VOLUME 25 NUMBER 13 JULY-SEPTEMBER 1995 RESIDENTIAL

KAPALUA MAUI, HAWAII PROJECT TYPE A 1,500-acre oceanfront destination resort that includes three world class resort properties—the Ritz-Carlton Kapalua, Kapalua Bay Hotel and Villas, and The Kapalua Villas—as well as seven residential communities, three championship golf courses, two tennis centers, three white sand beaches, and specialty shopping. The community was started in 1975 and currently is about 50 percent complete. SPECIAL FEATURES Destination resort Oceanfront site Golf as primary amenity DEVELOPER Kapalua Land Company, Ltd. a subsidiary of Maui Land & Pineapple Company, Inc. 1000 Kapalua Drive Kapalua, Maui, Hawaii 96761 808-669-5622 SITE PLANNER Belt Collins and Associates 680 Ala Moana Blvd. Suite 200 Honolulu, Hawaii 96813 808-521-5361

GENERAL DESCRIPTION Kapalua is an upscale, self-contained, master-planned resort community set amid a 23,000-acre privately owned pineapple plantation. It is located on the scenic northwest coast of Maui, approximately one hour by car from Maui's main airport in Kahului and five minutes from the Kapalua-West Maui Airport. It has been developed as a destination resort on 1,500 acres along three miles of shoreline, of which 3,700 feet is prime beach frontage on the Pacific ocean, including several bays. The land consists of sloping hills and valleys, with elevations from sea level to approximately 750 feet. A key focus of the resort concept has been the development of condominiums, or villas, in addition to the resort hotels, as well as single-family fee-simple homesites. The single-family owners provide the resort the stability of long-term residents and add profitable land use alternatives to high-density resort hotel and commercial uses. Kapalua provides a model for contemporary resort developments in that it is an exclusive resort whose design is highly sensitive to its surrounding natural environment. The natural contours of the land have been preserved, with no mass grading, and the existing plantation roads form the basis of the unified design, which harmoniously blends the natural beauty of the site with the mix of land uses necessary for the resort's success. No mega-hotels make big exotic statements at Kapalua; the hotels are designed to complement the ocean frontage, not compete with it. THE SITE AND DEVELOPMENT PROCESS In the late 1800s, Kapalua was part of Honolua Ranch, an agricultural operation with taro patches, coffee beans, and cattle. At the turn of the century, Maui businessman H.P. Baldwin acquired the ranch. He planted pineapple, as well as a variety of other crops (macadamia, mango, aloe, corn), and hundreds of trees, including Cook and Norfolk pines. Colin Cameron, a fifth-generation descendent of Baldwin, founded the Kapalua resort. His conservation mentality led to extraordinarily sensitive environmental and site planning. The resort is now owned and managed by the developer, Kapalua Land Company, Ltd., a subsidiary of Maui Land & Pineapple Company, Inc. The company sought to create a high-quality, self-contained, full-destination resort with a unified design and carefully planned mix of facilities primarily for the free independent traveler and quality tour groups. Planned components included luxury hotel accommodations, attached and detached housing, golf, tennis, beach/ocean recreation, restaurants, and shops. Free, resort-wide shuttle service was considered essential. The project has been developed in two major phases, with construction starting in 1975. Phase I: 1964 to 1985. The first phase of the project was developed over a 21-year period, with construction and sales beginning in 1975, and currently consists of the following: Kapalua Bay Hotel and Villas, a 194-room hotel with an open-air configuration of rooms and suites, as well as 100 one and two bedroom villas. It is noted for The Point, which, with its butterfly-shaped pool and dramatic ocean panoramas, is a popular site for weddings. Its amenities include private room lanais, afternoon tea service, complimentary in-room videos, year-round children's programs, whale/ocean lectures, an exercise room, and two hours daily use of complimentary water sports equipment at Kapalua Bay. The developer sold the project in 1985 to KBH Operations Limited Partnership. Condominium Villas, four separate projects totaling 488 units, including: The Bay Villas, 141 one- and two-bedroom units on 16.5 acres, completed in 1977; The Golf Villas, 186 one- and two-bedroom units on 15.8 acres, completed in 1979; The Ridge Villas, 161 one- and two-bedroom units on 22 acres, completed in 1980; and The Ironwoods, completed in 1980, which includes 40 units in 10 plantation-style buildings on 9.2 acres, with 4 homes in each building.

