Alexander & Baldwin Management Discusses Q1 2013 Results - Earnings Call Transcript

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Alexander & Baldwin (NYSE:ALEX)

Q1 2013 Earnings Call

May 09, 2013 5:00 pm ET

Executives

Suzy Hollinger

Stanley M. Kuriyama - Chairman and Chief Executive Officer

Christopher J. Benjamin - President, Chief Operating Officer and President of A&B Properties, Inc

Paul K. Ito - Chief Financial Officer, Senior Vice President, Controller and Treasurer

David Haverly - Senior Vice President of Leasing

Analysts

Young Ku

Sheila McGrath - Evercore Partners Inc., Research Division

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Alexander & Baldwin Earnings Conference Call. My name is Regina, and I'll be your conference operator for today. [Operator Instructions] As a reminder, today's event is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Ms. Suzy Hollinger, Director of Investor Relations. Please go ahead, Ms. Hollinger.

Suzy Hollinger

Thank you, Regina. Aloha, and welcome to Alexander & Baldwin's First Quarter 2013 Earnings Call. On the call with me today are Stan Kuriyama, A&B's Chairman and CEO; Chris Benjamin, A&B's President and COO; and Paul Ito, A&B's CFO. Along with us today -- also with us today is David Haverly, A&B Property Senior Vice President of Leasing, who will participate in the question-and-answer portion of the call.

Before we commence, please note that statements in this call and presentation that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relative forward-looking statement.

Factors that could also cause actual results to differ materially from those contemplated in the statements include, without limitation, those described on pages 18 to 28 of the companies 2012 Form 10-K. These forward-looking statements are not guarantees of future performance, and we do not undertake any obligation to update our forward-looking statements.

Management will be referring to non-GAAP financial measures when discussing results for the year, in particular, we will be referring to adjusted net income and diluted earnings per share that exclude the impact of separation expenses on first quarter 2012 results. We will also be referring to net operating income and included in the Appendix of today's slide presentation are reconciliations of GAAP to these non-GAAP financial measures and a statement regarding our use of these measures.

Slides from this presentation are available for download at our website, www.alexanderbaldwin.com. Slide 3 provides an agenda for today's presentation, after which, we'll take your questions. We'll start with Stan who will comment on results and review the first quarter operational highlights.

Stanley M. Kuriyama

Thank you, everyone, for joining us this afternoon. As noted in our earnings release, the company posted earnings in the first quarter of $0.12 a share. This compares to an adjusted $0.09 a share last year, which excludes separation cost. All business segments contributed to the improvement in results.

Leasing NOI increased 4% compared to last year, benefiting from higher portfolio occupancy of 94% and the net effect of acquisition and sales activity. We expanded our Hawaii portfolio with the purchase of Waianae Mall at an 8% cap rate using proceeds from last year's sale of 286 acres on Maui. In development, the pickup in sales activity that we noted last quarter continued in the first quarter and higher power margins drove the improvement in Agribusiness results.

Strategically, we've made significant progress in pursuing post-separation objectives for our real estate business, and we are starting to see the value creating activities that we have focused on over the past few years begin to bear fruit. We sold the Northpoint Industrial property in Fullerton, California, at a 5.9% cap rate and expect to use the proceeds to purchase the Napili Plaza Shopping Center on Maui, furthering our strategy of migrating the commercial portfolio back to Hawaii over time.

The Napili purchase is expected to close this quarter. Following the very strong sales results at Waihonua and ONE Ala Moana, we recently unveiled plans for our newest high-rise project, which we previously referred to as our Kaka'ako high-rise condominium. The Collection at 600 Ala Moana, as the project is now named, is currently planned to feature 3 different residential living choices for local buyers along with retail and dining options.

And at our Maui business project in Kahului that was announced earlier this month, that Maui's first Target store will be opening at the project. This will solidify Maui Business Park's position as the primary retail destination for Maui's residents and will be a significant boost to our lot sale program over the coming years. We also continue to gain traction at other projects and with our ongoing Hawaii investment program with various potential investments in the works.

