Alexander & Baldwin, Inc.

Thank you, Ann. Aloha, and welcome to Alexander & Baldwin's Third Quarter 2012 Earnings Call.

On the call with me today are, Stan Kuriyama, A&B's Chairman and CEO; Chris Benjamin, A&B's President and Chief Operating Officer; and Paul Ito, A&B'S Chief Financial Officer. Also with us today is David Haverly, A&B Properties’ 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 relevant forward-looking statements.

Factors that could cause actual results to differ materially from those contemplated in the statements include without limitation, those described on Pages 20 to 38 of the Information Statement filed as Exhibit 99.1, the company's registration statement on Form 10. These forward-looking statements are not guarantees of future performance; 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 quarter. In particular, we will be referring to adjusted net income and diluted earnings per share that exclude the impact of separation expenses and noncash [indiscernible] reduction in the carrying values of 2 Mainland [indiscernible].

We will also be referring to cash net operating income.

Included in the Appendix of today's slide presentation are reconciliations of these GAAP to non-GAAP financial measures, and a statement regarding our use of these measures. Slides from this presentation are available for your download at our website www.alexanderbaldwin.com.

This slide provides an agenda for today's presentation, after which we will take your questions.

We'll start with Stan, who will comment on the quarter.

Thank you everyone for joining us this afternoon. As noted in our earnings release and on Slide 4, the company posted solid earnings in the third quarter.

Adjusted to exclude separation costs, earnings were $0.32 per share for the third quarter compared to $0.10 a share last year. The primary drivers of the improved results were an 11% increase in leasing operating profit, a $5 million improvement in Agribusiness performance and a $7.3 million gain on the sale of 286 acres of non-core agricultural land.

Paul Ito will go over the results in greater detail later in the presentation.

During the quarter, we also made strides in our operating performance. We continue to identify good investment opportunities in Hawaii and announced a $20 million preferred investment in One Ala Moana [ph], a 206 unit luxury high rise condominium project planned at the Ala Moana Shopping Center.

Occupancy and rents in our commercial portfolio continued to trend upwards. We've made excellent progress in reducing our 2013 lease rollovers.

We've also seen a modest, but welcomed pickup in activity at Kukui'ula; Chris Benjamin will detail all of this in his remarks, but first let me update you on the Hawaii economy.

Economic indicators for Hawaii continued their positive momentum. Tourist expenditures and arrivals remain extremely strong up 19% and 9%, respectively, for the first 9 months of the year with all major markets contributing to this extraordinary growth.

Seat capacity to Hawaii increased 7% over the period, and Oahu Hotels led the nation in average daily rate increases with a 15% increase over last year. For these reasons, tourism officials continue to expect 2012 to be the best year for arrivals and expenditures in the state’s history.

Turning to Slide 7. Tourism’s performance is benefiting Hawaii’s broader economy.

Unemployment dropped to 5.7% in September, the first time it’s fallen below 6% since December 2008. Oahu’s unemployment rate is even lower at 5.1%.

Bankruptcy filings are down 26% year-to-date, and foreclosures are down 30%.

First Hawaiian Bank’s business activity report indicates credit sales activity is up over 9% in the third quarter compared to last year, and state revenue collections are projected to be up by 15% this fiscal year compared to 2011; all positive signs that the economic recovery is beginning to extend to Hawaii consumers. Construction permits were also up 33% for the first half of the year, but much of this was due to solar energy installations as opposed to major site work or construction projects.

Oahu real estate is rebounding nicely. Through October median and single family home prices were up 9%, and condominium prices were up 4%.

In October, residential sales throughout the state were up significantly over October of last year. Single family home sales were up 26%, and condo sales were up 33%.

All of this is being driven in part by a shrinking inventory with only 3.3 months of inventory of Oahu homes available at the end of September, a 44% decline from last September.

The Oahu commercial real estate market is also performing well. Industrial and retail vacancies remain below 5%, and office vacancies have stabilized at about 13%.

All-in-all, the local economy is driving a definite turnaround in our primary housing and commercial sectors, but it will still take continued improvement in the Western U.S. economy and in consumer confidence to materially benefit our resort residential sales.

I will now ask Chris to update you on our operations.