Pineapple Hill, 99 single-family, fee-simple detached homesites on 45.5 acres, first made available in 1985 and sold out by 1987. Phase I amenities include two 18-hole golf courses designed by Arnold Palmer—the 6,600-yard Bay Course, which opened in 1975, and the 6,632 yard Village Course, which opened in 1980; the Tennis Garden, with 10 courts, four of them lighted for night play, which opened in 1979; and Kapalua Shops, a 40,000-square-foot boutique shopping center adjacent to the Kapalua Bay Hotel, completed in 1979. Phase II: 1986 to present. The second and most recent phase of the development includes: Kapalua Place, eight fee-simple, single-family homesites in a private, gated oceanfront community on 8.9 acres. These sites were first offered in 1989 and sold out in one year. Plantation Estates, 36 fee-simple, single-family homesites in a private, gated golf community on 108.4 acres. First offered for sale in 1990, the sites are nearly sold out. The 550-room Ritz-Carlton Kapalua hotel, opened in late 1992. It is owned by the Maui Land & Pineapple Company, Nissho Iwai, and the Ritz Carlton Hotel Company, and operated by Ritz-Carlton. Situated on 37 acres, the hotel is bordered by a white sand beach and the Bay Course. It has an open-air configuration of oceanfront rooms and suites, including 58 executive suites and two Ritz-Carlton suites. All guest rooms have spacious lanais. The hotel also has a 10,000-square-foot, three-level swimming pool with a 20,000-square-foot sun deck; over 30,000 square feet of meeting space; a 165-seat theater; a private lounge serving continental breakfast, afternoon tea, daily cocktails, and after-dinner cordials; and five restaurants. Phase II amenities include: The Plantation Course, an 18-hole, 7,263-yard championship course designed by Bill Coore and Ben Crenshaw, which opened in 1991 and is the heart of the residential community of Plantation Estates; a 33,000-square-foot clubhouse with a full-service golf shop, men's and women's locker facilities, and a restaurant, which also opened in 1991; and the Village Tennis Center, a landscaped tennis complex located on the oceanfront lawns of the Ritz-Carlton Kapalua hotel, which opened at the end of 1992 and includes ten courts, half of them lighted for night play. PLANNING AND DESIGN At Kapalua, developers used low-rise, low-density construction to blend with the natural contours of the site rather than intrude on it. The unified design is distinctive yet appropriate to both the site and the Hawaiian islands. Rules adopted for each segment of the resort control the design and construction and the selection of architects. The design and construction rules for each community are part of the declaration of covenants, conditions, and restrictions for that community. In Pineapple Hill, for example, design standards define the general style as cascading hipped roof forms with strong overhanging masses composed of basic earthtone colors that blend into the natural setting. Consistency of roof form and restraint in use of materials and color are key design elements. Grading is minimal, and buildings are "stair stepped" with existing contours. Condominiums are developed in small clusters and sited for maximum view orientation. In addition to the ocean views, the site offers many attractive non-ocean views, since the adjoining land is still used for pineapple farming. Forestland and watersheds provide mountain vistas as well. The covenants and design review regulations provide the continuing site-planning tools that ensure maximum view orientation for each residence. Careful placement of buildings also provides natural air circulation and protection from wind. Design guidelines for Plantation Estates require homeowners to use informal landscaping to soften retaining walls with cascading vines, and to ensure that buildings and trees—except for