Overall, Hawaii's economy is performing well. Our visitor industry remained strong, with arrivals and expenditures growing by 7% and 8%, respectively, through March as compared to last year. Hawaii hotels led the nation in occupancy and revenue per available room in the first quarter. Unemployment was 5.1% at the end of March, compared to 6.2% a year ago. These factors are positively influencing other economic indicators, such as state tax revenue collections, which were up 8% through March as compared to last year, and bankruptcy filings, which declined by 25% in the first quarter.

Notably, construction has turned the corner and is up this year after growing modestly in 2012. Through March, the value of construction permits increased by 13% compared to last year, primarily due to a significant increase in the value of residential permits on Oahu. State economists project solid annual growth in construction jobs and income in the 7% to 11% range between 2013 and 2015.

Oahu's primary housing market continues to perform well. Oahu's median single-family home resale prices were up 2% and condominium resale prices were up 9% in March compared to last year. Single-family sales volumes were up 4% and condo sales were up 22% for the same period. Days of available inventory remained at or near historic lows and Oahu commercial real estate market remained stable.

I'd like to now ask Chris to update you on our operations.

Christopher J. Benjamin

Thanks, Stan. I'll elaborate on how Hawaii's improving market is benefiting our sales activity and I'll also shed a little more light on our investment and development activity, which do demonstrate good progress and strategic execution as noted. And of course, I'll comment on performance of the commercial portfolio and the Agribusiness segment.

Starting on Slide 11, as Stan noted, we're seeing and participating in strong performance in the primary residential market on Oahu. Nearly 90% of our Waihonua high-rise condominium units have been pre-sold under binding contracts, more than 1.5 years before delivery, and we have fewer than 20 units remaining for sale. Also, as you can see from this picture, we're making good progress on construction with the tower foundation nearly complete. Vertical progress has begun. Preparations are being made to pour the second floor slab for the tower and we remain on schedule to deliver units in the first quarter of 2015.

On Slide 12, all of the 205 units that were available for sale at ONE Ala Moana, which is the Howard Hughes Corporation's luxury condominium tower, into which we're investing $20 million, have been pre-sold under binding contracts, for an average price per unit of $1.6 million or nearly $1,200 per square-foot. Construction started recently and the building is expected to be completed by the end of 2014. We expect that our full $20 million investment will be funded this month.

And with respect to the third tower that Stan mentioned, last month we held a joint press conference with Kamehameha Schools to announce The Collection at 600 Ala Moana. Positive coverage was received from both broadcast and print media, which has helped create excitement in advance the presales that are scheduled to commence this summer. This slide highlights The Collection's central location between downtown Honolulu and the Ala Moana Shopping Center. While The Collection is not a joint venture with Kamehameha Schools, it is an integral part of the exciting redevelopment program that they're implementing in the Kaka'ako neighborhood of urban Honolulu. Our efforts and theirs are mutually beneficial and we're pleased to be collaborating with such a strong organization in the redevelopment of this area.

The Collection's conceptual design has been completed and consists of a variety of product types including a nearly 400-unit high-rise condominium tower, a 54-unit mid-rise building that consists primarily of studios and 16 two-bedroom and 3-bedroom townhomes. The project also includes approximately 13,000 square feet of convenience, retail and restaurant space, most of it with prime Ala Moana Boulevard frontage.

While we haven't finalized pricing for the project, it is designed for the local market, with expected prices in the high-rise starting in the high $300,000 for 1 bedroom units to mid-$500,000 range for 2-bedroom units and mid-$700,000 range for 3-bedroom units. The configuration of the tower also allows for excellent ocean views from most of the units. The Collection will be extremely appealing to buyers who want to live in what promises to be an exciting new urban community in Kaka'ako. Recall that we have not yet had to purchase the land, as we continue to benefit from the option structure to acquire the site from Kamehameha Schools.

