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The Honolulu Advertiser
Posted on: Monday, December 22, 2003

Parker Ranch CEO finds advantages in Hawai'i's weather

Interviewed by David Butts
Advertiser Staff Writer

David Houle

Age: 56

Title: President and CEO

Organization: Parker Ranch Inc. The private company runs a 175,000-acre cattle ranch on the Big Island. In addition to cattle, it has commercial leasing, tourist and other real-estate operations. The net income of Parker Ranch Inc. goes to the Parker Ranch Foundation Trust that supports four beneficiaries: the North Hawai'i Community Hospital, Hawai'i Preparatory Academy, Parker School Trust Corp. and the Hawai'i Community Foundation's Richard Smart Fund.

High school: Notre Dame, Harper Woods, Mich.

College: Michigan State University

Breakthrough job: Becoming treasurer at Bank of Hawaii in December 1992.

Little known fact: Houle plays fantasy camp baseball with the Detroit Tigers in Florida. At fantasy camp, retired players coach amateurs. Houle's shining moment was getting a hit off Mickey Lolich, the former Tigers pitcher who led them to a World Series crown in 1968.

Major challenge: "Transforming the ranch from the vestiges of being the solely owned property of Richard Smart (who died in 1992) into a modern corporate business."

• • •

Q. Isn't it an anachronism to be ranching in Hawai'i?

A. It's a challenge to produce beef on an island in the middle of the Pacific Ocean. The advantages are the ability to feed grass to our cattle year round because of weather. A rancher in Montana runs out of growing grass to feed cattle four months out of the year and has to buy feed. Another (advantage) is attrition. From a national standpoint, cattle ranchers tend to lose to death something like 2 percent of their cows per year. Parker Ranch attrition is half of the national average.

The disadvantage is the cost of transport. You've got to ship them an extra 2,500 miles.

Q. Why are you shipping cattle out while Safeway and others are shipping beef in?

A. It's a function of consumer taste and efficiencies. We produce cattle that eat grass. There is a growing element of the market that has a preference for grass-fat beef. (It) has a reputation for being healthier but also tasting different. Most of the beef that is imported into the state for consumers' tables tends to be the grain-fed variety. And it costs less to ship packaged beef product here than it does to ship grain here to feed cattle on very expensive Hawai'i land.

Q. Do you foresee a day when you will no longer be in the cattle business?

A. The history of Parker Ranch ... and the Richard Smart legacy will keep us in ranching as far out as I can see.

Q. Wouldn't a bean counter on Wall Street say you could be more profitable converting it all to residential or commercial use?

A. I'll give you a less than direct answer: Ranching is faced by some pretty significant economic challenges.

Q. Do you hear often from the community that they want the ranch to be protected?

A. There is very deep appreciation for the paniolo heritage in this community. Yes, we have that sense of responsibility of helping to preserve that. It reflects Richard Smart's will and a set of trustees who understand they have an obligation to produce economic returns for our named beneficiaries and social returns for the community and for the beneficiaries. Yes, it's different than a Harvard Business School approach.

Q. A Stryker brigade combat team has been approved for Hawai'i. Will Parker Ranch sell the 23,000 acres adjoining Pohakuloa Training Area that the Army wants to use as a maneuver area for the Stryker brigade?

A. We know that the Army has expressed an interest and commissioned an EIS (environmental impact statement) study. We are awaiting the outcome to the EIS study and issues raised by the community. We have not entered into negotiations with them.

Q. Does it fit your strategic plan to sell the land?

A. Our strategic plan calls for a rebalancing of the assets owned by Parker Ranch Foundation Trust, reducing the number of assets represented by land and increasing the number of assets represented by financial portfolio.

Q. So it would fit?

A. That's right.

Q. What is your opinion of the court decision on the Hokuli'a development, where builders were ordered to halt construction until the agricultural land can be reclassified? Do you think it reflects a community desire to keep some land out of development?

A. I think Hokuli'a points out the need to take the community's views into consideration. And that's our position with respect to wanting to ensure the community's views are properly considered with things like the prospective acquisition of land by the military.

Enough time needs to be invested in understanding the issues of the community, the issue of families, on the Big Island, trying to keep those issues balanced with development potential.

Q. You took over the ranch in March 2002 and have said you intend to slowly convert land use to create a fund of $50 million to $100 million over the next five years. What progress have you made?

A. In 2003, we've sold about $12.5 million worth of land, which matches what we planned for 2003. (It represents) under 1,000 acres out of 175,000. A very small amount relative to the number of acres controlled by the ranch.

Q. Is that a typical value for your land?

A. Some land is very dry and tends to have little in way of alternate use; others have beautiful views of the ocean, are very green and have access to water. So there is a large disparity between land values.

Q. What is the best use of your 175,000 acres?

A. From the standpoint of the ranching business, our objective is to keep the cattle ranching operation productive and efficient. Ranching across the United States is a commodity business. To be successful, somebody competing in a commodity business needs to be a low-cost, high-quality producer and that's our objective for Parker Ranch Inc.

Q. How much of your land is devoted to ranching?

A. Out of the 175,000 acres, in the neighborhood of 99 percent is represented by the ranching operation. In dollar value, out of a $350 million asset base, I estimate that about $300 million to $315 million worth of those assets would be represented by the ranching operation in the form of land owned.

No more than 5,000 acres are devoted to non-cattle ranching and, out of that, 4,400 acres is devoted to raising trees.