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The Russians are Coming!

Monday, July 16th, 2007

The recent articles by Molokai Ranch CEO Peter Nicholas make life on Molokai very interesting and give us lots to talk about. From the tone of his letters, he seems to have overdosed on Li Hing Mui and the sour tone stays in his mouth. Every time I see the GEICO commercial with the Gecko speaking, I think of him. He even sent his same article to a national website called National Wind Watch; I guess he really wants to undermine our BTR effort at all cost. Quoting from the movie, Milagro Bean Field War, “Desperate times call for desperate measures.”

I still remember a another movie called ‘The Russians are Coming’. It starred Jonathon Winters and was about a boat load of lost Russian fisherman who crashed landed their boat somewhere along the Massachusetts coast. It was during the cold war when Americans were deathly afraid of a Russian invasion. The men of that community gathered arms, and Jonathon Winters put his five-year old son in charge of a family of four girls and his wife, and left to join the fight. Poor Russians were just as scared as the residents.

What makes Peter think the Russians cannot come even if HIS plan succeeds? They could buy lots at La’au or one of 500 rural lots at Kawakiu, or even a hotel site right there. Early on in the Master Land Use Plan meetings when we met at Home Pumehana, I saw that the area between the Kaluakoi Hotel and Kawakiu was a different color from the rest. I asked Peter about this and he said, “We won’t develop it; we’ll probably just sell it.” Well Peter, the Russians are coming, and nobody is going to stop them!

The military purchase was held over our heads throughout the Land Use process as a way of making us say yes. I can still remember in the early 70’s when the military held landing exercises at Papohaku, their landing craft were flipping over in the shore break like toys and a handful of these guys drowned. To even promote the desecration of land in the same breath as preserving is, like, bi-polar.

Peter is angry because Karen and MCSC didn’t come to him to talk about buying the Ranch.  But in the next breath he says he wouldn’t sell it anyway.  Why talk to the unwilling sergeant when you can talk to the general? The Ranch is just a commodity to the mother company, Guoco, and if you flash them the right amount of dim sums, they will give it to you lock stock and barrel.

Peter was sad that Karen didn’t get involved in the process, yet in his early community consultations with key leaders, he chose not invite Karen. I guess if you don’t invite everyone, the ones you leave out are the ones who may bite you on your okole. 

To tell us what is good for us is, well, arrogant and condescending at the least. This is definitely the Great White Father syndrome that you’re reverting back to. I think the first visitors to the islands did the same thing. We definitely speak a different language and this is why when you tell me we’ll keep some lands in agriculture, do you really mean more gentlemens estates or a field of dreams? Also, to compare Kainalu land values with West Molokai is like comparing sand crabs to Alaskan King crab for dinner. This is not pineapples and pineapples. To say we’re getting a good deal because you can sell it for more is questionable if you don’t have water.

I remember a story of one of Kamehameha’s battles on Maui on his way to the unification of the islands. As he made his way from Hana to Wailuku to his big battle at Kapaniwai near Iao with Kalanikupule, the son of Kahekili, he had these lesser battles along the way. In one of these skirmishes, he became overconfident because he believed his war god idol, Kukailimoku told him he was going to be victorious. That day, he barely escaped death.

What Kamehameha learned from that experience is to always have another way out of a predicament. Buying the Ranch is our other way out. Twenty years of fighting is twenty years too many. As we move through this EIS process, it becomes politically corrupt. We cannot depend on a political process that is expected to be pono when it’s not.

The only way we can stop this craziness about anybody else buying the ranch is to buy it ourselves. If the Nature Conservancy can attract all these millionaires looking for a tax break, why can’t we? The bottom line is the Ranch is for sale.

And Peter, regarding an Asian syndicate coming in, they already own the ranch.

Buy The Ranch campaign gives false hope

Monday, July 16th, 2007

Via the National Wind Watch Website

I can only describe the plan proposed by the Molokai Community Services Council and Karen Holt to purchase and operate Molokai Ranch as a cruel way of diverting the community’s attention away from the benefits and objectives of the Community-Based Master Land Use Plan for Molokai Ranch.

