MAUI LAND & PINEAPPLE CO INC

Previous wording

We own and steward a portfolio including approximately 22,300 acres of land on the island of Maui, Hawaii along with 266,000 square feet of commercial properties. For over a century, we have built a legacy of authentic innovation through conservation, agriculture, community building and land management. To continue this legacy, we are driven by a renewed mission to carefully maximize our assets to be actively used to their fullest potential, resulting in added value to the company by building resiliency for future generations.

Current wording

We own and steward a portfolio including over 22,300 acres of land on the island of Maui, Hawaii along with 266,000 square feet of commercial real estate. For over a century, we have built a legacy of authentic innovation through conservation, agriculture, community building and land management. To continue this legacy, we are driven by a renewed mission to strategically maximize our assets to be used to their fullest potential, resulting in added value to the Company and creating a more resilient community for future generations.

Previous wording

In April 2023, we began a leadership transition with the addition of a Chief Executive Officer and Chairman of the Board, both of whom are experienced in real estate planning, development, and asset management. The transition continued with the addition of three executive leadership team members with planning, community development, land and natural resource stewardship and real estate expertise. To further establish and execute land utilization strategies, we intend to make investments to build a lean, experienced team with the necessary capabilities to accomplish market research, project management and planning, and engineering services.

Current wording

In April 2023, we began a leadership transition by appointing a new Chief Executive Officer and new Chairman of the Board, both of whom are experienced in real estate planning, development, and asset management. The development of our team continued with the addition of three executive leadership team members with planning, community development, land and natural resource stewardship and real estate expertise. In efforts to further establish and execute land utilization strategies, we continue to make investments to build a lean, experienced team with the most recent leadership additions including a Director of Engineering and Vice President of Land Productivity and Asset Management.

Previous wording

To improve our operating revenue from our commercial properties, we have developed updated tenanting plans with a focus on thoughtful placemaking in our Kapalua, Haliimaile and Alaeloa commercial centers. Despite the challenges following the 2023 Maui wildfires, the effort to increase occupancy in the town centers resulted in an 8% year-over-year growth in revenue and an 18% improvement in overall occupancy for the period April 1, 2023 to March 31, 2024. Paired with these placemaking efforts, we have begun executing land strategies for the surrounding, undeveloped areas adjacent to the town centers. We anticipate short-term fluctuations in earnings as we improve tenant occupancy. We intend to attract a diverse merchant mix to reposition our spaces at market rents. Long-term positive impacts to operating revenues are expected as the occupancy of our existing commercial real estate and utilization of our land holdings continue to improve.

Current wording

After updating tenanting plans with a focus on thoughtful placemaking, we actively pursued new opportunities to optimize existing tenancy and execute new leases for available commercial spaces with a goal to improve our operating revenue. Despite the challenges following the 2023 Maui wildfires, this effort in the town centers resulted in a 24% improvement in overall occupancy over the past year. Due to this improved occupancy, recent land sales of non-strategic parcels, and operational improvements of resort amenities, the Company has experienced a 7.5 % growth in overall operating revenue. Paired with these placemaking efforts, we have begun executing land strategies for the surrounding, undeveloped areas adjacent to the town centers. We anticipate short-term fluctuations in earnings as we improve tenant occupancy and improve our buildings. Continual, long-term positive impacts to operating revenues are expected as the occupancy of our existing commercial real estate and utilization of our land holdings continue to improve.

Previous wording

Our primary goal is to execute our established strategies to activate our land holdings to meet the long-term needs of the community, including the provision of land for agriculture and housing in a supply-constrained market. We expect long-term positive changes in land development and sales revenues as we have begun to list our non-strategic lands for sale, list large tracts of agricultural land for lease, and strategically develop land.

Current wording

Our primary goal is to execute our established strategies to activate our land holdings to meet the long-term needs of the community, including the provision of land for agriculture and housing in a supply-constrained market. We expect continued long-term positive changes in land development and sales revenues as we recently sold a non-strategic easement in West Maui and currently have four additional non-strategic parcels being marketed for sale to generate cash flow. We are also listing large tracts of agricultural land for lease.

Previous wording

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Current wording

Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023

Previous wording

Real estate operating revenues include the sales of our real estate inventory. There were no sales of real estate during the three months ended March 31, 2024 and the three months ended March 31, 2023. This is purposeful as the Company is evaluating its commercial assets and land holdings to determine better utilization to value creation of its assets.

Current wording

Land development and sales operating revenues include the sales of our real estate inventory. There was one sale of real estate during the six months ended June 30, 2024 amounting to $200,000 for a land easement in West Maui and no sales of real estate during the six months ended June 30, 2023. This is purposeful as the Company is evaluating its commercial assets and land holdings to determine the best utilization of its assets in West Maui and in Upcounty Maui in the town of Haliimaile to increase value.