the historic Norfolk pines—not exceed 35 feet in height to preserve views. Residents may use a limited variety of plants to establish the overall landscape theme for the lot, which much reinforce the character of the golf course within a transitional area between the golf course and the residence. Gulches—defined as densely vegetated land with slopes of 20 percent or greater, inaccessible without major land-form adjustments—are to be protected; they may not be altered without the written approval of the design review committee. The plan leaves sensitive areas undeveloped, greatly enhancing the environmental setting for the development. An ancient burial ground has been preserved as well as Pu'u Kukui, an 8,661-acre rare native rainforest. Situated above Kapalua in the West Maui Mountains, the rainforest is home to three native bird species, five rare snail species, and 12 natural communities. In 1992, Colin Cameron granted The Nature Conservancy of Hawaii a permanent easement over the native forest, creating the state's largest private nature preserve. Since 1978, Honolua and Mokuleia bays have been declared marine life conservation districts by the state; fishing is prohibited in an effort to protect the island's unique ocean resources. MANAGEMENT AND MARKETING The variety of hotel, residential, and recreational offerings on the site has resulted in a complex resort operation—comprising numerous operating entities—and a detailed merchandising plan. For example, Kapalua Bay Hotel and Villas are owned and managed by the KBH Operations Limited Partnership, which acquired the property from the developer in 1985; the latter continues to own the land and leases it to the hotel. Other villa rentals are managed by Kapalua Land Company, and amenities include privileges at the Ritz-Carlton Kapalua hotel, including the Ritz Kids program, spa, and pool. All villas at Kapalua are individually owned. The three golf courses are owned by Kapalua Land Company and are open to the public. Priority is given to members of the Kapalua Club, a nonequity club managed by the developer, and resort guests, who are allowed to book tee times in advance of other players. Golf play from members and owners constitutes only about 7 percent of golf activity and 20 percent of tennis activity. Golf play from resort guests represents about 50 percent. The balance comes from visitors staying off the resort and from the local community. The Kapalua Club offers three classes of membership: resort, golf, and corporate. Resort memberships are available for purchase by resort property owners and, in addition, a limited number (presently not to exceed 100) are offered for nonproperty owners. Initiation fees are moderate—$500 for property owners and $1,000 for nonproperty owners. Annual dues currently are $150 for property owners, $300 for nonproperty owners. Resort privileges include beach and pool facilities with payment of equipment rental fees, complimentary tennis court fees, a year-round calendar of member activities, advance golf reservations at reduced fees, eligibility for spa memberships at the Ritz-Carlton Kapalua hotel, and discounts on the published rack rate for resort properties and on restaurant charges. Golf memberships may be purchased by a limited number of resort property owners (presently not to exceed 100) and nonproperty owners (presently not to exceed 50). The initiation fee currently is $8,500 for property owners and $14,000 for nonproperty owners, of which 80 percent is refundable if a replacement member is found. Golf privileges include resort membership, complimentary greens fees at the golf courses, seven-day advance reservation at the Bay and Village courses, ten-day advance reservation at The Plantation Course, complimentary privileges at the two practice ranges, and reduced lesson and other fees. Kapalua provides a good example of how a new destination resort community is by nature a long term undertaking, requiring significant resources and staying power of the financial partner. Kapalua has been financially successful, in spite of having to provide most of the infrastructure, which the local government did not provide. In the mid-1970s, the developer had to absorb significant design, infrastructure, and carrying costs. Revenues from resort operations and lot sales did not offset expenses until Kapalua achieved reasonable maturity in

