Friday, May 2, 2008
Hokulia developer stops work, seeks cash
Pacific Business News (Honolulu) – by Janis L. Magin Pacific Business NewsThe developer of the Hokulia project has stopped work on two clubhouses and various other amenities at the Big Island luxury golf course development, apparently caught short by the international credit squeeze.
It is the second time in five years that the billion-dollar Kona development, which has been plagued by litigation since starting up in 1999, has had to halt construction. The developer is also unable to close any pending sales until public documents are updated with a new construction schedule.
On Feb. 29, the county issued building permits for a $10.75 million clubhouse complex at the 1,540-acre project above Kealakekua Bay. The complex includes a $7.5 million clubhouse, a $1.7 million cart storage building, a $1.3 million pro shop and a $250,000 generator building.
Work on that complex and on a second clubhouse, the Ocean Club, stopped two weeks ago.
Last week, developer Lyle Anderson wrote to lot owners and club members to assure them that the project was not bankrupt and said that he was looking for an “equity partner or partners for some of my companies.”
Hokulia developer 1250 Oceanside Partners is an affiliate of Anderson’s The Lyle Anderson Company, which also developed the 930-acre Superstition Mountain Golf and Country Club, the 8,000-acre Desert Mountain and the 850-acre Desert Highlands in Arizona and the 4,700-acre Las Campanas near Santa Fe, N.M.
In the April 24 letter, Anderson said his companies have had a line of credit for the past 14 years with a bank and that the loans are secured by the companies’ assets — thousands of acres of real estate. He did not name the bank.
“The global credit crunch and oversupply of residential real estate have caused valuation adjustments of our real estate holdings that are of concern to the bank, and although they have continued to fund ongoing operations, they have expressed reluctance about advancing additional funds for major development activities,” Anderson wrote in the letter, a copy of which was obtained by PBN.
“During the discussions with the bank, there has never been any discussion of shutting down Hokulia, putting Hokulia in bankruptcy or of not completing the amenities or the bypass highway, although construction of the Clubhouse and Ocean Club, which are bonded, has been temporarily suspended. The discussions have related to the outstanding obligations between my companies and the bank, and not as to the wisdom of the long-term development of Hokulia.”
Hokulia was forced to stop construction in September 2003 after Circuit Court Judge Ronald Ibarra ruled that the subdivision was an illegal use of agricultural land.
After a 30-month shutdown, 1250 Oceanside Partners reached an out-of-court settlement allowing construction to resume in March 2006.
The developer is in the process of preparing a supplement to the final environmental impact statement submitted in 1993 as part of its request to the state Land Use Commission to reclassify the land from agricultural use, said Hokulia CEO John DeFries.
DeFries told PBN last fall that the supplemental EIS would take up to nine months to complete, but he said this week that the document is not yet finished, and that the state would not rule on 1250 Oceanside Partners’ petition until the supplemental EIS is accepted.
DeFries declined to say how long the latest shutdown would last, citing confidentiality agreements.
“I think all parties understand that expediting that negotiation is in everyone’s best interest,” he said.
Under the March 2006 settlement, Hokulia agreed to downsize the density from 1,400 to 665 lots, to forego adding another nine holes to the golf course and to abandon plans to build a members’ lodge.
1250 Oceanside Partners must also complete the Mamalahoa Bypass road, a partially built 5.5-mile stretch of highway that runs parallel to Mamalahoa Highway.
The developer has completed the first 2.5 miles of the road, from Alii Drive at Keauhou to the north to Halekii Street in the Kona Scenic subdivision in Kealakekua, but much of that has been closed because of a lawsuit involving one landowner who refused to give up the right of way on the three miles of highway left to be completed.
Last fall, Ibarra ruled that the 1,000-foot stretch of land owned by the Charles and Joan Coupe Trust could be condemned by the county because the highway was in the public interest.
Hawaii County now has possession of the property, but the Coupes have appealed the ruling, and Hokulia is working with the county to protect the developer in the event the Coupes prevail on their appeal, said Hawaii County Public Works Director Bruce McClure.
Once construction resumes, Hokulia will have approximately 39 months to complete the highway to its end at Napoopoo Junction, under its original agreement with the county,.
In the meantime, all of about 200 lots in Hokulia’s phase one have been sold. Five homes have been completed, five are under construction and three are scheduled to start construction by the end of the year. There are also 34 lot owners who are in the design review process for their homes.
In November, the developer began sales on the project’s second phase, Nalu Kai Estates, 45 home sites surrounded by the first nine holes of the project’s Jack Nicklaus-designed 18-hole golf course, close to the 140-acre shoreline park and near the project’s planned ocean club and spa retreat. Six sales have closed since then, five are in escrow and eight are under contract but have not gone into escrow, DeFries said.
“We can resume escrow closings once our public documents are updated at the conclusion of the negotiation between the lender and The Lyle Anderson Co.,” he said.
The Canadian firm S&P Destination Properties is handling sales for the phase two lots, which range from at least one to more than two acres in size, and are priced between $2.5 million and $4.5 million.
Those prices are considerably higher than the lots in the first phase, which went on sale in 1999 at prices ranging from $700,000 to more than $2 million for lots of between one and 1.5 acres in size.