foreclosure auction

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

foreclosure auction

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

foreclosure auction

Unity House Bids 8.5 Million for the Lotus Hotel in Waikiki

Unity House Inc. emerged as the highest bidder yesterday afternoon at a foreclosure auction for the Lotus at Diamond Head in Waikiki.

The nonprofit, which serves labor workers, offered $8.5 million for the 51-room boutique hotel formerly known as the W Honolulu at the auction outside state Circuit Court.

The bid is still subject to court confirmation, although a 10 percent deposit was required.

State-appointed Commissioner Richard Emery confirmed that he received a cashier’s check from Unity House. During the auction, he said he had a list of five potential bidders.

“Traditionally, in this type of situation, you may get a bid at auction, but other people are watching,” Emery said. “They have another bite at the apple at the confirmation hearing.”

At the hearing, to be scheduled in about 30 days, other buyers can reopen bidding with an offer 5 percent higher than Unity’s.

Castle Hotels & Resorts continues to manage the property at 2885 Kalakaua Ave. on Waikiki’s Gold Coast.

The Diamond Head Grill and bar at the Lotus, however, was closed down as of yesterday, Emery said, because it was not making money.

Unity House Chairman James Boersema, who put in the bid, said it would be an investment for the 58-year-old nonprofit, which owns several other properties on Oahu.

First Hawaiian Bank, which holds the first mortgage on the property, put in an initial bid of $5.7 million. Unity House upped it to $5.8 million.

Then Central Pacific Bank, which holds the second mortgage on the property, offered $8.1 million, and Unity House swooped in with $8.5 million.

The Lotus went into foreclosure last year under the ownership of Big Island developer Brian Anderson’s company, Anekona W LLC.

Anderson filed for Chapter 11 bankruptcy in May, just 15 days before a scheduled foreclosure auction. But U.S. Bankruptcy Judge Robert Faris dismissed the case last month and, in a hearing yesterday morning, allowed the auction to proceed despite a motion for reconsideration.

Faris almost granted Anekona one more week to put together a potential deal, based on Anderson’s claim that there was a buyer for his two notes. But Faris decided the buyer still could come forward in the foreclosure auction process.

Anderson said in court documents he had a February appraisal from CB Richard Ellis that gave the Lotus a market value of $16 million, and an agreement with Colliers Monroe Friedlander to list the property for $14 million.

He also said the Lotus would have greater value as a condotel, and had a letter of intent with Wilson Homecare to develop the hotel into a senior living residence.

In mid-August, Emery informed Anderson that his year-to-date losses at the Lotus through June 30 were at $529,996.03 and that he owed $207,711 in past due lease rents and property taxes.

Source: SB