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Sunday, April 21, 2013
How A&B Wins Big From Environmental Litigation
By Andrew Walden @ 3:08 AM :: 7011 Views :: Environment, Development, Greenmail, Land Use

by Andrew Walden

Environmental groups win 90% of the cases they bring before the Hawaii Supreme Court, according to research by UH Law Professor David Callies. 

Another UH law professor, Denise E. Antolini, counters, “the environmental review jurisprudence of the Moon Court appears to be concerned less with substantive results than with process, focusing on the likely benefits to agencies and all stakeholders of more robust public participation, a core value of Chapter 343.” 

Arguments and insults have been flying for months, but when one sets the legalities aside and looks at the economics, it is a distinction without a difference. 

Annual grants from the San Francisco-based Wallace Alexander Gerbode Foundation flow to the Sierra Club, Nature Conservancy, Trust for Public Lands, Environment Hawaii, Protect Kahoolawe Fund, Malama Maunalua, and others.  That’s “Alexander” as in “Alexander and Baldwin”.  Gerbode Foundation Chair, Maryanna Shaw-Stockholm, is one of A&B’s largest shareholders and sat on the A&B Board of Directors from 1980 to 2011

Why would one of the state’s largest developers fund so-called anti-development groups?

Native Hawaiian Legal Corp lawyer, David Frankel’s operatives are not lying when they claim they are “not against development.”  Rather than shutting down all development, Hawaii’s convoluted land use policies serve as a classic barrier to entry which gives large established Hawaii land trusts with well-developed political and legal operations a competitive advantage over outside developers.  Hawaii residents pay for the maintenance of the local land trusts’ oligopoly by suffering some of the highest housing costs in the nation—with the telling exception of the east side of the Island of Hawaii.

How is the barrier to entry created?

Attorney Paul J. Schwind points to “a long tradition in Hawaii that land use cases are litigated in court on procedural rather than substantive grounds.” 

Hawaii Business April, 2013 reports:

Antolini … believes the current system works well for those who play by the rules. “I think there is a lot of development moving ahead successfully in Hawaii – some of it very good,” she says. “The rules are pretty clear on most land-use and environmental laws, and I think the businesses and developers who are used to operating here know how to get through the system. I think the projects that get stymied, or become controversial, or blow up, tend to be the projects driven by interests that don’t have a lot of experience or roots in Hawaii.”

Likewise, Alexander and Baldwin’s 2012 Annual Report justifies the company’s undiversified focus on Hawaii real estate explaining that in Hawaii, A&B can: “leverage its market knowledge, relationships and financial strength to create significant value….”

And the eco-lawyers pick and choose. Hawaii Business continues: “(Sierra Club lawyer) Robert Harris…reminds us that nonprofits like the Sierra Club have limited resources and can’t afford to fight every battle.”

Marketwatch September 28, 2011 described Kukui’ula, an A&B Kauai luxury golf development which nobody protested against:

It's not that Alexander & Baldwin, who first began zoning the project some 25 years ago, and partner DMB Associates, a renowned golf-community developer from Arizona, aren't offering up a stellar product. They are. But the market for these kinds of things has been treacherous…. "The most recent down cycle was one of the worst we've seen in Hawaii." (Said Honolulu-based real-estate analyst Ricky Cassiday) … some of Kukui'ula's best lots have yet to be marketed, which will come in handy when things pick up.

"They can pull the ace from the hole any time they want. And at this point, everyone else is dying off," he said, referring to several other projects in the Islands that have stalled or been halted altogether.

"Kukui'ula has enough invested to be the last one standing, and that's a good thing," Cassiday said. "A&B and DMB have spent a ton of money here, but the value won't go away — entitled land in a great place with high barriers to entry is good, especially long-term."

Citing A&B’s 2010 Annual Report, the Star-Advertiser April 10, 2011 writes:

A&B lists the average cost for its Hawaii land at $150 per acre….

The company says it has the best keys to unlock the long-term value of its land while also producing significant annual profit from its interrelated operations.

“Hawaii’s multi-tiered entitlement process can be challenging, at times taking years to move a project from application to approval,” A&B said in the report. “Our ability to navigate this process is one of the company’s core competencies.”

Robert Harris explains, “When you speak to real developers, the regulatory side is not where their source of frustration lies…. It’s the cost of financing a project out over time, the cost of construction and construction delay. Those are the things that really drive them to distraction.”     

Of course the cost of finance flows largely from the lengthy regulatory process—but more so for companies that have to finance their land.  Since A&B only has to justify $150 per acre, the cost of finance is for them a lot less distracting.  Outside developers have to carry the cost of modern day land acquisition on their books.  By erecting numerous time consuming ‘process’ hoops for developers to jump through, those who recently purchased land are winnowed out.

Interestingly, 2011 Gerbode grant recipient Malama Maunalua may play a key role in squelching East Oahu development plans by A&B competitor Kamehameha Schools.  This could pose conflict of interest issues for A&B stockholders on the Board of the Gerbode Foundation.

Did Gerbode Foundation trustees suffer a conflict of interest when then-Sierra Club Chair Frankel hired operatives to spearhead the attack on Big Island luxury golf development Hokulia?  After facing down plaintiffs’ demands for millions of dollars in personal cash, Hokulia is now in bankruptcy and A&B’s Kukui’ulu Kauai luxury golf development faces that much less competition.

Some people think this has to do with saving the ‘aina or something.  How sad for them to discover they are just tools in A&B’s profit system.

---30---

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