Hawai'i developer Alexander & Baldwin Inc. has become the majority investor in the Kukui'ula residential resort under construction on Kaua'i, taking over the position from its Arizona-based partner.

The move follows negotiations between A&B and Scottsdale, Ariz.-based DMB Associates Inc. after DMB informed A&B in February that it was evaluating its future ability to pay at least 60 percent of capital expenses as required under their joint venture.

In the amended Kukui'ula arrangement, A&B will contribute 57 percent of total capital invested through the next three years, or a projected $240 million of $421 million, with DMB contributing 43 percent, or $181 million.

To date, the partners have already invested $257 million of the $421 million, with A&B contributing 43 percent, or $111 million that includes the project's real estate valued at $28 million.

That means A&B has committed to spend another $129 million of the projected $164 million needed in the next three years to complete the project's primary recreational amenities and infrastructure for residential lots.

In the longer term, additional development costs are expected to be paid for with proceeds from residential lot sales and other revenue at the estimated $900 million project envisioned to take 10 to 15 years to build out.

DMB executive Richard Holtzman will continue as general manager of the project and president of the Kukui'ula Development Co. LLC joint venture.

As majority investor, A&B will receive preferred rates and priority on a greater share of any partnership profits.

"This investment allows for the completion of what we believe will truly be one of Hawai'i's outstanding resort communities, and will position us to capture rising buyer demand as the economy and real estate markets recover," Stan Kuriyama, A&B president, said in a statement.

Kukui'ula is designed to be a luxury community with 1,200 homes, an 18-hole golf course, a resort spa, 90,000-square-foot retail complex and a 31-unit boutique hotel.

Described as "Kaua'i's Living Garden," the project on 1,010 acres between Po'ipu and Lawa'i Valley on Kaua'i's southern shore also includes $85 million in landscaping, a 20-acre lake, trails, a 5-acre beach park, a 20-acre community park and an 8-acre farm staffed by a resident horticulturist.

Infrastructure construction began in 2006, and subdivision improvements have been completed for 123 residential lots. Construction of the Tom Weiskopf golf course, clubhouse and spa began last year, and is scheduled for completion at the end of 2010. The retail complex is slated for completion in late summer with tenants including Merriman's Cafe, Rustic by chef Jean-Marie Josselin, Tommy Bahama, Quiksilver, Maui Divers and others.

But lot sales, which began three years ago, have suffered from the downturns in real estate, financial markets and the economy that emerged last year.

Through the end of last year, 80 lots had been sold for an average of $1.4 million, or $112 million in all, according to A&B. Of the 80 sales, only 13 were made last year.

The results are dramatically weaker than previously anticipated by A&B, which in 2005 said prospective buyers had made more than 300 nonbinding reservations for lot purchases.

Previously, A&B and DMB expected lot sale proceeds would have been high enough by now to carry out project development.

Drew Brown, DMB chairman, in a statement said that the company is still extremely pleased by the progress made at Kukui'ula, and that A&B is a proven and capable partner.

"In these extraordinary times, we remain committed to our owners and the residents of Kaua'i to develop a project that proudly reflects this remarkable place," he said.

The present effort to develop Kukui'ula is the latest in a string of attempts since A&B, which owns about 22,000 acres on Kaua'i, first initiated a master plan for the site and began seeking approvals in 1985.

Originally, A&B design-ed Kukui'ula for 3,400 homes, a marina and golf course, but the economic downturn that unfolded after Hurricane Iniki in 1992 deferred development.

In 1998, A&B reshaped Kukui'ula with a mix of homes, and hotel and timeshare units, around a golf course, but only a few lots were developed and sold in what was then still a thawing real estate market.

Then, in 2002, A&B partnered with DMB, a privately held real estate development firm and one of the most active developers of master-planned communities in the western Mainland states.

A&B initially contributed the land to the partnership, and DMB was to provide financing. But in late 2004, A&B exercised an option to provide up to 40 percent of the project's future capital needs and increase its share of returns.

Under the new arrangement, A&B will receive priority distribution of returns between 15 percent and 25 percent on $79 million of the $129 million it has committed to invest over the next three years.

DMB stands to earn a return of 15 percent on $20 million of the $35 million it has committed to spend in the same period.

After the preferred returns, distribution of any returns on future investment is projected to be split 77 percent for A&B and 23 percent for DMB.