Kaanapali Land, LLC (Kaanapali Land) engages in the property and agriculture businesses.
Segments
The company operates in two primary business segments: Agriculture and Property.
The Agriculture segment primarily engages in farming, harvesting and milling operations relating to coffee orchards pursuant to farming agreements with the LOA and a related entity. The company also cultivates, harvests and sells bananas and citrus fruits and engages in certain ranching operations.
The Property segm...
Kaanapali Land, LLC (Kaanapali Land) engages in the property and agriculture businesses.
Segments
The company operates in two primary business segments: Agriculture and Property.
The Agriculture segment primarily engages in farming, harvesting and milling operations relating to coffee orchards pursuant to farming agreements with the LOA and a related entity. The company also cultivates, harvests and sells bananas and citrus fruits and engages in certain ranching operations.
The Property segment primarily develops land for sale and negotiates bulk sales of undeveloped land.
The Property and Agriculture segments operate exclusively in the state of Hawaii.
KLC Land Company, LLC (KLC Land) is the direct subsidiary of Kaanapali Land through which the company conducts substantially all of its remaining operations. KLC Land conducts substantially all of its business through various subsidiaries. Those subsidiaries with remaining assets of significant net value include KLC Holding Corp. (‘KLC’), Pioneer Mill Company, LLC (‘PMCo’), Kaanapali Land Management Corp. (‘KLMC’ formerly known as Kaanapali Development Corp.) and PM Land Company, LLC.
Project Planning and Development. The company's real estate development approach, for land that it holds for development rather than investment, is designed to enhance the value of its properties in phases. In most instances, the process begins with the preparation of market and feasibility studies that consider potential uses for the property, as well as costs associated with those uses. The studies consider factors such as location, physical characteristics, demographic patterns, anticipated absorption rates, transportation, infrastructure costs, both onsite and offsite, and regulatory and environmental requirements.
For any property targeted for development, the company will generally prepare a land plan that is consistent with the findings of the studies and then commence the process of applying for the entitlements necessary to permit the use of the property in accordance with the land plan. The length and difficulty of obtaining the requisite entitlements by government agencies, as well as the cost of complying with any conditions attached to the entitlements, are significant factors in determining the viability of the company’s projects. Applications for entitlements may include, among other things, applications for state land use reclassification, Maui County (the ‘County’) community plan amendments, changes in zoning, and if applicable, subdivision.
Pioneer Mill Site. The company owns approximately 19 acres in Lahaina, known as the Pioneer Mill Site, which is zoned primarily industrial. This is the former site of PMCo's sugar mill on Maui and was the site of the coffee mill operation. In addition, portions of this parcel were subject to various short-term license agreements with third parties that generated income for the company. Plans are in process for future potential development of the site. As discussed below, the site was negatively impacted by the Lahaina wildfire.
Lahaina Wildfire. Beginning on August 8, 2023, a wildfire occurred due east of historic Lahaina town in Maui. The fire spread rapidly due to extreme wind conditions caused in part by Hurricane Dora which traveled 800 miles offshore west of Maui. The fires caused multiple fatalities, widespread damage to Lahaina town and the surrounding area including the company’s 19-acre Pioneer Mill site. The company’s offices and coffee mill were located on the site as well as various other structures and a building which is leased to an unrelated third party and used to operate a coffee store. The company also utilized portions of the property for short term license agreements with third parties that generated income for the company. Although no employees were injured in the fire, the company’s offices and coffee store building were destroyed. Additionally, it appears that most of the personal property of the licensees and the coffee mill was destroyed. The widespread destruction is likely to cause disruptions in the company’s development plans. The damage to the coffee mill has disrupted operations and prevented the company from processing and selling the current year coffee crop. It is also likely that the fires and devastation caused thereby will adversely affect the Maui economy and businesses operated on Maui. Clean up of Lahaina, including the Pioneer Mill site, has commenced by the U.S. Army Corps of Engineers (‘USACE’) contractors. Access to the property remains restricted, and such restrictions are expected to continue while the clean-up of Lahaina town continues, estimated by USACE to be completed in approximately 18 months. The company has initiated claims with its insurance carriers. The company has relocated its offices to temporary office facilities located on its lands in Kaanapali and is in the planning stages of relocating its coffee mill to its farm in Kaanapali. Additionally, the company was able to recover its electronic files which were stored on its servers destroyed in the fire from back up files existing at an offsite location. Recovery efforts continue.