Giving the community false hope that MCSC can achieve this objective is grossly misleading for the following reasons:

Molokai Properties Limited or Molokai Ranch is not for sale
The company, its directors and shareholders are committed to the implementation of the Master Plan, its donation of 26,200 acres to the Molokai Land Trust, the re-opening of the Kaluakoi Hotel, the establishment of a Community Development Corporation funded by an initial $10 million from lots sales at La’au Point, placing protective easements on a further 24,000 acres that will prevent development and most importantly, an economic future for the company’s current staff and its ahupua’a community of Kaluakoi and Maunaloa.

MPL is committed to the Master Plan and will see it through. It’s the best result for everyone.

No Master Plan
In the event the Master Plan is prevented from being implemented, MCSC like every other potential buyer from around the world, can stand in line and bid for the more than 100-plus TMK’s that comprise the property and will be sold off over time. Have no doubt that this will be the outcome that will regrettably be forced on the company.

After a three year community process in which all the island was invited to participate, MPL shareholders will no longer be interested in any other course of action but selling off the property in pieces; an avenue that creates the greatest return for its shareholders.

In this event, MCSC would have to bid against other interested parties such as:

# The Military who have been interested in buying portions of La’au Point for training exercises involving amphibious and airborne landings.

# Russian millionaires who see the island’s remoteness as a destination for parties and events that they can’t hold in their own countries.

# Wind farm operators who want to build 100 wind turbines on the West End and supply power to Oahu, with little benefit to Molokai itself.

# An Asian syndicate interested in purchasing the Ironwoods golf course for their private and exclusive use.

And don’t think it wouldn’t happen or that anyone could stop it.

No approach from MCSC or Karen Holt why?
MPL has never received any approach or communication from MCSC or Karen Holt expressing an interest in purchasing Molokai Ranch.

If that approach had been made, it would have been rejected for the reasons described below.

Did MCSC and its people know this and, for this reason, not contact me or any other MPL director or senior staff member?

It’s very hard to conduct a campaign to “Buy the Ranch” when you’ve been told the potential vendor won’t sell it to you!!!

Who says $200 million would be an adequate purchase price?
MCSC is proposing a $200 million purchase price for MPL.

In the event that MPL is forced to sell its land piecemeal to the highest bidder, it would expect to receive, over time, far more than $200 million for all its property. The receipts would be more likely to be $300 million or more. It would be negligent to shareholders if anyone planned to sell the property off in pieces for anything less.

In January 2006, a desk-top valuation of MPL property was conducted by Oahu valuer Jim Hallstrom for the Hong Kong Stock Exchange. This valuation was forced on MPL’s ultimate parent, the Guoco Group, when a related party wanted to purchase additional shares in BIL.

That valuation stated that if MPL sold its property in pieces, over time, it could expect to receive a minimum of $203 million. It placed valuations on individual TMK’s that comprised the property.

But since January 2006, MPL has sold minimal amounts of property in order to fund its losses and stay cash positive at prices far in excess of those values that made up the $203 million!

People should also look to the recent sale of land at the East End to the Maui Coastal Land Trust at $14,000 an acre. Multiply that by 60,000 plus acres and its $840 million!

Why make a buyout attempt for 60,000+ acres when 26,200 acres or 40 percent of the property is being donated to the community under the Master Plan?
This makes no sense from a management or shareholder perspective. The appraised value of the donated lands, the drop in value of the lands earmarked for protective easements, and the funds going to the CDC from the La’au Point development totals $75 million.

# $40 million for the donated 26,200 acres.

# A minimum of a $25 million drop in value on easement lands.

# An initial $10 million from La’au Point lot sales and an income for the CDC in perpetuity from every subsequent sale.

The question must be asked whether MCSC want the lands for itself and doesn’t like the thought that a Molokai Land Trust, which it has advocated for many years, is outside its control.

The sad part is that if Karen Holt had been a willing participant in the Master Land Use Plan process, she could have made a valued and knowledgeable Land Trustee who would have brought much experience to the organization. Who knows, time might change her opposition.

