Maui Land & Pineapple Company, Inc. (MLP) is a Delaware-based real estate and land management company with a rich history spanning over a century. The company owns and stewards a diverse portfolio of approximately 22,300 acres of land on the island of Maui, Hawaii, along with 266,000 square feet of commercial properties. MLP's mission is to carefully maximize its assets, building resilience and creating value for future generations.

In 2023, MLP underwent a leadership transition, appointing a new Chief Executive Officer and Chairman of the Board with extensive experience in real estate planning, development, and asset management. This transition has been accompanied by the addition of three executive leadership team members with expertise in planning, community development, land and natural resource stewardship, and real estate.

Business Overview

MLP's operations are organized into three reportable segments: Land Development and Sales, Leasing, and Resort Amenities. The Land Development and Sales segment focuses on the planning, entitlement, development, and sale of real estate inventory. The Leasing segment generates revenue from real property leasing activities, license fees, and the management of ditch, reservoir, and well systems that provide non-potable irrigation water. The Resort Amenities segment includes the operations of the Kapalua Club, a private, non-equity club that provides members access to certain amenities within the Kapalua Resort.

Financials

For the fiscal year ended December 31, 2023, MLP reported annual revenue of $10.9 million, a net loss of $3.1 million, annual operating cash flow of -$1.4 million, and annual free cash flow of -$2.1 million. The company's quarterly results for the three months ended March 31, 2024, showed operating revenues of $2.5 million, a net loss of $1.4 million, and net cash used in operating activities of $10,000.

Leasing Segment Drives Quarterly Performance

MLP's leasing operations were the primary driver of its quarterly performance, generating $2.2 million in revenue for the three months ended March 31, 2024, compared to $2.1 million in the same period of the prior year. This increase can be attributed to higher percentage rents and the return of tourism and visitor traffic to pre-pandemic levels, partially offset by the impact of the Maui wildfires in August 2023 on certain tourism-based tenants.

The company's resort amenities and other segment reported revenue of $267,000 for the three months ended March 31, 2024, up from $221,000 in the same period of the prior year. This increase was due to new memberships being sold for the Kapalua Club and a focus on offering fee-based club events to members.

Liquidity

As of March 31, 2024, MLP had cash and cash equivalents of $5.4 million and investments of $3.2 million. The company also had access to $15.0 million in available borrowing capacity under its revolving line of credit facility with First Hawaiian Bank, which matures in December 2025. MLP was in compliance with the covenants of this credit facility as of March 31, 2024.

Asset Utilization and Occupancy Improvement Initiatives

Under the new leadership team, MLP has undertaken a comprehensive review of its diverse asset portfolio. The initial results of this review have identified a material opportunity to increase the level of utilization, occupancy, and stabilized income from the company's operating assets. As of March 31, 2024, MLP's commercial properties and land were occupied at 82% and 16%, respectively.

To improve operating revenue from its commercial properties, MLP has developed updated tenanting plans with a focus on thoughtful placemaking in its Kapalua, Haliimaile, and Alaeloa commercial centers. Despite the challenges following the 2023 Maui wildfires, these efforts have resulted in an 8% year-over-year growth in revenue and an 18% improvement in overall occupancy for the period from April 1, 2023, to March 31, 2024.

Paired with these placemaking efforts, MLP has begun executing land strategies for the surrounding, undeveloped areas adjacent to the town centers. The company anticipates short-term fluctuations in earnings as it improves tenant occupancy and attracts a diverse merchant mix to reposition its spaces at market rents. However, long-term positive impacts to operating revenues are expected as the occupancy of its existing commercial real estate and utilization of its land holdings continue to improve.

Land Development and Sales Segment

MLP's land development and sales segment did not generate any revenue during the three months ended March 31, 2024, or the three months ended March 31, 2023, as the company is evaluating its commercial assets and land holdings to determine better utilization for value creation. In December 2023, MLP contributed approximately 30 acres of land in Upcountry Maui, valued at $1.6 million, to a joint venture for the development and sale of ranch lots. The company anticipates sales of these ranch lots to total approximately $4.1 million, with its share of the sales proceeds expected to be around $2.2 million, which it expects to occur between late 2024 and mid-2025.

Prior to the Maui wildfires in August 2023, there was a shortage of primary housing supply on Maui. While the provision of land to generate primary housing and additional jobs was a priority for MLP before the wildfires, the loss of over 2,000 homes and 3,000 jobs has accelerated the company's efforts to get land into productive use to meet these critical needs.

Risks and Challenges

MLP faces several risks and challenges, including the potential impact of natural disasters, such as the Maui wildfires, on its operations and financial performance; concentration of credit risk on deposits held at banks in excess of FDIC insured limits and in receivables due from its commercial leasing portfolio; unstable macroeconomic market conditions, including energy costs, credit markets, interest rates, inflationary pressures, and changes in income and asset values; and the ability to complete land development projects within forecasted time and budget expectations.

Outlook

Under the leadership of its new executive team, MLP is focused on unlocking the value of its diverse asset portfolio through strategic initiatives to improve occupancy, utilization, and stabilized income from its operating assets. While the company may experience short-term fluctuations in earnings as it implements these initiatives, the long-term outlook is positive, with the potential for increased land development and sales revenue, as well as growth in leasing and resort amenities revenue. MLP's strong liquidity position and access to credit facilities provide the resources necessary to execute its strategic plan and navigate any near-term challenges. As the company continues to transform its operations and asset management approach, investors should closely monitor MLP's progress in creating sustainable value for the long term.