions and dispositions (0.9) (0.4) Same-Store NOI $ 122.4 $ 117.4 37 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, 2023) 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 year ended December 31, 2022, included $73.1 million in cash proceeds from disposal of assets, primarily related to the sale of approximately 18,900 acres of agricultural and conservation land on the island of Kauai and 100% of the Company's ownership interest in McBryde Resources, Inc..
The year ended December 31, 2022, included cash proceeds of $73.9 million from the sale of approximately 18,900 acres of agricultural and conservation land on the island of Kauai and 100% of the Company's ownership interest in McBryde Resources, Inc., partially offset by capital expenditures of $21.7 million.
The Company's FFO and Core FFO may not be comparable to FFO non-GAAP measures reported by other REITs. These other REITs may not define the term in accordance with the current Nareit definition or may interpret the current Nareit definition differently. NOI is a non-GAAP measure used internally in evaluating the unlevered performance of the Company's Commercial Real Estate portfolio.
The Company's FFO and Core 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. NOI is a non-GAAP measure used internally in evaluating the unlevered performance of the Company's Commercial Real Estate portfolio.
This substantially completed the Company's goal to monetize its unconsolidated equity method investments in joint venture development projects at Kukui'ula. 28 Termination of certain employee benefit plans On February 23, 2021, the Company’s Board of Directors approved a plan to effect the termination of the A&B Retirement Plan for Salaried Employees of Alexander & Baldwin, LLC and the Pension Plan for Employees of A&B Agricultural Companies (collectively, the “Defined Benefit Plans”), which became effective on May 31, 2021.
Termination of certain employee benefit plans On February 23, 2021, the Company’s Board of Directors approved a plan to effect the termination of the A&B Retirement Plan for Salaried Employees of Alexander & Baldwin, LLC and the Pension Plan for Employees of A&B Agricultural Companies (collectively, the “Defined Benefit Plans”), which became effective on May 31, 2021.
Financial results Results of operations for the years ended December 31, 2022, 2021 and 2020, were as follows: (amounts in millions; unaudited) 2022 2021 2020 Development sales revenue $ 8.1 $ 16.0 $ 7.9 Unimproved/other property sales revenue 19.9 41.3 9.7 Other operating revenue 1 15.3 22.6 21.1 Total Land Operations operating revenue 43.3 79.9 38.7 Land Operations operating costs and expenses (34.2) (38.9) (30.6) Selling, general and administrative (3.5) (3.8) (4.9) Intersegment operating charges, net 2 (0.3) (0.2) (0.3) Gain (loss) on disposal of assets, net 54.0 0.1 8.9 Earnings (loss) from joint ventures 1.6 17.9 6.7 Pension termination (62.2) — — Interest and other income (expense), net (0.1) (1.8) (0.5) Total Land Operations operating profit (loss) $ (1.4) $ 53.2 $ 18.0 1 Other operating revenue includes revenue related to trucking, renewable energy and licensing and leasing of non-core legacy agricultural lands. 2 Intersegment operating charges for Land Operations is primarily from the Commercial Real Estate segment and are eliminated in the consolidated results of operations. 2022: Land Operations revenue of $43.3 million during the year ended December 31, 2022, was primarily driven by sales of six development parcels at Maui Business Park for $8.1 million, as well as unimproved and other land sales on the islands of Kauai and Maui of approximately 1,300 acres for $19.9 million.
Financial results Results of operations for the years ended December 31, 2023 and 2022, were as follows: (amounts in millions; unaudited) 2023 2022 Development sales revenue $ — $ 8.1 Unimproved/other property sales revenue 12.3 19.9 Other operating revenue 2.6 15.3 Total Land Operations operating revenue 14.9 43.3 Land Operations operating costs and expenses (5.6) (34.2) Selling, general and administrative (1.8) (3.5) Intersegment operating charges, net 1 — (0.3) Gain (loss) on disposal of assets, net 1.1 54.0 Earnings (loss) from joint ventures 1.9 1.6 Pension termination — (62.2) Interest and other income (expense), net 0.3 (0.1) Total Land Operations operating profit (loss) $ 10.8 $ (1.4) 1 Intersegment operating charges for Land Operations is primarily from the Commercial Real Estate segment and are eliminated in the consolidated results of operations. 2023: Land Operations revenue of $14.9 million during the year ended December 31, 2023, was primarily driven by the sale of approximately 460 acres of unimproved and other land holdings on Maui and Kauai for $12.3 million.
