The Fed: 39 US States Saw Their Economies Strengthen in September

By Paul Ebeling

In September the output strengthened in 39 US states up from August with some of the best gainers concentrated in northeastern territories including Massachusetts, New York, and New Jersey, a Fed proxy showed.

Readings weakened in 8 states, with the steepest fall in tourism-dependent Hawaii, and remained stable in 3 as Q-3 closed, according to the Philadelphia Fed’s State Coincident Indexes report released Friday.

Longer term, several states have almost fully rebounded back to their pre-Covid-19 marks. Nebraska, Utah and Missouri came back in September to within 1% of their February readings, while Georgia, Kentucky, Montana and Oklahoma were less than 2 pts away.

The indexes combine 4 state-level indicators: payroll employment, manufacturing hrs worked, the jobless rate, and wages paid to summarize current economic conditions.

Over the past 3 months, the Fed’s national index has increased by 2.3% as 48 states showed improvement and just 2 saw declines: Hawaii and New Mexico.

Friday, the benchmark US stock market indexes finished at: DJIA -28.09 at 28335.51, NAS Comp +42.28 at 11548.21, S&P 500 +11.90 at 3465.39

Volume: Trade on the NYSE came in light at 722-M shares exchanged

HeffX-LTN’s overall technical analysis for the major US stock market indexes for the week ended 23 October 2020 is Bullish with a Very Bullish bias.

NAS Comp +28.7% YTD
S&P 500 +7.3% YTD
DJIA -0.7% YTD
Russell 2000 -1.7% YTD
Looking Ahead: Investors will receive New Home Sales for September Monday.

Have a healthy weekend, Keep the Faith!

Hawaiian Holdings – Consensus Indicates Potential 7.5% Upside

Directors Talk Interviews
by: Amilia Stone

Hawaiian Holdings found using ticker (HA) have now 8 analysts covering the stock with the consensus suggesting a rating of ‘Hold’. The target price ranges between 19 and 7 with a mean TP of 13.75. Now with the previous closing price of 12.79 this indicates there is a potential upside of 7.5%. The day 50 moving average is 13.49 and the 200 moving average now moves to 13.42. The market cap for the company is $593m. Find out more information at:

Hawaiian Holdings, through its subsidiary, Hawaiian Airlines, engages in the scheduled air transportation of passengers and cargo. The company offers daily services on North America routes between the State of Hawai’i and Long Beach, Los Angeles, Oakland, Sacramento, San Diego, San Francisco, and San Jose, California; Las Vegas, Nevada; Phoenix, Arizona; Portland, Oregon; Seattle, Washington, and New York City, New York. It also provides daily service on Neighbor Island routes among the six islands of the State of Hawai’I; and international routes between the State of Hawai’i and Sydney, Australia, as well as Tokyo and Osaka, Japan. In addition, the company offers scheduled service between the State of Hawai’i and Pago Pago, American Samoa; Papeete, Tahiti; Brisbane, Australia; Auckland, New Zealand; Sapporo, Japan; and Seoul, South Korea, as well as various ad hoc charters. Hawaiian Holdings distributes its tickets through various distribution channels, including its Website primarily for North America and Neighbor Island routes, as well as through travel agencies and wholesale distributors for its international routes. As of December 31, 2019, the company’s fleet consisted of 20 Boeing 717-200 aircraft for the Neighbor Island routes; 24 Airbus A330-200 aircraft; and 17 Airbus A321-200 for the North America, international, and charter routes, as well as owns 4 ATR42 aircrafts. Hawaiian Holdings was founded in 1929 and is headquartered in Honolulu, Hawaii.

Par Pacific Holdings Announces Third Quarter 2020 Earnings Release and Conference Call Schedule

Par Pacific Holdings, Inc. (NYSE: PARR) (“Par Pacific”) today announced that it will release its third quarter 2020 results before the New York Stock Exchange opens on Monday, November 2, 2020. This release will be followed by a conference call for investors at 9:30 a.m. Central Time (10:30 a.m. Eastern) on the same morning. The full text of the release will be available on Par Pacific’s website at

Par Pacific Holdings Third Quarter 2020 Earnings Conference CallMonday, November 2, 20209:30 a.m. Central time (10:30 a.m. Eastern)Dial-in number: 1-877-407-3982 (toll-free) or 1-201-493-6780 (toll)

Individuals who would like to participate should dial the applicable dial-in number at least 10 minutes before the scheduled conference call time.

To access the live audio webcast and related presentation materials, please visit the investor relations section of Par Pacific’s website at

A replay will be available shortly after the call and can be accessed by dialing 1-844-512-2921 (toll-free) or 1-412-317-6671 (toll). The passcode for the replay is 13711849. The replay will be available until November 16, 2020.

