Land Board to Again Take Up Naniloa DebtsSeptember 11, 2013, 2:42 PM HST (Updated September 11, 2013, 2:44 PM)
A state board this week will take up several financial matters involving the beleaguered Naniloa Volcanoes Resort.
Among the issues that may come up at Friday’s meeting of the Board of Land and Natural Resources is whether the resort will be given additional time to add $500,000 to its performance bond.
In May, the land board voted to require that Hawaii Outdoor Tours, the Ken Fujiyama company that holds the state lease on the Naniloa, restore its performance bond to its original amount of $1 million.
The bond was required by the terms of the 65-year lease won by HOT at auction in 2005 and was equivalent to twice the annual rent of $500,000.
However, in 2011 the land board granted a request from Fujiyama to use half of the bond to cover an overdue lease payment to the state.
Fujiyama was delinquent on another lease payment in March 2012. Although the hotel’s mortgage-holder, First Citizens Bank & Trust, eventually made good on that payment, that meant the Naniloa was again in default of its lease.
That triggered a clause in the 2011 agreement the allowed the land board to demand the bond be restored to its full amount.
The board is also scheduled to take up Fujiyama’s failure to make another semi-annual lease payment of $250,000 which was due Aug. 1.
According to DLNR documents, that was at least the sixth time that Fujiyama has failed to make required lease payments on time.
Under the terms of the lease, failing to make timely lease payments and other defaults would allow the state to cancel Hawaii Outdoor Tours’ lease on the Naniloa and its nine-hole golf course. So far, the board has been reluctant to do so.
The state is also hampered from some actions by the Naniloa’s filing for bankruptcy late last year.
The filing also put on hold a foreclosure action by the bank owed more than $10 million on a loan Fujiyama took out in 2006.
First Citizens Bank & Trust Co. foreclosed after Fujiyama quit making payments on the loan.
According to a plan Naniloa filed with the bankruptcy court, the resort also owes roughly $1 million in back state and county taxes.
The land board on Friday will also consider whether to revoke a portion of the $5 million construction bond posted by Fujiyama.
The bond was required to guarantee that the same amount would be spent on improvements to the resort, but not all of that work has been completed.