Mitch Hutchinson/iStock via Getty Images
Mitch Hutchinson/iStock via Getty Images
I think that the Maui Land & Pineapple Company, Inc. (NYSE:MLP) is a Buy because the value of the land this company owns and currently plans to build on is worth approximately $86.22 a share, a 333% upside compared to the $19.89 a share its currently trading at. MLP's largest shareholder is former AOL CEO and Chairman Steve Case who has a 62% stake in the company. Steve Case has been involved in real estate and land development for decades launching Revolution Places after leaving AOL.
Revolution Places announced that in 2025 it would be opening a luxury Waldorf Astoria hotel in Costa Rica called Waldorf Astoria Guanacaste. Just like in Maui Steve Case had waited 15 years until he felt the timing was just right before he began developing this piece of land. I believe that Steve Case will now shift his attention to MLP's land. The Maui fires have created an increased need for residential housing. These fires have also created pressure for local government authorities to expedite regulatory processes to help speed up the pace of new developments on the island. I believe that MLP will attempt to use this opportunity to develop its lands now because it has been adding directors and management that are extremely talented at building and managing both luxury resorts and residential housing.
Since mid-2022 MLP has brought on board new CEO Race Randle as well as new board members Glyn Aeppel, Scot Sellers, and John Sabin who is Steve's right hand man in his development projects at Revolution Places. Every one of these new appointees to MLP brings an incredible wealth of land development knowledge and practical experience to the table. It really does appear that Steve Case is moving all of the pieces into place to finally begin realizing the potential value locked into the property MLP owns and I think that shareholders of MLP couldn't ask for a better management team to help deliver this value. MLP also changed their incorporation status in 2022 from Hawaii to Delaware, in order to alleviate some of the regulatory difficulties involved with developing land in Hawaii.
Maui Land & Pineapple Company, Inc. was incorporated in 1909 in Lahaina, Hawaii. The company currently owns approximately 22,000 acres in West Maui which it currently runs leasing, a resort, and real estate operations from. The company used to run pineapple plantations from some of its property but shut down operations in 2009 after years of unprofitable harvests. MLP's existing business operations don't make a lot of money and the business has posted a loss in operating income every year since 2018 except for 2022. In early 2023 MLP hired colliers to assess how the company can maximize its real estate portfolio.
Operating Income And Income From Continuing Operations (Seeking Alpha)
The case for a buy rating isn't in MLP's current operations but in the land that MLP owns. MLP owns approximately 22,000 acres in Maui. 10,350 acres of this is conservation land of which just over 9,000 acres makes up the Pu’u Kukui Watershed Preserve. The existing 11,650 acres of MLP land are made up of 10,981 acres zoned for agricultural use, 933 acres are residential, and 22 acres are used for commercial and or industrial purposes. Right now MLP has entitlement rights on 880 acres of land to build 1,300 housing units in Kapalua. The entitlements to build housing on this land also includes entitlements to build commercial properties and amenities for these communities. This land sits right next to the Kapalua Central Resort (which MLP owns) and will sell for a much higher price than MLP's other lots due to the property's close proximity to some of the best entertainment Maui has to offer. This property also touches the Pu’u Kukui Watershed Preserve offering future Kapalua residents outdoor hiking and various eco related entertainment opportunities.
880 Acres Of MLB Land Currently Entitled To Build 1,300 Housing Units (County Of Maui Tax Parcel Viewer)
Lots Of Land For Sale In Kapalua (Redfin)
I looked at the six lots of land currently for sale in Kapalua. The average price per acre from these six lots is currently $3.17 million. One lot in particular far exceeded the normal price per acre range of the other five properties so I made the decision to remove that property from the data to be more conservative. After doing so I got an average price of $2.24 million an acre. Using this figure MLP could get up to $1.97 billion for this property. If you take 21% from this land sale figure to account for taxes we then end up with $1.56 billion for these 880 acres. Divide that by MLP's 19.62 million shares currently outstanding and we come to a price figure of $79.39 a share a 299% increase from the stock's current price.
Value Of MLP's 880 Acres Of Entitled Land In Kapalua (Leland Roach)
This land is already entitled and due to an agreement made with the Maui government when MLP sold off its water treatment facility in 2019, the Maui government will provide new water service lines to MLP's properties as they are developed. These two factors should really play into MLP's ability to attract premium prices for their properties. This land is situated in a prime location on Maui right next to highway 30 and around the activity filled Kapalua resort, multiple golf courses, access to some of the world's most beautiful beaches, and is right next to all of the outdoor recreational activities that come from being so close to the Pu’u Kukui Watershed Preserve.
MLP also has 300 acres located in Haliimaile that it plans to build into an extension of an existing community starting in 2029. When looking into current land for sale around Haliimaile it becomes apparent that this land is not nearly as valuable as MLP's Kapalua property. Even so the average price of land in this region is still going for an average of $584,896 an acre. When multiplying this by the 290 acres that MLP plans to actually sell in Haliimaile (accounting for a 21% tax rate from the sale) we get $133 million. This ends up adding $6.83 per share of value added to the $79.39 a share's worth of value from the Kapalua property. Bringing the total value of property per share that MLP is already engaged in plans to develop up to $86.22. That's a 333% increase in value from the current stock just by selling off 5.4% of their total land holdings.