Commercial Real Estate Financial results Results of operations for the years ended December 31, 2022, 2021 and 2020 were as follows: 2022 vs 2021 2021 vs 2020 (amounts in millions, except percentage data and acres; unaudited) 2022 2021 2020 $ % $ % Commercial Real Estate operating revenue $ 187.2 $ 174.1 $ 151.6 $ 13.1 7.5 % $ 22.5 14.8 % Commercial Real Estate operating costs and expenses (98.7) (96.0) (95.6) (2.7) (2.8) % (0.4) (0.4) % Selling, general and administrative (6.8) (6.5) (7.5) (0.3) (4.6) % 1.0 13.3 % Intersegment operating revenue, net 1 0.3 0.4 0.4 (0.1) (25.0) % — — % Pension termination (0.7) — — (0.7) — % — — % Interest and other income (expense), net 0.2 0.6 0.9 (0.4) (66.7) % (0.3) (33.3) % Commercial Real Estate operating profit (loss) $ 81.5 $ 72.6 $ 49.8 $ 8.9 12.3 % $ 22.8 45.8 % Net Operating Income ("NOI") 2 $ 117.8 $ 110.7 $ 94.3 $ 7.0 6.3 % $ 16.4 17.4 % Same-Store Net Operating Income ("Same-Store NOI") 2 $ 117.1 $ 110.5 $ 91.9 $ 6.7 6.0 % $ 18.6 20.2 % Gross Leasable Area ("GLA") in square feet ("SF") for improved properties at end of period 3.9 3.9 3.9 — — % — — % Ground leases (acres at end of period) 140.7 143.4 153.8 (2.7) (1.9) % (10.4) (6.8) % 1 Intersegment operating revenue, net for Commercial Real Estate is primarily from the Land Operations segment and is eliminated in the consolidated results of operations. 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 37 . 2022 compared to 2021 Commercial Real Estate operating revenue increased 7.5% or $13.1 million, to $187.2 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Commercial Real Estate Financial results Results of operations for the years ended December 31, 2023 and 2022, were as follows: Favorable (Unfavorable) Change (amounts in millions, except percentage data and acres; unaudited) 2023 2022 $ % Commercial Real Estate operating revenue $ 194.0 $ 187.2 $ 6.8 3.6 % Commercial Real Estate operating costs and expenses (101.0) (98.7) (2.3) (2.3) % Selling, general and administrative (7.0) (6.8) (0.2) (2.9) % Intersegment operating revenue, net 1 0.1 0.3 (0.2) (66.7) % Impairment of assets (4.8) — (4.8) — % Pension termination — (0.7) 0.7 100.0 % Interest and other income (expense), net (0.1) 0.2 (0.3) NM Commercial Real Estate operating profit (loss) $ 81.2 $ 81.5 $ (0.3) (0.4) % Net Operating Income ("NOI") 2 $ 123.3 $ 117.8 $ 5.5 4.7 % Same-Store Net Operating Income ("Same-Store NOI") 2 $ 122.4 $ 117.4 $ 5.0 4.3 % Gross Leasable Area ("GLA") in square feet ("SF") for improved properties at end of period 3.9 3.9 — — % Ground leases (acres at end of period) 142.0 140.7 1.3 0.9 % 1 Intersegment operating revenue, net for Commercial Real Estate is primarily from the Land Operations segment and is eliminated in the consolidated results of operations. 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 35 .
As of December 31, 2022, there is $0.8 million from tax-deferred sales that are available for use and have not been reinvested under §1031 of the Code. In addition, the Company holds approximately $3.1 million from tax-deferred involuntary conversions that had not yet been reinvested under §1033 of the Code as of December 31, 2022.
As of December 31, 2023, the Company has no funds from tax-deferred sales that are available for use and have not been reinvested under §1031 of the Code. In addition, the Company held no funds from tax-deferred involuntary conversions that had not yet been reinvested under §1033 of the Code as of December 31, 2023.
