A faltered plan to transform the Makaha Resort hotel into a luxury time share has led to a foreclosure lawsuit against the owner of the 173-room property in West Oahu.
An affiliate of Pacific Links Hawaii, a golf course operator that tried to help finance the conversion, filed the suit on Friday in Circuit Court against an affiliate of the shuttered hotel’s Canada-based owner, Northwynd Resort Properties Ltd.
Pacific Links bought the 18-hole golf course that was part of Makaha Resort in April 2011 for $2.5 million from Northwynd, according to property records, and began a $3 million course upgrade. The company also agreed to loan the hotel owner $6.8 million to help finance the plan to renovate the hotel and convert units for sale as time shares.
But Northwynd was unable to completely finance its plan, and the company closed the hotel in October 2011. As a result, about 95 employees were laid off. The company said at the time that it anticipated being able to secure financing, make the upgrades and reopen Makaha Resort.
Pacific Links said that Northwynd had defaulted on its loan and concluded in January that it would not be able to obtain financing to execute its plan. The golf company also alleged in the suit that Northwynd has sold part of the property without consent and misused loan proceeds.
The foreclosure suit was filed to repossess the hotel that secured the loan. Future ownership of the hotel will depend on the outcome of the case.
"It is very unfortunate that Makaha Hotel and Resort was unable to secure the financing to reignite hotel operations," Micah Kane, chief operating officer of Pacific Links Hawaii, said in a statement. "However, we will use this as an opportunity to pursue a more comprehensive, community-based approach to developing a truly sustainable economic plan for Makaha Valley."
Pacific Links said the foreclosure will have no impact on golf operations.
The golf course closed for renovations in May 2011, and the work is about 80 percent complete.
Pacific Links also owns the neighboring golf course known as Makaha Golf Club East and formerly known as Makaha Valley Country Club, which is operating.
Northwynd took ownership of Makaha Resort in July 2010 when it acquired the assets of another Canadian firm, Fairmont Resort Properties Ltd., through a court-supervised debt restructuring.
Fairmont bought the resort in 2004 for $13.5 million, and at one point launched a plan to sell 40 hotel units as time shares to help finance improvements.
The hotel once known as the Sheraton Makaha was developed with the golf course in 1969 by island financier Chinn Ho, but owners have been challenged by the resort’s remote location.
ANA Hotels Hawaii Inc., which bought the property in 1979, closed the hotel in 1995 after years of losses.
Wisconsin-based real estate development firm Towne Realty Inc. bought the golf course and the shuttered hotel in 2000 for $6.1 million, reopened the hotel in 2001 after making some renovations and then sold the resort to Fairmont.