Kaanapali 2020 Development Plan. The company's developable lands are located on the west side of the Island of Maui in the state of Hawaii. The majority of the developable lands are located near to the Kaanapali resort area. The Kaanapali development lands have been the subject of a community-based planning process that commenced in 1999 for the Kaanapali 2020 Development Plan. The Kaanapali 2020 Development Plan includes a mix of residential (including workforce affordable housing), commercial, quasi-public facilities, recreation, agriculture, rural, and open space. Any development plan for any of the company’s land, including the Kaanapali 2020 Development Plan, will be subject to approval and regulation by various state and County agencies and governing entities, especially insofar as the nature and extent of zoning, and improvements necessary for site infrastructure, building, transportation, water management, environmental and health are concerned. A substantial portion of the company’s Kaanapali 2020 Development Plan land will require state district boundary amendments and county general plan and community plan amendments, as well as rezoning approvals. In Hawaii, the governmental entities may impose limits or controls on growth in their communities during the review and consideration of the various entitlement processes mainly through restrictive conditions, including limitations on density, impact fees, infrastructure contribution, among others, all of which may materially affect utilization of the land and the costs associated with developing the land. In addition, the County requires certain percentages and levels of affordability to be included in proposed residential developments or subdivisions of land, thereby affecting the feasibility of these projects. There can be no assurance that the company will be successful in obtaining the necessary zoning and related entitlements for the development of any currently unentitled Maui lands. At this time, the only Kaanapali 2020 Development Plan land that has sufficient entitlements to commence development is the Puukolii Village Mauka development, as described below.
The current regulatory approval process for a development project takes a number of years or more and involves substantial expense. The applications generally require the submission of comprehensive plans that involve the use of consultants and other professionals. A substantial portion of the company’s Kaanapali 2020 Development Plan land will require state district boundary amendments and county general plan and community plan amendments, as well as rezoning approvals. There is no assurance that all necessary approvals and permits will be obtained with respect to the current projects or future projects of the company.
At the state level, all land in Hawaii is divided into four land use classifications: urban, rural, agricultural and conservation. The majority of the Kaanapali 2020 Development Plan land is classified as either agricultural or conservation.
A relatively small portion (approximately 300 acres) of the Kaanapali 2020 Development Planning area owned by the company, known as Puukolii Village Mauka, consisted of two parcels known as Puukolii Village Mauka and another parcel adjacent to Puukolii Village Mauka, received entitlements in 1993 under the terms of a superseded law that fast tracked entitlements for planned mixed use developments that contained the requisite percentage of affordable housing units. The requirements imposed on the company relative to these entitlements proved uneconomic and thus the developments were not pursued. The company proposed revisions to certain entitlement conditions, as well as the development agreement with the applicable state agencies and is continuing to plan for the development of the Puukolii Village Mauka area, which will, if ultimately developed, include certain affordable and market housing units, a small commercial area, a school, a park and associated improvements. From 2007 through 2009, the company received various approvals of its proposed revisions of entitlement conditions and of the development agreement, including the addition of the County housing department as a party to the development agreement.
Despite the hurdles mentioned above, the company remains hopeful that it will generally be able to develop that portion of its land for which it can obtain classification as an urban district from the State Land Use Commission. However, it is uncertain whether the company will be able to obtain all necessary entitlements or, if so, how long it will take, and it cannot be predicted what the market will be for such land (or the associated development costs) at such time. Conservation land is land that has been considered by the state as necessary for preserving natural conditions, as well as to protect water resources and cannot be developed. Lands within agricultural and rural districts have limited development potential, especially as it relates to density and use. Pursuant to the Kaanapali 2020 Development Plan, the company intends to apply to the State Land Use Commission for reclassification of a portion of the agricultural lands to urban, and perhaps some rural, but does not intend to apply for reclassification of the conservation lands.