Previous wording

In December 2021, we entered into an agreement to sell the Kapalua Central Resort project for $40.0 million. On May 13, 2022, terms of the agreement were amended to include a closing condition requiring the Maui Planning Commission to approve a five-year extension of a Special Management Area (SMA) permit issued by the County of Maui. We allowed the agreement to expire on April 11, 2023. The development plans for our real estate holdings continue to be reviewed and evaluated. We continue to manage the application process of the SMA permit extension for the Kapalua Central Resort project while the project continues to be marketed for sale or joint venture.

Current wording

In December 2021, we entered into an agreement to sell the Kapalua Central Resort project for $40.0 million. On May 13, 2022, terms of the agreement were amended to include a closing condition requiring the Maui Planning Commission to approve a five-year extension of a Special Management Area (SMA) permit issued by the County of Maui. We allowed the agreement to expire on April 11, 2023. The development plans for our real estate holdings remain subject to our review and evaluation. The Kapalua Central Resort project continues to be marketed for sale or joint venture and the application for the SMA permit extension remains ongoing.

Previous wording

In December 2023, we contributed approximately 30-acres of land in Upcountry Maui, valued at $1.6 million, to BRE2 LLC, a joint venture between the Company and Stone Properties, for the development and sales of ranch lots. There were no proceeds from the transaction as the land was an equity contribution to the joint venture and was recognized as real estate operating revenues. We anticipate sales of the ranch lots to total approximately $4.1 million, with approximately $2.2 million constituting our share of the sales proceeds, which we expect to occur between late 2024 to mid-2025.

Current wording

In December 2023, we contributed approximately 30-acres of land in Upcountry Maui, valued at $1.6 million, to BRE2 LLC, a joint venture between the Company and Stone Properties, for the development and sales of ranch lots. There were no proceeds from the transaction as the land was an equity contribution to the joint venture and was recognized as land development and sales operating revenues. We anticipate sales of the ranch lots to total approximately $4.1 million, with approximately $2.2 million constituting our share of the sales proceeds, which we expect to occur between late 2024 to mid-2025.

Previous wording

There were no significant real estate development expenditures during the three months ended March 31, 2024 and 2023.

Current wording

Approximately $391,000 was spent towards real estate development expenditures during the six months ended June 30, 2024 for development efforts both in West Maui and Haliimaile. No significant expenditures were made during the six months ended June 30, 2023.

Previous wording

Real estate development and sales are cyclical and depend on several factors, such as interest rates and demand. Results from one period are not indicative of future performance trends in this business segment. Prior to the Maui wildfires which occurred on August 8, 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 of ours prior to the wildfires, the loss of over 2,000 homes and over 3,000 jobs in the Maui wildfire accelerated our efforts to get land into productive use to meet these critical needs.

Current wording

Land development and sales are cyclical and depend on several factors, such as interest rates and demand. Results from one period are not indicative of future performance trends in this business segment. Prior to the Maui wildfires which occurred on August 8, 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 of ours prior to the wildfires, the loss of over 2,000 homes and over 3,000 jobs in the Maui wildfire accelerated our efforts to get land into productive use to meet these critical needs.

Previous wording

Operating revenues from leasing activities for the three months ended March 31, 2024, were comprised primarily of $1.9 million from commercial, industrial, and agricultural leases, and the remaining $0.3 million was comprised of $33,000 of licensing fees from our registered trademarks and trade names, $175,000 from potable and non-potable water system sales and $85,000 in grant revenue from the State of Hawai‘i for conservation management of our Pu‘u Kukui Watershed. Operating revenue from leasing activities for the three months ended March 31, 2023, were primarily comprised of $1.8 million from commercial, industrial, and agricultural leases, and the remaining $0.3 million was comprised of $33,000 of licensing fees from our registered trademarks and trade names, $183,000 from potable and non-potable water system sales and $72,000 in grant revenue from the State of Hawai‘i for conservation management.

Current wording

Operating revenues from leasing activities for the three months ended June 30, 2024, were comprised primarily of $1.9 million from commercial, industrial, and agricultural leases, and the remaining $0.3 million was comprised of $33,000 of licensing fees from our registered trademarks and trade names, $175,000 from potable and non-potable water system sales and $85,000 in grant revenue from the State of Hawai‘i for conservation management of our Pu‘u Kukui Watershed. Operating revenue from leasing activities for the three months ended June 30, 2023, were primarily comprised of $1.8 million from commercial, industrial, and agricultural leases, and the remaining $0.3 million was comprised of $33,000 of licensing fees from our registered trademarks and trade names, $183,000 from potable and non-potable water system sales and $72,000 in grant revenue from the State of Hawai‘i for conservation management of our Puu Kukui Watershed.