Value Of MLP's 300 Acres In Hali`imaile (Leland Roach)
MLP owns over 9,000 acres of conservation land in the Pu‘u Kukui Watershed preserve. This land is clearly never going to be developed. MLP also owns another 5,370 acres just north of the Kapalua resort. This land looks like it might not be developable either. It's full of mountainous terrain and does not appear to have ever had fields plowed into it the way their agricultural acreage south of the Kapalua resort does. This northern acreage also bumps up to the West Maui Forest Reserve. Land this close to important natural resources would likely make things like entitlement rights difficult to procure and I wouldn't be surprised if this property was gifted back to Hawaii in exchange for entitlement rights to build on MLP's other existing agricultural properties which are much better positioned to have communities built on them and are already closer in proximity to existing infrastructure on the island. I will exclude these acres as the Pu'u Kukui Watershed Preserve will clearly remain untouched and MLP's land north of the Kapalua resort seems to be mostly mountainous unimproved land that may prove difficult to even farm on. MLP does however have a lot more land that could possibly be sold off in the future.
MLB's Pu'u Kukui Watershed Preserve And Acreage North Of The Kapalua Resort (County of Maui Tax Parcel Viewer)
MLP owns another 1,200 acres of land in Hali`imaile that is currently zoned mostly for agricultural use. Property values here are not as enticing as they are in West Maui but still offer up a large chunk of value. MLP could get $554 million after excluding 21% for taxes if it can sell that land for the $584,896 an acre that it is likely to get from the other 300 acres it is trying to develop in Hali`imaile.
Value Of The Rest Of MLP's 1,200 Acres In Hali`imaile (Leland Roach)
MLP also has another 5,920 acres of land between Kapalua and Lahaina that it currently leases out to farmers for agricultural purposes. This property runs right along highway 30. Many of these lots of agricultural land are located directly across from other housing and looks like the perfect location for future development. Without the land being entitled and without MLP making a comment on the direction they'd like to go with this property it's hard to place a price on it but even if it was assumed to only have a value of $500,000 an acre and MLP could only get half of it developed MLP would still get $1.17 billion out of it after applying a 21% tax rate to the land sale.
Value Of The Rest Of The 1,200 Acres At Hali`imaile (Leland Roach)
While there's no guarantee if and or when MLP will develop its existing agricultural properties once these other projects are completed, having all of this land at its disposal adds a large margin of safety to MLP. An extra $87.85 worth of land value sitting in MLP's land portfolio should give the company the advantages and flexibility it needs to realize value for its shareholders.
I'm personally only adding the value of the current projects that MLP has stated it intends to pursue to my valuation but this extra 5,920 acres between Kapalua and Lahaina I essentially view as an extra value cherry on top. The cost of MLP's stock is already covered three times over by the $79.39 per share value from their Kapalua properties plus another $6.83 per share of value on their Haliimaile community they intend to start building in 2029. These additional 5,920 acres you are essentially getting for free and offer an additional safety moat against some sort of sudden down turn should for whatever reason the price of land in Hawaii fall significantly.
Steve Case is a MLP board member and is MLP's largest shareholder. Steve owns 62% of the company originally buying a 41% stake in the company back in 1999 before increasing his stake in 2010. Steve was a co-founder of AOL and was still a board member when he originally purchased stake in MLP. AOL had been undergoing some major difficulties and Case's purchase was at the time very poorly received.
One of the reasons why I think the Maui Land and Pineapple Company has such great potential is because Steve is actually from Hawaii and bought this land not just because he thought he could make money out of this investment one day but because he really does seem to have a keen interest in preserving some of the paradise he grew up in. Steve's lifelong understanding of Hawaii should play a major role in the success of MLP's land development endeavors. Case's father Daniel Case was a well know lawyer in Hawaii and his mother Carol Case was a school teacher. Steve's cousin is currently a congressmen in the house of representatives servings as a Democrat so needless to say I think Steve has his roots set in Hawaii.
The other equally important reason why I think that MLP has so much potential is Steve's patience. The building arm of his Revolution LLC company Revolution Places has developed other plots of land into extravagant resorts that turned into handsome profits for those involved. In 2022 Revolution Places finally broke ground on a large Waldorf Astoria hotel in Costa Rica that it intends to open in 2025. Revolution Places had acquired the property in 2007. When asked by Forbes contributor Carrie Coolidge what took him so long to build Case replied “It was more important to do it right. So we spent more than a decade finding the right partners who wanted to honor this special place.”
That statement leads me to my next set of management team introductions. Since 2022 MLP has strategically brought on 3 new members to its board of directors, and a new CEO. The members of this team are frankly almost too talented for a small company like MLP with a $390 million market cap and it is my belief that they wouldn't have jumped on board with this company unless they were absolutely convinced that MLP's potential for future value generation far exceeds what is reflected on the company's financial statements today.