Thanks, Stan, and aloha to everyone on the call. As Stan mentioned, we are encouraged by the improvement in the Hawaii real estate markets.

I would say that statewide, we are still in more of a buyer’s market than a seller’s market, but we are beginning to turn the corner, and we are seeing a modest pickup in sales activity at our various resort developments as well as continued strength in the Honolulu high rise market. Demand for our new condo product in Honolulu continues to drive sales activity at our Waihonua project.

In addition, we are identifying good investment opportunities and I’ll touch on those in a moment.

Slide 10 shows recent and perspective sales activity at Kukui'ula. During the quarter, we closed 2 cottage sales and a lot sale; this is the first developed for custom home lot sale since 2008.

In October, we closed another cottage sale, and anticipate 2 additional cottage sale closings in December, which will take the project over $20 million in transactions for the year. This figure includes home sales by our builder partners where we recognize only the value of the lot.

We are not at the level we hope to be in the next year or 2, but this pace of closings is quite a positive change from prior years and shows that our marketing and home building initiatives are paying off.

At our other resort projects progress is more limited, but nonetheless positive. In September, 1 of 3 single family homes under construction at our Ka Milo joint venture on the Big Island was completed and sold for $1.3 million.

Year-to-date, we have closed 6 units, a combination of single family and duplex units at an average price of $1.1 million.

We also closed the first developer sales since 2010 at our Kai Malu condominium project in Maui at a price of $1.2 million. While this progress at our various resort projects is modest, we believe it does signal the gradual return of buyers to this asset class.

The results in 2013 will depend largely on the strength of the boarder U.S. market, which drives the resort segment in Hawaii.

Returning to Waihonua on Slide 12. This is a primary development focused for us right now.

We have executed partnership documents with our investment partners who will be contributing half of the $65 million of equity capital for the development. In addition, a commitment letter for $120 million construction loan has been executed with the syndicate of lenders led by First Hawaiian Bank, and we finalized our contract with Hawaiian Dredging as general contractor for the construction of the project.

Hawaiian Dredging was founded in 1902, has built many of Hawaii’s most significant developments and has significant high rise experience. Foundation excavation began at Waihonua in September, and in the process, ancient Hawaiian burials were uncovered, which is not uncommon for developments in this area of Honolulu.

We are working closely with representatives of the Hawaiian community and government agencies to ensure the burials are treated with care and respect. At this time, we don't expect that these findings will significantly impact the cost or timing of construction or the delivery of the units, but we will be in a better position to evaluate the impacts in the next couple of weeks.

In order to respond to quickly and maximize our flexibility and appropriately dealing with these issues and to keep construction on track, we've elected to amend our condominium documents to reserve additional developer rights. As a result of this amendment, we've decided to offer our buyers a 30 day right of recession.

Now Waihonua will be the last condominium to be built in this premier high rise neighborhood block adjacent to the Ala Moana Center, which is Hawaii’s premier shopping destination and one of only a few urban Honolulu condominium projects expected to reach the market in the next couple of years.

For these reasons, we are confident that buyers will continue to value the great location, pricing, design and amenities that Waihonua has to offer. We continue to seek additional projects to add to our development and investment pipeline, and I'm personally encouraged by the progress we are making.

During the quarter, we agreed to invest $20 million in another near-term Honolulu residential project, the One Ala Moana Tower, a 206 unit ultra luxury condominium project to be constructed atop the Nordstrom parking structure in the Ala Moana Center. This investment will be in the form of mezzanine depth with a preferred return and profit participation.

The project’s prime location is expected to appeal to Asian and local buyers, and there already is a strong interest in the project. Marketing is expected to commence soon.

Also in the category of new projects, we are making good progress on planning for an ocean view high rise condominium on another urban Honolulu site in Kukui'ula that we've secured under a long-term option agreement with Kamehameha Schools.

As we've mentioned previously, the site is near down town Honolulu and close to shops and beach parks, an attractive location for young professionals and empty nesters alike, and we expect to begin marketing this project in 2013.

Turning to our commercial portfolio on Slide 16. Overall occupancy for our Hawaii properties increased by 2 percentage points to 93% in the quarter, due to the 100% lease up of an industrial property in West Oahu.

Overall, occupancy for our mainland portfolio was 93% for the quarter, slightly higher than last year.

