$300M resort
project proposed
for Maui

Landowner Maui Land &
Pineapple plans to raze
the Kapalua Bay Hotel
and build a major complex

Just eight months after buying the Kapalua Bay Hotel, Maui Land and Pineapple Co. announced plans yesterday to reposition its Valley Isle property as a more upscale destination by razing the hotel and surrounding shops to make way for a $300 million resort tied to health and wellness.

The new 24-acre complex, which will be rebranded the Kapalua Beach Club, will include 150 hotel rooms, 120 time-share units, 30 condominiums, an oceanside spa, a beach club and boathouse. The project, slated to start in the spring of 2006, is at the center of the company's revitalization plan for its 23,000-acre resort, said David C. Cole, chairman, president and chief executive of Maui Land.

"Kapalua Resort is undergoing a significant transformation as we reposition the destination at the pinnacle of the Hawaiian hospitality industry," Cole said. Marriott International and Exclusive Resorts SM LLC will serve as the project's minority partners.

The Kapalua Bay Hotel was purchased for $102 million in 1990 by Japan-based KBH Operations LP, but sold for less than a fifth of that amount in 1996 to New York-based YCP Kapalua LP, a partnership managed by the Yarmouth Group. A series of mergers involving the Yarmouth Group resulted in management of the property by Morgan Stanley, which sold it to Maui Land last May for an undisclosed amount.

"Our partnership's redevelopment of the Kapalua Bay Hotel is critical to the resort's successful revitalization," Cole said.

Maui Land owns approximately 29,000 acres on the Valley Isle. Its primary operations include cultivating, processing and distributing pineapple, operating the Kapalua Resort and creating and managing holistic communities on Maui.

Eventually the master-planned Kapalua Resort -- which encompasses three beaches, 54 holes of golf, the 548-room Ritz-Carlton Kapalua, the 196-room Kapalua Bay Hotel and the 292-unit Kapalua Villas -- will also include an upscale health and wellness village, Cole said.

Last year, Maui Land announced that it would partner with Miraval, Life In Balance, to build the resort's oceanside spa. Maui Land and Miraval also plan to open a 150-room, adults-only spa hotel and a mountain activity center, Cole said.

Maui Memorial Hospital also will partner with Maui Land in late 2006 or 2007 to build a 35-bed urgent-care facility in Pulelehua, he said.

Redevelopment of the resort, will pump more money into West Maui's economy. The hotel will benefit by attracting guests that are willing to pay a higher daily rate, Cole said.

Room rates, time-share and condo prices have not been disclosed, but Cole said oceanside property in Kapalua is selling for more than $2,000 a square foot.

More than 244 full-time and 20 casual hotel employees and workers at a dozen neighboring shops will initially lose their jobs. However, the development will stimulate greater opportunities for West Maui residents, Cole said.

Running a more upscale resort with a higher level of service will require more employees, he said. In the meantime, employees can attend a job fair and seek transition assistance, Cole said.

The large-scale development, which is expected to be completed in 2008, will be financed by equity, banks and real estate sales, Cole said.