MAKENA – The state Land Use Commission began this week what promises to be a long series of proceedings on Alexander & Baldwin Properties’ proposed 545-acre, 2,550-unit Wai’ale subdivision in Central Maui.
The commission listened to about two dozen residents testify for and against the proposal Thursday and Friday at the Makena Beach & Golf Resort.
“This is very preliminary,” said A&B Properties Vice President Grant Chun. “We are still in the conceptual phase. A lot of the questions asked today are to be answered on the county level.”
Commission members said that they intend to return for more testimony from state and county officials in April, Chun said Friday.
The Wai’ale project is seeking a state land-use district boundary change from agriculture to urban. And, the Maui County Council will take up proposed changes of zoning for the property as well as amendments to the county general and community plans, said county Deputy Corporation Counsel Michael Hopper.
The governor’s Office of Planning and Mayor Alan Arakawa’s Department of Planning support the project. Proponents of the development maintain it will bring jobs, tax revenue and affordable and market-priced homes as Maui’s population continues to grow.
Members of the Waikapu Community Association, conservationists and Native Hawaiian groups oppose the project.
Alexander & Baldwin Inc.’s agricultural sector – led by Maui’s Hawaiian Commercial & Sugar Co. – produced a “strong performance” in 2011 while losses related to Matson Navigation Co. and the real estate sales division put a drag on company profits.
In reporting its 2011 and fourth-quarter financial results Monday, the Honolulu-based company said it logged a net income of $34.2 million, or 81 cents a share, for the year, down 63 percent from the $92.1 million, or $2.22 a share, in 2010 and down nearly 75 percent from the $132 million, or $3.19 a share, in 2008, as the Great Recession began roiling the national economy.
For the fourth quarter, A&B’s net income was only $1.6 million, or 4 cents a share, down from $20.2 million, or 48 cents a share, in the same quarter the previous year.
The company’s ocean transportation sector showed an operating profit of $74.1 million for the year, down from $118.7 million in 2010. This sector of the company suffered losses from the discontinuing of its second China-Long Beach service in the third quarter.
In addition, A&B said that the company continues to make progress on plans to separate its shipping and real estate/agricultural businesses in the second half of this year.
The agricultural sector, which includes HC&S and trucking and storage companies on Maui, Kauai and the Big Island, showed an operating profit of $22.2 million in 2011, up 264 percent from $6.1 million in 2010. This is a big contrast from three years ago, when agriculture lost $27 million and the board of directors debated shutting down sugar operations.
Alexander & Baldwin Inc. said today its board of directors has approved a plan to split the company into two separate companies, one focusing on real estate and agriculture and the other on shipping.
The two companies would be independent and publicly traded, the company said in a news release.
Under the plan, A&B shareholders will own one share of both A&B and Matson stock for each share of company stock owned. The separation is expected to be completed in the second half of 2012.
The announcement was made after the market closed. A&B’s shares rose $1.50 to $39.56 in after hours trading.
“Over the past decade, Alexander & Baldwin’s board of directors and management have periodically conducted strategic reviews, including an evaluation of the merits of separating into two companies,” said Walter Dods, A&B’s chairman. “After thorough evaluation, we have concluded that the increased size, capabilities and financial strength of both our land and transportation businesses now enable these operations to independently execute their strategies to maximize shareholder value.”
Honolulu-based A&B has grown substantially over the past decade. Its commercial real estate portfolio has increased by almost 50 percent to its present size of 7.9 million square feet, comprising 44 properties in Hawaii and eight mainland states. The portfolio of commercial properties generates a significant and stable source of cash flow for the company, and is an important source of capital for A&B’s real estate investment and development activity.
Researchers from the U.S. Department of Agriculture and the University of Hawaii will arrive on Maui this summer to work with Hawaiian Commercial & Sugar Co. to study crops, growing conditions and other issues in developing biofuels on the island.
The 130-year-old plantation is working with federal and state partners to help determine not only its own future, but also the future of growing biofuel crops in Hawaii to power both the U.S. Navy’s Pacific Fleet and private vehicles across the state. The end result could be the development of a biofuel refinery for HC&S, said company General Manager Rick Volner Jr.
The goal is to transition HC&S into a leading “energy farm,” and develop the resources to sell commercial jet and diesel fuels to the government and private consumers.
Success could guarantee that the company would continue to employ around 800 people, and perhaps even more, company officials said.
“There are no firm deadlines for this project, but the sooner we can decide, the easier it will be for the board of Alexander & Baldwin (HC&S’s parent company) to fund some of these products, and obviously we will need to make some capital investments,” Volner said last week. “But we’re more interested in making the right decision than when we make it.”