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' core operating results, and/or the underlying business trends affecting performance on a consistent and comparable basis from period to period.
Additionally, during the year ended December 31, 2022, the segment incurred a settlement charge of $62.2 million in connection with the termination of the Defined Benefit Plans. 34 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' core operating results, and/or the underlying business trends affecting performance on a consistent and comparable basis from period to period.
During the year ended December 31, 2021, the Company recorded impairment charges of $26.1 million related to Grace Pacific's paving and roadway solutions operations. During 2020, the Company recorded impairment of $5.6 million in connection with the disposition of GPRM in the quarter ended June 30, 2020.
During year ended December 31, 2021, the Company recorded impairment charges of $26.1 million related to Grace Pacific's paving and roadway solutions operations, which is included in discontinued operations.
The assets and liabilities associated with the Grace Disposal Group have been classified as held for sale in the consolidated balance sheets, and its financial results are classified as discontinued operations in the consolidated statements of operations and cash flows for all periods presented and the Company’s former Materials and Construction ("M&C") segment has been eliminated.
The assets and liabilities associated with the Grace Disposal Group were classified as held for sale in the consolidated balance sheet as of December 31, 2022, and financial results are classified as discontinued operations in the consolidated statements of operations and cash flows for all periods presented.
See below for further discussion on the Company's use of §1031 and §1033 of the Code. 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.
The Company made no acquisitions during the year ended December 31, 2022. 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.
The Company's cash flows from continuing operations provided by operating activities for the year ended December 31, 2022, reflects a decrease of $50.9 million from the prior year amount of $118.1 million, which was largely driven by cash contributions made to and in conjunction with the termination of the Company's Defined Benefit Plans in 2022 and lower cash proceeds from unimproved 40 and development land sales in 2022 as compared to 2021.
The Company's cash flows from continuing operations provided by operating activities for the year ended December 31, 2023, reflects an increase of $8.3 million from the prior year amount of $67.2 million, due primarily to the cash contributions made to and in conjunction with the termination of the Company's Defined Benefit Plans in 2022 that did not recur in 2023, partially offset by lower cash proceeds from unimproved and development land sales in 2023 as compared to 2022.
The 177 renewal leases consist of 591,600 square feet with an average annual base rent of $27.70 per square foot. Of the 177 renewal leases, 124 leases with a total GLA of 469,100 were considered comparable and resulted in a 4.0% average base rent increase over comparable expiring leases.
The 150 renewal leases consist of 442,300 square feet with an average annual base rent of $31.76 per square foot. Of the 150 renewal leases, 113 leases with a total GLA of 254,300 were considered comparable and resulted in a 7.6% average base rent increase over comparable expiring leases.
Operating revenue for 2022 decreased 9.3%, or $23.5 million, to $230.5 million due primarily to lower legacy business activities revenue (primarily McBryde's legacy leasing revenue and energy generation due to its sale in the second quarter of 2022) and lower unimproved property sales revenue from the Company's Land Operations operating segment, partially offset by higher revenues from the Commercial Real Estate segment.
Operating revenue for 2023 decreased 9.4%, or $21.6 million, to $208.9 million due primarily to lower revenues from Land Operations segment land sales and legacy business activities sold in the second quarter of 2022 and first quarter of 2023, partially offset by higher rental income and tenant recoveries from the Commercial Real Estate segment.
While there is management judgment involved in classifications, new developments and redevelopments are moved into the Same-Store pool after one full calendar year of stabilized operation. Properties included in held for sale are excluded from Same-Store.
New developments and redevelopments are moved into the Same-Store pool after one full calendar year of stabilized operation. 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.
The proceeds from involuntary conversions under §1033 of the Code are held by the Company until the funds are redeployed. During the year ended December 31, 2022, the Company completed one transaction that gave rise to cash proceeds from sales or involuntary conversion activity that qualified under §1031 or §1033 of the Code.
During the year ended December 31, 2023, the Company completed no transactions that gave rise to cash proceeds from sales or involuntary conversion activity that qualified under §1031 or §1033 of the Code and, over the same period, completed one acquisition utilizing eligible/available proceeds from tax-deferred sales or involuntary conversions.
