debt

General Growth rejects Simon’s $10B offer

General Growth Properties Inc., owner of Honolulu’s Ala Moana Center, has rejected a $10 billion offer to sell to rival Simon Property Group.

But the nation’s second-largest mall owner did not reject outright Simon’s overtures and indicated it would consider being acquired as part of its efforts to emerge from Chapter 11 bankruptcy protection. Indianapolis-based Simon is the nation’s largest mall owner.

General Growth CEO Adam Metz, in a letter to rival Simon CEO David Simon, said the company remains committed to restructuring its debt but will not allow Simon to derail that process.

Metz said Simon’s offer “is not sufficient to preempt the process we are undertaking to explore all avenues to emerge from Chapter 11 and maximize value for all the company’s stakeholders.”

Chicago-based General Growth made the letter public in a press release issued Tuesday evening in response to Simon’s decision to publicize its acquisition offer. General Growth filed for bankruptcy protection in April 2009.

Simon, which owns the Waikele Premium Outlets on Oahu, said Tuesday it has offered to acquire General Growth for $10 billion, including $9 billion in cash. The offer would give General Growth creditors $7 billion in consideration.

Shareholders would get more than $9 a share, including $6 a share in cash.

General Growth owns or manages more than 200 regional shopping malls in 43 states, including Ala Moana Center, Ward Centre, Ward Entertainment Center and Ward Gateway Village in Honolulu and Prince Kuhio Plaza in Hilo. The company also manages Windward Mall on Oahu; King’s Shops at Waikoloa Beach Resort and Queens’ Marketplace on the Big Island; and Whaler’s Village and Queen Kaahumanu Center on Maui.

Source: PBN

debt

Unfinished Hawaii condo tower up for auction

Moana Vista, a half-completed high-rise condominium tower in Kakaako, is scheduled to go on the auction block in two weeks after the general contractor foreclosed on the developer for not paying a $29.5 million construction tab.

Owner Fred Chan lost $65 million of his own money on the $140 million Kapiolani Boulevard project, which rose from the ground just in time to miss the last real estate boom.

The developer, Chan’s KC Rainbow II, is canceling some 175 sales reservations. The prospective buyers, who had put 10 percent down to reserve units ranging in price from $350,000 to $600,000, will start receiving refunds this week, said Allen Leong, director of operations for KC Rainbow Development.

Leong acknowledged that Chan is walking away from Moana Vista.

“We hope that somebody will pick it up and finish the project,” he said.

KC Rainbow II was sued by its general contractor, Hawaiian Dredging and Construction Co., first in a mechanic’s lien filed in December and then in April for foreclosure.

The foreclosure was granted on Aug. 12, and Sanford Murata was named commissioner.

Murata has advertised the Sept. 25 auction for three weeks and walk-throughs of the property were scheduled for Wednesday and again on Sept. 16.

The sale of the glass-walled tower will begin at noon Sept. 25 on the steps of the 1st Circuit Court building. There is no upset price, Murata said.

“It’s hard to determine what the price would be,” Murata said. “We don’t know what a buyer would do with the property — unless you know what that buyer’s plans are it’s difficult to guess what the value or offering price might be.”

The project is also on the market, although without a price. It could possibly sell before Sept. 25, precluding the auction. Unidentified developers from San Diego had been interested in purchasing the project but were reportedly unable to make a deal with Chan.

Construction stopped last Dec. 19 at the 27th floor of the building, barely three months after the world financial crisis erupted and most commercial financing evaporated. The building is designed to have 46 floors and 492 two-bedroom units.

The lender for the construction loan, HSBC Bank of New York, decided not to fund the loan and KC Rainbow II tried unsuccessfully to find new financing or a partner or to sell the project to another developer.

“We’ve been very hopeful for a long period of time that the project could restart and we’re hopeful at this point that (the auction) could lead to that,” said Hawaiian Dredging President Bill Wilson.

Chan was also the developer for the Moana Pacific condominium a few blocks down Kapiolani Boulevard. That project had people standing in line to buy units in the twin oval towers back in 2004, when Honolulu’s last high-rise boom was in full force.