We've been pleased to see a pickup in activity in our mainland office properties. During the third quarter, we executed 10 new leases comprising 66,000 square feet of office space.

Market rents are consistent with prior quarters, but we are seeing a modest reduction in concessions in certain markets.

At the Concorde Commerce Center in Phoenix, Arizona, we recently released 80,000 square feet of office space that was set to expire in 2013, and the new tenant leased an additional 25,000 square feet of space in the same center. The releasing of this space together with the second quarter renewal of the Savannah warehouse leased to Matson Logistics and other lease renewals to-date has substantially reduced the lease roll over originally projected for 2013.

Over the course of the past 3 quarters, the 2013 lease rollover exposure has been reduced from 29% of portfolio GLA to just 11% and from 16% to 8% of portfolio rents. As we've indicated, it’s our intent to migrate our mainland portfolio back to Hawaii opportunistically over time, and we're making progress in identifying commercial assets in Hawaii, both for this migration and for the reinvestment of proceeds from Hawaii land sales.

We can’t predict with certainty when we will close acquisitions, but the pace of activity on the acquisition front is high enough that we're selectively marketing a few mainland assets to generate proceeds for Hawaiian acquisitions. In Agribusiness, we're pleased by our year-to-date and projected full-year financial performance.

This is the result of strength in the sugar business and some of the enhancements we've made to our supporting operations.

Our enthusiasm over 2012 performance, however, is being moderated somewhat by concerns over long-term sugar prices, which have fallen significantly from the beginning of the year. Fortunately, we've priced all of this year’s crop and 67% of next year’s crop at favorable levels.

We continue to anticipate that 2012 sugar production will be in line with 2011.

And finally, we're nearing completion of our 6 megawatt solar farm in Port Allen, Hawaii. We expect to place the project in service in December.

Total project cost is projected to be $23.5 million, which is 6% below budget, and we continue to expect that 70% of this cost will be recaptured by the end of 2013. This investment is expected to yield an after-tax return of about 20% and generate roughly $2 million in annual pre-tax operating cash flow.

So overall, we're extremely pleased with the progress and the success of this project.

So with that, I would like to turn it back over to Paul to talk about financial measures.

Thank you, Chris. Slide 18 breaks down operating profit by business segment.

As Stan mentioned, we continue to see strong performance in our leasing and agribusiness segment and the Ag parcel sales on Maui drove development sales results. The leasing segment posted an 11% increase in operating profit from 2011; this significant improvement was due to lower expenses and the favorable impact of acquisitions and dispositions.

Cash in [indiscernible] was $16 million in the quarter, an 8% improvement compared to last year.

Development and sales segment results for the quarter were consistent with last year. Chris previously described the sales for the third quarter of 2012.

Sales in the third quarter of 2011 included an industrial property in Hawaii and a residential unit on Oahu.

As shown on Slide 21, agribusiness operating profit for the third quarter of 2012 increased $5.3 million. The improvement was related to higher sugar margins resulting from higher prices per ton, but was also due to the timing of sales as we completed 2 sugar voyages in this quarter compared to one voyage last year.

In addition, molasses and power margins were higher. The tiny benefit of the extra sugar voyage, however, will reverse itself in the fourth quarter.

Corporate expenses were $3.7 million in the quarter, which was $1 million lower than last year due to lower compensation related expenses and lower professional service fees partially offset by $700,000 of separation related expenses.

Effective tax rate for the quarter was approximately 12%, and for the year-to-date period including taxes on discontinued operations, effective tax rate was approximately 22%. The reduction in the effective tax rate is primarily due to federal and state renewable energy credits partially offset by certain non-deductible separation costs.

Slide 23 compares our balance sheet at quarter-end to year-end. Our debt-to-debt plus equity ratio remained low at 22% at the end of the quarter, but we do expect our leverage to increase as we find attractive investment opportunities.

Our balance sheet remains strong with $325 million of available borrowing capacity, which positions us well to capitalize our new investment opportunities.

Cash flow is used in operating activities were $13 million for the first 9 months of the year, an increase of $7 million compared to last year. The increase was primarily due to $23 million of increased real estate development and capital expenditures principally related to our Maui Business Park 2 project and $6 million of cash separation cost.