About Par Pacific

Par Pacific Holdings, Inc. (NYSE: PARR), headquartered in Houston, Texas, owns and operates market-leading energy, infrastructure and retail businesses. Par Pacific’s strategy is to acquire and develop businesses in logistically complex markets. Par Pacific owns and operates one of the largest energy networks in Hawaii with 148,000 bpd of combined refining capacity, a logistics system supplying the major islands of the state and 91 retail locations. In the Pacific Northwest and the Rockies, Par Pacific owns and operates 60,000 bpd of combined refining capacity, related multimodal logistics systems and 33 retail locations. Par Pacific also owns 46% of Laramie Energy, LLC, a natural gas production company with operations and assets concentrated in Western Colorado. More information is available at

Investor Contact:Ashimi PatelManager, Investor Relations(832)

Get ready for blowout Q3 results in container shipping

American Shipper
by Greg Miller

Preliminary Matson numbers point to big gains for larger carriers

“We knew it was going to be good, but dadgum …,” exclaimed Stifel analyst Ben Nolan upon seeing the preliminary third-quarter 2020 results from Matson (NYSE: MATX).

Matson’s disclosures offer the first signals of how solid Q3 2020 earnings will be for container lines across the board. Container-line profits exceeded expectations in Q2 2020, a period when volumes were weak. In the third quarter, volumes and rates surged — and not just in the trans-Pacific trade.

“The stars are aligning for container shipping: historic consolidation, rational capacity management and now a fast bounce-back in demand post-lockdown,” wrote Jefferies analyst David Kerstens in report published this week.

Matson’s upside surprise

Matson is primarily in the Hawaii and Alaska Jones Act trades, but also runs China-U.S. services called CLX and CLX+. After market close on Thursday, Matson said it expected Q3 2020 earnings of $1.55-$1.60 per share, far exceeding the Wall Street consensus for 96 cents. Expected ocean transport operating income of $84.5 million-$86.5 million is double last year’s number.

Matson’s China volumes spiked 125% year-on-year, which the company attributed to a shift from air freight to premium ocean service, e-commerce demand and tight U.S. inventories.

“While rates may not be able to hold their current levels … volumes remain very high. Thus, we are expecting continued strength in the fourth quarter,” said Nolan.

Matson’s shares jumped 15% on Friday. The stock price has doubled since mid-May.

Exposure to trans-Pacific upside

Matson’s exposure to the trans-Pacific route was around 5,800 twenty-foot equivalent units (TEUs) per week in Q3 2020. This pales in comparison to the larger carriers.

Alphaliner analyzed the top carriers’ capacity on the trans-Pacific route as of Sept. 30. It found that the COSCO Group ranked highest in terms of volume, with an average weekly capacity of 89,050 TEUs. The group includes COSCO Shipping and OOCL, both listed in Hong Kong.

France’s CMA CGM — which has publicly traded U.S.-dollar-denominated bonds — came in second, with 74,200 TEUs. Japan’s ONE took third with 61,200 TEUs. And Denmark-listed giant Maersk — which has American depository receipts trading in the U.S. (OTC: AMKBY) — had the fourth-highest exposure, 59,000 TEUs per week.

Interestingly, when looking at the top 10 carriers in terms of volume, Israel’s ZIM, the company that ranked 10th, had the highest exposure as a percentage of total deployments. It deploys 52% of its global fleet in the trans-Pacific.

ZIM is planning an IPO and is in the midst of buying back outstanding bond debt, according to Alphaliner. “ZIM may not find a better time in the cycle to attempt an IPO,” said Alphaliner, which noted that ZIM failed at three previous IPO attempts in 2008, 2011 and 2016, respectively.

Q3 customs data: bullish

Inbound volumes to the U.S. West Coast were exceptionally strong in the third quarter. According to investment bank Jefferies, the upside from a historic inventory restocking phase has just begun.

FreightWaves’ SONAR platform features data collected from U.S. Customs on the number of maritime import shipment customs filings per day (regardless of volume), calculated as a seven-day moving average.

The countrywide data (SONAR: CSTM.USA) shows the number of filings exceeded levels seen in the past two years for about two-thirds of Q3 2020. In contrast, the number of customs filings in Q2 2020 exceeded the prior two years’ levels for only about a quarter of that reporting period.

Q3 rate data: even more bullish

Asia-West Coast spot rates remain near record highs, despite the recent Golden Week holiday in China.

The Freightos Baltic Daily Index assessed Thursday’s rate from China to the West Coast (SONAR: FBXD.CNAW) at $3,841 per forty-foot equivalent unit (FEU), very close to the high. The Shanghai Containerized Freight Index (SCFI) puts this week’s Shanghai-Los Angeles rate at $3,848 per FEU, essentially flat week-on-week (down 0.3%).