The estimates of fair value consider matters such as contracts or the results of negotiations with prospective purchasers. These estimates are subject to revision as market conditions, and our assessment of such conditions, change.
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. During the year ended December 31, 2023, one CRE improved property met the criteria for classification as held for sale.
Excluding this transaction, the Company completed real estate disposals involving approximately 1,300 acres of land holdings on Maui and Kauai for $19.9 million and closed on the sale of six Maui Business Park II lots for $8.1 million.
In connection with the sale, the Company recognized a net gain on disposition of $54.0 million and received cash proceeds of $73.9 million. Excluding this transaction, the Company completed real estate disposals involving approximately 1,300 acres of land holdings on Maui and Kauai for $19.9 million.
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.
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.
In conjunction with the Board's authorization, the Company concluded that the Grace Disposal Group met the criteria for classification as held for sale and discontinued operations as of December 31, 2022.
As of December 31, 2023, the Company concluded that a CRE improved property met all of the criteria listed above for classification as held for sale. As of December 31, 2022, the Company concluded that the Grace Disposal Group met all of the criteria listed above for classification as held for sale.
Operating profit increased 12.3%, or $8.9 million, to $81.5 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021. The increase in Commercial Real Estate operating revenue and operating profit for the year ended December 31, 2022 was primarily driven by higher base rents and higher recoveries.
The increase in segment operating revenue for the year ended December 31, 2023, was primarily driven by higher base rents and recoveries from tenants. Operating costs and expenses increased 2.3% or $2.3 million to $101.0 million for the year ended December 31, 2023, as compared to the prior year due primarily to higher property operating costs and property taxes.
Cash used in financing activities is primarily composed of dividend payments and payments of notes payable and other debt, which totaled $57.7 million and $61.2 million during the year ended December 31, 2022, respectively.
Cash used in financing activities is primarily composed of dividend payments and payments of notes payable and other debt, which totaled $64.3 million and $35.1 million during the year ended December 31, 2023, respectively. Partially offsetting these cash outflows were net borrowings on the Company line-of-credit agreement of $25.0 million during the year ended December 31, 2023.
With respect to the A&B Revolver, as of December 31, 2022, the Company had $12.0 million of borrowings outstanding, $1.1 million letters of credit issued against and $486.9 million of available capacity on such revolving credit facility.
With respect to the revolving credit facility, as of December 31, 2023, the Company had $37.0 million of borrowings outstanding, no letters of credit issued against, and $463.0 million of available capacity (with a term through August 29, 2025, with two six-month extension options).
Cost of operations for 2022 decreased 1.5%, or $2.0 million, to $132.9 million, due primarily to a decrease in costs incurred by the Land Operations segment, partially offset by higher costs from the Commercial Real Estate segment.
Cost of operations for 2023 decreased 19.8%, or $26.3 million, to $106.6 million due primarily to a decrease in costs incurred by the Land Operations segment from legacy business activities sold in the second quarter of 2022 and first quarter of 2023 and lower development property sales, partially offset by higher property operating costs from the Commercial Real Estate segment.
Selling, general and administrative costs for 2022 decreased 1.9%, or $0.7 million, to $35.9 million primarily due to lower consulting costs in the current year.
Selling, general and administrative costs for 2023 decreased 5.3%, or $1.9 million, to $34.0 million due primarily due to higher pension service cost and professional services expense in the prior year.
As a result of Grace Pacific and the Maui Quarries classification as held for sale as of December 31, 2022, the Company measured the disposal group at its fair value less costs to sell and accordingly recorded impairment of $89.8 million in 2022.
As a result, the Company measured the property held for sale at its fair value less costs to sell and accordingly recorded impairment of $2.2 million in 2023. Also during the year ended December 31, 2023, the Company recorded an impairment charge of $2.6 million related to the abandonment of potential CRE development projects.
Cash proceeds from unimproved/other property and development sales decreased by $23.1 million from $49.1 million for the year ended December 31, 2021, to $26.0 million for the year ended December 31, 2022. The Company's operating income (loss) and cash flows provided by operating activities is generated by its subsidiaries.