The bottom of this slide provides a reconciliation of capital expenditures shown on the cash flow statement to total capital expenditures, including amounts invested in joint venture projects and real estate developments. Through the third quarter, our capital expenditures amounted to $84 million, which included $41 million of development capital for active real estate projects joint ventures and investments.

$19 million for the Port Allen solar project and $9 million for 1031 reinvestments with the remainder primarily for maintenance CapEx in our leasing and Ag segments.

For the balance of the year, we anticipate another $16 million in capital expenditures, principally for development projects and maintenance CapEx.

I will now turn the call over to Stan for closing remarks.

Thanks, Paul. Overall, we are pleased with the company's performance in the quarter.

Tourisms exceptional performance benefiting the broader Hawaii economy, resulting in strong occupancies in our retail and industrial markets and a definite turnaround in our primary housing market. We’ve expanded our investment in the strong urban Honolulu market with a $20 million investment and luxury high rise at Ala Moana Center.

Planning is progressing for another high rise condo project closer to downtown Honolulu.

We continue to very actively evaluate a wide range of residential opportunities both in Oahu’s urban core and the suburbs. And finally, while still modest, we are encouraged also by the pickup in sales activity at Kukui'ula.

Looking forward to the fourth quarter, we continue to anticipate solid performance in our commercial portfolio. However, the fourth quarter is typically our lowest quarter for leasing, so results for the quarter are expected to be modestly above last year.

It’s still too early to tell which of our property sales will be closing in the quarter, and therefore, we are unable to provide any specific guidance on sales at this time.

Finally, earnings from our Ag segment will decline from last year’s fourth quarter, as we expect 2 sugar voyages in the quarter compared to 3 last year. Despite this timing difference, the fourth quarter is expected to cap off an extremely strong year in agribusiness performance.

As Chris mentioned, we are also beginning to gain traction on locating Hawaii replacement commercial properties in order to migrate our mainland investments to Hawaii. And I'm pleased by the large number of other real estate investment opportunities in various stages of evaluation.

As we look towards the completion of what has been a historic year for Alexander & Baldwin, it’s imperative that we continue to build value in our land holdings and through our capital investments. We are encouraged by Hawaii’s economic performance, and we remain confident in our ability to locate and make good investments in this state for our shareholders.

That concludes our presentation this afternoon, and we would be now happy to answer your questions.

Can you just give us a little bit more color on the 286 acres of land? What exactly was that, and as far as the evaluation per acre, is that something that we should use going forward, or is this more of a kind of a onetime case?

Yes, this is Chris. I'll address that.

First of all, these are Ag lands in Central Valley of Oahu, I'm sorry of Maui, that were not in use for sugar cultivation for a variety of reasons. They are very distant from the mill, and they didn't have quite the characteristics that we find most attractive in sugarcane lands, but they were attractive to another Ag user, and so it was sold to an Ag user for crop cultivation.

As far as pricing goes, the $29,000 or so per acre was very much in line with the range that we've had in transactions over the last several years. It’s a little bit at the higher end.

It was very attractive price, but it's not inconsistent with that range, and having said that that doesn't mean that all of our non-core Ag line is worth $29,000 an acre, but there is quite a wide region, and we've talked about that in the past that it can fluctuate based on a lot of different characteristics of the land and what it's going to be put to use for. But it was an attractive price, but I wouldn't project out or predict the timing of any additional sales of that kind.

And then as far as the pipeline or acres that you are close to potentially selling, can you give us an idea of what the composition might look like? Is that also more kind of Central Valley Ag land, or is this going to be other types of land?

Well, it is a pretty wide range, and this is going to sound like an evasive answer, but it's really just a reality of the fact that we look at selling very diverse kinds of non-core land. Some of it has, in the past, been almost unfarmable, but it's been used for base yards.

Some of it is farmable land. Some of it is really more well suited to Ag lot subdivisions, and we got one project on Kauai called Brideswood [ph], where we're actually putting some improvements in to create Ag lots for farming and other uses.

So it really depends. I would say that, we don’t project as I said before, the timing or the quantity of the acreage that we expect to sell, but we do have a number of parcels that are in various stages of marketing for sale.

I don’t know, Stan, if you want to...