Previous wording

Certain rental income is contingent upon the sales of tenants exceeding a defined threshold and recognized as a percentage of sales after those thresholds are achieved. As the COVID-19 pandemic waned, visitor traffic to Maui increased and these percentage rents, leasing revenues in general and land licensing from adventure tourism tenants were returning to pre-pandemic levels until August 8, 2023, the date of the devastating Maui wildfires. The wildfires directly and critically impacted West Maui and took its toll on percentage rents and revenues for tourism based tenants. The $1.9 million of operating revenues from leasing activities for the three months ended March 31, 2024, compared to $1.8 million for the three months ended March 31, 2023 is an indication that tourism and visitor traffic is returning to pre-pandemic levels.

Current wording

Certain rental income is contingent upon the sales of tenants exceeding a defined threshold and recognized as a percentage of sales after those thresholds are achieved. As the COVID-19 pandemic waned, visitor traffic to Maui began to increase and these percentage rents, leasing revenues in general and land licensing from adventure tourism tenants were returning to pre-pandemic levels until the occurrence of the devastating Maui wildfires on August 8, 2023. The wildfires directly and critically impacted West Maui and took its toll on percentage rents and revenues for tourism based tenants. The $2.2 million of operating revenues from leasing activities for the three months ended June 30, 2024, compared to $2.2 million for the three months ended June 30, 2023 is an indication that tourism and visitor traffic is returning to pre-pandemic levels. The minimal increase in operating revenues at June 30, 2024 compared to June 30, 2023 is not reflective of our efforts to re-tenant and re-merchandise the tenant mix in the three commercial centers owned by the Company in the Kapalua Resort, Haliimaile Town and the Alaeloa Business Park. New tenant leases are being executed with an initial free rent period in lieu of expending funds towards tenant improvements and commercial leases are being renegotiated to reflect current market rental rates compared to the previous below market rates.

Previous wording

The increase in leasing operating costs and expenses for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, can be attributed to higher property maintenance costs for our commercial leasing portfolio properties, which had been deferred in prior years, hiring a property management and leasing firm to grow our leasing portfolio, and the start-up costs and fees associated with our leasing portfolio.

Current wording

The increase in leasing operating costs and expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, can be attributed to higher property maintenance costs for our commercial leasing portfolio properties, which had been deferred in prior years, hiring a property management and leasing firm to grow our leasing portfolio, and the start-up costs and fees associated with our efforts to increase tenant occupancy and to improve the tenant composition in our leasing portfolio.

Previous wording

The increase in operating revenues for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was due to new memberships being sold for the first time since 2019 and the Kapalua Club management team focusing on offering fee-based club events to members.

Current wording

The increase in operating revenues for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was due to new memberships being sold for the first time since 2019 and the Kapalua Club management team focusing on offering fee-based club events to members.

Previous wording

Contracted fee expenses decreased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, due to decreased fees for access and utilization of golf privileges.

Current wording

Contracted fee expenses decreased for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due to decreased fees for access and utilization of golf privileges.

Previous wording

The Kapalua Club has undergone restructuring in 2023. Its revised policies and practices have been implemented to reduce the impact of the amenity fees and to better align club dues and club expenses. The Kapalua Club began to accept new membership applications beginning late 2023.

Current wording

The Kapalua Club was restructured in 2023. Its revised policies and practices have been implemented to reduce the impact of the amenity fees and to better align club dues and club expenses. The Kapalua Club began to accept new membership applications beginning late 2023.

Previous wording

General and administrative costs and share-based compensation for each of the three months ended March 31, 2024 and March 31, 2023, amounted to $2.0 million.

Current wording

General and administrative costs and share-based compensation for the six months ended June 30, 2024 amounted to $4.8 million, compared to $3.8 million for the six months ended June 30, 2023.

Previous wording

An option to purchase 400,000 shares of the Company’s common stock under the Equity Plan was granted to the Company's Chief Executive Officer during the three months ended March 31, 2024, none of these options shares vested during this period. Additional information of the option issuance to the CEO is detailed in Note 11 of the financial statements. For the three months ended March 31, 2024, director options to purchase 82,000 shares and 164,000 shares vested for annual board and committee service, respectively. This expense was not incurred during the three month period ending March 31, 2023. During the three months ended March 31, 2023, $0.7 million was incurred for restricted stock vesting for the former Chief Executive Officer upon his separation from the Company – there was no comparable expense in the three months ended March 31, 2024.

