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Alexander & Baldwin: Say Aloha to Hawaiian Real Estate

By Chris Katje

NEW YORK (TheStreet) -- Alexander & Baldwin (ALEX - Get Report) may be the best real estate company in paradise, and one of the least known.

A&B has a huge amount of commercial, residential and agricultural land in Hawaii. With high tourism dollars and disposable income of residents, the economy of Hawaii continues to thrive. Investors should consider following Alexander & Baldwin into Hawaii to capitalize on rich land assets and one of the strongest real estate portfolios available.

On June 29, Matson (MATX) completed the spin-off of Alexander & Baldwin. The break-up split up a company founded in 1870 into two unique companies. One company (Matson) deals with the transportation business, while the other (Alexander & Baldwin) maintains the real estate and land assets. Alexander & Baldwin operates its A&B Properties real estate segment along with several construction and natural reserve assets.

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A&B Properties has 87,000 acres of properties and over eight million square feet of retail space. Real estate assets are spread out across Hawaii, Arizona, California, Colorado, Georgia, Nevada, Texas, Utah and Washington. A&B's current push is towards acquiring and developing properties in Hawaii.

Alexander & Baldwin's real estate segment has been on an acquisition spree, which should cause investors to take note. Since the separation from Matson, the company has spent over $1 billion on deals. Here is a look at some of the larger deals done by the company:

  • Alexander & Baldwin acquired Pearl Highlands, a West Oahu retail property with over 400,000 square feet. The property is anchored by retailers including Sams Club, Pier One Imports (PIR), and Buffalo Wild Wings (BWLD). The acquisition, priced at $141.5 million closed on Sept. 17. The acquisition increased Hawaii's commercial portfolio square footage by 25% at the time. The deal made Alexander & Baldwin the second-largest owner of retail properties in the state.
  • On Sept. 10, Alexander & Baldwin acquired a residential portfolio that consists of some premium properties in Hawaii. The company is paying $97 million for the portfolio highlighted by 27 properties located on Kahala Avenue. The street is near the Kahala Hotel & Resort and Waialeee Country Club and is one of the premier residential areas in the state. Included in the purchase was agricultural and preservation zoned land as well. Amazingly enough, the land only value of the acquired properties is $117.6 million. Investors should note  the company plans to reposition, refurbish, and resell in the next three to five years.
  • The company's most recent acquisition was from the Kaneohe Ranch and Harold K.L. Castle Foundation. Alexander & Baldwin spent $373 million to acquire a large portfolio of retail and light industrial properties. The acquisition also comes with 585 acres of preservation-zoned land and 76 acres of agriculture zoned land.

Another key growth item for Alexander & Baldwin is its focus on creating communities. On April 9, the company announced its plans for a unique community in Kakaako. Through a partnership with Kamehameha Schools, which owns the land, Alexander & Baldwin is creating a property called "The Collection." Prices of apartments range from $300,000 (one bedroom) to $700,000 (three bedrooms). The 43-story building will also have retail properties and townhomes. Alexander & Baldwin maintains an option to buy the property outright from Kamehameha Schools.

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