How would MCSC plan to make MPL cash positive?
Even at $200 million, MCSC would need a lot more cash. MCSC says in its statement that MPL “profits” would be reinvested in community programs and all current jobs would be saved.

There are no profits and losses need to be funded. How would MCSC find the $30 million needed to re-open the Kaluakoi Hotel? Maybe they wouldn’t bother. No jobs at the Kaluakoi Hotel then!

MPL has a cash deficit from operations of approximately $3.5 million per annum.
The reason is that MPL continues to employ 140 staff and operates a cash-negative Lodge and Beach Village, a loss-making golf-course and pays huge Workers’ Compensation premiums and huge property maintenance costs.
So, if MCSC and Karen want to kill the Master Plan and the subsequent economic future for the company, they will need to be either extremely innovative, or ruthless. Or both!

To prevent continually putting in more cash, the new owners will need to either:

# Cut most of the staff costs of $4.5 million a year by firing staff; and/or

# Raise the accommodation rates at the L&BV to $800 per night and increase the golf course fees for everyone, including locals, to $190 per round of golf at both Kaluakoi and Ironwoods. Also they will need to increase water charges to Kualapu’u and Maunaloa residents from $1.90 per thousand gallons to $4 per thousand gallons.

Plan opposition folk have a lot of great ideas about how to make MPL profitable, but I have never found anyone offering to put in cash and joint venture with us on any of those wonderful schemes.

My responsibility to employees, our Molokai Ranch family
MPL employees have asked me, and I have given them a guarantee, that we will not contemplate selling to MCSC. They worry about their futures every day, and while they face turmoil with opposition to the Master Plan, they believe in The Plan and can visualize their futures with confidence.

They have told me on many occasions they would not wish to be employed by any organization or person that lacks strong for-profit business experience, has no deep understanding of finance, banking or structuring, or has a long-standing distrust of the company and its people.

Why doesn’t MSCS concentrate on the ALDC Alternative, a La’au Point Purchase?
The Alternative to La’au Point Development Committee was comprised of many concerned and caring young people on our island who wanted to find an alternative to MPL developing La’au Point, while recognizing MPL needs cash from a development to implement the Master Plan.

We have stated in the draft Environmental Impact Statement that has been filed with the Land Use Commission that we are willing to work with potential buyers of La’au Point as an alternative to its development.

Should MCSC and Karen Holt direct its energies to this and not confuse the community with a proposed buyout of the entire property that is just not going to happen?

Beware of strangers bearing gifts
My advice from the Conservation Fund, the largest protector of land in the U.S., and from discussions with the Maui Coastal Land Trust, is that there a few donors who give money without a “catch” or “hook.”

So, there is often what is called a “quid-pro-quo” in large donations. I believe you could count the people on one hand who will give large sums of money in the millions to the “Buy the Ranch” campaign without wanting something in return.
I would pose the question as to whether one of those is a company called UPC, a wind farm company that developed the wind-farms on Maui. That company itself initiated a proposal to a BIL parent company that offered $80 million to purchase the Ranch to follow a three-year option period of investigating whether wind farms would work on Molokai. UPC never contacted MPL directly.

UPC would build 100 or more wind turbines on the West End of the island and channel the 300MW of power to Oahu by undersea cable. Any land they didn’t need, they say, they would donate to a Land Trust. Only five new jobs would be created.

Their offer was rejected; it didn’t comply with the Master Plan for many reasons.
Imagine looking at Molokai from Oahu and seeing wind turbines swishing around as your dominant view of the island. Most would be sited on the north shore between Mo’omomi and Illio Point, the most pristine and ecologically important piece of coastline on Molokai! This is land being donated to the Land Trust in the coming months whether or not this Master Plan eventuates.

Who would want to see the destruction of pristine habitat and Native Hawaiian cultural legacy lands and the loss of view shed and open space on the entire West End with no economic benefit for Molokai?
By MPL President and CEO, Peter Nicholas