Alexander Goldfarb: You’re saying that land operations was masking some of the cost?
Clayton Chun: What I’m saying is that for FFO, it was a greater portion of the FFO. So the composition of our FFO did have more land operations in the past, whereas for 2024, that is not the case.
Alexander Goldfarb: Okay. And then you mentioned office was a bit weak, obviously, we all know what’s going on there, but you also mentioned repurposing for higher and better. Just a bit more on that. Is this like an office to resi conversion, like what [indiscernible] is doing? Or are you thinking about knocking down buildings? Or what are you thinking about for office higher and better use?
Lance Parker: We’re open to exploring different options, Alex. So, as you know, we’ve only got four office properties within our portfolio. One’s here in Oahu and three are on the neighbor island of Maui. And so where you’re seeing the softness, both really in vacancy and where we were sort of signaling with NOI is coming from our three Maui assets, two in particular, that sit on the same block. And that’s where there will be an opportunity for us, whether it’s through redevelopment, quite frankly, whether it’s a capital recycling opportunity through a user sale, just given where we are with occupancy, I think there’s a couple of different options that we’re going to be exploring throughout 2024.
Alexander Goldfarb: Okay, so it’s the three office assets on Maui. I guess to that point, we’ve had this discussion before, especially around Maui Business Park, where you guys have sold land rather than doing development. If you keep selling, like, selling office and selling land parcels, obviously it’s harder to grow. But sometimes the right decision is to sell rather than invest more capital and I get that. As you think about the portfolio as it is now, if you think about 100% being the current portfolio is it everything that you want or is there more beyond these three assets that you may see selling? And I’m just trying to think about growth of the company going forward.
Lance Parker: Sure. I think it’s important to make sure that we get the message that we are a net buyer. So we want to grow the company. Now, that being said, as we look at various sources of capital, to the extent that there may be something to recycle into a significantly better return, we will certainly consider that relative to the cost of some of our other capital opportunities. But by all means, our goal is to be a net buyer grower of the portfolio.
Alexander Goldfarb: Okay. And then just final question. I appreciate the time. I think a few years ago, you sold a property, and I think there was some water, you didn’t necessarily guarantee, but there was like a buyback or whatever. If the entity didn’t get the zoning or the water access or there was something like that, that was part of that sale. Just curious how that new owner is proceeding. And if you think that there’s any chance that they won’t be able to achieve their goals, which case that property comes back to the company.
Lance Parker: Trying to think of specifically what you’re referring to in terms of property coming back to the company.
Alexander Goldfarb: There was some asset that you sold and the buyer, I think you guys said that there was some guarantee, I think that they could get water rights or some sort of rights on the project, and if they didn’t, over a course of time, they could sell it back to you.
Lance Parker: So we do have on the balance sheet some reserves that we have for certain obligations related to prior sales. And I’m assuming that that’s probably what you’re referring to. I guess suffice it to say that we are – we feel like we are properly reserved from a balance sheet perspective for any potential outcomes.
Alexander Goldfarb: Okay. Thank you.
Operator: Our next question comes from Mitch Germain with Citizens JMP.
Mitch Germain: Yes. Hi, how are you guys doing? The timing of the debt redemption, I guess you use the Grace proceeds there. Was that when you received them? Is that like December? When should I kind of consider that occurring?
Lance Parker: So for the proceeds that we received from the Grace transaction, we had $45 million of cash that was received in December. And then in January of this year, there was $15 million that was repaid related to the promissory note. So all in, that was the $60 million. And so that was applied against net debt.
Mitch Germain: So it paid the balance in the revolver. Is that the way to think about it?
Lance Parker: It did go down to, or it was applied towards the revolver, Mitch.
Mitch Germain: And so late December and then early January are the two assumptions we should.
Lance Parker: So yes, $45 million in December was cash that we received at the time deal was closed, and then $15 million in January.
Mitch Germain: Got you. Got you. Got you. I’m curious about the capital plan. I mean, the buyback was really tiny, but obviously, given the pricing of some of the debt, I’m just curious about kind of your thoughts about going forward. If you have any potential land sales or any monetization is probably a good way to put it in your portfolio, how you’re thinking about using those proceeds.
Lance Parker: Sure. So with respect to the remaining non-core lands that we have, it is a much smaller footprint than it was years ago. And so we’re now at a point where it’s under 4,000 acres of non-core land that we have remaining. And so we will be opportunistically monetizing. And so with the proceeds that do come in, our intent would be to eventually recycle that into CRE growth opportunities, but in the meanwhile, we would be applying it towards the repayment of any debt.
Mitch Germain: Got you. And I guess I’m sticking with the balance sheet. You’ve got two tranches of debt coming due, two mortgages. Did you say both of them were going to be combined into an unsecured note? Is that the way to think about that?