And lastly on Oahu, we recently completed an 11,500 square foot building at the Gateway at Mililani Mauka project, which will bring our total GLA at this project to 17,400 square feet. This site map identifies the new building, which is 78% leased. Tenant improvement work is underway and the first tenant is expected to open this month, with several more to follow in the third quarter. A lease also was signed with Starbucks for a 1,500 square-foot pad site at the project and construction commenced on that in April. Construction on the next increment of gateway's expansion, an additional 16,000 square-foot retail building will commence in June.

Turning to the neighbor islands. Last year's modest pickup in sales activity at our various resort developments is being sustained, despite the fact that neighbor island real estate markets are lagging Oahu's. At Kukui'ula, one sale closed in the quarter, a custom lot for $1.1 million. Additionally, 2 binding contracts have been secured for club cottages at a price of $2.75 million each and a binding contract has been secured for another custom lot for $900,000. These sales are scheduled to close this month.

Vertical construction activities continue to expand at Kukui'ula. This year, we commenced construction on 8 homes and will soon commence construction on at least 4 more homes. These homes are being built in partnership with 5 different homebuilders and will range in price from $1.2 million to $7 million. As we noted previously, we're seeing far greater interest in built product than in lot sales and we're working to meet this demand in a capital disciplined manner.

Sales and construction activity is increasing at the 137-unit Ka Milo joint venture development with Brookfield Homes on the island of Hawaii. Four units have closed in 2013, including a single-family home for $1.5 million in April. Five additional units are under binding contracts, consisting of 4 duplexes at prices ranging from $790,000 to $935,000 and a single-family home at $1.4 million, with closings on these scheduled through September.

As this market steadily recovers, we expect gradually to increase per unit margins, which have been minimal over the past few years, as our focus has been primarily on maintaining activity at the project and minimizing capital outlay. Sales activity is also continuing to pick up on Maui at the 150-unit Kai Malu joint venture at Wailea. Two units closed during the first quarter and one unit closed in April at $1.3 million. Two more units priced at $1.1 million and $1.2 million, respectively, are under binding contract and are scheduled to close in May, 5 units remain to be sold in this project.

Now based on the recovery in sales at Kai Malu, we're advancing our plans to bring on more inventory at Wailea. We're seeking county regulatory approval for a 70-unit low rise condominium project and have the ability to bring on, quickly, another 75-unit project if we see demand for higher priced product ramping up. While we're encouraged by this gradual return of buyers to resort residential projects, we'll need to see sustained economic recovery in the U.S. Mainland in general and West Coast markets in particular to achieve our resort residential sales objectives.

Turning to Slide 21 and also on Maui. Safeway's real estate development arm, Property Development Centers or PDC announced in April that it intends to develop a shopping center on 24 acres to be acquired from A&B, adjacent to the Maui Business Park. The release also noted that the center will include Maui's first Target store. PDC, which has developed a number of similar projects in Hawaii and on the U.S. Mainland, is currently conducting due diligence. This would not only be a positive earnings driver for us, but it should help catalyze activity at Maui Business Park.

Turning now to our commercial portfolio on Slide 23. Overall occupancy for our Hawaii properties was 92% in the quarter, up slightly from last year. Overall occupancy for our Mainland portfolio was 95% for the quarter, 3% higher than the first quarter of 2012, driven in part by improved office occupancy.

We've been successful in identifying additional Hawaii commercial portfolio expansion opportunities, including the 46,000 square-foot grocery-anchored Napili Plaza in Mahina, Maui. Actually, it's closer to Kapalua. We expect to be reinvesting proceeds from the sale -- the January sale of the Northpoint Industrial facility in Napili. So between Napili and Waianae Mall, which we acquired in January, we'll have increased our Hawaii property portfolio GLA by 216,000 square feet in the first half of 2013. We expect to accelerate the pace of Hawaii acquisition activity throughout the course of the year.