During 2012, the County updated its General Plan which projects general growth of the County over the next few decades. This update included a new component with maps which show directed growth areas. The County recognized the Kaanapali 2020 Development Plan to be within the urban growth limits identified in these directed growth maps. Development of the Kaanapali 2020 Development Plan lands in accordance with the Kaanapali 2020 Development Plan will require, in addition to state land use reclassification of some of the land from agriculture to urban, appropriate designation under the County community plan, and the appropriate County zoning designation included in the Maui County General Plan noting it as an urban growth area. In December 2021, the West Maui Community Plan (‘WMCP’), which consists of a vision statement, goals, policies, and actions to guide growth and preservation in West Maui, was updated and became part of the General Plan. The company is evaluating the effect, if any, the changes to the WMCP will have on its development plans. Obtaining any and all of these approvals can involve a substantial amount of time and expense, and approvals may need to be resubmitted if there is any subsequent, material deviation in current approved plans or significant objections by the responsible government agencies. There are no assurances that the company can obtain approvals or deviations.
In connection with any successful petition to change any of the various land use classifications (state land use district, county community plan, county zoning) of the Kaanapali 2020 Development Plan, the company may be required to make significant improvements in public facilities (such as roads), to dedicate property for public use, to provide employee/workforce housing units and to make other concessions, monetary or otherwise. The ability of the company to perform its development activities may also be adversely affected by restrictions that may be imposed by government agencies and the surrounding communities because of inadequate public facilities, such as roads, water management areas and sewer facilities, and by local opposition to continued growth. The Lahaina wildfires may also cause further delays in the company’s planned developments. However, as part of the Kaanapali 2020 Development Plan, the company has included a number of community members and local government officials in the development planning process and has earned significant community support for its preliminary Kaanapali 2020 Development Plan. It also believes that it enjoys general local community support for its new Puukolii Village Mauka concept. The company hopes that carrying on with this process will continue to generate substantial support from local government and the community for the company’s development plans.
In September 2014, KLMC, pursuant to a property and option purchase agreement (‘Purchase Agreement’) sold an approximately 14.9 acre parcel in West Maui. In accordance with the Purchase Agreement, the receivable accrues interest of 6.5% and is secured by the 14.9 acre property. The developer has begun certain other offsite construction has begun at the site. In conjunction with the Purchase Agreement, the company retains certain approval rights relating to the uses and designs of the site to ensure the uses and designs are aligned with the company’s planned master development. If such uses result in a dispute with the developer of the site, such dispute could delay the development of the site. The 14.9 acre site is intended to be used for a critical access hospital, skilled nursing facility, assisted living facility, and independent living facility.
The company is in the planning stages for the development of a 295-acre parcel in the region mauka of the Kaanapali Coffee Farms (‘KCF Mauka’). The parcel is to be consisted of 61 agricultural lots that will be offered to individual buyers. The company expects to develop the parcel in phases and all phases have been submitted to the County for subdivision approval. The company continues to work with the County to resolve certain of the County’s comments relating to the subdivision. The company’s understanding is that all outstanding comments from the County have been resolved verbally with County staff. The final approval letter has been pending and additional efforts are being made to secure the approval. Upon final subdivision approval of all phases and receipt of final plat of the first phase from the County, which requires a bond in the amount of the cost to develop the first phase, the company can pre-sell the undeveloped lots in the first phase. The company expects to market the lots in the first phase upon receiving final approvals from the County, subject to various contingencies, including but not limited to, governmental and market factors and the availability of a bond to secure the first phase of the development. At this time, the company is assessing whether the fires and resulting devastation may negatively impact the near term marketability of the lots in the first phase of the development. Therefore, there can be no assurance the company will be able to meet such timetable, that the subdivision will ultimately be approved or that the lots will sell for prices deemed advantageous by the company.
The company is in the planning stages for the development of a 241-acre residential development site in the region south of Kaanapali Coffee Farms known as Puukolii Village. The conceptual master plan is consisted of 20 developable parcels planned for 940 units including a mix of affordable and market priced homes, both single and multi-family, mixed use commercial, parks, school, and community facilities. Puukolii Village is fully entitled. At this time, the company is uncertain whether the fires and resulting devastation might delay approvals from the County. In conjunction with the potential development of Puukolii Village and in coordination with the possible development by an unrelated third party of the 14.9 acre site to be used for a critical access hospital, as noted above, the company entered into a contract to install a sewer line from the Puukolii Village site to the critical care hospital site. The developer of the critical access hospital site is obligated to share in the sewer line cost for the portion of the sewer line fronting the critical care hospital site.