Current wording

An option to purchase 400,000 shares of the Company’s common stock under the 2017 Equity and Incentive Award Plan (the Plan) was granted to the Company's Chief Executive Officer during the three months ended March 31, 2024, none of these options shares vested during this period. Additional information of the option issuance to the Chief Executive Officer is detailed in Note 11 of the financial statements. During the six months ended June 30, 2024, 325,709 shares of stock options vested which were comprised of 82,000 option shares to the Directors issued in May 2023, 110,375 option shares issued to directors in May 2024 and 133,334 option shares issued to the Chairman of the board in March 2023. During the six months ended June 20, 2023, 82,000 option shares were vested under options issued to directors in March 2023.

Previous wording

Interest income of $0.1 million was earned on our money market and bond investment portfolio during the three months ended March 31, 2024 and March 31, 2023. The Company does not maintain or possess any off-balance sheet financing nor transactions.

Current wording

Other income of $0.2 million and $0.5 million was earned during the six month period ended June 30, 2024 and 2023, respectively. During the 6 months ended June 30, 2024, other income was due to interest earned on savings and dividends earned on a investment bond fund of varying maturities. For the six month period ended June 30, 2023, $0.3 million was earned interst on savings and dividends on an investment bond fund of varying maturities and $0.2 million was earned on a refund of captive insurance funds from a now defunct joint venture the Company was a partner in. The Company does not maintain or possess any off-balance sheet financing nor transactions.

Previous wording

Our cash and cash equivalents were $5.4 million and $5.7 million (audited) at March 31, 2024 and December 31, 2023, respectively.

Current wording

Our cash and cash equivalents were $3.7 million and $5.7 million (audited) at June 30, 2024 and December 31, 2023, respectively.

Previous wording

We also had investments of $3.2 million and $3.1 million at March 31, 2024 and December 31, 2023, respectively. Our investments consist of corporate bond securities maturing on various dates through January 2025. These bond investments yield approximately 5.5% at March 31, 2024. We intend to hold our bond securities until maturity.

Current wording

We also had investments in a bond fund with varying maturities in the amount of $3.2 million and $3.1 million at June 30, 2024 and December 31, 2023, respectively. Our investments consist of corporate bond securities maturing on various dates through November 2025. These bond investments yield approximately 5.7% at June 30, 2024. We intend to hold our bond securities until maturity.

Previous wording

The terms of the Credit Facility include various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a minimum liquidity (as defined) of $2.0 million, a maximum of $45.0 million in total liabilities, and a limitation on new indebtedness.

Current wording

The terms of the Credit Facility include various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a minimum liquidity (as defined in the Credit Facility) of $2.0 million, a maximum of $45.0 million in total liabilities, and a limitation on new indebtedness.

Previous wording

Net cash flow provided by (used in) our operating activities for the three months ended March 31, 2024 was $(10) thousand and $0.7 million for the three months ended March 31, 2023.

Current wording

Net cash flows used in our operating activities for the six months ended June 30, 2024 were $0.5 million and $0.4 million for the six months ended June 30, 2023.

Previous wording

Interest income earned from our money market and bond investments was $0.1 million for each of the three months ended March 31, 2024, and March 31, 2023.

Current wording

Interest income earned from our money market and bond investments was $0.2 million for the six months ended June 30, 2024, and $0.2 million for the six months ended June 30, 2023.

Previous wording

The outstanding balance of our Credit Facility remained zero at March 31, 2024. There were no interest payments due on our Credit Facility during the three months ended March 31, 2024.

Current wording

The outstanding balance of our Credit Facility remained zero at June 30, 2024. There were no interest payments due on our Credit Facility during the six months ended June 30, 2024.

Previous wording

The preparation of the unaudited condensed consolidated interim financial statements in conformity with GAAP requires the use of accounting estimates. Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on the unaudited condensed consolidated interim financial statements and thus actual results could differ from the amounts reported and disclosed herein. For additional information regarding our critical accounting policies, see the section titleCritical Accounting Policies and Estimates in Part II, Item 7, within our Annual Report. There have been no material changes to the critical accounting policies and key estimates and assumptions disclosed in our Annual Report.

Current wording

The preparation of the unaudited condensed consolidated interim financial statements in conformity with GAAP requires the use of accounting estimates. Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on the unaudited condensed consolidated interim financial statements and thus actual results could differ from the amounts reported and disclosed herein. For additional information regarding our critical accounting policies, see the section titledCritical Accounting Policies and Estimates in Part II, Item 7, within our Annual Report. There have been no material changes to the critical accounting policies and key estimates and assumptions disclosed in our Annual Report.