Thursday, October 23, 2014

BY BRENDAN SHRIANE | WEST HAWAII TODAY

Nearly 20 years after it was envisioned, the upscale Hokulia development is in limbo.

Just five years after undeveloped lots were regularly selling for more than $1 million, there's no construction at the high-end resort south of Keauhou.

The couple hundred lot owners of Hokulia are in a holding pattern, with property that has lost millions of dollars in value.

"Are we frustrated? Certainly," said Bill Allen, who has owned a lot at Hokulia since 2006. "The process has taken a long time."

There are numerous lawsuits involving the development -- including one that may be heard by the U.S. Supreme Court.

In January 2008, a U.K. bank foreclosed on the developer's $1 billion debt.

It's a far cry from the 1990s when 1250 Oceanside Partners envisioned what was then to be called The Villages at Hokukano. The resort's developers had grand visions of hundreds of upscale homes, a golf course and clubhouse, beach club, spa, a pair of boats, tennis courts -- all the amenities expected of a luxury resort.

Those amenities are what convinced buyers to invest in Hokulia.

"It is unique -- most of the lots have wide ocean views -- and it's a fine golf course," Allen said.

Now, a couple decades later, the name of the development has been changed to Hokulia and much of the land on the 1,550-acre property is still undeveloped.

"There's been some patience on the part of many -- but the patience is beginning to wear thin," Allen said.

More than 200 house lots have been sold but only 11 houses have been built. The Jack Nicklaus-designed golf course is there but nearly all other amenities haven't been built.

The dream is gone,
but the debt is real

When Halifax Bank of Scotland called in Arizona developer Lyle Anderson's billion dollar loan, it stopped any building.

"Until there is financial security and a successor developer is located -- there will be no development," Hokulia executive John De Fries said recently.

Anderson -- according to multiple disclaimers on the Hokulia website -- is no longer involved in the project. The Lyle Anderson Cos. website, though, does list Hokulia as part of its portfolio.

Anderson didn't return a call seeking comment for this story.

But while his former project, Hokulia, is no longer actively being developed, the Scottsdale, Ariz.-based developer is now launching a 200-acre ecoresort called The Reserve in the Sonoran Desert.

Debt for sale

Since the foreclosure, Halifax has been acquired by Lloyds Banking Group in the wake of the credit crunch in the United Kingdom.

To maintain its investment halfway around the world, Lloyds has hired a restructuring company -- New York-based Marotta Gund Budd & Dzera LLC -- to keep the course operational.

"We're fortunate the bank has continued to fund the maintenance," De Fries said. "If you don't manage it, it'll manage you."

MGBD's subsidiary, Scottsdale, Ariz.-based Oasis Management Resources, which specializes in managing distressed properties, owns 1250 Red Hill, which is the general partner in the current operator of the property, 1250 Oceanside.

Steven Marotta, MGBD chief executive officer, said he couldn't comment on Hokulia because of an ongoing lawsuit with the county and the company that holds the bond for the Hokulia bypass.

But while MGBD and Oasis run the development, De Fries said the debt and assets of the company are owned by Lloyds, which is trying to sell the loan for the development.

Claire Barratt, a spokeswoman for Lloyds in London, said her company couldn't comment on a potential asking price for the loan.

The lot owners hope someone will come in and seal the deal.

"We hope that someone will step in and see this place has a lot of potential," Allen said. "There are people who have been looking at the property and hopefully they'll find a way to make it work."

But Dean Gilpin, of Dean Gilpin & Associates, whose company sold many of the lots at Hokulia doesn't see much hope for a sale.

"Unfortunately, what I believe is that Hokulia will have to go bankrupt," he said. "All the things they've promised, you can't pay for those today if you're selling lots for $500,000."

Hokulia not able
to sell property

The operator of the property can't even sell land for $500,000 or any amount right now because, said De Fries, the company can't legally make the necessary disclosures needed.

Among the disclosures: Access and the ability to complete the project.

Both would be dependent on the completion of the Mamalahoa bypass road. That road, however, is in limbo since Hawaii County called in the bonds securing the $35 million bypass, then sued the developers and American Motorists Insurance Co., which holds the bonds.

In that suit, filed in 3rd Circuit Court, the county is seeking damages from AMIC, which holds a completion bond to build the proposed 5.5-mile bypass, which was bought as part of a 1998 development agreement signed by then-Mayor Stephen Yamashiro.

In order to build Hokulia, 1250 Oceanside agreed to finish the road from Keauhou to Napoopoo.

Deputy County Counsel Joseph Kamelamela, who is representing the county in the lawsuit, said a recent mediation session between the parties didn't resolve the case but the court has planned a settlement conference for Aug. 15.

In another suit involving the Hokulia bypass road, lawyers for the Coupe family, whose land the county is trying to condemn to make way for the road, filed a writ earlier this month to have its case heard by the U.S. Supreme Court after losing in Hawaii Supreme Court.

The Coupes' lawyer, Kenneth Kupchak, said neither he nor his clients wanted to comment on the ongoing case.

The Coupes are trying to stop the county from using eminent domain to condemn property they own, claiming the condemnation is illegal because it benefits a private company.

The Coupes and Lyle Anderson, though, were apparently able to do business a couple decades ago. Both are listed as sellers of a $26 million property in 1990 in the area adjacent to Hokulia.

In another case, Hokulia, the county and then-county Planning Director Chris Yuen were also sued by a group of Kona residents over water pollution, planning and land use concerns, Native Hawaiian remains and other issues. That case was settled in 2006.

But five years after that settlement, while legal fees have been paid, many of the conditions haven't been completed, said Robert Kim, attorney for the plaintiffs.

Chuck Flaherty, one of the five plaintiffs in that case, cited examples such as the units of affordable housing the developer was supposed to have built and the unfinished bypass road as examples of how Hokulia hasn't held up its end of the bargain.

"Until the financial health of the owner/developer have been resolved, those conditions will remain unfilled," De Fries said.

Possible sale
in the future?

Still there remains optimism Hokulia will find new owners.

"I'd say we're a lot closer than we were two years ago," Allen said. "There's certainly interest."

De Fries, who was the CEO of Hokulia at one time, said potential buyers have made multiple inquiries about the loan.

Hokulia representatives recently sent out an email to lot owners saying New York-based Cooper Investment Partners has expressed interest in making a deal.

A call to Stephen F. Cooper, the founder of Cooper Investment Partners, was not returned.

bshriane@westhawaiitoday.com

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Comments

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Seems to be today's most read article. Guess those are the ones stuck in the Konawaena School traffic jam. 

Why doesn't the county get the ball rolling and bids out the completion now? Doesn't cost anything, but will save time later.

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Oh my, what a surprise.

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