But Moana Vista, which is located between Ward Avenue and Kamakee Street, didn’t start sales until late 2006, when the market was starting to cool and several neighboring condo towers were finished or close to completion. Unlike some of the other residential towers built recently, which attracted buyers from Asia and the Mainland, most of the buyers who reserved units at Moana Vista were local, Leong said.

Chan and his wife, Annie, also put the former Kaiser Estate in Portlock on the market for $80 million on Dec. 9, 10 days before Hawaiian Dredging pulled the plug on Moana Vista. The couple,  University of Hawaii graduates who made their high-tech fortune in the San Francisco Bay Area, bought the one-time home of industrialist Henry Kaiser on Portlock Road for $9.6 million nine years ago from Kamehameha Schools.

The listing, which is being marketed by Mary Worrall Associates Sotheby’s International Realty, was still active this week.

Hawaiian Dredging’s claim was not the only claim against KC Rainbow II, but it was the largest.

Subcontractors have claimed in other mechanic’s liens that they are owed nearly $800,000. Architects Hawaii Ltd., which also designed Moana Pacific, filed an application for a mechanic’s lien on Feb. 12, claiming the firm was owed $683,876 in fees plus interest.

The structural engineering firm Lincolne Scott also filed a mechanic’s lien and says it is owed $69,126 in unpaid bills.

Keko Investments claimed in its filing that it was owed $9,844 plus interest and fees. And Kalu Glass Co. Inc. filed an application for a mechanic’s lien on Aug. 19, but the amount owed was not available.

Source: PBN

debt

Developer owes money to Hawaii hotel’s high bidder

The connection between Unity House and developer Brian Anderson goes deeper than its high bid this week of $8.5 million at a foreclosure auction for The Lotus at Diamond Head hotel.

Anderson owes the nonprofit organization several million dollars from a 5-year-old loan, and Unity House was in talks earlier this year to buy the former W Honolulu hotel from Anderson as a means to settle the debt.

“We initially got onto this because Brian owed us money,” said Unity House Chairman Jim Boersema. “We considered a number of options and one of them was the W hotel.”

The money owed is more than $4.5 million, according to documents from a lawsuit Unity House filed in June 2008 that is still pending in 1st Circuit Court.

Unity House was unable to work out a final agreement between Anderson and First Hawaiian Bank and Central Pacific Bank, which held mortgages on the property totaling more than $10 million.

After the first foreclosure auction, scheduled for June, was delayed, Unity House took another look at attempting to acquire the hotel.

“We basically decided a few weeks ago,” Boersema said. “We’ve liked the property; we think in the long run it’s going to be a good investment.”

Anderson’s company, Anekona W, purchased the hotel, which sits on leased and fee-simple land on Kalakaua Avenue’s Gold Coast, from Colony CSR Investors LP on Aug. 17, 2004, nearly five years to the day before Tuesday’s auction.

First Hawaiian Bank filed for foreclosure on the property in October, saying it was owed more than $4.9 million in principal, fees and interest from a $5 million loan. Central Pacific Bank also is owed about $5 million on a second mortgage. The sale to Unity House must be confirmed at a hearing in about 30 days, at which time other parties could still outbid the nonprofit.

The hotel was worth between $10.2 million, according to an appraisal ordered by Central Pacific Bank, and $16 million, the figure in an appraisal ordered by Unity House, which assumed the conversion of the 51 rooms into condominium hotel units.

Unity House had loaned Anderson $2.5 million in 2004, with an interest rate of 30 percent, due in March 2006, according to court documents.

In March 2008, the two sides had reached a settlement agreement, but the lawsuit said that Anderson, identified in the original complaint as John Doe, and his wife, Joan, had “failed and refused to pay the principal and all the accumulated interest” to Unity House.

In November 2008, the two sides reached a settlement compromise in which Anderson would turn over six condominium units on the 25th floor of the Ilikai by March 31 in lieu of paying back the loan. If the condos were not conveyed by that date, then Unity House would seek a judgement against the Andersons for $4.5 million plus 10 percent interest, according to court documents.