Cash proceeds from unimproved and development 38 land sales decreased by $18.1 million from $26.0 million for the year ended December 31, 2022, to $7.9 million for the year ended December 31, 2023.
Operating profit increased 45.8%, or $22.8 million, to $72.6 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020.
Commercial Real Estate operating revenue increased 3.6% or $6.8 million, to $194.0 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. Operating profit decreased 0.4%, or $0.3 million, to $81.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
In the year ended December 31, 2022, the Company had capital expenditures for property, plant and equipment of $21.7 million.
The Company primarily uses cash in investing activities for capital expenditures related to its CRE segment. For the year ended December 31, 2023, all of the Company's capital expenditures for property, plant and equipment of $31.2 million related to the CRE segment.
During the year ended December 31, 2021, the Company completed real estate sales involving approximately 1,800 acres of land holdings on Maui and Kauai for $41.3 million, and also closed on the sale of nine Maui Business Park II lots for $16.0 million.
Related to the Land Operations segment, during the year ended December 31, 2023, the Company completed the sale of approximately 460 acres of land holdings on Maui and Kauai for $12.3 million.
Operating costs and expenses remained relatively flat, increasing slightly by 0.4% or $0.4 to $96.0 million for the year ended December 31, 2021. 33 Commercial Real Estate portfolio acquisitions, transfers and dispositions During the year ended December 31, 2022, the Company transferred the following commercial real estate properties from other segments as follows (dollars in millions): Transfers Property Location Date (Month/Year) Purchase Price GLA (SF) Maui Lani Industrial Maui, HI 06/22 N/A 1 8,400 1 Represents an intercompany transaction.
Commercial Real Estate portfolio acquisitions, transfers, and dispositions During the year ended December 31, 2023, the Company's acquisitions and transfers of commercial real estate properties were as follows (dollars in millions): Acquisitions Property Location Date (Month/Year) Purchase Price GLA (SF) Kaomi Loop Industrial Oahu, HI 05/2023 $9.5 33,200 Transfers In Property Location Date (Month/Year) Purchase Price GLA (SF) Maui Business Park II - 2.4 acre parcel for build-to-suit development Kahului, Maui 12/2023 N/A 1 N/A 2 1 Represents an intercompany transaction.
During the year ended December 31, 2022, there were no acquisitions or dispositions of commercial real estate properties. Leasing activity In the year ended December 31, 2022, the Company signed 84 new leases and 177 renewal leases for its improved properties across its three asset classes, covering 777,800 square feet of GLA.
Leasing activity During the year ended December 31, 2023, the Company signed 83 new leases and 150 renewal leases for its improved properties across its three asset classes, covering 623,600 square feet of GLA. The 83 new leases consist of 181,300 square feet with an average annual base rent of $30.37 per-square-foot.
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. 34 The Company's improved portfolio occupancy metrics as of December 31, 2022 and 2021, were as follows: As of As of Basis Point Change December 31, 2022 December 31, 2021 Leased Occupancy 95.0% 94.3% 70 Physical Occupancy 94.2% 93.8% 40 Economic Occupancy 93.6% 92.2% 140 Leased Occupancy As of As of December 31, 2022 December 31, 2021 Basis Point Change Retail 93.8% 93.1% 70 Industrial 98.4% 97.0% 140 Office 88.2% 91.5% (330) Total Leased Occupancy 95.0% 94.3% 70 Economic Occupancy As of As of December 31, 2022 December 31, 2021 Basis Point Change Retail 91.7% 89.9% 180 Industrial 98.2% 97.0% 120 Office 87.7% 90.0% (230) Total Economic Occupancy 93.6% 92.2% 140 Same-Store Leased Occupancy 1 As of As of December 31, 2022 December 31, 2021 Basis Point Change Retail 93.8% 93.1% 70 Industrial 98.3% 96.9% 140 Office 88.2% 91.5% (330) Total Same-Store Leased Occupancy 95.0% 94.3% 70 Same-Store Economic Occupancy 1 As of As of December 31, 2022 December 31, 2021 Basis Point Change Retail 91.7% 89.9% 180 Industrial 98.1% 96.9% 120 Office 87.7% 90.0% (230) Total Same-Store Economic Occupancy 93.6% 92.1% 150 1 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 37 . 35 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.