SeaIntelligence Consulting CEO Lars Jensen pointed out in an online post that if one takes normal Golden Week seasonality into account, “the spot market actually strengthened slightly.”

Looking at the third-quarter rates as a whole, the data shows that spot China-West Coast rates were roughly double Q2 2020 levels and almost triple rates in Q3 2019. Furthermore, rate strength is not limited Asia-U.S. trade.

“The trans-Pacific is not the only trade that witnessed hefty rate increases,” said Alphaliner. “The evolution is even more spectacular between Shanghai and Santos [Brazil]. Unexpectedly high cargo demand has also pushed up spot rates on other North-South routes” including Shanghai to Durban, South Africa, and to Lagos, Nigeria, it added.

According to the SCFI, rates from Shanghai to Santos were $3,952 per TEU this week, seven times the rate in late August. Last week, Shanghai-Durban hit a record high of $1,737 per TEU and Shanghai-Lagos hit a record high of $3,293 per TEU.

Here Are The Hottest Housing Markets, Real Estate Stocks In Surprise Covid Boom

Investors Business DailyJust six months ago, the idea of a housing boom would have seemed ridiculous as millions of Americans were losing their jobs. But low interest rates and the work-from-home trend are stoking real estate stocks and home sales in smaller housing markets.

The flip side is that once-sky-high markets have come crashing down, especially in the San Francisco Bay Area. But overall, both new and existing-home sales have reached levels last seen before the Great Recession.

Real estate stocks are rebounding strongly. The triple-leveraged Direxion Daily Homebuilders & Suppliers (NAIL) ETF has shot up 900% from its coronavirus crash lows. Homebuilders like LGI Homes (LGIH) and D.R. Horton (DHI) have broken out into buy zones.

Low mortgage rates spurred longtime fence-sitters to jump into the market, Chief Economist Danielle Hale says. But she acknowledges the housing boom is uneven.

“Among a lot of key homebuyer demographics, high-income folks, we haven’t seen the same level of job losses that we have among lower-income workers,” she told IBD. “So that has helped the market from a homebuyer perspective.”

Demographics are a factor too as more millennials — the nation’s largest adult generation — are starting families and driving demand for single-family homes. And the leading edge of Generation Z, an even larger cohort that straddles young adults and adolescents, is just starting to buy homes.

Best Housing Markets
As living within commuting distance to work becomes less important, the housing boom is elevating some surprising markets.

According to data for September, the hottest metro areas include Fresno, Calif.; Columbus, Ohio; Rochester, N.Y.; Colorado Springs, Colo.; Bakersfield, Calif.; Portland-South Portland, Maine; Worcester, Mass.; Stockton-Lodi, Calif.; Harrisburg-Carlisle, Pa.; and Allentown-Bethlehem, Pa.

Under this definition, “hotness” reflects a combination of factors like how quickly properties sell and the number of views per property.

In January, before the coronavirus forced millions to work from home, the San Francisco-Oakland area was the hottest metro market. Fresno was No. 9.

Bakersfield was No. 10. It moved up to No. 5 last month even as the collapse in oil prices slowed its energy sector. But the biggest gainers include Allentown, Pa. (No. 65 in January), Portland, Maine (56), and Harrisburg, Pa. (54).

Outside the top 10, others have made big leaps too, such as the Riverside-San Bernardino-Ontario, Calif., area about two hours’ drive from Los Angeles. Before the pandemic, it was already growing as a major distribution hub for Amazon and other e-commerce companies. It’s now the No. 39 market, up from No. 68 in January.

Regional differences could also determine which real estate stocks outperform. Of the 30 hottest housing markets, 20 are in the West and Northeast.

Worst Housing Markets
The San Francisco-Oakland area plunged to No. 45 in September as Bay Area tech giants like Facebook (FB) and Twitter (TWTR) allowed employees to work from home indefinitely.

The San Jose-Sunnyvale-Santa Clara area — in the heart of Silicon Valley — plunged to No. 62 in September from No. 3 at the start of the year.

Housing markets outside high-cost, high-tax California felt the pain too. The Dallas-Fort Worth metro area, which has been drawing businesses and residents from California, saw its rank tumble to No. 41 from No. 19 in January.

The crash in oil prices may also be slowing the Dallas housing market. Many companies that serve the Permian Basin farther west have headquarters there.

At the very bottom, the coldest large metro areas last month included Miami-Fort Lauderdale-West Palm Beach, Fla.; Baton Rouge, La.; Honolulu, Hawaii; McAllen-Edinburg-Mission, Texas; Cape Coral-Fort Myers, Fla.; and New York, N.Y.-Newark-Jersey City, N.J. Most of those markets were already near the bottom in January.

How Much Is Bank of Hawaii Corporation (NYSE:BOH) Paying Its CEO?

Simply Wall St.

