Case’s stake in ML&P 65 percent, growing

Maui Land & Pineapple Co. majority shareholder Steve Case has been incrementally amassing stock in the company – nearly 85,000 shares since November – and raising his stake in ML&P to more than 65 percent, company filings with the Securities Exchange Commission show.

Case’s most recent purchases of common stock were filed Tuesday and March 15 – 2,600 shares of common stock at about $4 a share by his trust. That brought his total amount of ML&P stock owned to about 11.9 million shares, most of it through a trust of which he is the sole trustee, SEC documents show.

The company’s annual report indicated that as of February, Case held a 65 percent stake in ML&P. As of March 1, the company’s annual report showed 18.8 million shares of common stock outstanding.

The stock purchases by the co-founder of AOL since November, when the stock was selling at $2.67 a share, are moving him closer to two-thirds ownership of the company, a supermajority of shares that could give him significantly greater decision-making power, previous reports have indicated.

Most of the purchases were in increments of 1,000 to 3,000 shares.

ML&P officials did not respond to requests for comment about Case and the annual report filed this month.

Although it was not clear from where those shares came, the company’s annual report indicated that 21,277 restricted shares vested in 2012 and were granted to management employees and the company’s board of directors, of which Case has been a member since 2008. Another 78,769 shares of restricted stock vested after requirements were met last year.

Case also gained a little more power on the board, as have other members, with the amending of the company’s bylaws to reduce the number of directors from six to five, according to a filing with the SEC in February.

The same filing said that Kent T. Lucien, who has served on the board since 2004, will not be seeking re-election at the company’s annual meeting April 22.

Lucien has served as vice chairman and chief financial officer of Bank of Hawaii Corp. since April 2008 and on the board of Wailuku Water Co., according to a report in Reuters. He served as a trustee of C. Brewer & Co. that once owned Wailuku Sugar Co. from 2006 to 2007 and was chief executive officer of operations of C. Brewer & Co. from 2001 to 2006.

In its annual report, the company that owns 23,000 acres on Maui reported a loss of $4.6 million, or 25 cents a share, in 2012 compared with a $5.1 million net income in 2011. The report indicated that the 2011 income figures were boosted by $15.1 million from the sale of the Kapalua Bay Golf Course.

Revenues were higher in 2012, $16.2 million compared to $14.5 million in 2011, and expenses were lower, $18.6 million in 2012 compared to $21.8 million in 2011.

On the revenue side of the ledger, the sale of an 89-acre parcel in Upcountry brought in $1.5 million last year. The company also cut its general and administrative expenses by more than half to $3 million, compared to more than $6.3 million 2011. The lower expenses were attributed to reduced staffing levels and lower professional services and outside consulting costs, the annual report said.

The company that was once one of Maui’s largest employers had 17 employees at the end of 2012, the report said.

“MLP made significant progress toward completing our restructuring efforts during 2012,” said Warren H. Haruki, chairman and chief executive officer of the company, in a statement released with the annual report. “We now have a simplified business model focused on our core land holdings; we are moving forward with the resolution of our legacy issues and have significantly reduced our operating cash burn.”

He said the company still faces “significant challenges” while lauding the Maui County Council’s General Plan approvals and designation of 290 acres in Haliimaile as urban small town in the Maui Island Plan last year.

The company reported that it had 1,500 acres in various stages of development with three major projects:

* Kapalua Resort, 800 single- and multifamily residential units, about 30,000 square feet of commercial/retail space and up to 27 holes of golf on 900 acres. The Village at Kapalua has its land zoning and is currently in the design and permitting stage for components of the master plan.

* Pulelehua, 882 housing units, a new elementary school, 91 acres of open space and a village center on 312 acres in West Maui. The project received final zoning approval from the county in November 2011, and planning and subdivision work is under way.

* Hali’imaile Town, an expansion of the existing plantation town on 290 acres. It does not have zoning.

The company warned in the report that if it were unable to complete land development projects on time and within budget and were unable to obtain land-use entitlements, the company’s bottom line would be affected. It also said that the company’s cash outlook and ability to pay its loans are “highly dependent” on implementing its business plans and selling its real estate assets at “acceptable prices.”

ML&P faces major challenges, including debt of $49.3 million as of December 2012, the report said. The company has a line a credit with Wells Fargo for up to $34.5 million, with $8.8 million available as of the end of 2012, and a secured term loan with American AgCredit for $24.1 million. In February, the company was able to extend the May 1 maturity dates of both loans by a year.

“We have pledged a significant portion of our real estate holdings under our credit facilities, limiting our ability to borrow additional funds,” the report said.

About 11,000 acres are being used as security for loans and pension obligations. Included in those 11,000 acres are 7,000 acres at Lipoa Point and other West Maui land pledged to secure $18.7 million in unfunded retirement liabilities. Community groups have sought to put Lipoa Point into conservation during recent Maui Island Plan discussions, but the company warned that doing so would jeopardize the agreement.

In November 2012, the company executed a settlement agreement and pledged security of about 7,000 acres in West Maui that will be released in five years if the company does not default on the agreement involving its pension liabilities, the report said.

There are efforts ongoing in the state Legislature to purchase Lipoa Point from the company, a joint effort that could include state, county and private funding.

The company faces other major challenges:

* Pension funding liability of about $30.3 million as of Dec. 31.

* The company was warned in October that it was not in compliance with New York Stock Exchange listing standards because the company’s average market capitalization was less than $50 million in a 30-trading-day period, and the most recently reported shareholders’ equity was less than $50 million. The company submitted a business plan to the NYSE demonstrating the ability to achieve compliance with the continued listing standards within 18 months. The plan was accepted in January.

* ML&P and and five other Hawaii farms have been sued by the Equal Employment Opportunity Commission in U.S. District Court alleging violations of the civil rights of immigrant farm workers from Thailand. The EEOC is seeking back pay and up to $300,000 in damages for each of the workers, according to published reports.

Financial obligations related to the disastrous Residences at Kapalua Bay project continue to weigh on the company.

ML&P has a 51 percent ownership interest in Kapalua Bay Holdings, which is the sole member of Kapalua Bay. It was Kapalua Bay that built the residential and time-share development on the site of the old Kapalua Bay Hotel.

ML&P made a $53.2 million cash contribution to Bay Holdings and a contribution of land, valued at $25 million. The company does not expect to recover anything from its Bay Holdings investments, the report said.

On March 13, lenders notified Kapalua Bay that the construction loan was in default and on June 13 filed for foreclosure against Kapalua Bay, Bay Holdings and others related to the project. A public auction was held Dec. 3, and Jan. 31 an investment firm was confirmed as the successful bidder of Kapalua Bay’s assets with a $100 million bid.

As of Dec. 31, $285 million was outstanding on the construction loan to Kapalua Bay, the report said, noting that the loan was collateralized by the land that underlies the project.

Per a previous agreement, ML&P agreed to purchase from Kapalua Bay amenities, including a spa, that were completed in 2009. The construction cost was $35 million, which the company says it does not have funds to pay. The company said it is negotiating with lenders to resolve the issue.

Interestingly, Case may have personal ties to Kapalua Bay through ER Kapalua Investors Fund LLC, which owns 15 percent interest in Bay Holdings. Case is the chairman and chief executive officer of Revolution LLR, which is the majority owner of ER.

* Lee Imada can be reached at