Maui Land & Pineapple Co Inc: Form 10-Q for the period ended Mar 31, 2025

The following discussion and analysis of our unaudited condensed consolidated interim financial condition and results of operations should be read in conjunction with our annual audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 (our “Annual Report") and the unaudited condensed consolidated interim financial statements and related notes included in this Quarterly Report on Form 10-Q (this “Quarterly Report”). The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied by the forward-looking statements below. Factors that could cause or contribute to those differences in our actual results include, but are not limited to, those discussed below and those discussed elsewhere within this Quarterly Report, particularly in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Depending upon the context, the terms the “Company,” “we,” “our,” and “us,” refer to either Maui Land & Pineapple Company, Inc. alone, or to Maui Land & Pineapple Company, Inc. and its subsidiaries collectively.

Overview

Maui Land & Pineapple Company, Inc. is a Delaware corporation and the successor to a business organized in 1909 as a Hawaii corporation. The Company reincorporated from Hawaii to Delaware pursuant to a plan of conversion completed on July 18, 2022. Total authorized capital stock of the Company includes 48,000,000 shares, consisting of 43,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Shares of the Company’s common stock are listed on the New York Stock Exchange under the ticker symbol “MLP.” The Company consists of a landholding and operating parent company, has a principal subsidiary, Kapalua Land Company, Ltd., and certain other subsidiaries

We own and manage a diverse portfolio including over 22,000 acres of land on the island of Maui, Hawaii along with approximately 247,000 square feet of commercial real estate. For over a century, we have built a legacy of thoughtful stewardship through conservation, agriculture, community building and land management. Our current portfolio of assets includes unimproved land, entitled land allowing for various residential and mixed-use construction, and completed commercial properties.

In April 2023, a leadership transition was initiated by appointing a new Chief Executive Officer and new Chairperson of the Board, both of whom are experienced in large scale real estate portfolio management including master planning, community building, and asset management. The strengthening of our team continued with the addition of team members with localized experience including planning, engineering, permitting, community development, land and natural resource stewardship, and asset management.

To continue our over 100-year legacy, we are driven by a renewed mission to strategically maximize the use of our assets, resulting in added value to the Company and improved quality of life on Maui for future generations.

As a key initiative of the new leadership team, we have advanced efforts to maximize the productivity of our leasable land and commercial properties. At March 31, 2025, our commercial properties and land were occupied at the following levels:

(Note: no increase in leased sq. ft. during the three months ended March 31, 2025)

From January 1, 2024 to March 31, 2025, the team has increased commercial property occupancy from 72% to 86%, including tenant relocations and improvements necessary to enhance the variety and quality of experiences in our town centers. This effort will continue, along with capital improvements necessary to continue attracting top tier tenants. In addition to stable cashflow in a supply-constrained market, our commercial properties allow us to perform value-creating placemaking for our surrounding landholdings. We anticipate cashflow from our commercial properties to increase in the coming years, as we reach stabilization and fund the near-term costs for tenant improvements and leasing costs inherent with new tenancies.

To enable the productive use of land for homes, businesses, farms, resort projects, or otherwise, we generally must make improvements to the land. These improvements take the form of master planning, entitlements and zoning, subdivision into useful lot sizes, and the addition of infrastructure, enabling it to be placed into productive use. We continue to progress portfolio-wide strategic plans across over 22,000 acres of landholdings to prioritize and guide actions of the Company in the forthcoming quarters.

Our strategic plan for land utilization aligns with our mission to meet the current and future needs of the community, in a significantly supply-constrained market. The plan identified four categories of improved and unimproved land actions as follows in the table below.

As a result of this strategic planning effort, our team is underway with concurrent activities to activate our land holdings to meet the long-term needs of the community, including the provision of land for agriculture and housing.

We have recognized revenue from one non-strategic parcel sale in the first quarter of 2025 and anticipate additional near-term sales revenues (1-3 years) from other remnant parcels for sale, along with improved land in active marketing for sale and/or development with partner(s).

Unimproved land in active planning and improvements will likely require three or more years before improvements are completed and revenue generation is realized. Funding for soft cost improvements, if not covered by our commercial properties and land leasing cashflow, will likely be provided by remnant non-strategic parcel sales and our revolving line of credit. As infrastructure and site improvement hard costs are warranted, capital will primarily be provided by project presale deposits and construction financing.

For the Honokeana Homes project, we have agreed to lease up to 50 acres to the State of Hawaii for up to seven years with no lease revenue, to support the needs of victims of the 2023 Lahaina wildfire. The State of Hawaii set aside an initial $35.5 million for the project, to fund hard and soft costs related to horizontal improvements on the land. We have agreed to administer the horizontal improvements utilizing third party contractors, on a cost recovery basis with no direct profit from the administrative work.

Approximately $2.3 million was spent on behalf of the State during the three months ended March 31, 2025 to administer the State’s improvements on the Honokeana Homes emergency relief project. On other projects, approximately $266,000 in development expenditures were made during the three months ended March 31, 2024.

