Hokulia developer will pay, not build
Developers of the long-delayed Hokulia development are opting to pay Hawaii County $20 million rather than build the incomplete bypass road.
According to 1250 Oceanside Partners’ restructuring plan, which Oceanside filed with fellow debtors Pacific Star Co. LLC and Front Nine and their lender, Sun Kona Finance 1 LLC, that U.S. Bankruptcy Court Judge Robert Faris accepted last month, the developer will pay the county in full by March 23.
Hawaii County officials in March 2012 accepted a settlement from the developer and the bond company securing the road project that gave the county $12.5 million in cash and a $20 million mortgage, secured by property within the project to be paid within two years if Oceanside or a subsequent developer did not complete the southern portion of the bypass. At the time, county officials conceded it would likely be the county that would construct the bypass segment, which will run from Halekii Street to Napoopoo Road.
Mayor Billy Kenoi said the county plans to put the project out for bid in the first quarter of next year, with a target of starting construction in the fall.
“We’ve been really adamant that we be a secured creditor on the property,” Kenoi said Friday. “We wanted to make a commitment to the community, no matter what happened, this road would happen.”
The county has encountered some “challenges” in completing the engineering work for the intersection with Napoopoo Road, as well as with acquiring land for the road’s right-of-way, he added. He said the Public Works Division’s deputy director confirmed the proposed time line on Friday.
“The goal is to leave office with that road constructed,” Kenoi said.
He will complete his second mayoral term in December 2016.
Oceanside and other debtors had proposed making two payments, $15 million in December, with the remaining $5 million owed by May, court documents said. The final version reflected the revision requiring the payment by March.
The long-delayed development could emerge from bankruptcy as soon as February.
Faris, Oceanside officials said, ruled the disclosure statement plan proponents submitted “adequately and sufficiently detailed the restructuring plan and pertinent circumstances,” according to a press release. “The bankruptcy code requires such a disclosure statement that provides detailed information for claims holders to make informed decisions, before the plan itself can be considered for approval.”
The plan called for giving unsecured creditors — former officers and directors, lot owners and vendors — 2.5 to 4 percent of each claim.
In January 2008, the Bank of Scotland declared a default on the nearly $1 billion in secured debt owed by the Hokulia project’s original developer, Lyle Anderson, and his various entities. At that point, development of the West Hawaii project came to a halt. In October 2008, the Bank of Scotland separated the various debts, leaving about $494 million in Hawaii-based debt, secured by Hokulia and a related development at Keopuka, according to court records.
Oceanside applied for bankruptcy in March.
Chief Restructuring Officer Rick Robinson said it could take a while for the project to begin selling lots again.
“We’re making every effort to address things that are there,” Robinson said. The project, which has sat idle for five years, has “a lot of items we have to address. It’s not a quick fix.”
Things are moving in the right direction, though, he said.