the mid-1990s. Only then did the developer break even on the initial resort infrastructure. Approximately one-third of the developer's revenue from resort operations in 1994 came from golf and tennis fees, one-fourth from retail sales, about 15 percent from condominium rentals, 8 percent from commercial leases, 6 percent from membership and utility company income, and 15 percent from other sources. The hotels sold off by the developer have experienced numerous ups and downs. The Kapalua Bay Hotel and Villas opened in 1979. From then until it was sold in 1985, occupancy ranged from 54 percent to 68 percent, and the hotel did not operate at a profit. The property had three good years from 1986 to 1989, with occupancy rates reaching 87 percent. However, a glut of high-end room inventory on Maui and on Hawaii in general, coupled with poor economic growth, resulted in low occupancy and losses again after 1989. Since the Ritz-Carlton Kapalua hotel opened, occupancy has averaged 58 percent. The hotel has consistently generated positive cash flow from operations before debt service. However, the cash flow has not been enough to cover debt service on the mortgage, and the hotel currently is restructuring its debt. Kapalua's residential component provides an additional revenue source. In the resort's early days, investors bought many of the villas and lots. Recently, however, the trend has shifted toward owner occupancy. Oceanfront lots are the most valuable, with two-third-acre lots at Kapalua Place currently selling for between $2.5 million and $2.8 million. The price of golf course frontage lots vary, but Pineapple Hill's predominantly quarter-acre lots sell for approximately $450,000. Lots in Plantation Estates have been selling for about $1 million per acre, with lot sizes of two or more acres. Comparing prices among developments is difficult because each is unique, and lot sizes vary because Kapalua's hallmark is a land plan in which the lots are shaped by and complement the terrain. Lot sale and housing prices climbed until the recession of the early 1990s, when they began to fall. As of 1995, however, they have stabilized. Over the last two years, sales averages in Pineapple Hill have been up 45 percent over original prices. Kapalua capitalizes on its extraordinary environmental setting by providing eco-vacation packages, a recent trend in the resort business. In 1993, it launched Eco Resort Shuttle Tours to highlight Kapalua's environmental and preservation efforts. EXPERIENCE GAINED Kapalua provides a good example of how environmentally sensitive planning and design, enforced by covenants and design review standards and procedures, ultimately translates into financially rewarding investments. However, the time frame for this to occur can be quite long. Kapalua Land Company was fortunate that its parent company, Maui Land & Pineapple Company, Inc., was well capitalized and had the financial staying power necessary to provide upfront planning and infrastructure years before construction could begin. It could also weather the long period before revenues caused the resort to break even. The resort also provides a good lesson in how important it is for self contained destination resorts to create diverse environments that include residential components. Kapalua's residential component stabilized the resort and created additional business for resort operations. Resort components, in turn, supported and fed the marketing effort for the residential lots, helping to generate a greater market for luxury housing and multimillion-dollar estates, important profit centers for the resort. The developer's choice of maximum quality environmental planning has paid dividends in the quality of Kapalua. The incomparable natural features of Kapalua have been enhanced by the ongoing requirements for quality design. The harmony of the resort with its surroundings and the company's stewardship of the land have played a large part in enhancing the value of residential real estate in Kapalua. Kapalua's developer

chose a different path in its development as a resort from the other mega hotels of Maui, and it has proven that environmentally sensitive land planning does translate into incomparable results that withstand the test of time.

PROJECT DATA LAND USE PLAN Acres

Percent of Site

Detached Residential

205

13.7%

Attached/Multifamily Residential

260

17.3

85

5.7

550

37.0

50

3.3

300

20.0

Commercial

15

1.0

Other

35

2.3

1,500

100.0%

Hotel Golf Courses Roads Common Open Space

Total HOTEL INFORMATION

Number of Separate Hotels Planned: 3 Number of Separate Hotels Completed: 2 Total Hotel Rooms Planned: 1,380 Total Hotel Rooms Completed: 744 Average Daily Room Rate: $250 Average Annual Occupancy Rate: 60 percent RESIDENTIAL UNIT INFORMATION Lot Size Completed Unit Date No. of Units Acres (Square Areas Type Completed Planned/Built Feet)

Range of Sales Prices

The Bay Villas

16.5

1,560

MF

12-77

141/141

$370,000-950,000

The Golf Villas

15.8

1,500

MF

8-79

186/186

$300,000-460,000

The Ridge Villas

22.0

1,650

MF

4-80

161/161

$295,000-460,000

The Ironwoods

9.2

2,520

MF

3-80

40/40

-

45.5

11,000

SF

10-87

99/99

$212,500-430,0001

8.9

43,800

SF

6-89

8/8

-

22.5

113,000

SF

6-90

36/36

$585,000-950,000

Pineapple Hill Kapalua Place Plantation Estates I

Total Residential Units Completed: 671 Note:

1

Price for lots only. Homes typically sell for around $1,150,000.

DEVELOPMENT SCHEDULE Site Purchased: Early 1900s Planning Started: 1964 Construction Started: 1975 Sales Started: 1975 Percent Completed: 50 percent DIRECTIONS From Kapalua-West Maui Airport: Proceed north on Hanoapiilani Highway. Turn left into community entrance at "Kapalua" sign. Driving Time: 5 minutes in non-peak-hour traffic.

The Project Reference File is intended as a resource tool for use by the subscribers in improving the quality of future projects. Data contained herein were made available by the Development team and constitute a report on, not an endorsement of, the project by ULI - The Urban Land Institute. Copyright 1995, 1997, by ULI - the Urban Land Institute 1025 Thomas Jefferson Street, N.W. Ste. 500w, Washington, D. C. 20007-5201

DOCUMENT IMAGES