Dot.com Desires

Real estate continues to power economic gains on Maui. But there are signs that the county is ready to grow in other areas, too.

June, 2000

Maui real estate has long been one of two bright shining lights on an otherwise bleak economic landscape for the county. While the Valley Isle’s enviable visitor industry figures—especially climbing occupancy and average daily room rates—couldn’t help but steal the spotlight when compared to declining figures facing other neighbor island counties, Maui’s growing success in real estate was largely placed on the backburner. Sure, Maui real estate had seen unit and average sales prices double in both the condominium and single-family resale markets during the last half of the 1990s. But hadn’t all the neighbor islands seen something akin to that? Uh-huh, sure. Still, with so-called “dot.com millionaires” last year snapping up high-end properties statewide like they were Pokemon cards, nobody could keep the Maui real estate juggernaut confined in a corner any longer. And fittingly, the person who topped off the Maui real estate’s year of ice cream days with a cherry, was the head of one of the largest dot.coms around.

America Online Chairman and CEO Steve Case’s decision to buy a $39.2 million controlling interest in Maui Land & Pineapple Company, Inc. (AMEX: MLP) for the simple sake of it procuring a good Hawaii land investment in a down real estate market, made both local and national headlines. As the biggest landholder in Kapalua, which along with Wailea has become the nexus for high-tech investors, Maui Land & Pine may have been the largest real estate plum on the island, but it wasn’t the only one.

Land sales were up 41 percent island wide in 1999, with total dollar volume for those sales climbing a whopping 87 percent from $73.3 million to $137.2 million, according to Maui Board of Realtors figures. With 1998 high-tech hot spot Kapalua practically tapped for land, parcel sales in Wailea soared 46 percent last year. Additionally, Wailea’s total dollar volume for land sales climbed 278 percent from $14.3 million in 1998 to $54.1 million in 1999. Single family home resales in resort heavy Wailea and Kaanapali were up 39 percent and 108 percent, respectively.

“The strength of the technology sector has been of particular importance to the kind of real estate activity that’s become so attributable to this particular phase of Maui’s expansion,” says Bank of Hawaii economist Paul Brewbaker. “And it’s primarily (high-end) resort-oriented properties that are really hot. And they’re all basically gone.” That kind of action has attracted a number of new agents to Maui, and even spurred a few retired ones to unpack their “for sale” signs and re-up for Maui Board of Realtors memberships.

“Our membership was up 13.5 percent last year and it’s (pacing) at the same rate this year,” says Maui Board of Realtors Executive Vice President Terry Tolman. “In a word, it’s a terrific market right now. If you’re a working Realtor and you’re not making money, there’s something wrong.” Want to talk expectations for 2000?

Land sales for the first quarter of this year were up 133 percent in Wailea and 200 percent in Kaanapali when compared to same quarter figures for 1999. Single-family unit resales for the island overall during the first three months of 2000 were pacing 42 percent ahead of 1999 numbers, and average sale price climbed 19 percent to $355,000.

“It’s still a great time to buy, but I expect that prices will continue to go up quite a bit this year,” says Cathy Paxton-Haines, Maui Board of Realtors president. Paxton-Haines expects high-end single family home sales to continue to pace well ahead of last year, with middle- and lower-range home sales growth largely determined by the rise and fall of interest rates. “The only thing that might slow (the market) down is a lack of inventory,” says Paxton-Haines.

And speaking of slowdowns. Though annual occupancy figures from PriceWaterhouseCoopers Hospitality Consulting put overall Maui hotel occupancy figures ahead of Oahu for the second year in a row (77.4 percent for Maui vs. 71.9 percent for Oahu), 1999 nonetheless necessitated a reality check of sorts for the island’s number one industry. Occupancy figures from PKF-Hawaii’s recap of hotel trends may have shown 1999 Maui County gains of 6.1 percent in occupancies from 72.8 percent to 77.3 percent, and 3.5 percent in average daily room rate from $161.40 to $167.08 when compared to 1998 tallies.

In comparison, figures provided by the Hawaii Visitor and Conventions Bureau showed a drop of 1.5 percent in visitors overall. A drop of 21.9 percent in the eastbound market simply overpowered a gain of 2.5 percent in westbound arrivals.