In early March, Pacific Office Properties, a Honolulu base publicly traded REIT, filed an 8K announcing the sale of the Clifford Center, a Honolulu office building to A&B. At the time of their announcement, we were in the early stages of due diligence. Following that due diligence, we decided not to proceed with the acquisition.

And finally, on Slide 24, touching on Agribusiness, operating profit in the Agribusiness segment improved in the first quarter, due primarily to increased power sales at HC&S and the fact that our Port Allen solar facility is now online. On our last call, we forecasted positive full year Agribusiness operating profit for 2013, but at half the level of 2012. To date, we've locked in prices for 98% of the 2013 crop and sugar yields appear to be on track with our plan. As a result, we're not changing our Agribusiness outlook at this time.

With that, I'd like to turn it over to Paul, to talk about financial matters.

Paul K. Ito

Thank you, Chris. Slide 25 provides an overview of operating profit by business segment for the quarter. First quarter operating profit in our leasing segment increased by 2% and NOI improved 4% compared to the first quarter of 2012. The increase was due primarily to improved portfolio occupancy and acquisition and sales activity.

Performance of our development and sales segment for the first quarter improved over last year, due principally to the sale of Northpoint, but also due to an improvement in joint venture results. And Agribusiness operating profit was $3.8 million or 9% higher than the first quarter of 2012, principally due to higher power sales from HC&S and the new Port Allen solar farm.

On Slide 26, consolidated net income for the quarter was $5 million or $0.12 per diluted share. This compares to an adjusted $4 million or $0.09 per diluted share last year, which excludes separation related expenses. The overall increase in net income and operating profit was partially offset by higher corporate expenses from increased professional service fees associated with increased investment activity.

On Slide 27, I would compare our balance sheet at the end of March to the balance sheet at year-end. Our debt to debt plus equity ratio remains low at 24%, which represents a 4 percentage point increase since year end, due to capital investments, including the assumption of a $20 million loan as part of the Waianae Mall acquisition and normal seasonal working capital attributable to our sugar operations. Our balance sheet remains strong, with $306 million of available borrowing capacity at quarter end.

Cash flow used in operating activities, excluding capital expenditures for real estate development inventory, was $21 million in the first quarter, moderately higher than in 2012, principally due to seasonal Ag working capital. The bottom of this slide provides a reconciliation of capital expenditures shown on a cash flow statement to total capital expenditures including amounts invested in joint venture projects and real estate developments.

In the first quarter, our growth capital additions amounted to $33 million, most of which was for growth capital, including $9 million of development capital for active real estate projects joint ventures and investments and $20 million for the acquisition of Waianae Mall, net of $10 million funded by 1031 proceeds.

I'll now turn the call over to Stan, for closing remarks.

Stanley M. Kuriyama

Thank you, Paul. As always, we are focused on building value by continuing to grow our development pipeline and by locating superior investment opportunities in Hawaii. I'm pleased with the progress we are making so far this year in implementing our post-separation strategies.

In development, we've increased our exposure to the urban high-rise market and both Waihonua and ONE Ala Moana have sold extremely well. The Collection condominium project is on schedule to commence presales this summer. On Maui, the Safeway transaction, if it closes, will be a major sale for the company and boost to Maui Business Park, and we are encouraged by the modest pickup in sales at our neighbor island resorts. We continue to expand our development pipeline and believe we are well positioned on Oahu and for market recovery on the neighbor islands.

In leasing, we saw a 4% growth in our commercial portfolio NOI in the first quarter and expect continuing improvement throughout 2013. We are also gaining traction on our long-term strategy to migrate our commercial portfolio from the Mainland to Hawaii. Should Napili Plaza close as expected this month, we will have grown our Hawaii GLA by 15% in 2013 and we continue to identify other commercial real estate opportunities in Hawaii. The overall activity level in our pursuit of good Hawaii investments has increased and we expect to be able to report on some of this in the coming months.

