September 13, 2013
Hawaii

An inside look at Larry Ellison’s Lanai

David Thompson | Honolulu Magazine | August 2013 | www.honolulumagazine.com

When software billionaire Larry Ellison bought the island of Lanai last summer, he handled his end of the transaction partly through a limited partnership called Octopus Holdings and its corporate partner, Tentacle Corp. If the names suggest something ominous about Ellison—ranked by Forbes magazine as the fifth richest man in the world—they also reveal a sense of humor. As co-founder and CEO of Oracle, Ellison is infamous for his cut-throat, scorched-earth approach to business. Apparently, he also has a likeable side.

A year has passed since Ellison added the 141-square-mile Hawaiian Island to his portfolio, and his likeability quotient among Lanai’s small and leery population remains as high as ever. “Hope,” “hopeful” and “cautiously optimistic” are words a visitor wandering around Lanai City, the island’s only town, hears again and again these days. “The talk he’s talking is giving a lot of people hope—a lot of people think he’s the new messiah,” says Andrew de la Cruz, owner of a small general store, International Food & Clothing, who places himself on the “cautiously optimistic” end of the Ellison outlook spectrum. “I’m just really hoping this guy comes through.”

Ellison’s grand plan for Lanai—which once prospered as the world’s largest pineapple plantation, and has limped along in more recent times as a luxury resort destination—is to transform it into a “laboratory of sustainability,” with desalinated seawater irrigating organic farms, and a solar electric grid recharging the batteries of electric cars. From the standpoint of the people who live there, and whose livelihoods are now deeply dependent on Ellison’s decisions, sustainability lab sounds pretty good.

And even as the more potentially controversial details of Ellison’s vision have emerged—he plans to build a third resort on an undeveloped shoreline and wants to double the size of the island’s population from 3,000 to 6,000—the widespread sense of optimism on the island is undiminished.

“It feels like good things are happening here, and we’re all going along for the ride,” says Mike Carroll, an artist who runs the Mike Carroll Gallery in Lanai City.

The good feelings toward Ellison largely reflect the good job that Lanai Resorts, the organization overseeing all of Ellison’s many on-island operations, has done with community relations. Heading the organization is Kurt Matsumoto, who ran the island’s two resort hotels for their first decade of operation in the 1990s. Matsumoto, who was born and raised on Lanai, and is well regarded there, routinely appears at public forums with Lanai Resorts’ other top executives to discuss what Ellison has in mind and to hear the community’s concerns.

“It’s not Ellison’s ideas that are giving people hope, it’s the way he’s involving the community,” says Butch Gima, president of a community advocacy group called Lanaians for Sensible Growth. “It’s a much more transparent process than it’s been over the last two decades.”

The goodwill can also be attributed, at least partially, to the fact that Lanai was simply ready for a change. After 22 years with previous owner David Murdock, the CEO of Castle & Cooke and the island’s curmudgeonly, micromanaging overlord, it was time for someone new. “He was a tyrant,” says one outspoken Murdock critic, Ron McOmber. “His attitude was, ‘You’ll do it my way, and if you don’t like it, you’ll do it my way anyway!’”

Ellison’s charm offensive began the day after Castle & Cooke reported that the island’s sale was complete. It started with an email to the monthly newspaper, Lanai Today, announcing that the long-shuttered community swimming pool—which Ellison now owned—would reopen. Workers were soon on the site, pouring fresh concrete, installing showers that switched on when you stepped in front of them, and landscaping the grounds in a lush tropical style comparable to that of the island’s two Four Season’s hotels—which Ellison also now owned. The humble old community pool didn’t just reopen, it was reinvented as something worthy of a five-star resort.

“A lot of people were really concerned about what Mr. Ellison would do with Lanai, and the first thing he did was something for the community,” says Alberta de Jetley, publisher of Lanai Today. “It was a very good public relations move.”

It was Murdock who had closed the pool seven years earlier as one of many cost-saving measures implemented during the end of his reign, a period of economic struggle on the island.

