Where the Rich and Famous Frolic
High-End Home Sales on Lanai Remain Steady for Castle & Cooke Inc.
When David Murdock, chairman and chief executive officer of Castle & Cooke Inc., completed the buyout of the publicly held real estate development company in September 2000, he acquired 98 percent of the island of Lanai along with it. He had a vision, for the island and its 3,000-plus residents, that was not centered around pineapples and plantations, but instead involved white-glove resorts, championship golf courses and secluded, high-end luxury homes.
The billionaire real estate mogul wanted to attract other wealthy individuals, like himself, to purchase property at either of the two luxury-resort home areas on the island: The Villas at Koele and The Terraces at Manele. Imagine, if you will, an island where the rich and famous retreat to secluded third and fourth homes, where they are free to frolic in absolute privacy.
Sales for both the townhouses and custom-built homes were slow to start. Early in 1998, just 10 of the townhouses were in escrow, and only seven homes had been sold. But of late, sales for both locations have been far from disappointing. “We started actively ramping up the home sales in 1999, and since then we’ve sold about 70 to 75 homes,” says Jon Revells, director of development for Castle & Cooke Resorts. And he says that despite recent economic downturns, the residential developments on Lanai – which range from $500,000 for a one-bedroom townhouse to upwards of $2 million for custom-built homes – are still holding steady.
“For Lanai to attract that many people at those prices is pretty good,” says Ricky Cassiday, research director for Prudential Locations. “Lanai’s home sales in 2001 were about the same as 2000. That means they have a steady sales rate, which is a real achievement, given the downturn in sales throughout much of Maui in 2001.” But opinion – like beauty – is in the eye of the beholder, and other real estate analysts were expecting more from the Lanai resort communities.
“The company has fallen slightly short of my predictions for Lanai home sales,” says Los Angeles-based real estate analyst Craig Silvers. “Total Lanai home sales were $20.3 million in 1999, and I expected that figure to improve modestly to around $21.3 million in 2000.” Although year-end revenues were not made public once the company was sold, Castle & Cooke’s Lanai home sales were up to $13.7 million by mid-2000.
Even though the company has yet to post the types of results he’s been hoping for, Silvers remains optimistic that the Lanai operations are a good long-term investment for Castle & Cooke. He calculated gross profit margins on the upscale homes of around 20 percent during the first half of 2000. The margins of a typical homebuilder on the Mainland average 10 percent to 15 percent. Silvers says that early high infrastructure development costs chiseled the profit margins slightly, but, with those costs out of the way, “margins are set to rise substantially, to around the 30 percent range.”
Although Castle & Cooke’s Revells says there have not been any major dropoffs in demand since 1999, Silvers feels home sales could see a lift, with adequate marketing. “The few ads I did see for the homes were generally lost among the clutter of many other ads. They didn’t stand out,” he says. Revells admits that a significant portion of Lanai’s homebuyers are move-up buyers who already have properties on the island, and are just looking to upgrade, which might indicate a lack of proper advertising to new buyers.
He adds, that these move-up buyers are slowly changing the landscape on the island. “In the past, buyers had a tendency toward the townhomes, but, over the past six months, there seems to be a desire to go with the custom homes,” he says. His hopes are that the spurt of extravagant digs will raise the eyebrows of other well-heeled homebuyers and attract them to the island as well. Lanai is, after all, the island where the rich and famous frolic.