Trouble dogs project
by Bishop trustee

Lawsuits and delays plague
the 50-home Kona subdivision

By Rick Daysog

When Bishop Estate Trustee Gerard Jervis and Kailua Realtor William Boyle formed White Hat Development Corp. in 1992, they envisioned themselves as good guys riding to the rescue of the affordable housing problem.

But these days, the partners have been busy rescuing their company from creditors.

Bank of Hawaii sued White Hat in August, alleging then that the company -- which is developing a 50-unit, affordable housing project in North Kona called University Heights West -- didn't make interest or principal payments on a 90-day, $50,000 loan that was due in February.

That suit came after R.M. Towill Corp. sued White Hat in June, saying it made "repeated demands" of the developers to pay $81,160.83 plus interest for engineering services that Towill conducted in 1994 and 1995.

The complaints recently were dismissed without prejudice, meaning that they could be brought back if payments aren't made. White Hat said the suits shouldn't have been filed in the first place and were the result of miscommunication between the creditors and their outside attorneys. White Hat said they're in the process of paying back the debts.

Jervis, White Hat's president and director, said that he has played a limited role in the development company since becoming a Bishop Estate trustee in 1994. He said he has been winding down his outside interest during the past 21/2 years but found it difficult to step away from White Hat since its development was already under way.

"This is a private matter," Jervis said. "There's no connection (to Bishop Estate)."

But one longtime Bishop Estate observer said the suits against Jervis's private company raises questions about how the trustee manages Bishop Estate's affairs -- a point that Jervis dismissed as an "offensive leap of logic."

"It's surprising that a trustee would be involving in that much litigation involving his own private interests," said Desmond Byrne. "If a trustee is involved in a bunch of lawsuits on their own deals, it raises a red flag."

The litigation is the latest obstacle faced by the project, which is years delayed.

About four years ago, the developers began marketing the project -- which is located on a 19-acre hillside strip near Keahole Airport -- and took reservations from about 350 prospective home buyers for 109 homes that they then planned to build, according to William Boyle, White Hat's vice president and director.

The company -- which paid $1.06 million in 1995 for the project's land after holding it under options for several years -- also sought a joint venture partner to help finance construction.

But when the Big Island real estate market went south in the early 1990s, the developers put the initial sales effort on hold. The downturn also made it difficult to attract partners, Boyle said.

"Everybody expressed disappointment that the project didn't work (then) but there haven't been a lot of (affordable) projects that have worked in west Hawaii," said Suzanne Patterson, Realtor and co-owner of the Prudential West Hawaii Realty, the listing agent for the project. "But this is going ahead."

Boyle said the developers have made the project more attractive by doubling lot sizes and reducing the number of homes to 50.

Prices for fee-simple, two-bedroom and three-bedroom homes at University Heights West start at $139,900 and top at $175,500. The lots ranging from 10,000 square feet to 20,000 square feet, according to a sales brochure.

Boyle said that there is strong demand for affordable housing in Kona and said about 80 percent of the project's 50 units already have been reserved by prospective buyers, who have submitted downpayments of about $1,000.

A recent study by The Prudential Locations Inc. shows that there are only six months of housing inventory for three-bedroom homes under $175,000 in the greater Kailua-Kona area.

"This is an exceptional, meritorious project," Boyle said. "We've made this an attractive project."

According to Boyle, the company hopes to get its construction loan by next month and plans to break ground soon after.

Boyle and Jervis both said that building will be financed by sales and the construction loan.

They both stressed that Bishop Estate has not invested any money in University Heights West nor have estate staffers worked on behalf of the project.

Bishop Estate declined comment, saying it has no involvement with White Hat. The estate referred all questions about White Hat to Jervis.

Boyle noted that the University Heights West project is unrelated to the 500-acre University of Hawaii Kona campus that was planned by the Waihee administration in the early 1990s. The campus, which lies next door to the White Hat project, has been put on the back burner by the Cayetano administration due to cost concerns.

Jervis is a long-time ally of former Gov. John Waihee and served on the state Judicial Selection Commission in the Waihee years.

Boyle said that the two suits against White Hat were due to a miscommunication between the creditors and their outside attorneys who filed the suits. He noted that White Hat is working to resolve the debts with Towill and Bank of Hawaii.

Boyle declined to say how much of the debts had been paid back or whether the company has other past-due debts.

Bank of Hawaii declined comment and a Towill executive did not return calls.

The outside attorneys for Towill declined comment and Bank of Hawaii's outside attorney did not return calls.

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