The state is once again on the hook for a decrepit building on Banyan Drive after the previous lessee of the former Country Club Condominium Hotel surrendered its permit for the property.

The Board of Land and Natural Resources in 2022 approved a revocable permit for Banyan Drive Management LLC to temporarily manage the property at 121 Banyan Drive until the BLNR could approve a developer for a much-needed renovation of the aging and run-down property.

Banyan Drive Management had submitted a proposal for a long-term development agreement for the property, which would include a roughly $20 million renovation of the site and convert 80% of the building’s 152 units into long-term rental units, and the remainder into extended-stay hotel units.

But the BLNR postponed any discussion on the matter for several months in late 2024, pending the results of potential legislation in the 2025 session of the Legislature that could affect the future of the Waiakea Peninsula.

According to a report by the Department of Land and Natural Resources’ Land Division, that delay seems to have been the last straw for Banyan Drive Management. The company submitted a letter to the Land Division on Jan. 9 stating that it intended to surrender its revocable permit for the property.

“It’s been two years since Banyan Drive Management officially operated 121 Banyan Drive building, and even with significant monetary loss every month, BDM managed the entire building on goodwill,” the letter stated. “However … we’re surrendering our revocable permit as DLNR now doesn’t even have a timeline when our submittal item will be put up for a vote.”

The letter stated BDM will vacate the premises Sunday and has issued a formal notice to vacate to all occupants of the building. Candace Martin, acting district land manager for the Big Island, told the BLNR on Friday that there are five legal tenants in the building, but 16 rooms are currently occupied.

The letter went on to say that BDM will help those tenants as much as possible to find other housing or connect them with rehousing agencies such as HOPE Services.

With BDM leaving, the DLNR is once again left in possession of a crumbling building in dire need of an expensive renovation or demolition, without the means to pay for it.

A 2018 demolition assessment estimated that the cost to demolish the Country Club would be about $6.2 million, although that number has almost certainly ballooned substantially over the past seven years of inflation.

The BLNR discussed the situation Friday but had no immediate solutions for the property.

Assistant Land Division Administrator Kevin Moore noted that the state’s first lease of the property did not include certain protections that are now standard for the department: namely, a removal bond requiring the lessee to remove all improvements to the site upon the termination of the lease.

Land Division Administrator Russell Tsuji said the cost to bring the building up to current code would be “$20 million or more,” funds the DLNR does not have. He said the department attempted to secure funds for a demolition in the past but was unsuccessful.

Tsuji added that several plans to deal with the ill-fated property have fallen through due to a series of unforeseeable crises.

At one point the managers of the Grand Naniloa Hotel were selected to renovate the Country Club, but they suffered a cascading series of financial and legal problems that led the DLNR to drop that plan. After that, in 2023 the DLNR selected another company, Savio SB Growth Venture LLC, but it withdrew from consideration less than a month later due to ongoing economic fallout following the COVID-19 pandemic.

“I understand: The world is unfair, you don’t have enough resources, you’re understaffed,” said BLNR member Riley Smith of Hilo. “But you have a responsibility. The board’s responsibility is policy, and what we need to deal with is dilapidated buildings that are going to require significant capital outlay.”

Meanwhile, Chair Dawn Chang said there will be legislation this session that would shift management of the Waiakea Peninsula from DLNR to the Hawaii Community Development Authority.

“I do believe historically the DLNR has objected to the transfer,” Chang said. “This is the first time I, as a chair, have been willing to consider it, or at least have greater discussion.”

This issue has arisen less than a month after the removal of the former Uncle Billy’s Hilo Bay Hotel, another derelict building the DLNR had to remove at the taxpayer’s expense. That demolition cost $14 million, something Chang said she doesn’t want DLNR to repeat.

In any case, the BLNR voted unanimously to approve BDM’s surrender of its revocable permit. What happens next to the hotel is unknown for now.

No representative of BDM, including president Ryan Lee, testified at Friday’s meeting.