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Big renovations slated to start after July 1 at Hilo Naniloa Hotel

Updated: 
May 22, 2014 - 12:05am

Significant renovations should begin after July 1 on the Hilo Naniloa Hotel, according to developer Ed Bushor.

Bushor is expecting to spend about $20 million to revamp the Banyan Drive hotel by Jan. 1. He is working on a tighter schedule than anticipated but expects to meet that target.

“The end date is the same,” he said. “We’re compressing it in the sense we were going to do the paint and roof way ahead of time.”

A $15 million construction loan should be secured in the next few weeks, he said, and building permit applications are expected to be submitted by Friday. He’s hoping to get the permits approved within 60 days. Bushor’s Tower Development is a managing partner with WHR LLC, which acquired the hotel through bankruptcy in December.

In the meantime, the hotel is facing another hurdle with the state Department of Land and Natural Resources.

The department says the hotel is in default on $2.115 million in bonds it says was supposed to be covered when the new owners took over the land lease. DLNR says it granted a 60-day cure period for the default Jan. 11.

The Board of Land and Natural Resources will consider the issue Friday. DLNR staff are recommending the lease be terminated for the hotel in 30 days after the meeting if payments aren’t made.

Bushor said he requested an extension until the next meeting, adding he expects to have the bonds covered in the next few weeks.

DLNR says it is owed $1 million for a performance bond intended to cover any delinquent lease payments. WHR LLC, the leaseholder, remains current on its payments. The lease amount for the 383-room hotel and golf course is $500,000 a year.

Additionally, the department says the hotel is required to cover a $1,115,356 construction bond issued for renovations the previous owner, Hawaii Outdoor Tours Inc., didn’t complete.

Even if the work was started by the previous operator, the leaseholder is still on the hook because the project is not finished, said Russell Tsuji, DLNR land administrator.

Bushor said his focus was on resolving building code violations first and DLNR could have used the violations as a reason to draw from the performance bond.

“When you come out of bankruptcy, you have all these violations on the property that existed from the prior owner,” Bushor said. “So we’re curing those violations ourselves.”

The board needs to approve any improvements on the property, according to DLNR.

The hotel submitted what the department considers “partial plans” for renovations because they didn’t address electrical, plumbing, mechanical and fire sprinkler systems, according to an April 29 email from Tsuji to Bushor.

Brandon Gonzalez, Hawaii County Public Works deputy director, said the department is satisfied with progress on the building code violations.

“They are making an effort to address things as best as they can,” Gonzalez said.

Email Tom Callis at tcallis@hawaiitribune-herald.com.