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Sunday, April 20, 2014         

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Hui puts farmers on ag land

A group buys 854 fallow acres, forms a cooperative and sells shares to growers

By Andrew Gomes

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Agricultural subdivisions have gotten a bad name in Hawaii from developers marketing such parcels subtly as gentleman farms. But in Kunia a true ag subdivision is being carved from former pineapple and sugar cane plantation land through creative use of a 4-year-old state law.

A hui of local business people bought 854 acres of fallow farmland earlier this year from James Campbell Co. for $7.7 million with the idea to subdivide the property and resell lots ranging from five to 35 acres to small farmers.

So far, 20 of 99 lots have been sold to farmers intending to raise crops including banana, lychee and mango as well as animals such as goats and horses. Another 40 sales are in escrow.

The subdivision is named Kunia Loa Ridgeland Farms, and unlike some ag subdivisions developed in recent years that have sprouted luxury homes, no homes are permitted by law on Kunia Loa land.

"We don't have electricity; we don't have (potable) water; we don't have sewers," said Calvin Lui, a partner in the hui doing business as C&C Farmlands LLC. "All we have is irrigation water and cane haul roads."

Kunia Loa is being developed under a law that allows subdividing farmland without complying with county subdivision standards -- which typically require such things as sidewalks and street lights. The parcels are restricted to farm uses. Homes are expressly prohibited.

The law, passed as Act 271 in 2006, was aimed at helping to reuse former plantation land by making it easier for large landowners to lease property to small farmers.

Though the law is limited to leasehold property, C&C with guidance from local attorney Ray Iwamoto structured the subdivision to meet the leasehold provision while conveying ownership. The hui formed a nonprofit corporation that owns the land and serves as a cooperative. Farmers buy shares in the corporation that give them a proprietary right to a lot lease that's perpetually renewable.

C&C might be the first entity to use Act 271 to subdivide and sell ag land to farmers.

Earl Yamamoto, a state Department of Agriculture planner, wasn't aware of any similar use and said that fee-simple ownership of ag lots that prohibit homes in Hawaii is unique. "It is novel," he said of C&C's project.

C&C pursued its concept for roughly two years. Initially the hui led by Larry Ordonez, a prominent businessman in the local Filipino community, made an attempt to buy 2,100 acres of former pineapple fields in Wahiawa from the George Galbraith Trust, but the seller opted to deal with another bidder.

C&C, which also involves Wallace Kazama and Conrad Valdriz, later arranged to buy the Campbell land and get financing from the local Ironworkers Union.

While Kunia Loa might be the first use of Act 271 to sell subdivided farm lots, other ag parks exist in Hawaii, such as Kula Agricultural Park on Maui, Mililani Agricultural Park on Oahu and 10 parks operated by the state. But these parks lease land to farmers.

The leasehold arrangement, while sometimes providing relatively long-term tenancy, still presents farmers with some uncertainty about future use and can hamper efforts to obtain loans. In addition, nearly all the state's ag parks have no available space.

At 854 acres, Kunia Loa would be one of the biggest ag parks in the state. By comparison, the biggest state-run ag park is the 753-acre Molokai Ag Park with 22 lots.

One significant limitation for Kunia Loa, however, is that about half the land isn't suitable for most crops because of hilly terrain and gulches.

Because of this, a large number of lot buyers are expected to use their land to keep horses or raise cattle, which is what some previous tenants of Campbell did on the property.

Water is available from Kunia Water Association wells, but C&C needs to develop two reservoirs and distribution infrastructure to supply lots with the irrigation water.

Lui said C&C could end up spending $6 million to $10 million on infrastructure, which also includes improving roughly 10 miles of dirt roads.

Debbie Lui-Anderson, another C&C partner and Lui's daughter, said design work and a conservation plan need to be completed before infrastructure improvements can be made, but she hopes an initial phase of water distribution can be completed in six months.

Hui members hope their subdivision plan can be a model that perpetuates reuse of fallow former plantation lands and makes small farming more viable in Hawaii.

While it's too early to tell whether Kunia Loa will be successful, some observers question how much commercial farming will take place there, and note that prices for lots aren't cheap by farmland standards.

"The concept sounds great. We really hope it works," said Stephanie Whalen, executive director of the Hawaii Agriculture Research Center. "But it is a high price. How many small farmers can afford it?"

Lot prices range from $40,000 to $60,000 per acre, which for a 5-acre lot translates to $200,000 to $300,000. The largest lot available is a 35-acre parcel priced at $1.4 million. Most lots are between five and 10 acres.

Lui said C&C researched how much small farmers were paying for rent, and aimed to make ownership more attractive. "We want them to be successful," he said of buyers.

Iwamoto said many Kunia Loa buyers so far are farmers who lease land on the North Shore but live in Central Oahu. He said they embraced the opportunity to work closer to where they live and have more control of their business by owning their farm property.

"There was a pent-up demand by small farmers to own their own farms," he said.

"This concept only works if you have farmers."

Joe Ho'okano, a heavy equipment operator with Grace Pacific, bought a lot with plans to raise dry-land taro, lychee, banana, goats and sheep. He said his wife will keep horses on part of the property, and his father-in-law is interested in aquaponics.

Ho'okano, 49, said the economic downturn motivated him to look for a way to supplement his income. "Work has gotten slow," he said. "I don't want to be a grumbler. I want to make things happen."






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