Ritz-Carlton Kapalua Heads To Auction

Ritz-Carlton, Kapalua heads to auction
Lenders foreclose on luxury resort

March 26, 2011 – By HARRY EAGAR, Staff Writer
Article from: The Maui News

Lenders have foreclosed on the Ritz-Carlton, Kapalua resort, with the luxury property scheduled to be sold at foreclosure auction in Wailuku on May 5.

Securities filings by minority owner Maui Land & Pineapple Co. have revealed for more than two years that the property was in default on a loan that totaled as much as $300 million with accrued interest. But the owners previously had said little except that they hoped to renegotiate the debt.

Lehman Brothers Holdings Inc. and SASCO 2008-C2 foreclosed March 17.

Documents presented to 2nd Circuit Judge Shackley Raffetto showed that in March 2007, very close to the last moments before the sickness that was soon to engulf Wall Street began to show its symptoms, W2005 Kapalua/Gengate Hotel Realty borrowed $232 million against the property.

The money was used for a complete renovation of the hotel – one of Maui’s newest big resorts – which was closed for most of 2007.

The overhaul included converting one wing of rooms to condominiums, and nearly three dozen of those were sold, with the amount of the principal reduced proportionately by those sales.

Meanwhile, much drama was occurring nearby. Lehman Brothers went bankrupt in 2008, and that threatened the financing for construction of the Residences at Kapalua Bay. Maui Land & Pineapple, which had participated in the Ritz loans by providing the land for the hotel, was a partner in the Residences, and lost hundreds of millions of dollars on the project. At the same time, it was being dragged down by the failure of its money-losing pineapple operations.

ML&P’s financial filings with the Securities and Exchange Commission provided limited insight into the woes of the Ritz. Default was entered in April 2009.

The loan was scheduled to have matured in February 2009, but owner W2005 Kapalua/Gengate exercised an option to extend the loan for one year.
As of Nov. 10, the amount owed was $268 million.

Earlier this month, Raffetto appointed Christopher Lau commissioner for the foreclosure sale. Lau was also the commissioner in the record-setting foreclosure auction of Makena Resort last year.

Lau has scheduled the sale for 11 a.m. May 5 at the Wailuku courthouse.

Since the ownership of the giant hotel has been broken up, the sale is for guest rooms that have not already sold as condos, along with other areas including the spa, and common areas – for a total of 262 guest rooms, 34 executive suites and one regular suite, 73 residential suites, the restaurants and lounges, pools, the fitness center, tennis courts and 48 acres of oceanfront land.

The property also comes with the status of a AAA Five-Diamond resort, since despite all its financial troubles, the luxurious hotel has continued to maintain its reputation as a tourist destination.

There will be showings to prospective buyers from 1 to 4:30 p.m. April 21 and 28, through Lau. The hotel management is not involved and should not be contacted with questions about the sale.

For information, contact Christopher Lau, commissioner, 220 S. King St., Suite 960, Honolulu 96813; or (808) 291-3511; or claukapalua@aol.com.

Lau said Friday that he will shortly have an information package available for bidders.
The lender can bid its interest, and any bidder will be required to pay 10 percent down.

As provided for in state law, the foreclosure auction cannot be forestalled by the borrower’s paying off the loan. But the winning bidder on the courthouse steps will have to have its bid confirmed by the court. At that time, any new bidders can reopen the auction by topping the May 5 top number by 5 percent.