“Maui would have definitely been further ahead in overall numbers if it wasn’t for that huge drop in eastbound,” says Marsha Wienert, executive director of the Maui Visitors Bureau. “Last year was the heaviest decrease we’ve seen (in the eastbound market).” According to Wienert, while wholesalers on the island indicate that day trips by Japanese visitors to Maui have remained steady, overnight stays have dropped significantly. It’s a situation Wienert believes could be righted by having more direct service eastbound carriers landing at Kahului Airport.

“With a direct service coming in, you may get one night, or even two nights, like the Big Island now does,” says Wienert. “That would make a huge difference in what our eastbound numbers would be.”

With no new hope for that scenario on the horizon anytime soon, Wienert predicts an additional decrease in Japanese arrivals of 7 percent for 2000, and more of the same in the years to come. This courtesy of Gov. Ben Cayetano’s cancellation last February of a Kahului Airport runway extension meant to more easily accommodate mainland and international flights. Citing decreased airport revenues, improved aircraft technology allowing usage of shorter runways and a lack of support by airlines as reasons for his cessation of the project, Cayetano effectively put an end to a 10-year battle of Maui County wills.

“First and foremost, I think that not being able to have international flights-especially a direct flight from Japan-makes our job harder,” says Wienert. ” What this means is that we’ll continue being dependent on one market, which is the U.S. mainland and Canada. And it doesn’t make any difference what kind of business you run…when you’ve only got one customer base, that’s not healthy.”

The outlook for some of Maui County’s other economic engines—which had experienced woeful times in recent years—came out looking rosier post-1999. According to Maui Chamber of Commerce President Lynne Woods, the county’s visitor industry muscle is finally trickling down revenues from resort area retail to businesses in heavy residential areas such as Kahului and Wailuku.

“I think that the whole retail picture got better,” says Woods. “Visitor retail had been climbing and climbing, but now local retailers are seeing revenues grow as well.” Bank of Hawaii’s Brewbaker says that the turnaround in retail is a result of the end of the big box invasion’s shakedown of Maui businesses. That shakedown left only retailers with the tools to compete still standing.

“The turbulence resulted not so much in a change in retail sales volume, as much as a change in its composition, and a change in where the receipts are falling,” says Brewbaker. “Now that tourism has kicked up in the last couple of years, that growth is entering a retail platform that is largely in its post-nineties evolved form. The growth of retail is pretty much a tourist-driven phenomenon.”

In agriculture, Amfac is further expanding its diversified agriculture projects in the wake of the shutdown of its West Maui Pioneer Mill sugar operations last year. The company is continuing to grow coffee through its Kaanapali Estate Coffee operation, and experimenting with corn and alfalfa crops. Maui Land & Pine subsidiary Maui Pineapple, now the only state grower canning Hawaii-grown pineapple, is also continuing to explore diversified crops such as asparagus and raspberries.

Maui’s high technology cache was given yet another boost with Shizuoka, Japan-based Micro Gaia Co. Ltd’s February groundbreaking in Kihei for construction of a microalgae production plant. Beginning with five acres and eventually expanding to 20, Micro Gaia will grow a variety of organisms to be used for health treatments, foods, cosmetics and neutraceuticals. Officials at the Maui Research and Technology Park, which will house Mirco Gaia’s facilities, are hopeful that they will continue to be able to attract and retain high-tech startups and transplants at an even faster clip.

Because who knows? Perhaps one day, a Maui-grown and educated high-tech job base will be able to fuel the kind of boom in real estate the county is experiencing courtesy of offshore high-tech investors. The best Maui residents can do right now though, is join the rest of the state’s counties in prayer for the kind of economic salvation that is bringing mainland real estate buyers to our shores in the first place.

“The market is being driven by mainland people and mainland dollars,” says Maui Board of Realtors’ Tolman. “It only takes a couple of Wailea Point condos to result in a big increase in either dollar volume or average or median price. Sure it’s better for the economy here. But are the people living here seeing a 300 or 400 percent rise in their income? Probably not.”

Well…at least if they’re not Realtors.

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