Naniloa Buyers Pay Up, to Appear Before Land Board
After a short delay, the new buyers of the troubled Naniloa Volcanoes Resort have followed through on their promise to deliver the funds necessary to secure the purchase of the hotel, according to bankruptcy trustee David Farmer.
Farmer told Big Island Now that a $6.33 million payment received on Monday from Tower Development Inc. CEO Ed Bushor means that the company, which partnered with Wyland Hilo Hotel LLC to bid on the Naniloa, has met the necessary obligations to purchase the resort.
State records show that the two companies have created a new business entity, WHR LLC, to purchase the Naniloa.
With the funds now received, Farmer was optimistic that the purchase could be finalized, and the deed to the property transferred by Dec. 18.
A potential obstacle to the purchase could come from the state Board of Land and Natural Resources, which will review the Naniloa situation at a meeting Friday in Honolulu.
The state has filed a notice of appeal of the sale. That filing is seen as a contingency move to ensure that the new buyers fulfill the requirements of the lease.
The board’s agenda for the meeting includes a presentation by Bushor.
According to Farmer, the Department of Land and Natural Resources has claimed the purchase violates state law, which Farmer acknowledged requires DLNR consent when leases of state land are “assigned” to another entity.
But Farmer insisted that federal bankruptcy procedures take precedent in the case of the Naniloa’s recent sale, which was approved in court by Judge Robert Farris at a hearing in November.
By Farmer’s account, Farris had explained in court that under bankruptcy law, the state’s consent was not required to transfer ownership of the hotel.
According to the purchase agreement accompanying the bankruptcy court’s order allowing the sale, the lease is considered part of the hotel’s assets being acquired by WHR.
WHR also filed a court motion on Monday stating that it has not been provided with sufficient information to determine what other property associated with the hotel would be part of the sale, including furniture, works of art and vehicles.
The motion said Naniloa owner Ken Fujiyama is claiming a variety of the items as his own personal property including the art work, golf carts, koa banquet chairs, two pianos and a Cadillac and a truck. WHR said that while it has been told that Fujiyama’s claim is suspect, it lacks sufficient information to determine if that is the case.
The motion said that during a visit on Dec. 4, WHR representatives found that all of the equipment in the kitchen had been removed, including dishes, ovens and liquor. Also missing from the hotel was the entire inventory of linens and towels.
As a result, WHR is asking the court to allow the closing of the sale to proceed but to also set aside $2 million of the purchase funding to later reconcile for any missing items.
The company also asked the court to extend the closing date to Dec. 18 to allow for completion of paperwork, including the transfer of the hotel’s liquor license to WHR. It said that had not yet been done because WHR and Aqua Hospitality, the company which will be managing the hotel, had not been provided with a variety of documentation.
If the sale goes through, the Naniloa’s new owners will be obligated to pay the state $500,000 per year to lease the property, a rate viewed as overvalued by some industry veterans.