Yes, I think, basically we call these sales non-core because they’re not used for agriculture operations. Or they're not slated for any type of near-term urban development.

And so I think, what you can anticipate going forward, principally these types of non-core sales, and as we mentioned, our goal is to accelerate the sales of those types of properties, but we’ve never tried to target any specific number of acres for any given year.

I was wondering if you could walk us through the Port Allen project. It's clearly compelling from a return perspective, but it's a little bit confusing.

So I am wondering if you could just go through how you get the returns in the lower tax rate and recapturing the cost, and then, separately, how we should think about modeling it. How long that lower tax rate lasts, and then when we can see the cash flows.

Why don’t I just start briefly for those who may not have been around and been in the stock when we first announced this middle of last year, and then I will let Paul jump in on some of the details of financials. Essentially what we did here is as we took 20 acres of industrial zone land, and we entered into an agreement with the local utility on Kauai to put in a 6 megawatt solar farm and sell them power for 20 years, and we’ve got a fixed price contract with them, and the Public Utility Commission here has approved that, and it’s about a $0.20 a kilowatt hour and it’s attractive relationship with the local utility.

But as we indicated when we first announced it. It is very much use driven by the tax credit such as significant part of the return, and as I said before with the help of the tax credits, we actually will recover about 70% of the investments within just over the first year of operation of the solar farm, so that’s really what drives the very attractive returns.

And then Paul can elaborate a little bit on the details on that.

Let me first start by describing what happens from a cash perspective versus a book perspective at a high level. So on a cash perspective, we essentially recognize the significant portion of the benefits upfront.

Its front end loaded, whereas for book purposes that benefit of the tax credit is actually recognized over time. So as Chris referenced in his remarks, approximately 70% of the invested capital gets recovered within the first year of operation from the tax credits but also from accelerated depreciation as well as cash flows from the operations of the assets.

Now from a book perspective, again it’s drawn out. So what you will see in 2012 is a benefit to our income tax rate, and you’ve seen that the year-to-date effective tax rate was 22%, but on a go-forward basis, you are not going to see in the rate.

What are going to see is a reduction in our depreciation on that assets because the tax credit reduce the book carrying value on that asset and so what the depreciation is lower in each year and that's how we get the benefit over the life of the asset from a book perspective.

So the 12% effective tax rate in the quarter, we should not assume that, it should flip back to a more normal corporate tax rate?

Right, so 2013 and beyond, I would target sort of near the statutory tax rate. Now we are looking at a number of additional renewable energy type investments, and so to the extent we are entering into those transactions, that would affect the tax rate.

But absent those investments we are targeting closer to the statutory rates 30% to 39%.

And then, I think Chris mentioned in his prepared remarks about $2 million of cash flow, and I just wanted to know, when will we see that, and does comes through the Ag business line item?

Yes, that will flow through the Ag segment, correct.

And so is that $2 million an annual number that since you are putting in operation in December, it' $2 million kind of annuals, is that were you talking about?

Let me just clarify one point. So the $2 million is cash flow.

From a P&L perspective, there is depreciation on the asset, and the asset will have a book bases of slightly less than $13 million and that will be depreciate over a 15 or 20 years, and there is a very nominal operating cost related to that.

Okay, great. And then question on Kukui'ula, and I will get back in the queue; just it is good news, it seems like you do have some follow through contracts beyond the ones closing.

Could you give us a little bit of detail on the buyer? Are these like West Coast Mainland buyers, and what you attribute the modest pick up to?

Yes, the buyers in general are very consistent with our historical target market, which has been West Coast, Southwest of the U.S. California; we actually are seeing some buyers from Canada, British Columbia, Calgary.

So I think that we are very consistent with what we've expected. We are not yet seen for example Asian buyers.

We've had a couple of local buyers, so really no surprises in terms of the buyer universe. And that's where we are seeing most of the traffic coming from in the sales office because as you can well imagine this level of sales is driven by a much higher level of activities to the sales office and project because it’s a fairly long courtship here, so this is the result of a lot of good effort.

As far as going forward, I think that what's really driving the success is the fact that we are getting more certainly tourism through Hawaii, but also we are developing more homes at Kukui'ula, and the market right now is much, much stronger for built product than it is for lots, and that is really reinforcing the value of what we've been doing in terms of stimulating home construction, both by ourselves as well as by third-party builders. So we feel good about the strategy and hope that it continues to bear fruit next year.