This article will reflect on the compensation paid to Peter Ho who has served as CEO of Bank of Hawaii Corporation (NYSE:BOH) since 2010. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Bank of Hawaii.

How Does Total Compensation For Peter Ho Compare With Other Companies In The Industry?
According to our data, Bank of Hawaii Corporation has a market capitalization of US$2.1b, and paid its CEO total annual compensation worth US$5.3m over the year to December 2019. That’s mostly flat as compared to the prior year’s compensation. While we always look at total compensation first, our analysis shows that the salary component is less, at US$818k.

In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$3.2m. Accordingly, our analysis reveals that Bank of Hawaii Corporation pays Peter Ho north of the industry median. Moreover, Peter Ho also holds US$11m worth of Bank of Hawaii stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20192018Proportion (2019)
Total CompensationUS$5.3mUS$5.2m100%

Talking in terms of the industry, salary represented approximately 43% of total compensation out of all the companies we analyzed, while other remuneration made up 57% of the pie. Bank of Hawaii sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it’s an indicator that the executive’s salary is tied to company performance.

A Look at Bank of Hawaii Corporation’s Growth Numbers
Bank of Hawaii Corporation has seen its earnings per share (EPS) increase by 2.3% a year over the past three years. In the last year, its revenue is down 6.7%.

We would prefer it if there was revenue growth, but it is good to see a modest EPS growth at least. These two metrics are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company’s future earnings..

Has Bank of Hawaii Corporation Been A Good Investment?
Given the total shareholder loss of 31% over three years, many shareholders in Bank of Hawaii Corporation are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary…
As we noted earlier, Bank of Hawaii pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Over the last three years, shareholder returns have been downright disappointing for Bank of Hawaii, and although EPS growth is steady, it hasn’t set the world on fire. This doesn’t look great when you consider Peter is taking home compensation north of the industry average. All things considered, we believe shareholders would be disappointed to see Peter’s compensation grow without first seeing an improvement in the performance of the company.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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Bank of Hawaii Co. (NYSE:BOH) Receives Average Rating of “Hold” from Analysts


Shares of Bank of Hawaii Co. (NYSE:BOH) have been given an average rating of “Hold” by the six ratings firms that are currently covering the stock, reports. Two research analysts have rated the stock with a sell rating, two have issued a hold rating and one has issued a buy rating on the company. The average 12-month target price among brokerages that have updated their coverage on the stock in the last year is $70.67.

BOH has been the topic of several research analyst reports. ValuEngine downgraded Bank of Hawaii from a “hold” rating to a “sell” rating in a research note on Monday, August 3rd. Zacks Investment Research raised Bank of Hawaii from a “sell” rating to a “hold” rating and set a $60.00 price objective for the company in a report on Friday, July 31st.

In other Bank of Hawaii news, Director John C. Erickson purchased 1,000 shares of Bank of Hawaii stock in a transaction that occurred on Thursday, September 10th. The stock was bought at an average price of $51.96 per share, with a total value of $51,960.00. Following the acquisition, the director now owns 5,450 shares of the company’s stock, valued at approximately $283,182. The acquisition was disclosed in a filing with the Securities & Exchange Commission, which is available through this hyperlink. Also, Director Victor K. Nichols purchased 4,475 shares of Bank of Hawaii stock in a transaction that occurred on Friday, August 21st. The stock was acquired at an average cost of $55.66 per share, with a total value of $249,078.50. Following the acquisition, the director now directly owns 10,055 shares in the company, valued at approximately $559,661.30. The disclosure for this purchase can be found here. Insiders own 2.14% of the company’s stock.

A number of hedge funds and other institutional investors have recently added to or reduced their stakes in the stock. Two Sigma Advisers LP raised its holdings in Bank of Hawaii by 9.7% in the 2nd quarter. Two Sigma Advisers LP now owns 40,900 shares of the bank’s stock worth $2,512,000 after purchasing an additional 3,600 shares during the period. Schonfeld Strategic Advisors LLC acquired a new position in Bank of Hawaii in the 2nd quarter worth about $386,000. Neuberger Berman Group LLC raised its holdings in Bank of Hawaii by 12.7% in the 2nd quarter. Neuberger Berman Group LLC now owns 2,621,961 shares of the bank’s stock worth $160,818,000 after purchasing an additional 294,909 shares during the period. Handelsbanken Fonder AB purchased a new stake in Bank of Hawaii during the 2nd quarter worth approximately $592,000. Finally, Charles Schwab Investment Management Inc. increased its stake in Bank of Hawaii by 26.7% during the 2nd quarter. Charles Schwab Investment Management Inc. now owns 551,947 shares of the bank’s stock worth $33,896,000 after buying an additional 116,344 shares in the last quarter. 74.03% of the stock is owned by institutional investors.

