hospitality

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.”

hospitality

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

hospitality

Moody’s: Honolulu commercial real estate market 4th in nation

Honolulu’s commercial real estate market is among the top five in the nation, according to a new report.

The area’s commercial real estate market ranked fourth among major metropolitan areas in the country in the fourth quarter of last year, according to a recent report from credit rating agency Moody’s Investors Service.

The report, which focused on the office, apartment and hospitality markets, gave Honolulu an overall average score of 72 out of 100 based on vacancy rates and other factors.

Pittsburgh ranked first in the report, scoring a 77 out of 100. Oklahoma City, 74, San Francisco, 74, Honolulu, 72, and Los Angeles, 68, rounded out the top five markets.

Riverside, Calif., 36, Jacksonville, 33, Trenton, N.J., 33, Detroit, 26, and Phoenix, 24, were the lowest scoring markets.

Source: PBN