Finally, in Agribusiness, we were able to price the remainder of the 2013 crop, and as Chris mentioned, anticipate positive results for this segment in 2013. That concludes our presentation this afternoon, and we'd now be happy to answer your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question today comes from the line of Young Ku with Wells Fargo.

Young Ku

My first question is with regard to the 24-acre sale to Safeway. Could you comment on the pricing?

Christopher J. Benjamin

Well, under the terms of our agreement, we're not at liberty to disclose pricing. I would say though that it's generally consistent with wholesale pricing for light industrial zoning in that area. And so if you were to look back at prior transactions, you'd be in the ballpark.

Young Ku

Okay, got it. And you've mentioned that you guys decided to pass on the Clifford Center transaction. I was wondering why you guys decided to pass on it after proceeding with due diligence?

Christopher J. Benjamin

Yes, I really can't comment on that. I think that really says at all. We conducted our due diligence and felt that it wasn't an opportunity that we wanted to pursue. I really can't elaborate on that.

Young Ku

Okay, okay. That's fair. And in terms of new investment opportunities in Hawaii, could you comment on, maybe, what product types, on the commercial side, that you guys view most favorable at this point between retail, industrial and office?

Christopher J. Benjamin

Yes, I'll make a short general comment and ask David to jump in. We -- just to reiterate, for those who may not know, we typically look to have a fairly diversified portfolio and we will, over time, try to maintain some level of diversification. So the short answer is, we'll look at office, industrial and retail and perhaps other asset classes. But specifically to, kind of the current market and what we're seeing and what we like, I'll let David comment.

David Haverly

Sure. Based on our current acquisition criteria and what we're looking at, we're finding a lot of success on the retail side, primarily due to the growth in the retail market and the growth in rents we're seeing and other factors relating to the economy. So as you can see by the announcement for Waianae Mall and Napili Plaza, that tends to be our current factor. But again, as Chris indicated, we're looking at all asset classes and will continue to do so.

Young Ku

Okay, okay that's helpful. And maybe I misunderstood, but the Waianae Mall transaction, you guys said that you did it out of 8 cap. I think previously, you said it was around 7.5. Is that right? Did something change?

David Haverly

You're correct. We're 8 cap after our acquisition and execution of a new lease upon closing of the property.

Young Ku

So it's beyond the 93% lease? Or is that [indiscernible], at 93% leased?

David Haverly

93% leased was at acquisition when the lease was signed.

Young Ku

Okay. And do you happen to -- can you give pricing range on the Napili transaction, maybe?

David Haverly

At this point, we can't comment on it, as we're still finalizing the closing.

Operator

[Operator Instructions] Your next question comes from the line of Sheila McGrath from Evercore.

Sheila McGrath - Evercore Partners Inc., Research Division

I was wondering if you could talk a little bit more specifically on The Collection, the approximate cost of the project and if you're entertaining -- taking on a partner for that development?

Christopher J. Benjamin

Yes, Sheila. Based on where we are in the project cycle, I wouldn't be prepared to talk about cost estimates. We of course haven't gone out for bids yet. We're still -- haven't even gotten to presales yet. So we're still working both the pricing and, of course, will be, for a while, working the cost estimates. Of course, we've got pro-formas and we've made assumptions, but I wouldn't be comfortable disclosing anything at this point. Unless Stan or anyone else wants to add to that. And then, I'm sorry, I forgot the second question.

Sheila McGrath - Evercore Partners Inc., Research Division

No -- I just asked if you would -- a partner.

Christopher J. Benjamin

Yes. So this would -- we may well look to bring in financial partners both from a capital planning and risk mitigation standpoint, we may do that. But from a development standpoint, we anticipate and plan to be the developer of the project.

Sheila McGrath - Evercore Partners Inc., Research Division

Okay. And then I did notice that...

