KAILUA-KONA — Aina Lea Inc. expects to emerge from bankruptcy next month following a judge’s tentative approval of a plan that will make viable the continued development of The Villages of Aina Lea.
“This should very well be it,” Robert Wessels, Aina Lea Inc. CEO and chairman, said of the long-stymied South Kohala project getting underway again after 10 years of essentially being on-hold amid legal and regulatory wrangling.
With two major financiers committed to financing the affordable housing component of the project, Lulana Gardens, Wessels says the company has all the “capital necessary to move forward” with the project that would add more than 1,900 affordable and luxury residential units to the Big Island housing market.
Construction could get back underway within a year, so long as all conditions of the plan are met, company officials say.
“We’re looking at hopefully being in construction before the end of the year and being able to deliver the units early next year because we have several units standing that are ready to be finished and turned over for the for-sale side of it,” Wessels said.
Aina Lea Inc. filed for Chapter 11 bankruptcy protection June 22, 2017, after years of litigation and regulatory issues stymied the development resulting in lenders calling loans and ultimately filing foreclosure proceedings.
U.S. Bankruptcy Court Judge Robert J. Faris on Monday confirmed the company’s reorganization plan subject to approval of exit financing during a hearing in Honolulu, signaling the end of the South Kohala developer’s nearly two-year trek through bankruptcy is near.
Wessels said Tuesday Aina Lea Inc. expects to exit Chapter 11 bankruptcy in May once the court signs off on the exit financing facilities.
The reorganization plan outlines how Aina Lea Inc. will pay back the more than $60 million it owes creditors. Among those creditors are Bridge Aina Lea, which is owed $20 million, and Romspen Investment Corp., which is owed $13.3 million.
“We are hopeful that Aina Lea, Inc.’s proposed financing will close next month, and that the project can then move forward with the prompt completion of the EIS,” Bruce Voss, counsel for Bridge Aina Lea said via email.
The company, according to its reorganization plan, anticipates it can nearly pay back nearly, if not all, it owes within five years.
“After 10 years, with all the starts and stops and all the difficulties we’ve had, we were able, as a result of this proceeding, to capitalize the company in a comprehensive way that allows us to move forward and obtain the fresh start that the bankruptcy code contemplates for viable companies like ours,” said Steve Jakubowski, attorney for Aina Lea Inc. “We were able to restructure the obligations in a way that really significantly enhanced the equity of the company. We’re now a very well capitalized company as a result of the bankruptcy.”
Also included in the plan is a map of the steps Aina Lea Inc. plans to take to meet for governmental development conditions that have blocked the project from moving forward over the years.
The company says its Land Use Action Plan — which will take about 10 to 18 months to implement — will resolve those conditions, including a court-ordered Tolling Order dating to 2013 and a stop-work notice issued by the county in May 2017 that also threatened to down-zone the project area due to noncompliance.
Aina Lea Inc. will prepare a new — not supplemental — environmental impact statement for the full 3,000 acres proposed for development about three decades ago, including its 1,072 acres and 1,927 acres owned by Bridge Aina Lea to meet the Tolling Order and stop-work notice.
Aina Lea Inc. will then submit an application to Hawaii County for new Project District zoning that would remove its land from a 1996 county ordinance that allowed the project. A new ordinance would provide the developer with greater flexibility to bring the project to reality.
In the interim, the county, on March 5, agreed to hold-off on initiating down-zoning of the project area based on the assumption that the plan will enable Aina Lea Inc. to comply with the Tolling Order and eventually provide the necessary environmental review to apply for the Project District. The stop-work order will “remain in full force and effect.”
Once Aina Lea Inc. is in compliance, work is commenced and units ready, sales of homes will begin, according to the plan.
Lulana Gardens comprises two of the 20 villages that would compose The Villages of Aina Lea, which is also called The Town at Aina Lea. At build out, it now includes 1,932 single- and multi-family residential units on 1,072 acres mauka of Queen Kaahumanu Highway and Mauna Lani Resort.
There’ll also be a mixed-use commercial area, a school site, open space for a future golf course, two or more parks and a network of cycling paths and natural open space buffers.
Within Lulana Gardens will be 432 townhouse units designated to meet local housing needs and earn Aina Lea Inc. at least 385 affordable housing credits. Aina Lea Inc. said it has already invested $40 million in capital with construction of dozens of affordable housing units and related infrastructure there. Though the units have been sitting since 2010, they remain in “great shape.”
Wessels announced Tuesday that 160 of the affordable units would be for rent — a change from prior proposals.
“We’ve got financing to build the for-sale units, which is what we originally planned to do, but because there is such a critical need for housing and some of the people don’t have the credit to be able to buy into the houses at this time, we have processing a HUD-insured market-rate loan for 160 of the townhouses to be rented to families under the county’s affordable rental rates,” Wessels said.
The for-sale affordable housing units would open first with units selling at prices determined by Hawaii County’s affordable housing guidelines currently set at $470,000 to $509,000, according to the reorganization plan.
Lulana Gardens will then be followed by Hoolei Village, a luxury home building area consisting of 70 single-family residential lots. Prices for luxury home sales in the area, such as would be built at Hoolei Village, run from $975,000 to nearly $3 million, according to the plan.
Aina Lea plans for townhouse sales to be marketed through local real estate brokers and sales representatives while lot and luxury condominium sales will be marketed through one or more international brokers. The developer said it has over 1,000 international-based shareholders who could introduce the debtor’s housing projects into 11 countries.
The 3,000-acre site is split between Aina Lea Inc. and Bridge Aina Lea. The grandiose residential community project was first proposed in 1989 and has been subject to numerous false starts and litigation since.
Bridge Aina Lea, based in Saipan, owns a 1,927-acre area classified agriculture and Aina Lea Inc., based in Waikoloa, owns 1,072 acres, of which 1,011 are classified urban. Aina Lea Inc. acquired the urban acreage from Bridge Aina Lea in 2015.
