Shopping Centers Today

SEP 2017

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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50 SCT / S E P T E M B E R 2 0 1 7 H awaii's biggest owner of grocery-anchored shopping centers has undergone no small amount of change through a nearly 150-year history. Honolulu- based Alexander & Baldwin, which started out as a sugarcane producer in 1870 and still owns some 87,000 acres, began embracing real estate development after World War II. Now the company is ramping up its real estate focus at home by reinventing itself as a REIT. The board announced the conversion in July, to become effective Jan. 1. "So much of the real estate investment capital out there is REIT- dedicated," said Christopher Benjamin, the company's president and CEO, in an interview with this publication. "By becoming a REIT, we will have a broader investor base and greater liquidity in the stock. That should then give us a lower cost of capital and make it easier for us to make acquisitions in Hawaii. It really helps accelerate the strategic direction we're taking." Alexander & Baldwin, the Aloha State's fourth-largest private landowner, manages some 4.7 million square feet of leasable space in Hawaii, including such retail assets as Kailua Town, in Honolulu County. Over the past few years, the company has been selling off real estate assets on the U.S. mainland and doubling down on its own famously scenic backyard. "We started the process in 2012," said Benjamin. "Back then, about 60 percent of our net operating income was generated on the U.S. mainland. Now that is down to 13 percent on a go-forward basis, so 87 percent of our NOI is from Hawaii." (Also in 2012, Alexander & Baldwin spun off Matson, Inc., one of the country's largest container-shipping concerns.) Thanks to this narrowed focus, Alexander & Baldwin's NOI has grown by roughly 38 percent, from $63 million to $87 million, over the past five years. "It demonstrates the success of our Hawaii growth strategy," said Benjamin. "Focusing on Hawaii made complete sense: We have been here for almost 150 years and have deep relationships and a deep understanding of the market." But there are still other reasons to be bullish on retail in Hawaii. For starters, the state is quite under-re- tailed, thanks in no small part to certain types of entry barriers that result from its location some 2,400 miles from California. The movements of e-commerce colossus Amazon.com may occasionally keep some mainland brick-and-mortar retailers awake at night, but Hawaii's relative isolation has effectively prevented online retail from taking hold to the same degree there, at least thus far. "Standard ship- ping typically takes a week to get here if not longer," explained Benjamin, "and you don't get free overnight ship- ping in Hawaii." Furthermore, Alexander & Baldwin's favored property type, needs-based retail, is similarly less vulnerable to e-commerce than, say, regional malls, Benjamin points out. Concentrating on Hawaii also helps the company court new tenants seeking to break into the state. "We are now getting critical mass within that [grocery- and drugstore-anchored] segment to allow us to do multilocation deals for new tenants that want to come in," he said. "It gives us the ability to really be a one-stop shop for a lot of retailers." Alexander & Baldwin is also reinvesting in older properties like Kailua Town, where the company took back a Macy's box for subdivision into roughly a dozen new spaces in a gathering spot called The Lau Hala Shops. The plan is to offer a mix of restaurants, retailers and services, among them Maui Brewing Company and a new restaurant by celebrity chef Roy Yamaguchi. "Historically, we had been putting our new capital into mainland expansion to get diversity," Benjamin said. "Now that we are coming back to Hawaii, one of the things I'm most excited about is what we are doing in terms of redevelopment." n An old company casts a fresh eye on Hawaii By Joel Groover Aloha again The Lau Hala Shops will provide a mix of retail and restaurants on the site of an old Macy's S I T E S & C I T I E S

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