Murdock had transformed Lanai’s economy in the early 1990s from pineapples to tourism, but he said his investment in the island never got out of the red. His plan to finally turn a profit on Lanai by building a massive wind farm that would sell electricity to Oahu polarized the community and generated so much animosity toward him personally that he stopped showing his face at the annual Pineapple Celebration, where he once enjoyed mingling with his “children,” as he called the island’s residents.

When Murdock put the island up for sale in 2011, he declared that the financial drain and the ill-will had become intolerable. “This is the poorest financial investment I’ve made in my entire life,” he groused to Lanai Today.

Ellison’s tentacles were all over Murdock’s bad investment right from the start, and they held hammers and paintbrushes and chainsaws. The pool turned out to be the kickoff for a comprehensive campaign to upgrade, renovate and generally spiff up the island.

Deferred maintenance on the hundreds of homes and apartments that Ellison suddenly owned was tackled. New construction began on vacant residential lots around town, in the classic plantation style of the island’s existing architecture. The stately Cook pines at Dole Park—now also Ellison’s property—were pruned for the first time in memory. The unsightly concrete parking barricades ringing the park disappeared overnight, and the old men who sit in the park each day at what’s known as the Old Man’s Pavilion got a new roof over their heads.

At the resorts, the gaudy Asian decor Murdock put in lobby of the Four Seasons at Manele Bay and the English country manor-style decor he installed at the Four Seasons Lodge at Koele were replaced with sleeker, lighter, more Hawaiian furnishings. At the community’s outdoor basketball court, b-ballers got a brand-new, all-weather playing surface. At the Administrative Services building, the pineapple plantation’s old headquarters, the hated kukui nut trees that had rained hard-shelled hell upon the parking lot for years were cut down and replaced with more auto-body-friendly palms.

The list of projects went on and on. Change was coming quickly to sleepy Lanai, although where it was all headed was a mystery at first. Ellison was pouring money into cosmetic improvements, but for the first three months after the purchase he revealed nothing about his long-term plans for the island.

Naturally, Lanaians developed theories as to why Ellison bought their island. Maybe he wanted to one-up Bill Gates, his software rival, two notches above him on the richest-person-in-the-world list. When Gates got married on Lanai in 1994, he famously booked all the airline flights and hotel rooms in order to have some privacy. What Gates had merely rented, Ellison now owned. Or maybe Ellison was a “prepper,” an end-of-the-world survivalist who needed a safe place to retreat to in the event civilization collapses. Or maybe he just wanted to have a warm, sunny training base for his America’s Cup sailing team. The strong winds and protected waters on the north side of the island do, after all, offer ideal conditions for high-speed sailing.

The sailing-base theorists, it turned out, were onto something.

Ellison poured hundreds of millions of dollars into winning the America’s Cup, international yacht racing’s most coveted prize, which he captured in 2010 after two previous attempts. As the winner, it was his prerogative to set the terms of the next race, which is currently underway in—his choice—San Francisco Bay. To broaden the race’s appeal for a TV audience, Ellison invented an entirely new type of boat: a frighteningly fast, 72-foot catamaran powered by a 13-story-tall, winglike sail. The boats can travel upwards of 50 miles per hour, and they’re prone to catastrophic wipeouts. During America’s Cup trials last spring, one sailor died in just such an accident. The sailing world is torn over Ellison’s monstrous innovation, with some saying the boats are simply too dangerous and shouldn’t be sailed at all.

In September 2012, Ellison’s Team Oracle USA filed permits with the state to use Lanai’s Kaumalapau Harbor—which is mainly utilized for the weekly barge deliveries from Honolulu—as a temporary winter training base. But, soon after, the team cancelled its Hawaii plans, explaining that modifications that needed to be done to the boat conflicted with the time it might spend in the Islands.

Lanai’s first glimpse at what Ellison himself had to say about the future of the island came in October from an unexpected place: cable TV, and more specifically, a financial news show on CNBC called Closing Bell. Ellison granted the host, Maria Bartiromo, a rare interview after wrapping up Oracle OpenWorld, his company’s annual technology conference in San Francisco. Mostly they talked about the conference proceedings, but after two commercial breaks Bartiromo asked this round-about question: “You must be a lot of fun to go shopping with. And the island of Lanai. I mean, that was such a—you love Hawaii or what was that?”