KLMC is a party to an agreement with the State of Hawaii for the development of the Lahaina Bypass Highway. Approximately 2.4 miles of this two lane state highway have been completed. Construction to extend the southern terminus was completed mid-2018. The northern portion of the Bypass Highway, which extends to KLMC’s lands, is in the early stage of planning. Any such amount contributed would be reduced by the value of KLMC’s land actually contributed to the state for the Bypass Highway.
These potential commitments have not been reflected in the accompanying consolidated financial statements. While the completion of the Bypass Highway would add value to KLMC’s lands north of the town of Lahaina, there can be no assurance that it will be completed or when any future phases will be undertaken.
Agriculture
Current Operations. Agricultural operations primarily consist of cultivation, milling and sale of coffee. The coffee farming operation includes manpower and equipment required to fertilize, prune and maintain the coffee plantations, as well as equipment required to harvest and haul coffee cherry to the company’s former processing plant (the ‘Mill’) located on the former sugar mill site in Lahaina, Hawaii. As discussed above, the coffee mill was destroyed in the Lahaina wildfire. The company is in the planning stages of building a new mill at its farm in Kaanapali, which is not expected to be completed in time for the next coffee harvest. The coffee fields were not destroyed in the fire. The company also maintains and operates a system of irrigation infrastructure including development tunnels, ditches, tunnels, siphons, flumes and reservoirs required to irrigate the company’s agricultural operations and future planned developments with non-potable water.
The company sells milled green coffee under the brand name Mauigrown Coffee mainly to interisland Hawaii customers, generally roasters who have retail coffee shops, and also sells to grocery stores and online. Based on availability, green coffee is also shipped and sold to mainland and international customers, including roasters, dealers, and traders. Portions of the coffee farms are operated as part of the 336-acre Kaanapali Coffee Farms agricultural subdivision, in which a portion of each lot owned by the lot owner is used for their single-family dwelling, while the remainder of the lot containing coffee trees is farmed by the company. The company has entered into certain agreements with the Kaanapali Coffee Farms Lot Owners Association in this regard. The planned 295-acre, second phase of KCF Mauka will be within the coffee farming area as well. The company continues to plant additional acreage of coffee on its agricultural land not currently included in the developable lands of Kaanapali 2020 Development Plan.
In addition to the company’s commercial coffee farming operations, the company grows bananas, citrus, and alfalfa. The company also has approximately 660 acres of fenced pasture for cattle grazing as well as approximately 40 acres of fenced pasture for goat grazing. The company’s banana operation consists of approximately 14 acres. The bananas are sold by the company to certain customers for distribution on Maui. KLMC also grows and sells various citrus, including grapefruit and lemons. These are sold to various local venders to be sold at farmer’s markets on Maui.
Trademarks and Service Marks
The company maintains a variety of trademarks and service marks that support each of its business segments. These marks are filed in various jurisdictions, including the United States Patent and Trademark Office, the State of Hawaii Department of Commerce and Consumer Affairs and foreign trademark offices. The trademarks and service marks protect, among other things, the use of the term ‘Kaanapali’ and related names in connection with the developments in the vicinity of the Kaanapali Resort area on Maui and the various trade names and service marks obtained in connection with the company’s coffee operations. Certain trademarks, trade names and service marks have also been registered in connection with the Kaanapali Coffee Farms development.
Government Regulations and Approvals
By letters dated October 28, 2022, the State of Hawaii Commission on Water Resource Management (‘CWRM’) officially designated all six Aquifer System Areas of the Lahaina Aquifer Sector, Maui, as Ground Water Management Areas, as of August 6, 2022. CWRM notified the company that by August 5, 2023, the company would need to apply for ground and surface water use permits to continue the company’s use of certain wells that are integral to the company’s entire operations. The company has submitted such applications for permits.
Environmental Matters
The company is subject to environmental and health safety laws and regulations related to the ownership, operation, development and acquisition of real estate, the destruction that occurred at the Pioneer Mill Site as a result of the Lahaina wildfire, or the operation of former business units.
History
Kaanapali Land, LLC was incorporated in 2002.
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