So there is better activity at Kukui'ula, but at the same time, your net loss from JVs remained about the same, I think at about negative $1 million or $1.1 million, given that you had 2 sales of cottages and the sale of a land parcel, why isn't the profit moving up?

Well, I think I can let Paul jump in here, if he would like to, but essentially Brendan, as you know, there are period costs, which are most of our marketing costs are period costs, and then those offset the margin that we recognize on sales. And the margin we recognize on sales is a function of obviously the value of the lot, the price of the lot, and the overall allocated cost of that lot, but it’s all been affected by percentage of completion, and even though we are selling homes in segments of the project that are essentially, fully completed the accounting is done on kind of a project-wide basis.

So the percentage of completion, even if we are selling for example a club cottage, it's right next to the club is not 100%. It’s still a smaller percentage of the full margin, and just with our period costs, those are not, the revenue from those few sales that we've had is not enough to fully offset the period costs that we incurred.

So the way Chris, sorry, maybe I misunderstood the way that the accounting, were you saying that the percentage of completion is just on the project meaning like the numbers that for GAAP purposes that are being shown, it doesn't matter how many sales you close, or you just recognize a percentage of completion on the 3 sales close as opposed to the one sale that was closed last period?

Well, we recognize -- so what you do is you take the margin on a particular lot sale for example, if you are selling a lot, and you recognize some percentage of that margin today, and then you’ll recognize the balance of that margin in the future as the project is completed, but the percentage of that margin you recognize is based on a formula that takes into account total project cost and how far along you are in completing the project. I will let, I am way beyond my knowledge base.

I will let Paul jump in if you like to.

No, the way that Chris described it is correct.

Okay, got it. So what do you think the cash flow is from that project right now?

Is the negative million that you guys had in the quarter for GAAP purposes, is that representative of the cash flow from that project in the quarter do you think?

In general, the cash flow is not going to be consistent with GAAP unless, it would be almost more of a coincidence if it is. Having said that, I can say that without getting into a lot of the specifics, I can say that generally the cash flow from sales activity and other activities at the project this year has generally funded operating expenses.

We have not written any significant checks into the project other than for the vertical construction that we've been doing, which has been relatively modest but really has been separate to stimulate home development. So we're not at this point subsidizing the project significantly essentially in sales proceeds have helped to cover the ongoing operating cost.

Okay, great. The investment that you guys are making in One Ala Moana, what's the return that you are getting on that preferred investment?

Well, it obviously depends on absorption and other assumptions, but based on our --what we think are relatively conservative assumptions, we are in the high teens for what I would describe as a relatively low risk investment given the mezzanine debt structure and the preferred return with the profit participation.

Okay, so it’s a lower number sort of upfront, but then do you get a profit participation in the back which drives the [indiscernible] to high teens?

Exactly, but the preferred return itself is pretty attractive given the risk profile, but yes it’s the profit participation that gets you up into the high teens.

Okay, great, and then I think you mentioned in the press release, it was in the commentary that the gain on the 286 acres was $7.3 million, but your operating profit for real estate sales was 44 [ph]. So were there some other sales that actually had a net loss during the period?

No just normal the administrative costs and just -- there was the JV loss that you have already referenced, but beyond that it would just be normal business expenses or a G&A expenses. We didn’t have any losses at a negative margin.

Okay, great, and then Chris you mentioned that the activity Hawaii prop investments are picking up, can you give us a sense of the magnitude of the pipeline, and then the magnitude of the pipeline of the 1031 assets that you are marketing on the mainland as well?

Yes, it’s a great question, and it’s a tough one to answer because what we have got, we are looking at assets right now that range from relatively small commercial assets to much larger ones, and we have got -- we are at the stages everywhere from having submitted unsolicited offers to being in due diligence on assets. So we are kind of all over the map.

Generally, we are looking at assets on Oahu, which has been our sort of stated intent was to sort of expand our footprint on Oahu, and it's hard to predict, when or if some of these sales will close, but I would say that the total magnitude of offers that we have outstanding is quite sizable. And if we hit on all of them, which of course we would never expect to hit on all of them, but if we did, we would have to monetize significant number of assets on the mainland.

