Trouble in paradise

September 15, 1996|By Christopher Reynolds | Christopher Reynolds,LOS ANGELES TIMES

While the island of Lanai could be the setting in a billionaire's daydream, it is the nightmare of many stockholders.

According to the Dole Food Co.'s 1995 annual report and literature at the Lodge at Koele, David Murdock's company spent more than $250 million on the transformation of Lanai from plantation to resort between 1985 and 1991. The Lodge at Koele, with 102 rooms, opened in 1990, followed a year later by the 350-room Manele Bay Hotel. Commissioning artworks and stockpiling antiques, Murdock and company aimed for the highest end of the market -- and debuted just in time to suffer the full weight of the American and Japanese recessions.

One estimate put the Lodge at Koele's first-year occupancy at just 15 percent. These days, insiders say, the figures are probably closer to 60 percent -- company officials won't release specific numbers -- but behind these handsome interiors and sprawling landscapes, a company has been bleeding. Company officials reported $36 million in losses on Lanai in 1995, and in December "wrote down" the investment's value, saying in essence that the resort upon which they had spent $400 million was now worth a "book value" of only about $235 million. In a simultaneous move that protects Dole's stockholders against any future Lanai losses, Dole spun off its Lanai holdings into a separate company, Castle & Cooke Inc.

The chief financial officer of that company, Edward Roohan, reports that the first quarter of 1996 was Lanai's best ever: For the first time, the resort made more than it spent -- a narrow $400,000 more, before depreciation.

Even to a casual guest, it's fairly clear that Murdock's long-term hope for Lanai is that the company can recoup its losses by gently steering guests into purchases of the condos and homes that he is putting up near the hotels. As of late May, Murdock had completed 19 luxury townhomes and houses on the island and received government approval to build about 750 more. Prices begin at $400,000 for bare lots, $497,000 for townhomes, $945,000 for homes. But there's a long way to go. In late May, a Koele salesman counted only six escrows closed.

Pub Date: 9/15/96

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