State eyes early ’14 close on Lipoa Point sale
West Maui state Rep. Angus McKelvey said last week that the state is hoping to close the Lipoa Point purchase by the end of the first quarter next year, as the landowner, Maui Land & Pineapple Co., cautioned in its quarterly report last week that the impact of the sale on unfunded pension liabilities remains “uncertain.”
When the Legislature passed the $20 million appropriation for the purchase of about 280 acres of undeveloped shoreline around Honolua Bay, the bill mandated that the money received by ML&P go toward defined benefit pension funds and toward absolving the state of remaining liability.
ML&P said in its third-quarter report that as of the end of September the company had unfunded pension liabilities of $24.2 million with those liabilities secured by about 8,400 acres, including Lipoa Point.
Lipoa Point’s role in these unfunded pension liabilities came up during last year’s General Plan discussions when groups sought to have the area designated as preservation instead of agricultural. ML&P resisted, saying the change would devalue the land and jeopardize pension agreements for its workers.
McKelvey called the bill, which was signed by Gov. Neil Abercrombie, a “win win” for everyone, including the company, pensioners and groups seeking to save Lipoa Point from development. ML&P said that the bill requires the state through the state Department of Land and Natural Resources to “ensure to the maximum extent practical that the company uses the proceeds of the sale to benefit the company’s defined pension plans.”
Although McKelvey was confident that a deal would be struck because both sides are committed to the main points of the agreement, ML&P cautioned in its quarterly report that “there is no certainty that any such sale will take place, and even if it does, the amount by which the company’s unfunded pension fund liabilities would be reduced is uncertain.”
The sale may not be enough to release the interest on other West Maui land holdings securing the unfunded pension liabilities, the report said.
McKelvey said that the sale process currently is being held up by the development of an appraisal by the state. He noted that last week’s special session on the same-sex marriage bill ran several projects “off the track,” including the Lipoa Point appraisal, he said.
ML&P reported a third quarter loss of $1.6 million, or 8 cents a share, which was slightly lower than the $1.6 million, or 9 cents a share loss, in the third quarter of 2012.
The company logged operating revenues of $2.8 million for the quarter, down from $3.6 million in 2012.
For the first nine months of the year, ML&P reported a net loss of $2.5 million, or 14 cents per share. In 2012, the company recorded a $2.9 million loss, or 16 cents per share.
ML&P reported revenues of $9.3 million for the first three quarters, down from $12.4 million last year.
In June, ML&P sold a 7-acre parcel that was the last of its former cannery in Kahului for $4 million. The sale resulted in a gain of $1.9 million.
The company also appears to be freeing itself of a major financial liability tied to the development of the former Residences at Kapalua Bay.
An entity mostly owned by ML&P built the Residences of Kapalua Bay on the site of the old Kapalua Bay Hotel and amenities, including a spa and a sundry store and made improvements to a beach club on an adjacent parcel owned by ML&P. The Residences ended up in a foreclosure proceeding with Island Acquisitions Kapalua LLC, claiming the property in an auction this year for $100 million.
ML&P had agreed to purchase from Kapalua Bay the amenities that were built in 2009 at an actual construction cost of $35 million. The company has said that it does not have $35 million in cash and was in negotiations with the new owners to resolve its purchase commitment.
In the third quarter report, the company said that it has entered into several tentative agreements with parties including the lenders and the new owners. In the tentative agreements, ML&P would fund $2.4 million of deferred maintenance at the project, convey land parcels under and adjacent to the project and provide other consideration in exchange for full releases from the company’s limited guarantees for its commitment to purchase the amenities and completion of the project.
The report said that the agreements are contingent on several factors, including the receipt of release agreements from a minimum of 70 nondeveloper time-share owners within 90 days of the execution of the agreements.
The new owners have said they will turn the time-share residences at Kapalua Bay into a combination of residences and a hotel. The property has been renamed Montage Kapalua Bay.
* Lee Imada can be reached at email@example.com.