Dozens of luxury condominiums and hundreds of time-share interests at the financially troubled Ritz-Carlton Club and Residences at Kapalua Bay are headed for the auction block in December.
Fifty-six residential condominiums along with 567 fractional-ownership interests in 62 time-share units will be sold at auction at noon Dec. 3 in Honolulu. The sale also will include leasehold interest in The Shops at Kapalua.
The assets will be sold as one piece, according to Honolulu attorney George Van Buren, the court-appointed commissioner in the foreclosure case brought by lenders on the project. The auction will be at the Ewa end of Ka'ahumanu Hale at 777 Punchbowl St. in Honolulu.
Project developer Kapalua Bay LLC - a joint venture among affiliates of Maui Land & Pineapple Co., Exclusive Resorts and Marriott International - owes more than $304 million in principal and interest on the property, which opened in mid-2009.
The land and buildings have a combined assessed value of $284.4 million for tax purposes, according to a fact sheet for the auction.
"They owe quite a bit more than the properties are worth," Van Buren said.
Lenders for the project - led by German bank Landesbank Baden-Wurttemberg - foreclosed on the property in June in 1st Circuit Court.
Lehman Brothers had been the initial lender for the $370 million project, but, prior to filing for bankruptcy in 2008, Lehman reconfigured the loan, with Central Pacific Bank, Landesbank, Deutsche Hypo, Swedbank and a Marriott affiliate each taking an interest. Central Pacific Bank, Landesbank and Deutsche have since sold their interests.
"The developer's interest will be foreclosed, and it will be sold to a new person," Van Buren said. "It might be the bank, one or more of the banks, or it could be to a third party. There is a lot of interest in the property."
The project was built on the site of the former Kapalua Bay Hotel with two distinct ownership entities: the club and the residences.
The residences portion is made up of 84 wholly owned condominiums that were initially priced between $3.9 million and $9.8 million. Each of the project's 62 time-share units has 12 fractional-ownership interests, and individual interests were initially priced between $350,000 and $850,000.
The units and time-share interests being auctioned off are those that the developer has been unable to sell.
Separate from the foreclosure case, the property's management company, The Ritz-Carlton, previously announced to unit owners that it would no longer manage the property after Monday "as a result of insufficient funding of ongoing operating costs."
Owners of 10 of the residence condominiums sued in June alleging the developer and management company have "allowed the project to fall into disarray."
The lawsuit alleges that the developer was responsible for paying its share of the common area maintenance fees for the project's unsold condominium units, but that it stopped paying earlier this year, "thereby rendering the (apartment owners' association) and the project woefully underfunded."
The lack of operating funds for the homeowners association triggered The Ritz-Carlton's termination notice.
The case is before 2nd Circuit Judge Joseph Cardoza, who will resume a hearing Nov. 2 in Wailuku.
For more information about the December auction, see: www.vcshawaii.com/kapalua.
* Nanea Kalani can be reached at nkalani@mauinews.com.
