The Maui News: “A&B reports progress in ag and real estate”

A&B reports progress in ag and real estate

CEO: Ag diversification is difficult; may not go according to timeline

Work continues recently on the Alexander & Baldwin joint venture Keala o Wailea condominium development. The project near the entrance to Wailea off Piilani Highway is scheduled to have 70 luxury two- and three-bedroom condos. During a conference call with investors last week, A&B officials reported that 19 units have closed for sale so far this year with another 48 units in binding contracts and two in nonbinding contracts. • The Maui News / MATTHEW THAYER photo

While Alexander & Baldwin continues work to diversify its Maui agricultural lands, redeploying 4,500 acres of former sugar cane lands last year, the company sees progress as slow, difficult and unlikely to turn a profit, A&B President and Chief Executive Officer Chris Benjamin told investors in a telephone conference call last week. Continue reading “The Maui News: “A&B reports progress in ag and real estate””

The Maui News: “Partnership rounded up for cattle ranching on former sugar lands”

Partnership rounded up for cattle ranching on former sugar lands

A&B’s Kulolio Ranch aims to raise calves to maturity, market weight

Alexander & Baldwin has established Kulolio Ranch in Hamakuapoko, a grass-fed cattle pasture operation. The formation of the ranch on 4,000 acres comes after trials that began in late 2015 on old Hawaiian Commercial & Sugar Co. lands. Alexander & Baldwin photo

Alexander & Baldwin has entered the ranching business on Maui, forming Kulolio Ranch in Hamakuapoko in a diversified agriculture venture on 4,000 acres of old Hawaiian Commercial & Sugar lands.

The ranch, a wholly owned subsidiary of A&B, will be collaborating with Maui Cattle Co., a partnership of six ranches, five on Maui, A&B said in a news release Tuesday. Under a grazing agreement, the ranchers will provide calves, while retaining ownership, to Kulolio Ranch, which will raise them to maturity and market weight, said Alex Franco, president of Maui Cattle Co., on Tuesday. Kulolio Ranch will be paid based on the weight gain.

“Having Kulolio has been a game-changer for us,” said Franco. “Our goal is to keep all our cattle here on Maui for the local market.”

Chris Benjamin, A&B president and CEO, said that “by raising grass-fed cattle on Maui, we believe we can increase and stabilize the supply of local beef and help increase consumer demand for local, fresh food products.”

“The goals of our partnership with Maui Cattle Co. are to increase local food production, support our local ranching community and deliver high-quality, healthy animals to the local market,” he said.

The ranch’s name comes from the wind that blows in the area, A&B said in a news release. Cattle trials, which included irrigated pastures in Hamakuapoko, have been ongoing since late 2015.

“We are really pleased with the results,” said Franco. “We like the quality of the beef that’s been coming from Kulolio.”

The ranch recently doubled the size of its grazing herd from 150 to 300 animals and is in the process of installing more than 18 miles of perimeter fencing and irrigation systems for the pastures, A&B said.

The ranch hopes to have 900 animals grazing in the fields by the end of the year and 3,500 animals by 2021.

Maui Cattle ranches will focus on producing calves rather than growing the cattle to maturity, said Franco. The 3,500 animals at Kulolio Ranch represent how many calves the local ranchers expect to be able to produce comfortably. With the focus on calf-raising, local ranches could produce more animals, he said.

The calves sent to Kulolio Ranch are 8 to 10 months old, and the ranch raises them for 12 to 15 months to maturity, he said. Franco did not disclose the rates to be paid, noting that they are based on a complicated formula, but did say they are compatible with market rates for the cattle industry.

Kulolio Ranch with its irrigated fields solves a problem ranchers have been dealing with for many years — drought, Franco said. Without green pastures to graze during drought, ranchers have been forced to reduce their stocks and to send their calves to the Mainland.

“When you are trying to supply the local market, whether it is drought or not, people are seeking the product,” Franco said. “When they are not able to get the product, it becomes problematic.”

The irrigated fields provide “a consistent means of getting our product into the marketplace” and “mitigate drought due to irrigation,” he said. While most of the trials were held during rainy times, the irrigation worked in getting grass established.

This arrangement allows Maui Cattle ranches and Kulolio Ranch to do what they do best, Franco said. He added that older mother cows are more able to handle drought conditions than cattle being grazed to market weight.

The addition of Kulolio Ranch offers a chance at a stable marketplace for the longtime ranches in Maui Cattle, which average 70 years in operation, Franco said. They include Ulupalakua, Kaupo, Hana, Haleakala and Nobriga ranches on Maui and Olumau Angus Plus on Kauai.

“You are looking at established companies that have been a big part of Maui for many, many years,” he said. “We are close to the market.”

They will provide jobs, buy materials from local vendors and “bring a lot into the economy,” Franco said.

Currently, 92 percent of beef on Maui is imported from the Mainland, New Zealand and Australia, he said. “We enjoy just a small portion of the marketplace,” he said.

Franco hedged when asked about the impact of Kulolio Ranch on imported beef but said “it is going to be real minimal,” maybe a 3 or 4 percent increase in locally produced meat.

There also will not be a major sway on meat prices. Franco said that the cost of doing business is higher in Hawaii and the scale of operations is smaller than the Mainland. He noted that some packers on the Mainland process 3,500 head of cattle in a couple of days.

“As far as price, our costs are still higher than our Mainland counterparts,”Franco said. “Our price still needs to be a little higher, so we can remain sustainable.”

Having grass-fed animals might be an advantage in the more health-conscious society. They are leaner with less intermuscular fat and higher in omega-3. Franco added, though, that the selection of grass- or grain-fed meat “depends on the palate of the consumer.”