Ellison replied that he did love Hawaii, and that Lanai was an “interesting” project. “What we are going to do is turn Lanai into a model for sustainable enterprise,” he said. “I own the water utility, I own the electric utility, and the electric utility is going to be solar photovoltaic and solar thermal, where it can convert seawater into fresh water. And then we have drip irrigation, where we are going to have organic farms all over the island. Hopefully, we are going to export produce, really the best, organic produce, to Japan and elsewhere.”

He added that he’s going to help local people start businesses, and there will be electric cars, and that the island will become “a little, if you will, laboratory for sustainability in business of small scale.”

So there it was. The world finally had a concrete vision statement about Ellison’s designs for Lanai, and it was surprising, exciting and completely in tune with the zeitgeist of the age. It was also, technically, incorrect.

Strictly speaking, Ellison doesn’t own the entire island of Lanai—just 98 percent of it. Thanks to a hard-fought union battle in the 1950s, most of the homes in Lanai City are on fee-simple land, rather than leasehold land. While Ellison owns about a third of the island’s housing, the majority of homes belong to property owners of far more modest means. The state of Hawaii and Maui County own the rest of the non-Ellisonian parts of Lanai, including the airport, the two harbors, the three main roads and the single school, which serves elementary through high school students.

Ellison owns three of the four regulated utilities: the water company, the wastewater treatment company and the public transportation system, which consists of the shuttles that run between the two resort hotels. The electric utility is in the hands of Maui Electric Co. Ellison does own a solar farm that sells some power to the electric company, but despite what he told Bartiromo, that’s the one utility he doesn’t own.

Lanaians shrugged off the misstatement. “If he thinks he owns the electric company, he probably will someday,” said John Ornellas, a local tour guide.

The momentum built steadily in 2013. Ellison met with Maui Mayor Alan Arakawa, and talked about the kind of produce a sustainable laboratory might export to the world. “It turns out Larry Ellison is a big fan of mangoes,” Arakawa said at a press conference the following day. Ellison met Gov. Neil Abercrombie, who later gushed to The Wall Street Journal, “I would say he is the best thing that’s happened to the island in 50 years.”

Ellison bought Island Air, Lanai’s single-propeller air carrier, added larger planes to the fleet and expanded interisland service. He announced plans to build a second, longer runway at Lanai Airport so larger planes could land there and, he later revealed, carry Lanai-grown flowers and produce directly to Asia and North America. At press time, he was closing in on a deal to buy a second local airline, go!

Meanwhile, Matusumoto and his team of Lanai Resorts vice presidents has continued meeting with the community, rolling out details of Ellison’s development plans and soliciting feedback. The plans now include expanding Lanai City by 470 acres; building up to 1,775 new houses and apartments both in Lanai City and on others parts of the island; developing a university campus for sustainability research; setting aside 200 acres for light and heavy industrial development; expanding the solar farm; building a world-class tennis academy; building up to 100 posh grass hales and 50 rural estates at Kahalepalaoa, the site of the proposed third resort.

One thing Lanai Resorts is not discussing is Murdock’s proposed wind farm, which he retained the rights to develop when he sold the island. Ellison has not taken a position on the project one way or the other. Since the terms of the sale were confidential, it’s unknown whether there’s a drop-dead date by which Murdock must get the permits and financing needed to to proceed with the project.

Lanai Resorts declined to speak to HONOLULU Magazine about Ellison’s plans for the island. “We prefer to let the community speak for itself,” is all a company spokesperson would say.

Fortunately for us, Ellison keeps issuing parsable tidbits of what he has in mind for the island. In the latest addition to the growing body of Ellisonian literature, The Billionaire and the Mechanic, an account of Ellison’s quest to win the America’s Cup, he mentions building “a winery or two” on Lanai. He says he wants to transform the island into “a Pacific Eden—a garden paradise for the people who live and work there, and for the people who visit.”

He also adds, “And gee, wouldn’t Lanai be a great place for a sailboat race?”

URL to article:  https://www.wind-watch.org/news/2013/09/13/an-inside-look-at-larry-ellisons-lanai/