Although its agribusiness sector continued its recovery in the first quarter, Alexander & Baldwin’s usual profit center, Matson Navigation Co., lost money, and the company reported a thin profit of $5.2 million, or 12 cents per share, Tuesday.
President Stanley Kuriyama said Matson couldn’t adjust its fuel surcharges fast enough to keep up with soaring oil prices.
Agribusiness, primarily Hawaiian Commercial & Sugar Co., had an operating profit of $2.6 million, compared with a loss of $1.1 million in the first quarter of 2010.
It is difficult to compare quarter-to-quarter results for HC&S, since in the first quarter of 2010 the Puunene mill shut down for an extended overhaul and harvesting did not begin until the second quarter. But Kuriyama pointed out that the company’s agriculture operation has now experienced four straight quarters of profitability, following years of serious losses.
It is also difficult to compare quarter-to-quarter changes at Matson, because it signed a significant connecting carrier agreement with a large international carrier and opened a second service to China. Both increased business, but the startup costs for the second “string” of voyages to China resulted in a loss.
Hawaii container traffic was up to 34,000, from 31,400 the year before, partly indicating expansion in the island economy.
Alexander & Baldwin Inc. has been in business 141 years, and for most of that time the kamaaina company has stood on three legs, each representing a major industry closely tied to Hawaii — agriculture, shipping and real estate.
The stool has been pretty sturdy, enabling the Honolulu-based company to realize or improve gains from one industry with the help of another, or to rely on different legs to weather downturns in others.
But at times in A&B’s history, influential shareholders have questioned the structure and made attempts to sell off pieces of the publicly owned firm.
Two weeks ago, a new plan to dismantle the stool is suspected of being set in motion by New York hedge fund manager Bill Ackman, who recently bought 10 percent of A&B with an associate to become the company’s largest shareholder.
Ackman hasn’t publicly detailed his intent, but said in a broad statement that he plans to hold discussions with A&B management, directors, other stockholders and other parties “concerning the business, assets, capitalization, financial condition, operations, governance, strategy and future plans” of the company.
A&B has said it is open to hearing Ackman’s ideas, but won’t comment on the subject of discussions.
Shares of Alexander & Baldwin stock soared 19 percent today to close up $8.82 at $54.47 following yesterday’s announcement that a New York hedge fund manager and a partner bought up shares to become A&B’s largest owner.
The closing price was the highest since Sept. 9, 2007, when A&B’s stock closed at $57.73 on the New York Stock Exchange.
Bloomberg News reported that Wells Fargo Securities, which downgraded A&B’s stock last week, raised its expectations for the stock and estimated A&B’s “break up” value — that is splitting apart core divisions of ocean cargo transportation, commercial real estate and agribusiness potentially to be sold — at about $54 a share.
Stock analysts and some company insiders anticipate that the hedge fund manager, Bill Ackman of Pershing Square Capital Management LP, will seek to break up A&B.
Ackman’s firm, along with former Pershing Square partner Richard McGuire of San Francisco-based Marcato Capital Management LLC, disclosed yesterday after the stock market closed that they recently bought $168 million of A&B’s stock to give them a 9.9 percent stake.
Ackman and McGuire paid an average of $41.04 for their shares, making their stake worth about $224 million at today’s closing price, or $56 million more than the average paid.
One of Hawaii’s last venerable Big Five companies, Alexander & Baldwin Inc., could be under pressure to break itself up.
A New York hedge fund manager known to agitate for change in his investment targets bought nearly 10 percent of A&B along with a partner, it was announced yesterday. The purchase triggered expectations the 141-year-old kamaaina company will be split into pieces to elevate stock value.
Neither A&B nor the hedge funds would disclose what the intent of the A&B stock purchase — a $168 million deal — might be yesterday.
“We expect to have a constructive dialogue with them as we do with all of our shareholders,” said Suzy Hollinger, A&B’s director of investor relations.
But stock analysts with insights to A&B and people with ties to the 2,300-employee company say the play almost certainly is a breakup of the conglomerate’s three core businesses — ocean cargo transportation, commercial real estate and agriculture.
“Are the parts worth more than the whole? That’s what this comes down to,” said local stock analyst Randy Havre, echoing views of two other analysts who closely follow A&B.
Two mainland investment firms have combined to purchase a 9.9 percent stake in Honolulu-based Alexander & Baldwin Co., according to a regulatory filing today.
New York-based Pershing Square Capital Management LP, led by activist hedge fund manager Bill Ackman, bought an 8.6 percent stake and San Francisco-based Marcato Capital Management LLC, led by Richard McGuire, acquired a 1.3 percent stake.