But the Ilikai itself was in foreclosure, and in May, New York lender iStar Financial took back the 203 residential units and the 16 commercial units after bidding $51 million at a confirmation hearing for the foreclosure auction. Anderson also lost the Kauai Beach Resort to iStar Financial through foreclosure a couple of weeks later.

Unity House did not receive title to the Ilikai units, and in June, the Andersons were named in the lawsuit, replacing the unnamed John Does.

Last week, the Andersons were named in an unrelated lawsuit filed by Pacific Rim Bank alleging they, one of their sons and a company called Lanihau Properties LLC owe nearly $1.6 million in principal, interest and fees from a $2 million line of credit opened on Aug. 25, 2006.

Anderson said Tuesday he had not seen the lawsuit and could not comment on it. He did not immediately return a call Wednesday seeking comment on the Unity House bid and lawsuit.

Anderson’s company, Anekona W, filed for Chapter 11 bankruptcy in June in an effort to prevent the Waikiki hotel from being sold at a foreclosure auction that same month. In July, he retained a broker to market the property for $14 million, but the Chapter 11 case was dismissed a week and a half later after the U.S. Trustee argued that the two mortgages on the property would leave little for other creditors.

Earlier this month, Anderson hired a new bankruptcy attorney and, less than two hours before the auction’s scheduled time on Tuesday, attempted to have the Chapter 11 case reinstated and the auction halted, claiming there was a buyer interested in purchasing the notes from the two banks

After a brief deliberation, U.S. Bankruptcy Judge Robert Faris declined to grant Anderson’s motions, saying that the time between the foreclosure auction and the confirmation hearing would give an interested buyer plenty of time to step in and purchase the hotel.

Unity House, which was founded in 1951 by Arthur Rutledge, has approximately 10,000 beneficiaries, mostly members and retirees of the UNITE H.E.R.E. Local 5 hotel and restaurant workers union and the Hawaii Teamsters, Local 996.

The Lotus at Diamond Head, which is managed by Castle Resorts & Hotels, is a non-union operation.

Boersema said the hotel likely would continue to be managed by Castle, but it’s unclear whether the hotel’s employees would become organized under Local 5 if Unity House prevails at the confirmation hearing.

“We have to actually obtain title to it and then look at all the various options for that property,” he said.

Source: PBN

debt

Bay View Golf Park Facing Foreclosure

Central Pacific Bank is pursuing foreclosure against a local partnership that bought Bay View Golf Park three years ago, though the owners of the Kane’ohe golf course hope they can resolve the loan default and retain the property.

The financial trouble has hurt plans by owner KBay LLC to redevelop half of the 18-hole course with a mix of 300 affordable and market-priced homes, a bowling alley, batting range, lodge and community center. But the golf course, driving range, restaurant and miniature golf facilities remain open.

Greg Hong, one of KBay’s principals, said he couldn’t comment about the mortgage troubles or development plan because the owners are trying to work with Central Pacific to avoid foreclosure.

The bank filed its foreclosure suit last month against KBay and its principals Hong, Michael Nekoba and Thomas Enomoto.

According to the suit, KBay borrowed nearly $6.9 million in March 2006 that helped the group buy the property for $11 million. The loan, Central Pacific said, matured on March 15 and wasn’t paid off by KBay, which owes nearly $7.1 million, including unpaid interest.

The suit is part of a wave of foreclosure cases imperiling commercial property owners who couldn’t refinance their debt in the past year or so because of the financial crisis constraining global credit markets.

KBay’s purchase came near the height of Hawai’i's last real estate investment boom, and three years after another hui of local investors — The Shidler Group, J.D. Watumull and Joe Leoni — bought the distressed golf course for $3.4 million and restarted play there after paying a $1 million property tax delinquency.

KBay’s plan was to spruce up facilities and increase kama’aina play. But the initiative faltered as a series of upgrades, including opening a new restaurant, failed to reverse financial losses and resulted in temporary closures and layoffs.

In a move to salvage the investment, KBay late last year unveiled a proposal to redevelop nine holes for other uses.

The plan, which the developer said had some community support but drew none at a November Kane’ohe Neighborhood Board meeting, involved developing 150 affordable multi-family rental homes for seniors earning between 80 percent and 140 percent of O’ahu’s median income, and 149 market-priced homes.

