Maui Land & Pineapple Company - Take This One to the (Land) Bank
Good Morning OpTrackers,
Today I am presenting you with a LONG idea to break up our streak of short ideas - we’re going to take a dive into Maui Land & Pineapple Company (MLP).
Now, I know there will be a particular category of public market nerd that immediately groans and rolls their eyes upon reading this - I know why and I acknowledge it has been well earned - but please bear with me! If you haven’t dug in recently, I think you’ll find some pretty compelling changes at the company.
For The Uninitiated
While there are dozens of tools available to enable the qualitative and quantitative analysis of THE BUSINESS of a potential investment, at OpTrack.io I believe there is an unmet need for analysis of THE PEOPLE that drive the outcomes of these businesses. I hope you find it helpful. If you do, please subscribe and share it far and wide. It would mean the world to me.
MLP Business Overview
MLP is a pretty simple company that I am going to further oversimplify for our purposes: The company owns a ton of land in Maui.
For a long time MLP has been a quintessential value trap, and you can read bull cases on the stock here and here. And if you do some Googling you can find a bunch more. And when I say this has been a long time value trap, I really mean it:
The stock has done absolutely nothing for >25 years. And Stephen Case has been the largest shareholder since 1999.
Side Note: Over the years the company has had some trouble with leverage (now gone), the legacy pineapple operation (now shut down), and pension liabilities (no longer a problem). So they haven’t truly done nothing, they’ve addressed these issues, but they’ve done nothing good on the real estate development front.
In my experience, these situations where there is consensus on the value of an non-operating asset (like a land bank) and it’s a value trap forever, the analysts are directionally correct on the value but ignore/misjudge the timing and governance dimensions. So for our purposes I am just going to take it for granted that the land is worth a significant premium to the current share price and let’s turn to the people.
MLP People (and Changes to the People) Overview
Normally my review of the folks involved in public companies focuses on prior public companies they were associated with and follow a strict “let the numbers talk” approach, but this time it’s going to be a bit different.
To be totally blunt about this, if you look at the track records of the following people… on balance they objectively leave something to be desired. No two ways about it. Putting the controlling shareholder aside, the real estate people involved here haven’t created value in their public company involvements for the most part (there is one massive exception). That said, I am now going to do what I am not known to do, which is to put the objective track records aside and make an excuse for these folks. Real estate has been a crazy place to invest since Q1 2020 with COVID + our latest interest rate tightening cycle (with the former being a far more forgivable excuse than the latter).
So here is what I posit to you and you can decide to take it or leave it: the thesis for MLP is that they are shooting fish in a barrel. They own a lot of (potentially very valuable) land in a location that sells itself and the market it valuing it at a pittance. To create value here, you just need folks who know what they’re doing to do basically ANYTHING. The bet here is not that this is the greatest assembly of real estate acumen since Sam Zell dined alone, it is that the fact that 4 key roles have been filled in 18 months - and filled by people who know what they’re doing - indicates that the company will go from doing nothing to doing SOMETHING for the first time in 25 years. And that is enough.
Stephen Case, MLP Director and Controlling Shareholder
If Stephen Case was running a normal operating business I would honestly be torn about whether to put him in the good bucket or the bad bucket. He is, after all, one of the key architects of infamous AOL / Time Warner merger. That said, you have to create a lot of mark-to-market value in the first place in order to do one of the most value destructive deals in the history of capitalism.
Additionally, MLP is not a normal operating business. In some sense this is sort of a vanity project. And we can be sure that Stephen Case, if nothing else, is an old, rich, white dude who is thus capable enough to become Executive Chairman of a >$300bn tech company at one point, well-funded, and well-connected.
He is also no stranger to (very slow) real estate development. In 2007 he bought a bunch of land in Costa Rica and it appears that a hotel will finally open on that land in 2025. So while MLP has been dormant a long time, I don’t believe Stephen has given up on it nor will he “forget” about it. And as the following changes indicate, it appears he is getting ready to accelerate development at MLP.
Glyn Aeppel, MLP Director, Newly appointed in July 2022
Glyn has extensive experience in the real estate industry with mixed results.
Glyn is the Founder of Glencove Capital, a real estate related fund, and has 30+ years of experience developing luxury real estate. She also sits on the board of AvalonBay (which has done well) and Simon Property Group (which has not).
On balance, she’s a credible person who knows her way around real estate and out guns MLP with its ~$250mm market cap.
John Sabin, MLP Director, Newly Appointed in July 2022
John Sabin is “Stephen Case’s Guy” so to speak. He has been the CFO of Case’s company that is doing the Costa Rica project for >10 years. And he has been involved in a lot of real estate related entities over the years (e.g., CFO of Hudson Hotels, VP of Finance of Choice Hotels, Director of Condor Hospitality, Director of Hersha Hospitality Trust).
Again, if you look up his involvement in Condor Hospital or Hersha Hospitality, John has not covered himself in glory. But I take it as a promising signal of increasing general levels of future activity that he was brought in to MLP.
Scot Sellers, MLP Chairman of the Board, Newly Appointed in March 2023
Scot Sellers is the real deal. He was previously the CEO, CIO, and Chairman of Archstone, one of the world’s largest apartment companies. During his tenure at the helm, public shareholders saw their shares increase 8-fold in 12 years from 1995 to 2007.
Further, he is on the Board of Howard Hughes and Irvine Company. He also used to be the Chairman of NAREIT.
Race Randle, MLP CEO, Newly Appointed in March 2023
First - and probably most importantly - Race Randle is a Hawaii native. Second, most recently Race Randle worked at Howard Hughes where he just oversaw the development of a real estate project in Honolulu. I would also presume that Scot and Race know each other well from Howard Hughes.
In summary:
MLP owns a bunch of land in Maui that everyone seems to agree is worth a ton of money if they actually monetize it. The company has long been controlled by a single shareholder who appears exceedingly patient, but has just turned over 1 of 2 Named Executive Officer roles at the company and 2 of 6 board roles, including the Chairman role.
I think it’s worth repeating what was stated above:
The thesis for MLP is that they are shooting fish in a barrel. They own a lot of very valuable land in a location that sells itself and the market it valuing it at next to nothing. To create value here, you just need folks who know what they’re doing to do basically ANYTHING. The bet here is not that this is the greatest assembly of real estate acumen since Sam Zell dined alone, it is that the fact that 4 key roles have turned over in 18 months indicates that the company will go from doing nothing to doing SOMETHING. And that is enough.
That being said, I still expect this to be a pretty slow going endeavor, measured in many years, not months or even a year or two. And the most dangerous phrase is “this time is different” so buyer beware. Stephen Case would decide to spend another 20 years on this development to make sure he does it “right”.
Disclaimer: Please remember this post should not be taken as investing advice and please consult a licensed financial advisor before making any investment decisions. The OpTrack team did its best to present everything above in a factually accurate way, but there is always room for error in biographical data on executives and market data. There may be mistakes of omission or commission in the above - if you find one - please reach out to OpTrack@OpTrack.io so that we can correct it.