How One Hawaiian Paradise Became a Ghost Town
by Shawn Langlois, Market Watch (Excerpt)
(Here’s the story of Kukui’ula, a Kauai development which nobody protested against. Of course it is an A&B development.)
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. All the palm trees and Lomi Lomi massages in the archipelago can't change that.
"The most recent down cycle was one of the worst we've seen in Hawaii," said Honolulu-based real-estate analyst Ricky Cassiday. "Sales have since recovered somewhat, and we are two years out from the bottom, but it is still anemic by historical standards."
Recognizing the futility in pushing sales during times as ugly as the past few years, the developers behind Kukui'ula decided to circle the wagons and stop spending on marketing. Of course, while it appears to have been the right move, it also kept a lid on demand.
Only one piece of land has sold in the past year-and-a-half after 80 "founder" lots were sold in 2006 for a total of $110 million.
Eventually, the project plans to offer a series of price points. On the low end, condos will be available for under $1 million. On the high end, Herrington said he sees custom homes upwards of $20 million.
Cassiday points out that 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."
read … How One Hawaiian Paradise Became a Ghost Town
A&B: Ability to navigate Hawai Land Use Process one of our Core Competencies (April 10, 2011)
A&B lists the average cost for its Hawaii land at $150 per acre, or a relatively minuscule $13 million for nearly 88,000 acres. The company regards most of its Hawaii real estate as having relatively low present value because it is incredibly difficult and time-consuming to convert farmland to higher-value uses such as residential or commercial development under state and county land-use regulations.
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.”
Developments proposed by Alexander and Baldwin also seem to evade the protesters’ attention. Of course this has absolutely nothing to do with the substantial funds donated to the Sierra Club, Nature Conservancy, Trust for Public Lands, Environment Hawaii, Protect Kahoolawe Fund and others by the Wallace Alexander Gerbode foundation. The Chair of the Board of Directors of the Gerbode Foundation, Maryanna G. Stockholm-Shaw, also formerly sat on the Board of Directors of A&B and Matson.
(Breaking up A&B could effectively destroy the cozy relationship between A&B the enviros. But there is no guarantee of that.)
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1) The Wallace Alexander Gerbode foundation is directed by Maryanna G. Stockholm, a major A&B stockholder and former longtime member of the board of directors of A&B. Her husband Charles M Stockholm has served as A&B Chairman.
2) The Wallace Alexander Gerbode Foundation gives megabucks to the Sierra Club every year.
3) David Frankel, then a leader of the Sierra Club, hired Jack Kelly to lead the assault on the non-A&B Development, Hokulia.
4) By this method, anti-Development protesters create the “high barriers to entry” behind which A&B shelters.
Anti-development protests are a competitive tool for Hawaii’s large landowners.