Though Bay View land is primarily zoned for preservation, the developer sought to use a state law that allows exceptions to zoning controls for housing projects where at least half the units are affordable to moderate-income buyers.

Other parts of the development plan include a 40-lane bowling alley replacing Bay View’s miniature golf course, a multipurpose senior community center, walking trails and a 60-unit lodge for sports teams. Part of Bay View’s two-story driving range was slated for conversion to a baseball batting range.

A wedding chapel and pet mausoleum also were elements in the draft plan that KBay said was subject to change based on public input.

KBay previously said one major benefit to developing half the golf course would be creating a safe public access to an adjacent city sewage treatment plant being taken out of use, allowing the city to convert the property to a dog park or other recreational use.

Another benefit would be expanded access to Waikalua Loko Fishpond, which KBay owns and seeks to sell to the nonprofit Waikalua Loko Fishpond Preservation Society that manages the pond.

KBay had planned to publish an environmental impact statement to address traffic issues, water use, storm water runoff and flooding, but the mortgage troubles have hung up the project.

Source: HNA

debt

General Growth reports $1.2B in overdue debt

General Growth Properties Inc., the owner of major retail destinations in Hawaii and the nation, had a grim showing last year.

The Chicago-based owner and manager of more than 200 malls and other developments reported about $1.18 billion in past-due debt and about $4.09 billion of debt that could be accelerated. Its lenders, however, haven’t taken action yet on that debt.

General Growth owns Ala Moana Center and Ward Centers in Honolulu.

General Growth (NYSE: GGP) also has $1.44 billion of consolidated mortgage debt and about $595 million of unsecured bonds that will mature this year that it needs to repay, refinance or extend. But “the refinancing market remains at a standstill,” the company noted in a news release.

General Growth said it is “considering all strategic alternatives” and is still talking with its lenders.

“In the event that we are unable to extend or refinance our near and intermediate term loan maturities, we may be required to seek legal protection from our creditors,” General Growth said.

The company is trying to cut costs. It has “suspended our cash dividend, halted or slowed nearly all of our development and redevelopment projects, systematically engaged in certain cost reduction or efficiency programs, reduced our workforce by over 20 percent and sold certain non-mall assets,” the release said.

As for results from retail operations, General Growth reported:

* Comparable tenant sales decreased 3.8 percent in 2008 compared to the previous year.
* Sales per square foot decreased 4.2 percent compared to 2007.
* Occupancy decreased to 92.5 percent as of Dec. 31, 2008, compared to 93.8 percent a year earlier.

General Growth’s funds from operations were $222.2 million in the fourth quarter of 2008, compared to $190.4 million in the same period a year earlier, an increase of approximately $31.8 million.

The results don’t look as good excluding funds from real estate, income from the master planned communities and benefit from income taxes. With those excluded, General Growth posted $231 million for the quarter, down from $271.2 million. Cost reductions in marketing, supplies, personnel and the like did not offset its decline in revenue, the company said.

Source: PBN

debt

General Growth gets another loan extension

General Growth Properties, a Chicago-based real estate trust that owns Ala Moana Center and Ward Centers, has received an extension on some of its debt through March 15.

The company (NYSE: GGP) made the debt agreements with its lender syndicates for both the 2006 senior credit agreement and its secured portfolio facility, whose forbearance agreements expired Monday.

It agreed to certain additional restrictions and covenants, which the company did not identify, while the lenders agreed that other company defaults would not cause a termination of the new forbearance agreements before their expiration.

In mid-November, General Growth warned that it might seek bankruptcy protection if it couldn’t restructure of refinance its heavy debt load.

On Dec. 10, Fitch Ratings downgraded the company and warned that a default on nearly $900 million in debt was likely. Two days later, General Growth said it had borrowed $896 million, which it used to retire a $58 million bond issued by the Rouse Co., as well as refinance $814 million of mortgage indebtedness that was originally scheduled to mature in 2009. The new mortgages mature in 2013 and 2015.

The new agreements give General Growth a bit of breathing room to reschedule or refinance its heavy debt load. The company owns or manages about 200 malls in 44 states.

Source: PBN