Unimproved land identified for long-term lease and ongoing asset management may be expected to be leased or licensed for diversified agricultural, conservation, and cultural uses for the next ten or more years. This land includes the Pu’u Kukui Watershed, which is over 8,600 acres and is actively managed to maximize rainfall capture and recharge of the aquifer which provides approximately 70% of the water consumed in West Maui.

As part of the effort to reactivate dormant croplands that were formerly irrigated, graded and actively farmed, we have initiated a new scalable business venture to cultivate agave. The business aligns with our focus on creating living wage jobs for local families, connecting people to the land, and boosting environmental and economic sustainability. Agave is a drought tolerant, low-maintenance crop attracting a growing global demand for agave-based added-value products. Our strategy complements our ongoing leasing and development projects, and utilizes our prime landholdings to enable revenue upside potential from vertical integration with on-island distillation, regenerative agri-tourism and global distribution.

Results of Operations

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

CONSOLIDATED

(unaudited)

(in thousands)

LAND DEVELOPMENT AND SALES

(unaudited)

(in thousands)

Land development and sales operating revenues primarily consist of the project revenue from the Honokeana Homes project. There were no sales of real estate during the three months ended March 31, 2025 or 2024. This is purposeful as we continue to evaluate our commercial assets and land holdings to determine the best utilization of our assets in West Maui and in Upcounty Maui in the town of Haliimaile to increase value.

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 development with partner(s) and the application for the SMA permit extension remains ongoing.

Approximately $2.3 million was spent towards real estate development expenditures during the three months ended March 31, 2025 related to the Honokeana Homes project. Approximately $266,000 in development expenditures were made during the three months ended March 31, 2024.

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.

LEASING

(unaudited)

(in thousands)

Operating revenues from leasing activities for the three months ended March 31, 2025, were comprised primarily of $2.2 million from commercial, industrial, and agricultural leases, and the remaining $1.0 million was primarily comprised of $33,000 of licensing fees from our registered trademarks and trade names, approximately $800,000 from potable and non-potable water system sales and $86,000 in grant revenue from the State of Hawai‘i for conservation management of our Pu‘u Kukui Watershed. 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.

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 $3.2 million of operating revenues from leasing activities for the three months ended March 31, 2025, compared to $2.2 million for the three months ended March 31, 2024 is an indication that tourism and visitor traffic is returning to pre-pandemic levels. The increase in operating revenues at March 31, 2025 compared to March 31, 2024, is reflective of our efforts to re-tenant, re-merchandise and convert below market leases to current market rate leases throughout the three commercial centers owned by the Company in the Kapalua Resort, Haliimaile Town and the Alaeloa Business Park. New tenant leases are typically being executed with an initial free rent period to reflect current market rental rates.

The increase in leasing operating costs and expenses for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, 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 increase occupancy of our leasing portfolio, and the costs associated with our efforts to improve the tenant composition in our leasing portfolio.

Our leasing operations face substantial competition from other property owners in Maui and Hawai‘i.

RESORT AMENITIES AND OTHER

(unaudited)

(in thousands)

Our resort amenities and other segment includes the operations of the Kapalua Club, a private, non-equity club that provides its members special programs and access and other privileges at certain of the amenities at the Kapalua Resort, including a 30,000 square foot full-service spa and fitness center, a private pool-side dining beach club, and two 18-hole championship golf courses. The Kapalua Club does not own or operate any resort amenities and the member dues collected are primarily used to pay contracted fees to provide access for its members to the spa, beach club and other resort amenities.

The increase in operating revenues for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to new memberships being sold.

Contracted fee expenses increased for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to bad debt write off.

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

GENERAL AND ADMINISTRATIVE COSTS, SHARE-BASED COMPENSATION

General and administrative costs and share-based compensation for the three months ended March 31, 2025 amounted to $3.1 million, compared to $2.0 million for the three months ended March 31, 2024.

Share-based compensation costs and share-based compensation for the three months ended March 31, 2025 amounted to $1.6 million, compared to $1.0 million for the three months ended March 31, 2024. The $0.5 million increase is attributable to option valuation expenses resulting from the options granted to our Chief Executive Officer in January 2024, options granted to our directors in May 2024, which were at a higher valuation from the options granted to directors in May 2023, and the options and shares cancellation that took place in August 2024. These differences are explained in the paragraphs below.

An option to purchase 400,000 shares of our common stock under the 2017 Equity and Incentive Award Plan (the Plan) was granted to our 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 three months ended March 31, 2025, 229,709 shares of stock options vested which were comprised of 96,375 option shares issued to directors in May 2024 and 133,334 option shares issued to the Chairperson of the Board in March 2023. 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.