Shares of BOH stock opened at $49.90 on Wednesday. The company has a debt-to-equity ratio of 0.04, a current ratio of 0.70 and a quick ratio of 0.70. The stock’s fifty day moving average price is $54.60 and its 200 day moving average price is $58.79. The company has a market cap of $2.00 billion, a price-to-earnings ratio of 10.87, a price-to-earnings-growth ratio of 1.68 and a beta of 1.19. Bank of Hawaii has a 1-year low of $46.70 and a 1-year high of $95.68.

Bank of Hawaii (NYSE:BOH) last posted its quarterly earnings results on Monday, July 27th. The bank reported $0.98 earnings per share for the quarter, beating the Thomson Reuters’ consensus estimate of $0.90 by $0.08. The business had revenue of $177.96 million for the quarter, compared to the consensus estimate of $167.62 million. Bank of Hawaii had a return on equity of 13.98% and a net margin of 23.91%. During the same quarter in the previous year, the business earned $1.40 EPS. As a group, equities research analysts anticipate that Bank of Hawaii will post 3.7 earnings per share for the current year.

The business also recently disclosed a quarterly dividend, which was paid on Tuesday, September 15th. Stockholders of record on Monday, August 31st were issued a $0.67 dividend. The ex-dividend date was Friday, August 28th. This represents a $2.68 annualized dividend and a dividend yield of 5.37%. Bank of Hawaii’s dividend payout ratio (DPR) is presently 48.20%.

Bank of Hawaii Company Profile

Bank of Hawaii Corporation operates as the bank holding company for Bank of Hawaii that provides financial products and services in Hawaii, Guam, and other Pacific Islands. It operates through four segments: Retail Banking, Commercial Banking, Investment Services and Private Banking, and Treasury and Other.

American Assets Trust (NYSE:AAT) Rating Lowered to Sell at Zacks Investment Research


American Assets Trust (NYSE:AAT) was downgraded by Zacks Investment Research from a “hold” rating to a “sell” rating in a note issued to investors on Tuesday, reports.

According to Zacks, “American Assets, Inc. is a real estate investment trust, or REIT, that owns, operates, acquires and develops retail and office properties primarily in Southern California, Northern California and Hawaii. The trusts assets include retail properties, office properties, Waikiki Beach Walk property and multifamily properties. American Assets, Inc. is based in San Diego, California. ”

Several other brokerages have also commented on AAT. ValuEngine lowered American Assets Trust from a “hold” rating to a “sell” rating in a report on Tuesday, August 4th. Wells Fargo & Company lifted their price target on American Assets Trust from $30.00 to $33.00 and gave the stock an “overweight” rating in a research note on Thursday, June 4th. Two analysts have rated the stock with a sell rating, one has assigned a hold rating and one has assigned a buy rating to the company’s stock. The stock has a consensus rating of “Hold” and an average price target of $39.50.

American Assets Trust stock traded down $0.57 during midday trading on Tuesday, hitting $23.91. 9,320 shares of the company were exchanged, compared to its average volume of 379,620. The firm has a market capitalization of $1.47 billion, a PE ratio of 31.05, a price-to-earnings-growth ratio of 3.73 and a beta of 0.88. American Assets Trust has a fifty-two week low of $20.15 and a fifty-two week high of $49.26. The business has a fifty day simple moving average of $25.60 and a two-hundred day simple moving average of $26.68. The company has a debt-to-equity ratio of 1.11, a quick ratio of 3.45 and a current ratio of 3.45.

American Assets Trust (NYSE:AAT) last issued its quarterly earnings data on Tuesday, July 28th. The real estate investment trust reported $0.13 EPS for the quarter, missing the consensus estimate of $0.37 by ($0.24). American Assets Trust had a net margin of 12.08% and a return on equity of 3.53%. The business had revenue of $82.11 million during the quarter. As a group, equities analysts expect that American Assets Trust will post 1.98 earnings per share for the current year.

In related news, CEO Ernest S. Rady acquired 20,000 shares of American Assets Trust stock in a transaction that occurred on Friday, September 11th. The shares were purchased at an average price of $24.69 per share, for a total transaction of $493,800.00. The purchase was disclosed in a document filed with the Securities & Exchange Commission, which is accessible through this link. Also, CEO Ernest S. Rady acquired 25,412 shares of American Assets Trust stock in a transaction that occurred on Monday, September 14th. The shares were bought at an average price of $25.32 per share, for a total transaction of $643,431.84. The disclosure for this purchase can be found here. In the last quarter, insiders have purchased 56,317 shares of company stock worth $1,410,574. 32.76% of the stock is currently owned by company insiders.