Long time CFO for two of Steve Case's companies Revolution LLC and Case Foundation John Sabin is always close by Steve's property development endeavors. John was appointed to MLP's Board of Directors in July of 2022. He has a long history and a lot of experience with various real estate and hospitality organizations under an assortment of legal and executive duties.
Glyn was also appointed to MLP's Board of Directors in July of 2022. Glyn has an extremely impressive record as Founder and CEO of "Glencove Capital the only woman-owned and operated hospitality investment firm in the United States." Le Meridien, Fairmont, Loews, and Marriott are just a few of the household names she has worked with. Glyn has over 35 years of experience developing hotel brands and "has sourced, closed, and financed real estate investments of well over $3 billion" in both the United States and Europe. She also serves on the board of Simon Property Group.
Scot is probably the perfect man for MLP. He sits on the boards of two of the most prominent companies in the United States that build Master Planned Communities which is exactly what MLP plans to build in Kapalua. Scot used to be the CEO of Archstone, one of the largest multi-family housing companies in the world. He was CEO for almost 20 years where he grew it from "several hundred million dollars in assets to a total capitalization exceeding $22 billion." Archstone (by then called Archstone-Smith) was sold to Tishman Speyer and Lehman Brothers Holdings Inc. in a deal that was estimated to be worth $13.5 billion. Scot joined the MLP Board of Directors in March of 2023.
Race Randle is a native Hawaiian that joined MLP in March of 2023 as CEO. His accomplishments include a redesign on Ward Village in Honolulu that involved building 4,300 residential units on 60 acres of land. This redesign was meant to be an eco-friendly design that promotes healthy lifestyles by creating a community where vehicles are largely unnecessary while simultaneously merging island life with the needs that come from an urban environment. Ward Village has won an impressive trove of accolades including “Master Planned Community of the Year” by The National Association of Home Builders, "LEED for Neighborhood Development Platinum certification" by the U.S. Green Building Council, and “Best-Planned Community in the United States” by Architectural Digest.
MLP's new management picks appear to be positioning the company to make the most out of its entitled land in Kapalua. I think this is a team that is fully capable of realizing the true value of MLP's land. The company also changed its state of incorporation from Hawaii to Delaware in July of 2022 as it was beginning to assemble this new management team. MLP did this (according to their 2022 10-Q Q3) for "predictability, flexibility, and responsiveness of Delaware law, 2) access to specialized courts, and 3) the enhanced ability to attract and retain qualified candidates for Board of Directors and management."
All of these appointments, in my opinion, indicate that MLP is finally making moves to profit off of the land it has been sitting on for so long. The combination of MLP acquiring an extremely talented management team, the company changing its state of incorporation, and hiring colliers to asses ways to maximize land value has me convinced MLP's share price has a ways to rise before it accurately reflects how valuable the land MLP currently owns really is.
MLP trades an average of 966 shares a day so if you needed to offload a $20,000 position you would likely run into difficulties doing so. Hawaii is also famously hard to get building permits to build just about anything. While I am hoping that the Maui fires put pressure on local governments to expedite some of these processes there is no guarantee this will happen. An inability to get anymore of MLP's agricultural land entitled could significantly hinder the company's ability for future profits beyond the 880 acres in Kapalua. If prospects to be able to entitle more of MLP's land begin to not look very promising this could greatly impact how much MLP could get for its land or even if there would be anyone or any entity willing to buy that land from MLP at a price that makes sense to the company's shareholders.
If MLP begins to somehow run into regulatory hurdles that threaten the future of its building projects at Kapalua I would consider selling. However it is hard to say right now how big those hurdles would have to be and if any large hurdles are likely to show up during the many stages of construction. If the stock reached anywhere close to the $79.00 a share price I would, depending on what management has said about future build prospects, consider selling since this is my value target for MLP's 880 acres currently entitled.
The aftermath of the Maui fires may change if only temporarily, the way Maui and Hawaii regulate their potential construction projects. Demand for housing after the Maui fires may just be the catalyst that helps MLP and other land owners get approval for future developments on the island.
I believe that Maui Land & Pineapple Company, Inc. is a BUY based off of the value of the land they currently have entitlements to build on coupled with the intense pressure that the Maui and Hawaiian governments are now facing to address the lack of housing available to residents after the horrible wildfires that swept through the area in 2023. Over 2,200 structures had been burnt and some 7,000 residents displaced last year which has added a great deal of urgency to local officials to act on the lack of housing in Maui. This could create a pathway for MLP to develop more of its agricultural acreage south of the land it already has entitled. This land is located between Lahaina and Kapalua. Lahaina was tragically burnt to the ground and this agricultural property MLP owns is well placed should officials ease regulations or create incentives for existing land owners to develop their property in order to ease housing constraints.
Even if the stretch of land between Lahaina and Kapalua stays agriculturally zoned and unentitled for the foreseeable future, MLP's existing property that is entitled is worth $79.39 a share which is a 299% increase from the $19.89 the share price was sitting at when I began writing this article. MLP also has another 290 acres that it has explicitly stated it will build housing on starting in 2029 which adds another $6.83 to the share price target. I think that MLP is a company you will be able to hold onto for years as the company finally begins to develop its land under their incredibly experienced and talented management team.