The Company's improved portfolio occupancy metrics as of December 31, 2023 and 2022, were as follows: As of As of Basis Point Change December 31, 2023 December 31, 2022 Leased Occupancy 94.7% 95.0% (30) Physical Occupancy 94.1% 94.2% (10) Economic Occupancy 93.0% 93.6% (60) 32 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, 2023 and 2022, were as follows: Leased Occupancy As of As of December 31, 2023 December 31, 2022 Basis Point Change Retail 94.3% 93.8% 50 Industrial 96.8% 98.4% (160) Office 84.2% 88.2% (400) Total Leased Occupancy 94.7% 95.0% (30) Economic Occupancy As of As of December 31, 2023 December 31, 2022 Basis Point Change Retail 92.1% 91.7% 40 Industrial 96.0% 98.2% (220) Office 82.8% 87.7% (490) Total Economic Occupancy 93.0% 93.6% (60) Same-Store Leased Occupancy 1 As of As of December 31, 2023 December 31, 2022 Basis Point Change Retail 95.6% 95.0% 60 Industrial 96.7% 98.4% (170) Office 84.2% 88.2% (400) Total Same-Store Leased Occupancy 95.5% 95.8% (30) Same-Store Economic Occupancy 1 As of As of December 31, 2023 December 31, 2022 Basis Point Change Retail 93.4% 93.0% 40 Industrial 95.9% 98.2% (230) Office 82.8% 87.7% (490) Total Same-Store Economic Occupancy 93.8% 94.4% (60) 1 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 35 .
The largest of such amounts pertain to the Company's CRE redevelopment project related to Manoa Marketplace (with a target in-service date in the third quarter of 2023) totaling approximately $3.9 million to be spent over the next twelve months.
The largest of such amounts pertain to one tenant improvement project totaling $19.7 million to be spent over the next twelve months.
Gain (loss) on disposal of assets, net of $2.9 million for 2021 was primarily related to the sale of residual land on Maui that was part of the Company's Commercial Real Estate segment.
Gain (loss) on disposal of assets, net of $1.1 million for 2023 was primarily due to the sale of the Company's ownership interest in a legacy trucking and storage business on Maui.
During 2020, the Company recorded impairment of $5.6 million in connection with the disposition of GPRM in the quarter ended June 30, 2020. 32 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.
Loss from discontinued operations (net of income taxes) of $86.6 million for the year ended December 31, 2022, primarily consists of impairment of $89.8 million recorded in 2022, upon the Grace Disposal Group's classification as held for sale and measurement at its fair value less costs to sell. 30 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.
Any such risks could cause our results to differ materially from those expressed in forward-looking statements.
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.
Consumer spending on discretionary goods may also decline as a result of lower consumer confidence levels, higher interest rates or higher fuel costs, even if prevailing economic conditions are otherwise favorable. Inflationary Trends During 2022, the U.S. economy experienced the highest rate of inflation in nearly 40 years, which impacted a wide variety of industries and sectors.
Trends, events and uncertainties Inflationary Trends In recent years, the U.S. economy experienced the highest rate of inflation in nearly 40 years, which impacted a wide variety of industries and sectors. Inflation increased construction costs, including tenant improvements and capital projects, and operating costs.
The critical accounting estimates inherent in the preparation of the Company’s financial statements are described below. 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.
The critical accounting estimates inherent in the preparation of the Company’s financial statements are described below.
The year ended December 31, 2021, included cash outlays of $47.2 million, which was largely driven by $30.3 million of capital expenditures for property, plant and equipment improvements, $10.8 million related to the Company's acquisition of two commercial real estate assets using proceeds from the sale of legacy landholdings that qualified for tax-deferral treatment under §1033 of the Internal Revenue Code of 1986, as amended (the "Code"), and $6.2 million for two land operations assets that qualified for tax-deferral treatment under §1031 and §1033 of the Code.
The acquisition was structured partially with funds acquired from voluntary and involuntary conversions in accordance with Code §1031 and §1033 from the sale of land on Maui in 2021 and 2022. The year ended December 31, 2022, included cash outlays of $21.7 million, of which $21.4 million related to capital expenditures for property, plant and equipment for our CRE segment.