A number of institutional investors have recently made changes to their positions in AAT. Vanguard Group Inc. raised its position in American Assets Trust by 0.9% in the second quarter. Vanguard Group Inc. now owns 7,926,096 shares of the real estate investment trust’s stock valued at $220,664,000 after purchasing an additional 72,683 shares during the period. Invesco Ltd. raised its position in American Assets Trust by 36.2% in the first quarter. Invesco Ltd. now owns 2,732,288 shares of the real estate investment trust’s stock valued at $68,307,000 after purchasing an additional 726,740 shares during the period. State Street Corp raised its position in American Assets Trust by 6.9% in the first quarter. State Street Corp now owns 2,591,919 shares of the real estate investment trust’s stock valued at $64,798,000 after purchasing an additional 167,372 shares during the period. Principal Financial Group Inc. raised its position in American Assets Trust by 366.1% in the second quarter. Principal Financial Group Inc. now owns 1,698,504 shares of the real estate investment trust’s stock valued at $47,287,000 after purchasing an additional 1,334,111 shares during the period. Finally, Macquarie Group Ltd. raised its position in American Assets Trust by 7.6% in the second quarter. Macquarie Group Ltd. now owns 1,330,379 shares of the real estate investment trust’s stock valued at $37,038,000 after purchasing an additional 93,670 shares during the period. Hedge funds and other institutional investors own 94.34% of the company’s stock.

About American Assets Trust

American Assets Trust, Inc (the “company”) is a full service, vertically integrated and self-administered real estate investment trust, or REIT, headquartered in San Diego, California. The company has over 50 years of experience in acquiring, improving, developing and managing premier retail, office and residential properties throughout the United States in some of the nation’s most dynamic, high-barrier-to-entry markets primarily in Southern California, Northern California, Oregon, Washington, Texas and Hawaii.

REITs: Own A Piece Of Hawaiian Paradise

Seeking Alpha

We believe that some of the unique challenges for the market are exactly what makes Hawaii an attractive place to invest.

In particular, the difficulty of developing new commercial real estate and housing keeps a lid on new commercial real estate supply, thus giving an advantage to current landlords.

While tourism can present a level of unpredictability, the long term supply and demand dynamics present an attractive risk-adjusted return, especially relative to other mainland markets.

Since becoming a state in 1959, Hawaii has been portrayed as a sunny beach vacation spot with palm trees and a rich cultural history. As with most things, reality is much more complicated. While it does boast some of the most beautiful beaches in the world (with top notch surfing), the rich cultural ‘history’ is not all in the past. As the most recent state added to the union, native Hawaiians have the shortest history as part of the USA. Similarly, their culture was independent of American culture more recently than any other state, exacerbated even further by geographical distance. As such, investing in Hawaii presents some of the most unique opportunities and risks relative to the other 49 states.

We believe that some of the unique challenges for the market are exactly what makes Hawaii an attractive place to invest. In particular, the difficulty of developing new commercial real estate and housing keeps a lid on new commercial real estate supply, thus giving an advantage to current landlords. While the contribution of tourism to the local economy makes it slightly more difficult to predict short term demand growth, the relative stability to other ‘island destinations’, solid infrastructure, and temperate climate give us confidence in long term growth. The Chilton REIT Composite has an overweight position to Hawaii as of February 29, 2020.

Hawaii Economic Overview
With about 1.4 million residents as of 2018, Hawaii is the 39th most populous state. However, it has established itself as one of the top tourist destinations in the world, boasting almost 10.0 million visitors in 2018. These visitors spent $17.6 billion, which comprised about 18.5% of Hawaii’s gross domestic product (or GDP). This compares to the national average of 2.9%, and ranks Hawaii as the highest state for tourism spending as a percent of GDP. On the back of strong tourism, Hawaii’s GDP growth has outpaced the national average since 2000, which is especially remarkable considering that tourism’s worst years occurred following the September 2001 terrorist attacks and the 2008-2009 recession.

Local population growth has also outpaced the national average going back to 1960, owing most of it to in-migration. However, population growth turned negative in 2017 and has been negative for 2018 and 2019 as well. Job growth to support tourism has flourished, but it has not been enough to keep up with the national average. Hawaii’s median per capita personal income of over $53,000 on the surface is positive relative to the national median of $52,000, but it doesn’t tell the whole story. According to the Tax Foundation, $100 is actually only worth $84.39 in Hawaii as of 2017, which is the lowest in the country, below even New York ($86.36) and California ($87.11). As a result, as shown in Figure 1, when adjusting per capita median personal income for cost of living (using ‘regional cost disparities’), Hawaii’s income as adjusted is much lower than the US average. Similarly, Hawaii’s 2.9% unemployment rate as of 12/31/19 is below the national average of 3.6%, but the workforce participation in Hawaii is well below the national average at only 60.9% versus 63.4%.

In summary, the state of Hawaii has certainly benefited from becoming a popular tourist destination. However, the locals may not have benefited as much as they would’ve thought, contributing to a cultural insulation against visitors, particularly those looking to invest.

