Ilikai dispute prompts lawsuit
Ilikai hotel developer Brian Anderson has been slapped with a federal lawsuit accusing him of mishandling investors' money in an attempt to redevelop the landmark Waikiki property.
The complaint, filed June 13 in U.S. District Court by Network Development Properties LLC and California investor Gordon Carlson, comes amid a simmering dispute between the developer and condominium owners, who say they have watched the hotel deteriorate since Anderson took over in July 2006.
The lawsuit is among other suits filed in recent years by former Ilikai tenants and investors of Anderson's other hotel ventures.
Network Development and Carlson invested $5 million in the Ilikai to help Anderson acquire 343 condominium units two years ago as part of his plan to renovate the property and sell the units, some of which were to be part of an upscale boutique hotel on the Ilikai's top four floors.
Carlson and plaintiffs' attorney John Dwyer Jr. did not return calls for comment yesterday.
The suit seeks to remove Anderson as manager of the Ilikai, stop him from using any assets or company funds for his own benefit, and prevent the authorization of a "fire sale" of the unsold rooms for an average $200,000 per unit.
Such a sale would "virtually destroy any profit interest" or return on investment for the plaintiffs and "will harm at least 97 current owners/investors" who acquired the property at an average $532,000 per unit, according to the court documents.
More than 100 units have been sold, though buyers were hesitant to close on the sale of another 200 units in play until renovations were under way, Anderson told the Star-Bulletin in late March.
Among the claims against Anderson and his company, Anekona Islander LLC, is waste of corporate assets; denying investors access to financial and other operational information; commingling company assets and funds for personal use or with affiliated entities; and misusing investment money, which includes a $94 million mortgage loan backed by company assets, and $5 million invested by the plaintiffs and proceeds from the rent or sale of condo units at the Ilikai.
The complaint, which cites breach of contract and fiduciary duty, fraud and conspiracy, also seeks to prevent the sale of Anekona's Kauai Beach Resort, which is covered by a separate mortgage.
Anekona has become the subject of dissent among some employees, tenants, guests and residents of the middle-age property, a 1960s Waikiki icon made famous on the television show "Hawaii Five-O."
Unite Here Local 5, the hotel workers union, also has publicly lashed out against Anderson's proposed $60 million renovation plan.
Anderson bought the property two years ago for $218 million with ambitious plans to reposition the Ilikai into an upscale condominium hotel. He simultaneously sold the 360-room Yacht Harbor Tower, along with the ballroom and central swimming pool, to San Diego-based eRealty Cos.
Since he took over, hotel occupancy has plummeted due to the loss of amenities, including a restaurant, bar and other typical services found in most Waikiki hotels, which were sacrificed for the proposed renovations.
Anekona cut its housekeeping work force earlier this year due to an anticipated decline in occupancy to as low as 30 percent in April and May.
Anderson and Anekona representatives did not return calls for comment yesterday.