Christopher J. Benjamin

But just to add to that, I would, from a modeling standpoint, I would assume that we will bring in a joint venture partner for the sort of half the capital. It would probably be the going assumption.

Sheila McGrath - Evercore Partners Inc., Research Division

And given that you haven't started the sales and everything, it safe to say that it's probably a 2016 kind of closings, or it's not 2015? Is that fair to say?

Christopher J. Benjamin

Probably a safe assumption, yes.

Sheila McGrath - Evercore Partners Inc., Research Division

Okay. And then I did notice that Hawaiian Airlines is going to start direct flights to Beijing in 2014. And also that there's some proposed legislation to simplify the Visa process for people from Hong Kong. And I was just wondering if you could talk about the potential there in terms of China visitors and what you're hearing in Hawaii?

Stanley M. Kuriyama

Sheila, this is Stan. I think the potential does remain quite robust. I mean, 2012, when I look at the numbers, there are about 120,000 or so Chinese visitors, which is about 1.5% of the total number of visitors to Hawaii. So there's enormous room for growth. I mean -- and this compares, for example, to the Japanese, where we see 1.2 million visitors, so about 15%. So the potential for growth is enormous. And the thing we like about the Chinese visitors is that they have thus far been by far the highest spenders per day while in the state. The Japanese have typically been the highest spenders when visiting Hawaii, but the Chinese, on a daily basis, are outspending the Japanese considerably. I mean -- so those are some good statistics that I think bode well for Hawaii tourism.

Sheila McGrath - Evercore Partners Inc., Research Division

Okay. And then the recovery in Hawaii seems so strong on Oahu, across most whether it's visitor arrivals or residential trends. And -- but still kind of slower on the neighbor islands. Just wondering if you could talk about, like historically if this is how it typically plays out, it takes a while for the recovery to hit the neighbor islands, and just a little perspective on how that is historically and how you think it may play out in the current recovery?

Stanley M. Kuriyama

Yes. I think if you look back historically, Sheila, the neighbor islands have always lagged Oahu. The economic recovery is usually initiated by tourism. We have such a large and powerful tourism base on Oahu that as tourism picks up, it really begins to affect Oahu immediately and quite substantially. The neighbor islands of course have much smaller populations so while the tourism might increase, it just doesn't have the direct impact that it has on Oahu. The other major factor influencing the different island economies is the military. We have a much larger military presence -- much, much larger military presence on Oahu relative to the neighbor islands. So the military has sustained its investment in the state. You continue to see the benefits much more on Oahu, as opposed to the neighbor islands. And then finally, construction, that's the third main engine for our economy. And usually that's in response to for some improvement in primary housing. So as the Oahu primary housing market recovers, you see the construction sector improve most significantly on Oahu. So for kind of all those reasons the neighbor islands typically lag. Among the neighbor islands, you might see different results. But traditionally, that's been the case and it's certainly what we're seeing in this cycle as well.

Sheila McGrath - Evercore Partners Inc., Research Division

Okay. And last kind of housekeeping question. On G&A, in the quarter, it was a little bit higher than I had expected. I'm wondering if you could comment on that and if you think first quarter is a good quarterly run rate for the year?

Paul K. Ito

Sheila, this is Paul. As I mentioned, we did have some professional service fees related to a range of investments that we're looking at. We can't elaborate further at this time, but our previous guidance, excluding those types of fees, is still appropriate, which is a run rate of about $18 million.

Operator

Your next question is a follow-up question from the line of Young Ku at Wells Fargo.

Young Ku

I just have a quick couple of follow-up questions. In terms of Agribusiness, you guys locked in pretty much all of 2013 sugar prices. When do you guys expect to start locking in 2014?