The plan is to have all of the cattle slaughtered and processed on Maui, Franco said. Darren Pai, A&B spokesman, said Tuesday that the company has had “preliminary discussions” with groups interested in leasing land for expanded slaughterhouse facilities.

“Those discussions are still preliminary and have not been finalized,” he said.

Kulolio Ranch currently has two full-time hands in the field every day, Pai said. The ranch is expected to increase the number of workers as the operation progresses.

The ranch will be employing sustainable ranching practices with animals moved daily within paddocks. This will allow the cattle to graze freely while allowing grass and other forage to accumulate and grow during rest periods, A&B said.

“The cattle naturally fertilize the soil, eliminating the need for chemical fertilizers,” A&B said. “This holistic management process improves soil quality, sequesters soil carbon, reduces runoff and provides a healthy environment for the cattle.”

Franco said that the establishment of Kulolio Ranch will allow for management of previously unmanaged, fallow sugar cane land. This will reduce the fire danger and provide a habitat for birds.

“This is another sign of progress as we transition from sugar to diversified agriculture,” said Benjamin.

The establishment of Kulolio Ranch is technically not A&B’s first venture into diversified agriculture for its former 36,000 acres of sugar fields, Pai pointed out. The company recently formalized an agreement with Oakland, Calif., based TerViva to grow pongamia for biofuel on a 250-acre demonstration project in the north Kihei/Maalaea area.

A&B said it aims to transition 8,000 to 10,000 acres into diversified agriculture this year and “to aggressively convert more acreage over the next few years.”

Benjamin told investors in May that he did not expect diversified agriculture operations on the old sugar lands to show a profit in the near term. A&B shut down HC&S in December.

“We expect this project (the Kulolio Ranch) and our other diversified agriculture programs will become profitable over time,” Pai said when asked about profitability of the ranch.

“This is a strong start, yet there’s much more progress on the horizon,”Benjamin said. “Establishing viable agriculture on these Central Maui lands will not be easy, but we are committed to being good stewards of these lands and working with the county, state and other partners in the community to improve food security in Hawaii and make diversified agriculture on Maui a success.”

* Lee Imada can be reached at leeimada@mauinews.com.

The Maui News: “A&B moving forward with repurposing of sugar cane land”

A&B moving forward with repurposing of sugar cane land

Hawaiian Commercial & Sugar  Co. equipment is lined up in front of shuttered Puunene Mill on Thursday afternoon. Alexander & Baldwin shut down sugar operations in December. A&B President and Chief Executive Officer Chris Benjamin told investors Thursday that agricultural diversification on former sugar land is “coming along well” but that there is no expectation of profits from those operations in the near term. -- The Maui News / MATTHEW THAYER photo

Hawaiian Commercial & Sugar Co. equipment is lined up in front of shuttered Puunene Mill on Thursday afternoon. Alexander & Baldwin shut down sugar operations in December. A&B President and Chief Executive Officer Chris Benjamin told investors Thursday that agricultural diversification on former sugar land is “coming along well” but that there is no expectation of profits from those operations in the near term. — The Maui News / MATTHEW THAYER photo

The Maui News

While agricultural diversification of Alexander & Baldwin’s 36,000 acres of former sugar lands on Maui is “coming along well,” there’s no expectation that the effort will be profitable in the near term, A&B President and Chief Executive Officer Chris Benjamin told investors Thursday.

“In fact, we may continue to have some modest net expenses as we work on repurposing the sugar lands,” he said in a conference call. “But we’re making good progress in discussions with several interested tenants who will help keep these lands in active agriculture.”

He referred to a recent announcement that A&B had entered into a partnership with Oakland, Calif.-based TerViva, a seed oil-producing company to produce biofuel from pongamia trees on 250 acres on Maui.

“If successful, the partnership could expand up to 2,000 acres,” he said.

Benjamin said the company also is working on trials with cattle grazing and other energy crops on Maui.

“Our objective is to deploy as much of our former sugar plantation lands as possible in viable agricultural uses as quickly as possible,” he said.

The company reported $2.4 million of after-tax income from discontinued Hawaiian Commercial & Sugar Co. operations, while the results of the first quarter of 2016 included a $10.8 million after-tax loss related to the sugar plantation’s shutdown, which was completed in December.

A&B announced income of $4.4 million, or 9 cents per diluted share, for the first quarter of 2017. That’s compared with $3.7 million, or 8 cents per diluted share, in the first quarter of 2016.

Results for this year’s first quarter included $3.7 million of after-tax costs ($4.8 million, pretax), which was related to the evaluation of real estate investment trust conversion.

Revenue for the company’s first quarter was $93.2 million, compared with $91.4 million for the same period last year.

“The increase in revenue is attributable to increased development and parcel sales, partially offset by lower materials and construction sales revenue and lower commercial real estate revenue,” A&B said.

A&B’s development of the Ho’okele Shopping Center, a 94,000-square-foot, 8.9-acre Safeway-anchored retail center in Kahului, was mentioned along with the La Hala Shops and Pearl Highlands Center on Oahu as part of “our strategic objective of increasing recurring earnings from our commercial portfolio,” Benjamin said.

In its commercial real estate segment, the company reported selling the 16,600-square-foot Maui Clinic Building for $3.4 million in January. The company also closed a sale of a Maui Business Park property for $2.4 million, and it sold an urban-zoned vacant property of 0.8 acre for $1.6 million.

A&B reported there were two Maui industrial tenants (both in the P&L Building on Papa Place) who chose not to renew their leases.

The company’s commercial properties increased operating profit 9.2 percent to $14.3 million in the year’s first quarter, compared with $13.1 million in last year’s first quarter. Occupancy of A&B’s commercial properties was “stable” at 94 percent, the company said.