Oracle’s Ellison wins tepid ‘Aloha’ on Lanai

Known as a litigious tech titan, Larry Ellison has garnered some favour by reopening the community pool on the Hawaiian island he bought.

  • Nov. 17, 2012 6:00 a.m.

Silicon Valley’s Larry Ellison’s purchase of the island of Lanai

Dan Nakaso

contributor

Known as a swashbuckling, litigious tech titan, Silicon Valley’s Larry Ellison has earned a kinder reputation on his recently purchased island of Lanai: He’s the man who reopened the community pool.

Through that modest act, Ellison has already won over some of the island’s 3,200 residents, who were used to living under the tighter purse strings of Lanai’s last owner, fellow billionaire David Murdock.

“Murdock was shutting the money off and cutting costs,” said Lanai resident Pat Reilly, 72, who spent 31 years as a counselor at Lanai High and Elementary School.

“With the sale, the faucet came back on.”

Still, five months after the Pineapple Island was sold to the Oracle co-founder, the people of Lanai have yet to hear directly from him. They are left to parse the tidbits from a single interview that Ellison gave last month, and are still guessing at what his reign might mean for their future on the 141-square mile island with no stoplights.

Ellison, one of the world’s richest men with a net worth estimated at $41 billion, signed an agreement in June to purchase 98 percent of the island from Murdock’s Castle & Cooke for an undisclosed price, although Castle & Cooke told Hawaii’s Public Utilities Commission in a filing that the deal was worth hundreds of millions of dollars.

The island has enjoyed a mini-construction boom since, thanks to Ellison’s upgrading of its two luxury resorts. As the state has seen record high tourism numbers, Lanai has benefited too, with unemployment dropping to 1.6 per cent in September, far below the 5.7 per cent rate for the entire state.

The former plantation island has long been dominated by landowners—first Dole Pineapple and then Castle & Cooke. When Murdock took over, he transformed Lanai’s rural island into a tourist-based economy, sparking resentment among some island inhabitants.

But Ellison won over many of Murdock’s critics in August when he reopened the island’s only community pool after it was inexplicably shuttered seven years ago.

On a much bigger scale, Ellison told CNBC in October that he wants to turn Lanai into a “little laboratory” for sustainable living.

Ellison told CNBC that he wants to use his control over Lanai’s utilities to convert seawater into fresh water; create drip irrigation systems for new organic farms designed to develop new export markets; and increase the number of electric cars on Lanai.

Ellison’s initiatives sound good to Ron McOmber, 74, who drives his own GEM electric vehicle with the customized license plate “LANAI” and fought Castle & Cooke construction and development plans for years as a founding member of the community group Lanaians for Sensible Growth.

Still, McOmber is cautious about whether Ellison’s words will become reality.

“Our hopes are that he will not be another David Murdock with the attitude, ‘I’m arrogant and rich and you’ll do everything my way. If you don’t like it, you’ll do it my way anyway,’ “ McOmber said. Ellison “hasn’t met anyone here and he hasn’t even given an interview in this state. What does that tell you? He needs to talk to us and meet the people that care about this place.”

McOmber’s suspicions about Ellison grew when Ellison’s Oracle Team USA yacht racing team filed plans with Hawaii’s Department of Transportation to use Lanai’s only commercial harbor, Kamalapau, as a winter base—without notifying residents.

The team told Hawaii officials in their filings that its San Francisco port is not ideal for research and training during winter months.

The team abandoned its plans in September, after Lanai residents objected.

“Mr. Ellison has invested a lot of money on Lanai but he needs to come down and be with us and talk with us people,” said Dolores M. Fabrao, who spent 20 years as director of nursing at Lanai Hospital. “Person to person matters in Hawaii and people want to talk to the boss every once in a while. Land is important in Hawaii. But the people who live on the land are more important.”

Murdock took control of Lanai in 1985 when he became chairman and CEO of the then-bankrupt Castle & Cooke, one of Hawaii’s original “Big Five” companies that ruled the islands during the reign of Hawaii’s pineapple and sugar plantations, which lasted from the late 1800s through the 1990s.

In 1990, Murdock opened the 102-room Lodge at Koele that sits among pine trees at an elevation of 1,600-feet above Lanai City. The following year, Murdock unveiled the 249-room Manele Bay Hotel along Lanai’s shoreline.

The “most affordable” rooms at the Lodge at Koele this month were advertised at $420 per night. “Prime” rooms with ocean views at Manele Bay were starting at $899 per night on weekends.

By 1993, Murdock had killed the last of Lanai’s pineapple operations and converted a workforce dominated by Filipino farm laborers into resort hospitality employees suddenly focused on servicing high-end visitors, not crops.

As the people of Lanai underwent huge economic and cultural shifts, Castle & Cooke’s financial troubles across Hawaii continued to grow and Murdock saw annual losses between $20 million and $30 million from 2006 to 2010.

Under Ellison, Lanai could have a second chance as both a model of environmental sustainability and a high-end resort destination for mainland and international visitors, said David Uchiyama, vice-president of tourism and marketing for the Hawaii Tourism Authority.

“What little contact I’ve had with Mr. Ellison’s group, they seem to be very sensitive to the host culture and to the community, which I think gets everything started on the right foot in regards to the relationship with the people of Lanai,” Uchiyama said. “That’s always a good step in the right direction. I’m expecting good things.”

Lanai

• Population: 3,200

• Size: 141 square miles

• Main industry: Tourism

• Nickname: “Pineapple Island”

• Number of schools: One—Lanai High & Elementary School. Enrolment: 536 students.

• Interesting facts: Lanai has no stoplights. Until recently, suspected criminals were detained in outdoor, caged holding facilities.

Dan Nakaso is a reporter with the San Jose Mercury News.

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