Hawaiian Culture
Notwithstanding the effects of tourism on the island, the insulated (and isolated) location of Hawaii generated a uniquely independent and proud culture that rivals many sovereign nations. Rightfully so after the experience that the Native Americans had with visitors looking to buy land and impart new customs, Hawaiians have been somewhat resistant to outside investment from the start. Infamously, the Delaware Indians sold Manhattan to Peter Minuit for $24 in 1626, which is equivalent to less than $2,000 today. In contrast, a study in 2018 estimated that the total value of Manhattan land was almost $2 trillion. Instead of outright sales to visitors, Hawaiians have shrewdly favored leasing the land for them to build hotels, condos, retail, and office properties. Thus, they are protecting themselves from losing out of the potential appreciation in the land, while also allowing investment to stimulate the economy (and hopefully make the land more valuable).

Despite the ground leases, the investment in housing has not been enough. Similar to California where regulations on development and rent control have created a mismatch in housing supply and demand, the lack of new housing has caused rents and home prices to explode well above the national average. According to one estimate, it can take 9 to 15 years to get entitlements approved. Approximately 95% of the state is reserved for agriculture and conservation, which further limits development, and increases the value of permitted land. As a result, the average Hawaii home transaction price was $780,000 as of September 30, 2019, which compares to the national average of $227,000. Similarly, the average rent for a 900 square foot (or sqft) apartment was $2,400 per month, which compares to the national average of $1,700, according to Zillow.

Furthermore, energy costs, gasoline prices, and even basics such as toilet paper are among the highest in the country. Gasoline prices are the second highest in the country, while electricity prices are almost triple the national average, and groceries are the highest. Some of this is due to the transportation costs to get goods to Hawaii, which must be brought via plane or ship. Due to a 100 year old law called the Jones Act, shipping goods between US ports is much more expensive than a ship from a foreign port to a US port. The Jones Act stipulates that all goods delivered from a domestic port to a domestic port must be carried on a ship that is built in America by Americans, at least 75% owned by Americans, and at least 75% of the crew must be American. While the purpose was to preserve the US shipbuilding industry (0.3% of global shipbuilding), it disproportionately punishes Hawaii (and Puerto Rico) which do not have the option of rail or truck. By some estimates, allowing foreign ships to deliver US goods from US ports could cut prices in half.

In addition, Hawaii has a state income tax with a top rate of 11%, which is second only to California with a top state tax rate of 12.3%. Adding more ‘SALT’ to the wound of high state taxes, the Tax Cut and Jobs Act of 2017 limited deductions of state taxes (property and income taxes) to only $10,000 which disproportionately hurt residents in Hawaii, among other states. These factors help to explain why population growth has turned negative. However, this is not all bad for commercial real estate.

Almost the entirety of the state’s office market is located on Oahu, and specifically Honolulu (including Waikiki). With about ten million sqft, Honolulu’s office market (downtown plus surrounding areas) compares to the downtowns (excluding surrounding area) of Nashville or Baltimore. Due to the high contribution of tourism, the office-using employment of Hawaii ranks quite low, with demand being driven mostly by local business and the government sector. As such, we expect demand growth to be muted. However, supply is tight, and the small denominator can make small absorption numbers have outsized effects on the market statistics. For example, the downtown Honolulu market absorbed 200,000 sqft in 2019, the largest year of positive absorption since 2006, though still only 2% of the total inventory. However, several office buildings are being converted to residential buildings, which reduced the supply. As a result, the office vacancy rate on Oahu declined from 13.7% in 2018 to 9.5% in 2019 according to CBRE. This should help office rent growth to continue to grow steadily in the face of low demand.

The REIT with the most Hawaii office exposure is Douglas Emmett (NYSE: DEI), which owns four buildings in Honolulu totaling 1.6 million sqft. As of December 31, 2019, these buildings were 94% leased with an averaged annualized rent of $34.96 per sqft, which compares to DEI portfolio averages of $44.80 per sqft. Annualized rent of $48.7 million at these Hawaii properties comprises about 7% of DEI’s office portfolio, or 6% of DEI’s total portfolio. The balance of DEI’s portfolio is located in West Los Angeles.

Hawaii-based REIT Alexander and Baldwin (NYSE: ALEX) also derives about 4% of its cash net operating income from office. As of December 31, 2019, the company owned 143,000 sqft spread between Oahu and Maui, which were 90.9% occupied generating annualized base rent of $32.93 per sqft.

