Farming is the process of growing crops or raising animals for milk, meat or other products.
Farms come in many shapes and sizes, but they all have one thing in common: passion.
Regardless of the size, farms are still business ventures that require planning, finance, licensing and permits. They also demand hard work, patience and knowledge of the market.
Future capital gains would be locked into local income levels as part of the plan.
Rick Coito’s number was among the last to be called at developer Peter Savio’s latest property lottery, one of hundreds of hopefuls vying for a chance to buy affordable agricultural land.
The 35-year-old had spotted two acres of the proposed Waialua development and envisioned native trees and fruit such as avocado and mango to sell to the community.
Orchard Plantation will be Savio’s fourth farming-focused development that aims to buy land owned by Dole and put it into the hands of locals.
But before Coito and other buyers can take ownership, Savio has to pull off an unconventional financing arrangement to purchase, survey and develop the blocks using a condominium model.
It’s a deal unlike any he’s done before.
“In most communities, you build houses for the people that live there and work there. In Hawaii, we built houses for what the retirees will pay, what mainland guys will pay, what Asian guys will pay,” Savio said. “We don’t build for the local guy, so the local guy gets left behind.”
Would-be buyers like Coito have to bring as much cash as possible with them, $130,000 per acre, if Savio is to secure all 155 acres.
Savio says he cannot afford the $9 million price tag outright.
Coito, a tattoo artist, is eager to farm and says he understands there could be some risk. He missed out on Savio’s Ohana Farm Parcels, a project completed last year.
Coito says having a home and plot on the Orchard Plantation would mean he could move out of his Mililani apartment and he would have something to leave his children.
“It’s hard just to keep your head above water. That’s the market,” Coito said.
And there’s a wrinkle in Savio’s plan.
The City and County of Honolulu won’t provide Tax Map Keys, property parcel identifiers, until the project is complete. Because of that, buyers are unable to access loans through the U.S. Department of Agriculture, which offers exceptionally low interest rates and can provide 100% financing.
Until those TMK numbers are generated, Savio says buyers will be given a 99-year license agreement so that they can work the land starting at a rate of $1.
The Orchard Planation’s design is based on a plantation camp model, which separates homes from farms, an attempt to keep “gentlemen farmers” out and local farmers in.
The farm land will accommodate conventional and organic plots and R2-rated water will be available to farmers from the ditch system, limiting what crops they can produce for market. It will take organic operations another three years until the products can be certified USDA Organic.
Because of the water restrictions though, the land is slightly cheaper, according to Savio.
‘No Rhyme Or Reason’
At an information briefing held in early February, Savio told hopeful buyers that some people who had lost out on previous projects would get first choice on these new land parcels.
The same may occur at the Orchard Plantation, because the deal’s success relies on the final offer he can take to Dole, he says.
Savio is not opposed to people taking loans; it was a matter of finding lenders willing to finance without TMK numbers.
If the City and County of Honolulu was willing to be more flexible on the TMK numbers, lending for agricultural developments like these would become more favorable to farmers, Savio says.
“It’s just one of those stupid little things we’ve always done. No rhyme or reason for it,” Savio said in an interview. “Nobody’s ever asked to change it. I do not believe it’s written in the law. It’s just some process.”
Mario Siu-Li, a planner with the City and County of Honolulu, says TMK numbers are issued at the end of the process because developments are subject to several steps of planning and permitting that may change the scope of a project.
Savio says all that is needed is for a tranche of TMK numbers to be reserved, so buyers can have a number to use when applying for loans or funding.
But changing the rules seems unlikely, according to Siu-Li.
“I don’t think the county would make any commitment,” Siu-Li said. “That implies commitment of resources from our side and we don’t want to create false expectations.”
Nevertheless, Savio says he has a meeting with officials in the coming weeks where he hopes to get support to change this process.
Savio says he hopes the Orchard Plantation will establish its own cooperative under its condominium designation.
It will then be able to make its own rules, which Savio hopes will include affixing a limit on capital gains: Future selling prices would be locked into local incomes, rather than driven by the property market.
Last year, a University of Hawaii Economic Research Organization study detailed how Hawaii’s overregulation of housing projects was stymying its efforts to address the issue.
But UHERO associate professor Justin Tyndall, who was part of the study team, says the Oahu market responds to local supply and demand and the impact of foreign or mainland interests can be overstated.
And fixing future capital gain to average income levels might not be the greatest idea either.
“A big reason we want to get local people to buy land is so they can accrue equity in that land,” Tyndall said in an interview.
But Tyndall said it all comes down to the counties and the way zoning is managed.
“If we’re able to change regulations to provide this type of housing, it might be a good option for people,” Tyndall said. “The real magic is the ability to build housing on agricultural land, which is something we typically don’t allow.”
Getting Locals On Board
The North Shore Neighborhood Board has been in talks about the development with Savio, who has actively engaged them, according to board member Racquel Achiu.
And while Achiu remains cautiously optimistic about Savio, the cash issue is hard to overcome.
“Local people don’t have a couple hundred grand hiding under their mattress,” Achiu said. “I think the project is a great idea. I just wish it was a little more secure for those putting down the money.”
“Hawaii Grown” is funded in part by grants from the Stupski Foundation, Ulupono Fund at the Hawaii Community Foundation and the Frost Family Foundation.
Sign up for our FREE morning newsletter and face each day more informed.