On August 5, 2024, R. Scot Sellers, a director and Chairperson of the Board, Stephen M. Case, a director, and Race A. Randle, Chief Executive Officer, voluntarily executed agreements to cancel previously granted stock options and common stock grants. The Equity Plan was amended in February 2023 to increase the limit on the number of shares to be awarded during a plan year to 400,000 shares. In 2023, Mr. Sellers received options to purchase 63,500 shares and 18,804 shares of common stock that exceeded the 400,000 share limit. In February 2024, Mr. Randle received 28,511 shares of common stock that exceeded the 400,000 share limit. In addition, although grants to Mr. Case did not exceed the Equity Plan limit, he voluntarily opted to cancel the common stock grants and options issued to him in 2023 amounting to 6,659 shares and 56,000 shares, respectively, and options and restricted shares issued in 2024 amounting to 3,124 shares and 56,000 shares, respectively. The cancellation of the options and common stock grants resulted in recognizing the remaining unvested awards of options and common stock grants immediately. In the third quarter of 2024, $631,000 was recognized as expense due to the cancellations, $402,000 due to the cancellation of Mr. Case’s options and common stock grants and $229,000 due to the cancellation of Mr. Randle’s common stock grants.

While the Company will continue to use equity as part of its compensation strategy, it does not anticipate using options. We expect a decrease in share-based compensation expenses in the future as a result.

OTHER INCOME

Other income of $0.1 million was earned during the three month period ended March 31, 2025 and 2024. During the three months ended March 31, 2025 and 2024, other income was due to interest earned on savings and dividends earned on an investment bond fund of varying maturities. We do not maintain nor possess any off-balance sheet financings nor transactions.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our cash and cash equivalents were $7.9 million and $6.8 million (audited) at March 31, 2025 and December 31, 2024, respectively.

We also had investments in a bond fund with varying maturities in the amount of $1.6 million and $2.7 million at March 31, 2025 and December 31, 2024. Our investments consist of corporate bond securities maturing on various dates through November 2025. These bond investments yield approximately 3.8% at March 31, 2025. We intend to hold our bond securities until maturity.

At March 31, 2025, $12.0 million was available from our revolving line of credit facility (“Credit Facility”) with First Hawaiian Bank (“Bank”), as the Company borrowed $3,000,000 in 2024. The Credit Facility, which matures on December 31, 2025, provides for revolving or term loan borrowing options. Interest on revolving loan borrowings is calculated using the Bank’s prime rate minus 1.125 percentage points. Interest on term loan borrowing is fixed at the Bank’s commercial loan rates with interest rate swap options available. We have pledged approximately 30,000 square feet of commercial leased space in the Kapalua Resort as security for the Credit Facility. Net proceeds from the sale of any collateral are required to be repaid toward outstanding borrowings and will permanently reduce the Credit Facility’s revolving commitment amount. There are no commitment fees on the unused portion of the Credit Facility.

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.

We were in compliance with the covenants of our Credit Facility at March 31, 2025. We may borrow under our credit facility to invest in, and build value in, our assets and fund working capital if economic conditions are negatively impacted in future periods.

Cash Flows

Net cash provided by our operating activities for the three months ended March 31, 2025 was $0.2 million and net cash used in our operating activities was $10,000 for the three months ended March 31, 2024.

There was land development revenue during the three months ended March 31, 2025 in the amount of $2.3 million for a Honokeana Homes project and no sales of real estate during the three months ended March 31, 2024.

Interest income earned from our money market and bond investments was $0.1 million for the three months ended March 31, 2025, and 2024.

The outstanding balance of our Credit Facility was $3,000,000 at March 31, 2025. There were no interest payments due on our Credit Facility during the three months ended March 31, 2025.

Contributions in the amount of $500,000 was required to be made to our defined benefit pension plan during the first quarter of 2025.

Capital Resources

Our business initiatives include investing in our operating infrastructure and continued planning and entitlement efforts on our development projects. At times, this may require borrowing under our Credit Facility or other indebtedness, repayment of which may be dependent on selling of our real estate assets at acceptable prices in condensed timeframes. We believe our cash and investment balances, cash provided from ongoing operating activities, and available borrowings under our Credit Facility, will provide sufficient liquidity to enable us to meet our working capital requirements, contractual obligations, and timely service our debt obligations for the next twelve months and the foreseeable longer term.

Our indebtedness could have the effect of, among other things, increasing our exposure to general adverse economic and industry conditions, limiting our flexibility in planning for, or reacting to, changes in our business and industry, and limiting our ability to borrow additional funds

Critical Accounting Policies and Estimates

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 titled Critical 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.

We have no material exposure to changes in interest rates related to our borrowing and investing activities used to maintain liquidity and to fund business operations. We have no material exposure to foreign currency risks.

We are subject to potential changes in consumer behavior and regulatory risks through travel and social distancing restrictions due to our location as a vacation destination. Potential deferrals and abatements may impact our rental income.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (“SEC”) rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures at the end of the fiscal quarter covered by this report. Based upon the foregoing, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective during the three months ended March 31, 2025 to provide reasonable assurance that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in applicable SEC rules and forms.

Changes in Internal Controls Over Financial Reporting

There have been no significant changes in our internal controls over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f) or 15d-15(f)) during the three months ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Potential risks and uncertainties include, among other things, those factors discussed in the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report. Readers should carefully review those risks and the risks and uncertainties disclosed in other documents we file from time to time with the SEC. We undertake no obligation to publicly release the results of any revisions to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. During the three months ended March 31, 2025, there were no material changes to the risks and uncertainties described in Part I, Item 1A., “Risk Factors,” of our Annual Report.