foreclosure

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

Maui Prince Hotel closing

Prince Resorts Hawaii said Monday it plans to terminate its management contract and close the Maui Prince Hotel and the Makena North golf course next month.

The resort’s 380 full- and part-time employees were notified Monday that the Makena Resort hotel and golf course would close on Sept. 16, according to a statement from Prince Resorts Hawaii.

Lenders, represented by trustee Wells Fargo, filed a foreclosure lawsuit on Aug. 24 against the hotel’s owners saying they had defaulted on a mortgage of $192.5 million.

Maui developer Everett Dowling and Morgan Stanley had purchased the hotel and the 1,800-acre Makena Resort two years ago for $575 million from the financially troubled Seibu Group of Japan. Dowling did not immediately return a call from PBN seeking comment.

The lenders were “unable to meet the funding terms and conditions” the hotel operator required to keep the 310-room hotel and golf course open, Prince Resorts Hawaii President Donn Takahashi said in a prepared statement.

The hotel operator, Maui Prince Hotel LLC, has been in discussions with the lenders to fund the hotel’s payroll and accounts payable, which previously were the responsibility of the owners, he said.

“Maui Prince Hotel LLC cannot continue to operate the hotel without adequate assurance that funds will be made available to pay for payroll and operating expenses for the hotel and golf course,” Takahashi said. “As of our deadline, Friday, Aug. 28, we did not receive funding from the owner or the lenders to pay for past-due account payables, and as of our deadline today, Aug. 31, we had not received a favorable indication from the owner or the lenders that they are willing to guarantee the required funding going forward.”

Wells Fargo is taking immediate steps to keep the hotel open, the lender’s attorney said.

“Tomorrow, we will ask the 2nd Circuit Court on Maui to appoint a receiver to take over operation of the resort,” attorney Barry Sullivan said in a statement. “If approved, the receiver and its team will transition to a new management company to be approved to operate the Maui Prince Hotel and Makena Resort. We look forward to a smooth transfer with Prince Hotels.”

Prince Resorts Hawaii told employees that they would received up to 60 days’ severance under state law. The state Department of Labor and Industrial Relations said it was working with Maui Prince management and with the International Longshore and Warehouse Union on assisting the displaced workers.

Many of the employees have been with the hotel for more than five years, and some have been there since it first opened in 1986, Takahashi said.

“This is a heartbreaking scenario,” he said. “The Maui Prince Hotel is a well-run operation with a great heritage, excellent potential, and wonderful employees that has fallen prey to the economic downturn.”

foreclosure

Lenders foreclose on Makena Hotel

A foreclosure complaint was filed this week against Makena Hotel LLC, the owner of the Maui Prince Hotel, but resort operators yesterday told employees and guests they plan to continue normal operations.

“We were informed by the lenders this afternoon that a foreclosure complaint was filed against Makena Hotel LLC, the owner of the Maui Prince Hotel, yesterday morning,” said Donn Takahashi, president, Prince Resorts Hawaii. Prince Resorts operates the Maui Prince Hotel and the Makena North golf course.

Many Hawai’i hotels have been suffering financially as a result of more than a year of declines in visitor arrivals.

Takahashi said the legal action in Maui courts is the beginning of a lengthy process to restructure and reorganize the ownership of the Resort, which Makena Hotel LLC acquired in 2007.

“Our primary concern is our employees and our guests,” Takahashi said. “We plan to have immediate discussions with the lenders to understand their plans for the resort moving forward.”

He said the company has about 380 employees, including full-time, part-time, and casual workers.

Takahashi added, “the foreclosure action is a legal process that we have no control over and we are hopeful that it will not interfere with how we are currently operating the hotel and golf course.”

He said the resort will continue to accept reservations “until the owner or the lenders advise us otherwise.”

In 2007, the Japan-based Seibu Group sold the Makena Resort and the upscale Maui Prince Hotel for $575 million to Honua LLC, an entity ultimately owned by Morgan Stanley Real Estate Fund and Dowling Company Inc. of Maui.

The 1,800-acre property includes the 310-room Prince, one 18-hole golf courses, another in development and 1,300 acres of undeveloped land.

In June 2007, title to the Maui Prince Hotel was conveyed to Makena Hotel LLC, as Honua LLC’s designee, which then retained Maui Prince Hotel LLC to manage the hotel through March 31, 2008, while the new owners were finalizing plans for the resort.

Source: HNA