DEI is the only publicly traded REIT with multifamily ownership in the state. Coincidentally, DEI is converting one of its office buildings to multifamily. 1132 Bishop Street is a 25 story, 490,000 sqft office tower that will be converted into 500 multifamily units. The conversion will be done in phases so that multifamily rent will replace office rent as office tenants vacate. The first units are expected to be delivered in late 2020. DEI owns three other multifamily properties in Honolulu, which were 98% leased at an average rent of $1,850 per month as of December 31, 2019. Annualized rent of $44.3 million comprises about 36% of DEI’s multifamily portfolio, or 4% of DEI’s total portfolio. When combining the Honolulu multifamily and office properties, DEI generates about 11% of its annual rent from the state.

Hawaii’s industrial market finished the year at only 2.0% vacancy, which is essentially full given a 1.5% ‘structural baseline vacancy’, according to Colliers, a global real estate research firm. According to CBRE, 2019 was the first full calendar year where all four quarters had positive net absorption since 2013, which drove steady rent growth. 2020 is expected to produce more of the same results, with Colliers projecting 2020 to have the highest net absorption in over a decade. ALEX owns a 1.2 million sqft industrial portfolio in Hawaii that was 95.3% occupied as of December 31, 2019. Net operating income of the industrial portfolio comprised approximately 16% of ALEX’s total portfolio as of the same date. An externally-advised REIT (which presents extreme conflicts of interest), Industrial Logistics Properties Trust (NYSE: ILPT), has the largest Hawaii industrial exposure with approximately 39% of its cash net operating income coming from the state.

Retail vacancy was 6.9% at the end of 2019 for all of Hawaii, which compared to 5.5% as of the same period in 2018 driven by slightly negative absorption of -145,000 sqft. Most of this occurred in the mall space, which was affected by the Sears bankruptcy in particular. 2020 may face similar bankruptcy headwinds due to announced closures of Pier One and the bankruptcy filing by Forever 21. Notably, Forever 21 is going to keep two stores open, and they are both at REIT-owned centers (Pearlridge, owned by Washington Prime Group (NYSE: WPG) and Ala Moana Center, owned by Brookfield Property Partners (NYSE: BPY)). American Assets Trust (NYSE: AAT) owns three properties in Hawaii, including a hotel and street retail property in Waikiki, and a grocery anchored center adjacent to a Premium Outlets (owned by Simon Property Group (NYSE: SPG)). AAT derives approximately 17% of its cash net operating income from Hawaii.

Ala Moana Center holds the crown as the most valuable US mall, estimated to be worth $6 billion. It comprises 2.4 million sqft and boasts 350 stores averaging sales of $1,500 per sqft. Brookfield Property Partners recently added a 300,000 sqft expansion, and plans to spend $153 million on a residential tower to be delivered in 2025. Publicly traded Howard Hughes Corp (NYSE: HHC, not a REIT) has capitalized on the “place” of Ala Moana, building five residential towers adjacent to the mall generating $2.2 billion in proceeds from condominium sales. HHC currently has plans for 11 more towers over the next eight years, as shown in Figure 2.

We believe it is important to delineate between the local and tourism-based retail markets in Hawaii. While Waikiki street retail and Ala Moana Center are driven by tourism spending which can be influenced by the strength of the US Dollar, grocery anchored centers are much more dependent upon the local economy. ALEX owns mostly grocery-anchored shopping centers that cater to locals. ALEX derives 77.3% of its cash net operating income as of December 31, 2019 from such centers spread between Oahu, Maui, and Kauai. The centers comprise 2.5 million sqft and were 93.3% leased with an average base rent of $33.12 per sqft as of December 31, 2019. This business should be much more resilient to the e-commerce threat than mainland shopping centers given the expensive and prolonged delivery times. For example, instead of Amazon Prime delivery times of one or two hours in many mainland cities, Hawaii Amazon Prime customers have delivery times of 3-7 days, which increases the reliance on brick-and-mortar shopping. In particular, grocery delivery is especially difficult on the island, which will keep the grocery brick-and-mortar stores as strong anchors for the foreseeable future.

In 2019, Hawaii’s lodging market logged Revenue per available room (or RevPAR) growth of 3.6%, which compared to the national average of 0.9% and the top 25 lodging markets at -0.2%. Two luxury developments were announced in 2019, which will carry the Rosewood and Auberge flags.

Host Hotels (NYSE: HST) owns the highest EBITDA-producing hotel among publicly traded REITs in the Hyatt Regency Maui, which produced $54.7 million in EBITDA in 2019 from 806 rooms. HST also owns the Andaz Maui and the Fairmont Kea Lani. Park Hotels (NYSE: PK), a spinoff from Hilton (NYSE: HLT) in 2017, owns the hotel with the largest number of rooms, the Hilton Hawaiian Village Waikiki Beach with 2,860 rooms. Rounding out exposure, RLJ Lodging (NYSE: RLJ) owns the Courtyard Waikiki Beach, and Sunstone Hotels (NYSE: SHO) owns the Wailea Beach Resort.