Makena Beach & Golf Resort not affected -- $200 million lien against the 1,800-acre Makena Resort (formerly Maui Prince Hotel) in a two-bidder foreclosure auction.
‘Business as usual’ pledged for employees of the resort
By Chris Hamilton, Staff Writer
reprinted courtesy Maui News May 29, 2010
Court commissioner Chris Lau of Honolulu reads the terms
of the auction Friday morning at the Wailuku courthouse.
WAILUKU - Employees of Makena Resort and its 310-room Makena Beach & Golf Resort will not be affected by the outcome of a foreclosure auction won Friday by the original lenders, said their Honolulu attorney, Barry Sullivan.
"I want to be clear. It will be business as usual," Sullivan said after the auction held near the steps of the Wailuku courthouse.
The collection of mortgage securities holders who have a $200 million lien against the 1,800-acre Makena Resort came out on top in a two-bidder foreclosure auction. The auction win protected their investment until a new property owner can be found, Sullivan said.
The top bid was $55 million by Wells Fargo Bank, which is the lenders' trustee, in what is believed to be the largest foreclosure in Maui history.
The mortgage holders won in a "credit bid," or paying for the title with what's owed them, Sullivan said. If they'd let Makena Resort slip away for any less than $200 million, the lenders would have lost money. Now, they can either resell the property once the title clears the courts - and the real estate market improves - or they can try to get most of their $200 million back at the upcoming confirmation hearing.
"That's where the action will really be," Sullivan said of the hearing to be held sometime in the next 45 days.
Second Circuit Judge Shackley Raffetto could reopen the bidding at the sale confirmation hearing, if a buyer is willing to come in with a bid at least 5 percent over $55 million, said Honolulu real estate developer and broker Chris Lau, who oversaw Friday's auction as the court-appointed commissioner.
The auction lasted about five minutes. The opening bid was $40 million.
"This is as big as it gets," Lau said.
Sullivan said the lenders have no intention of further developing the property.
Since September, the hotel, formerly the Maui Prince, has been run by Benchmark Hospitality, which a court-appointed receiver brought in to make the resort profitable. It's been a successful partnership, with the union currently representing 250 hotel employees, said Willie Kennison, Maui director of the International Longshore and Warehouse Union.
The hotel also employs 100 management personnel not represented by the union, he said. Before the hotel's foreclosure, the resort employed 517 in both management and union-represented positions.
Benchmark officials and the trustees "reached out to us from the start of this entire process, and we appreciate that they are committed to Makena just as we are," Kennison said.
Hotel room occupancy has nearly doubled from a year ago, said resort General Manager Kelly Lewis. And the resort has rehired many of the employees furloughed last year due to the downturn in the tourism industry, which has been on the rebound in recent months.
The Wells Fargo trust initially agreed to foot many of Makena Resort's bills to pay the hotel employees and keep the entire property, including the golf links, looking attractive to potential buyers. Since then, the resort also has renovated a restaurant, Zen Zen; developed outdoor event space and added horseback riding, Sullivan said.
In addition to the hotel, Makena Resort has valuable Maui County entitlements to build on undeveloped lands that would allow a future owner to subdivide the rural piece of oceanfront property in South Maui into up to 1,100 homes, apartments and condominiums.
When the resort was rezoned by the Maui County Council in December 2008, council members attached numerous development conditions, including studies on the area's archaeology, traffic impacts and water supply. The conditions also require the construction of 400 off-site affordable homes in the Kihei-Makena district.
The auction bidders were allowed to remain anonymous. The representative of the losing bidder declined to comment or even identify himself to The Maui News. However, a few people at the auction whom he spoke to said the man was from a Los Angeles-based investment firm.
Lau said that he received more than 200 calls from curious potential bidders and 900 hits on a website he set up for the property. He said he spent hundreds of hours showing Makena Resort to prospective buyers from around the world.
Several community activists watched the auction. Some held protest signs. Retired University of Hawaii Maui College professor Dick Mayer said most of them understand that developing Makena is inevitable. But they will lobby for a good owner and "a soft touch on the land," he said.
Maui developer Everett Dowling and his partners used commercial mortgage securities to help buy the resort in 2007 from the Seibu Group of Japan for a record $570 million for a Maui hotel.
Sullivan said Dowling and Morgan Stanley Real Estate invested another $100 million into Makena Resort on planning, designs and infrastructure.
But when Dowling and Morgan Stanley defaulted on their loan last August, the court foreclosed on them and put the Wells Fargo trust in the driver's seat since it held the mortgage on the real property.
Dowling has said that he wants to reacquire Makena Resort. However, he wasn't at Friday's auction and did not return messages seeking comment.
* Chris Hamilton can be reached at chamilton@mauinews.com.
reprinted courtesy Maui News May 29, 2010, original link www mauinews.com/page/content.detail/id/531975.html
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