Now given where we are in the process and the unpredictability of it, there is a little bit of the chicken and the egg thing here because you would ideally like to identify the asset and have it locked up before you monetize anything on the mainland, but at the same time, you don't want to miss an opportunity because you haven't monetized something. So we're really in that sort of a dance right now, and we are beginning to market some mainland assets on the basis of our confidence that we will be able to place some money in the next 6 months or so.

And we have got 4 to 5 assets that were currently actively seeking offers for, but how many of those we end up closing will depend again the activity on the Oahu side. So like I said, it’s little bit of dance, and we want to make sure we manage it carefully because we don't want to monetize a bunch of mainland assets and then not have the place to place the capital.

Sure, and do you think that there is, what do you think the cap rate differential is likely to be mainland versus Hawaii?

Let me invite David to jump in here, and talk a little bit about cap rate environments.

As we said before, the cap rate differential we’ve seen between the mainland and Hawaii generally ranges up to about 1%, and that seems to be attracting in this quarter at the same time. As in before we are hoping continue to see that differential.

Okay, that's helpful. I am sorry; I am taking a long time.

But it sounds like I was last one in the queue. So guess, I have one more on the sale, the Maui land sale, did you guys pay tax on that, or was that a 10/31 exchange too?

We are still within our period to do a 10/31 exchange, and we do hope to. One of the assets or a couple of the assets that we are looking at right now would qualify for 10/31 in exchange of those proceeds.

So we will just have to see where we end up on that, but it's our hope to reinvest them.

On Waihonua, you said that there's a new clause in the contract with -- on the units. I wonder if you could give us an update on how many units are under contract there and just re-explain that clause that you mentioned.

Yes, I'd be happy to Sheila. If you want any more details on the legal side, I will let Stan jump in, but I think your basic question is what we decided to do to give ourselves flexibility with how to treat the Hawaiian burials that we've found and to make sure that we can do what the state historic preservation division requests that we do, we wanted to make sure that we had within the counter documents the ability to do that, and I won't get into the details.

But essentially we want to just make sure that we had any contingency or scenario covered, so that we don't lose any traction on construction timeline. That then triggered our need to disclose that and to opt for the recession period.

We are going into that period, which started about 10 days or so ago, we had 260 or so binding presales. We are now in the process of waiting for buyers to either waive their recession right or if they chose to cancel, to cancel.

So far we are 10 days into that, and we are very pleased with the results. I don't want to get into specific numbers because we are only about a third of the way through the process, but based on what we would expect in this sort of a situation, which is you typically expect that anyone who wants to waive would do it relatively early in that process.

We are pleased with the results so far. So we don't anticipate that this is going to affect our ability to move forward with construction, close the construction loan and stay on our timeline.

But we will have better information in another couple of weeks or a few weeks.

And then real quick on agribusiness, you said that there was an extra voyage this quarter. So was that sort of like moving business from fourth quarter into third quarter?

Is that how we should look at it? I thought you said and then fourth quarter there was one less voyage than last year.

Yes, and there's really no operational significance to that. It just depends on the day that CNH wants to get the sugar delivered, and it just happened this year that another voyage fell into the third quarter rather than the fourth quarter.

But there's no real operational significance to it. It just has an accounting implication, which is that that's when you recognize the revenue.

I see, and last question on the $20 million mezz loan. Could you tell us who the developer is of that project, and how that opportunity came about?

Sure, well as you know Sheila we have had a history of working with a lot of Hawaii developers overtime in joint ventures. We have some going on now, and we’ve had others in the past, and this came about from our relationships with some of the other Hawaii developers.

The developers in this project are Howard Hughes Corporation and The MacNaughton Group and Kobayashi Group. The latter 2 are partners that we worked with before in the Hokua Tower and of course Howard Hughes you know well.

So this came from discussion with them about the project over the last year or so, and we were very pleased to have an opportunity to participate in this, and it's indicative of what we’d like to continue to do, which is work with other developers that we respect in Hawaii, and it’s a great fit for the portfolio we're trying to build out.

Thanks everyone for being on the call today. If you have any additional questions, please contact me at (808) 525-8422.

Thank you.