Christopher J. Benjamin

Well, this is Chris. The good thing about our pricing agreement with our raw sugar customer -- and by the way, everything I say is related just to -- the sugar we sell is raw sugar. We also sell 10% or so of the crop as specialty sugar and that's priced separately through long-term agreements. But for the raw sugar that we sell, our customer is C&H and we have a relationship with them that allows us to lock in pricing whenever there's active futures trading. So -- but we don't have to lock it in. So in the case of 2012, 2013, we locked in sugar pricing well in advance because the markets were strong and we're very glad we did that. But in the case of 2014, we don't actually have to start pricing until we physically deliver the sugar, which will be probably May next year, May or June of next year. So we will sit tight for now given where the markets are and we will certainly take advantages -- advantage of the routine normal volatility that we see in the market, as we see it. And for some of the crop, or a large part of the crop, we may just wait and let it market price next year.

Young Ku

One last question, regarding CapEx. You used to have about $110 million of spend for '13. Could you maybe summarize some of the uses-- the sources for the capital?

Paul K. Ito

This is Paul. I would say the biggest -- the top 3 projects or capital expenditures that we're looking at is we usually create day bucket of identified investment opportunities and that's anywhere from $20 million to $30 million. And then of course, we mentioned our ONE Ala Moana project, which is a $20 million investment that we expect to make. We're still finishing up construction at Maui Business Park. So that's a pretty significant piece of the capital. And then of course, there's just a various number of other projects that Chris talked about that there's capital going in. For example, some modest capital for the Kukui'ula vertical construction.

Christopher J. Benjamin

And the standpoint of -- okay.

Young Ku

I was just thinking about the sources of the $110 million, of the remaining CapEx.

Paul K. Ito

Source? Okay. I'm sorry, I misunderstood your question. I mean, essentially, we've always said we want to maintain a financial flexibility. So we do have sufficient capacity on the revolver to fund that as well. Obviously, in addition to the source of funds from our commercial portfolio. But our -- going in intent is, we're going to fund it on the revolver. And longer-term, depending on our capital outlook, proceeds from sales of our pipeline projects, we do look at whether we fix some of that -- or term of some of that debt out on fixed rates.

Operator

Your next question is a follow-up question from the line of Sheila McGrath with Evercore.

Sheila McGrath - Evercore Partners Inc., Research Division

Yes, just on Kukui'ula. I was wondering if you could -- I know there's not that much volume at this point. But if you could talk about the buyer profile. Are they from West Coast mainland? That's the first part of the question. And the second is, you mentioned that your partnering with builders there to get more built product. I was just wondering if you could kind of describe to us how that works in terms of funding. Is it a joint venture, the structure of those deals?

Christopher J. Benjamin

Okay. As far as the buyer universe, Sheila, it really hasn't changed much. It continues to be generally West Coast of the U.S. and also Canada, where we've had a couple of recent sales to buyers from Calgary, I believe, and continued interest, of course, from the West Coast. I would say, we are drawing some buyers from East Coast and Midwest, but I wouldn't say that the buyer profile has changed all that much. For example, we're not seeing a big influx of Asian buyers yet, but still hope that at some point in the future, that will happen. Although, this product really is targeted more towards a Western buyer. As far as the joint ventures or projects that we've got going, these are relatively small deals. Some are structured as small joint ventures, into which we contribute modest amounts of capital to build homes or a few homes. Others are structures where we have essentially fronted some of the land and then builders have built homes and we get the land value, some or all of it, upon closing of the transaction. But for the most part, the homes that are being built right now are in relatively small JV programs that really only involve $1 million to a few million dollars of our capital. Just as a catalyst to get the homes going.

Operator

Ladies and gentlemen, this concludes the question-and-answer portion of today's event. I'd like to turn the call back over to management for any closing remarks they'd like to make.

Suzy Hollinger

Thanks, everyone, for being on the call today. If you have any follow-up questions, you can contact me, Suzy at (808) 525-8422. Thank you.

Operator

Ladies and gentlemen, thank you so much for your participation today. This does conclude the presentation and you may now disconnect. Have a great day.

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