The former Maui Prince Hotel (now the Makena Beach & Golf Resort) Makena resort property covers 1,800 acres (about 3 square miles) and has entitlements for residential developments on 1,300 acres.
reprinted courtesy Maui News 9/1/10
by Harry Eager, Staff Writer
Now that the ownership of Makena resort has been formally transferred, the new owners are refining the details of development proposals that will include work force housing within the resort, which would be a first for Maui.
They have scrapped previous plans to close the former Maui Prince Hotel (now the Makena Beach & Golf Resort), said Sean Hehir, chief executive officer of Trinity Investments, the international hotel operator with headquarters in Honolulu and long ties to Maui through its co-chairman, Chuck Sweeney.
In a telephone interview from Honolulu on Tuesday, Hehir said the general direction will be to back off from developing Makena as an "uber-luxury" resort.
"We have some capital" immediately available to refresh parts of the hotel, and the owners plan to reopen at least nine holes of the closed South golf course, he said. "We know how important it is to have the support of the employees and the union" who at one time were facing layoffs when the Everett Dowling-Morgan Stanley group planned to close the hotel.
During the long foreclosure process, the receiver brought in Benchmark Hospitality to manage the hotel. According to Fitch Ratings, which was tracking the distressed debt of the resort, occupancy was raised from half-empty to more than 80 percent in June.
The 310-room hotel has long been viewed as too small to make money, and there is room on the lot to expand, but Hehir did not indicate whether the long-range plan would be to expand or to create a second hotel. He said, "There is a strong need for a hotel in the $200 to $250 range in that part of the island."
Makena's northern neighbor, Wailea, is the most expensive destination resort in the islands, with average prices well over $400 a night most months.
The Makena resort property covers 1,800 acres (about 3 square miles) and has entitlements for residential developments on 1,300 acres. When the Dowling-Morgan Stanley group paid $565 million in 2007, and then spent as much as $100 million more in development, Makena did appear headed for uber-luxury status. The price paid Seibu for its resort was, at that time, approximately double the market value of Maui Land & Pineapple Co., which had similar acreages, oceanfront, resort infrastructure and golf courses (but was dragged down, in the stock market's estimation, by a money-losing pineapple plantation).
Since then, ML&P has fallen on hard times, and had to sell one of its golf courses.
Hehir said he was not certain what is happening at Kapalua, but it may be that Makena "will be the only resort on Maui to control its own golf courses." (Kaanapali sold off its courses years ago.)
That would be a strategic advantage in developing the resort, he said.
The Dowling-Morgan Stanley interests were soon trapped by the collapse of international financial and real estate markets and defaulted on a basic loan of $195 million. Junior lenders who had supplied other financing were wiped out, and the senior creditors were able to use their credit to win a bid for the property at $95 million in July.
Wells Fargo was the trustee for the investment group but not an investor itself. The owners are AREA Property Partners in a joint venture with Trinity and Stanford Carr Development LLC.
Maui native Carr will be in charge of shepherding the new proposals, when they are submitted next year through the county approval process.
Through Sweeney, who developed the Embassy Suites in Kaanapali and the Kea Lani Hotel in Wailea, and his co-chairman, Jon Miho, whose parents operated a small business on Maui, Trinity "has a long interest and affection for Maui," said Hehir, and is looking forward to working with Carr, whose recent work on Maui includes Olena, the Cottages and the Villas, all at Kehalani.
"We look forward to working with the community," Carr said Tuesday. "There is a lot of work ahead of us, but we are in it for the long haul."
Hehir said the new master plan will need to "fully integrate the resort into the community," which will include housing for workers. "The full resort plan was never executed," he said.
Early on, the master plan was for a huge resort, and former county administrations were in those days ready to go along. But as time passed, the ideas of density imagined by pioneer developers shrank, and Seibu scaled back its plans, leaving much of the southern portion of the property open.
Now the wariness of investors is likely to temper the spaciousness of any new plans. Hehir said keeping the hotel open is important, even if it is not positioned to be a big moneymaker. The new owners need to make it operate so that "at least it is not a negative carry" while transforming the resort.
That is a long way from the attitude of the original developers. Seibu was once one of the biggest businesses in Japan, and the Maui Prince was used to entertain Seibu's friend, the prime minister. Filling the other rooms did not always appear to be a high priority in those days, so it didn't matter if other hoteliers thought the Prince was "too small."
The resort and hotel were in suspense for a long time. The property went into foreclosure in September 2009.
AREA, an investor in the lending trust, said it worked with the lender from the start of foreclosure to ensure that the hotel stayed open and guests continued to enjoy the resort experience, and it was designated to assume ownership by the lender.
"Over the last year, many parties including the receiver, the lending trust and its agents and the hotel management company made extraordinary efforts to stabilize the hotel operations and position it for a transition to long-term ownership" said Bradford Wildauer, AREA partner. "In assuming ownership of the property, AREA and our partners are expanding our commitment to the resort, its employees and guests.
"We plan to revitalize Makena so that it continues to be a premier destination resort."
AREA is a joint investor with Trinity in the Kahala Hotel and Resort on Oahu and was a partner with Trinity when it owned the Fairmont Kea Lani Resort and the Embassy Suites Kaanapali.
Formerly known as Apollo Real Estate Advisors, it describes itself as an international real estate investor and fund manager on behalf of prominent government and corporate pension funds, sovereign wealth funds, insurance companies, foundations, endowments and high net-worth individuals.
Since the firm's founding in 1993, AREA Property Partners has overseen the establishment of multiple real estate funds and joint ventures totaling $13 billion in equity commitments for investments in the United States and globally. Its funds have collectively invested in more than 515 transactions with an aggregated value in excess of $60 billion. The firm has offices in New York, Atlanta, Los Angeles, London, Paris, Luxembourg and Mumbai. Its website can be found at www areapropertypartners.com.
* Harry Eagar can be reached at heagar@mauinews.com.
reprinted courtesy Maui News 9/1/10, original link www mauinews.com/page/content.detail/id/539900/Work-force-housing-part-of-Makena-resort-plans.html?nav=10
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