Operating costs and expenses for this segment increased primarily due to cost of sales associated with the landholdings and Maui Business Park II lot sales, but also included costs and expenses related to the segment's other legacy business activities (e.g., trucking service and renewable energy). 2020 : Land Operations revenue of $38.7 million and operating profit of $18.0 million during the year ended December 31, 2020, were primarily driven by land monetization, including the sales of development parcels at Maui Business Park II and unimproved land sales on the islands of Kauai and Maui.
Operating costs and expenses for this segment is composed of costs related to the Company's legacy business activities and legacy land holding costs, including a $5.0 million impairment charge related to conservation and agriculture zoned land on Oahu, as well as costs associated with the sales of Maui Business Park II lots and unimproved and other landholdings.
Removed
This section of this Form 10-K discusses 2022, 2021, and 2020 items and year-to-year comparisons between 2022 and 2021, and 2021 and 2020. Amounts in the MD&A section are rounded to the nearest tenth of a million.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+4 added−1 removed6 unchanged
Biggest changeThe following table summarizes the Company's estimated exposure to interest rate risk over each of the next five years and thereafter based on the expected remaining principal obligation as of the beginning of each period and the related interest rates based on the Company's debt obligations as of December 31, 2022 (dollars in millions): Fair Value at Expected Remaining Obligation as of Beginning of Year December 31, 2023 2024 2025 2026 2027 Thereafter 2022 Liabilities Fixed-rate debt $ 460.4 $ 425.4 $ 263.5 $ 223.1 $ 153.9 $ 113.0 $ 437.4 Average interest rate on remaining fixed-rate principal 4.26 % 4.22 % 4.23 % 4.11 % 4.10 % 3.90 % Variable-rate debt 1 $ 12.0 $ 12.0 $ 12.0 $ — $ — $ — $ 11.8 Average interest rate on remaining variable-rate principal 2 5.44 % 5.44 % 5.44 % — % — % — % Fair Value at Expected Remaining Notional as of Beginning of Year December 31, 2023 2024 2025 2026 2027 Thereafter 2022 Interest rate swap agreements 3 Variable to fixed remaining notional and fair value of swap asset (liability) $ 54.5 $ 52.7 $ 50.9 $ 49.0 $ 47.0 $ 45.0 $ 5.5 Average pay fixed rate 3.14 % 3.14 % 3.14 % 3.14 % 3.14 % 3.14 % Average receive variable rate 2 5.74 % 5.74 % 5.74 % 5.74 % 5.74 % 5.74 % Fair Value at Expected Remaining Notional as of Beginning of Year December 31, 2023 2024 2025 2026 2027 Thereafter 2022 Forward interest rate swap agreements 3 Variable to fixed remaining notional and fair value of swap asset (liability) $ 130.0 $ 130.0 $ 130.0 $ 130.0 $ 130.0 $ 130.0 $ (2.8) Average pay fixed rate — % — % 4.85 % 4.85 % 4.85 % 4.85 % Average receive variable rate 2 — % — % 5.61 % 5.61 % 5.61 % 5.61 % 1 Estimated variable-rate principal is based on the amounts outstanding and the contractual maturity date of the revolving credit facility as of December 31, 2022.
