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Unity House has resolved the last major claim in its bankruptcy case tied to the former Lotus at Diamond Head hotel.
The claim involved a lease for restaurant space in the 51-room boutique hotel Unity House bought about three years ago as an investment.
The local nonprofit social welfare organization bought the Lotus in December 2009 for $8.5 million with plans to convert the hotel on leasehold land along Waikiki’s "Gold Coast" to condominiums. But the organization defaulted on the loan, and filed bankruptcy about a year ago to prevent foreclosure.
Investment firm MK Pacific LLC had lent Unity House about $6 million to buy the hotel, and as part of the deal retained control of the restaurant space through a lease.
In bankruptcy, Unity House sold the hotel last year for $18.5 million to a partnership of Japanese investors, but MK claimed it should be paid for the restaurant space, which it argued was worth $13 million.
Following mediation efforts in January, Unity House and MK settled the claim for $2.5 million.
After the settlement, legal fees and a $5.6 million expense to acquire the land under the hotel now known as the Aqua Lotus Honolulu, Unity House netted about $2.2 million in sale proceeds, which didn’t quite offset $3 million of equity it contributed to buy the hotel.
