A successor to former sugar and real-estate company Amfac Hawai'i has received approval to sell million-dollar house lots within its working coffee plantation on Maui.

Ka'anapali Development Corp. subsidiary PM Land Co. LLC earlier this week began marketing coffee-farm house lots expected to appeal mostly to Maui residents interested in trading their valuable urban homes for a more rural lifestyle.

The project represents a unique niche in the state's booming luxury home market — typically dominated by resort condominiums, ocean-front homes and posh high-rises — in that the lots provide one acre for a home and three to six acres of coffee trees leased to a farming contractor.

PM Land began marketing the lots on Wednesday and accepting reservations from prospective buyers who likely will be selected by lottery in early March.

Steve Lovelette, Ka'anapali Development executive vice president, said the developer received more than 50 inquiries yesterday morning for the first 13 lots priced from $1.2 million to $1.8 million in the planned 58-lot subdivision on 336 acres.

"We've had a good morning," he said. "We have gotten a very good response."

Lovelette said the 45-lot balance is expected to be released for sale throughout the year, and that PM Land seeks to expand the Ka'anapali Coffee Farms project with 48 more lots covering 250 acres of coffee for which the company is seeking county subdivision approval.

Using agriculture-zoned land for homes owned by nonfarmers has been a controversial but long-standing practice under poorly defined and enforced regulations of the state's 1961 Land Use Act.

In recent years, the controversy over "farm dwelling" subdivisions reached a zenith when opponents of the Big Island luxury homesite project Hokuli'a obtained a Circuit Court ruling in 2003 that deemed Hokuli'a an illegal use of agriculture land.

Hokuli'a was designed with a private golf course as its centerpiece but planned to grow about 200 acres of coffee as a qualified farm use equivalent to about 20 percent of house lot acreage.

The legal ruling, which halted development and sale of Hokuli'a lots, is on appeal to the state Supreme Court and is the subject of a bill in the Legislature that would allow Hokuli'a and other projects like it to proceed provided they are on agriculture land of the poorest farming quality.

Still, other criticisms of farm dwelling subdivisions persist on grounds that they drive up the price of farmland, making it prohibitively expensive for bona- fide farmers, and that developers don't pay traditional housing developer fees that help finance public facilities such as schools, parks and roads. And until recent county tax reforms, farm dwelling owners without agricultural operations sometimes paid lower property tax rates.

Lovelette said Ka'anapali Coffee Farms is an innovative way to ensure that unproductive agriculture land can be kept predominantly in farming, and to preserve about 25 farm jobs and coffee trees covering 80 percent of the property.

Amfac subsidiary Pioneer Mill Co. established four varieties of coffee — Red Catuai, Yellow Caturra, Typica and Moka — in 1991 on former sugar fields. The company, which lost millions of dollars on sugar, envisioned coffee as a diversified agriculture rebound, but found the 600-acre farm too small to compete with giant producers.

In the mid-'90s, the company tried to sell subdivided coffee farms to more entrepreneurial small farmers, but was unsuccessful in part because costs to extend roads and utilities to smaller farms were prohibitively expensive. "The market just wasn't there," Lovelette said.

Amfac ceased farming the coffee in 2001 and let the trees grow wild. The company filed for bankruptcy in 2002.

After emerging from bankruptcy later that year, Amfac successor Ka'anapali Land LLC sought to capitalize on the hot housing market by completing the subdivision, part of which received preliminary approval in the 1990s, and selling lots as residences promoted as the "new family farm."

Final subdivision approval to cut 336 acres into 58 lots was received at the end of last year, and PM Land received state approval of its marketing and sale documents last week.

Kimo Falconer, a former Pioneer Mill coffee executive, arranged to lease the coffee-tree parcels for 25 years with extension options, after restarting harvesting on part of the property in 2003.

Last year, Falconer's MauiGrown Coffee Inc. harvested 70,000 pounds of Ka'anapali Coffee Farms coffee, up from 40,000 pounds a year earlier.

"By bringing in the buyers, we are able to sustain the agriculture operations," Lovelette said.

Lot buyers are entitled to a small percentage of coffee-bean sales and receive $1,000 a year in lease rent for their coffee parcels, but will pay an estimated $1,100 a month in association fees that help maintain common areas and subsidize farm operations.

In future years, it is possible that farm income could grow to help reduce association fees, but Lovelette said that's difficult to forecast because of unknown future coffee prices, harvest yields, labor costs and other factors.

"It's made to be sustainable farm land forever," he said.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.