Biggest changeAs a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during future periods, our hedging strategies at that time, and actual interest rates. 43 Fair Value at Expected Remaining Obligation as of Beginning of Year December 31, 2024 2025 2026 2027 2028 Thereafter 2023 Liabilities Fixed-rate debt $ 427.1 $ 265.1 $ 224.6 $ 155.4 $ 114.3 $ 68.0 $ 414.9 Weighted average interest rate on remaining fixed-rate principal 4.23 % 4.24 % 4.12 % 4.11 % 3.91 % 3.57 % Variable-rate debt 1 $ 37.0 $ 37.0 $ — $ — $ — $ — $ 37.6 Weighted average interest rate on remaining variable principal 2 6.50 % 6.50 % — % — % — % — % Fair Value at Expected Remaining Notional as of Beginning of Year December 31, 2024 2025 2026 2027 2028 Thereafter 2023 Interest rate swap agreements 3 Variable to fixed remaining notional and fair value of swap asset (liability) $ 52.7 $ 50.9 $ 49.0 $ 47.1 $ 45.1 $ 43.0 $ 4.1 Average pay fixed rate 3.14 % 3.14 % 3.14 % 3.14 % 3.14 % 3.14 % Average receive rate 2 6.70 % 6.70 % 6.70 % 6.70 % 6.70 % 6.70 % Fair Value at Expected Remaining Notional as of Beginning of Year December 31, 2024 2025 2026 2027 2028 Thereafter 2023 Forward interest rate swap agreements Variable to fixed remaining notional and fair value of swap asset (liability) $ 130.0 $ 130.0 $ 130.0 $ 130.0 $ 130.0 $ 130.0 $ (2.7) Weighted average pay fixed rate — % 4.85 % 4.85 % 4.85 % 4.85 % 4.85 % Weighted average receive rate 2 — % 6.60 % 6.60 % 6.60 % 6.60 % 6.60 % 1 Estimated variable-rate principal is based on the amounts outstanding and the contractual maturity date of the revolving credit facility as of December 31, 2023.
With respect to exposure to changes in interest rates, the Company will continue to actively monitor the economic situation and its impact on interest rates and may take further actions that it determines is in the best interest of its business, financial condition and liquidity and capital resources. 45
With respect to exposure to changes in interest rates, the Company will continue to actively monitor the economic situation and its impact on interest rates and may take further actions that it determines is in the best interest of its business, financial condition and liquidity and capital resources. 44
Actual principal outstanding may be greater or less than the amounts indicated. 2 Estimated interest rates on variable-rate debt are determined based on the rate in effect on December 31, 2022.
Actual principal outstanding may be greater or less than the amounts indicated. 2 Estimated interest rates on variable-rate debt are determined based on the rate in effect on December 31, 2023.
As of December 31, 2022, the Company’s fixed-rate debt (after the effects of interest rate swaps), excluding debt premium or discount and debt issuance costs, consisted of $460.4 million in principal term notes and other instruments. As of December 31, 2022, the Company’s variable-rate debt under its revolving credit facilities was $12.0 million.
As of December 31, 2023, the Company’s fixed-rate debt (after the effects of interest rate swaps), excluding debt premium or discount and debt issuance costs, consisted of $427.1 million in principal term notes and other instruments. As of December 31, 2023, the Company’s variable-rate debt under its revolving credit facilities was $37.0 million.
As of December 31, 2021, the Company had $532.9 million of fixed-rate debt with weighted average interest rates of 4.1% and no variable-rate debt outstanding, and the aggregate fair value of its interest rate derivatives for variable to fixed interest rate swaps was a liability of $2.2 million. 44 Also, from time to time, the Company may invest its excess cash in short-term money market funds that purchase government securities or corporate debt securities.
As of December 31, 2022, the Company had $460.4 million of fixed-rate debt outstanding and $12.0 million of variable-rate debt outstanding with weighted average interest rates of 4.3% and 5.4%, respectively, and the aggregate fair value of its interest rate derivatives for variable to fixed interest rate swaps, including two forward interest rate swaps, was an asset of $2.7 million.
Removed
At December 31, 2022, and December 31, 2021, the amount invested in money market funds was immaterial. As noted above, recent disruptions in the global economy have contributed to significant volatility in financial markets and both near-term and long-term economic impacts remain uncertain.
Added
The table below summarizes the Company's estimated exposure to interest rate risk over each of the next five years and thereafter based on the expected remaining principal obligation as of the beginning of each period and the related interest rates based on the Company's debt obligations as of December 31, 2023 (dollars in millions).
Added
The table has limited predictive value as average interest rates for variable-rate debt included in the table represent rates that existed as of December 31, 2023, and are subject to change.
Added
Furthermore, the table below incorporates only those exposures that existed as of December 31, 2023, and does not consider exposures or positions that may arise of expire after that date.
Added
Also, from time to time, the Company may invest its excess cash in Federal Deposit Insurance Corporation ("FDIC") insured higher yield accounts and short-term money market funds that purchase government securities or corporate debt securities. As of December 31, 2023 and 2022, the amount invested in such financial instruments was immaterial.

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