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Ilikai lender seeking to replace receiver amid dispute over fees


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POSTED: Friday, February 20, 2009

It is unclear whether the lender of the troubled Ilikai hotel will keep operations alive after asking a Circuit Court judge to replace its court-appointed receiver, whose fees are being opposed by both the lender and developer of the landmark Waikiki property.

iStar FM Loans LLC filed a motion this week to install local attorney George Van Buren to manage hotel operations and auction off in foreclosure 203 hotel condominium units owned by embattled Big Island developer Brian Anderson in place of Joseph Toy, whose receivership began Oct. 29.

Toy most recently asked the court to order iStar to fund operations after the lender indicated that it would no longer pay the ongoing expenses of the hotel.

The lender will address the issue of additional funding with the substitute receiver at the “;appropriate time,”; according to Andrew Backman, iStar's senior vice president of investor relations and marketing.

“;The whole thing is a big scandal,”; Anderson's attorney Gary Dubin said of what he described as the “;exaggerated”; fees of the receiver and his attorneys. Since the end of October the fees have totaled about $800,000, he said.

However, Toy said his firm and outside professionals racked up expenses not conducive to a typical receivership as a result of the unusually complex and acrimonious situation at the circa-1960s hotel, immortalized in the television show “;Hawaii Five-O.”;

“;This is the most complex receivership I've ever seen,”; said Toy, who hasn't been paid for receivership duties as of yet. The court will determine the amount of payment at a later date, but has scheduled a hearing for Monday on the receivership issue.

“;There were no books and records for the hotel that were reliable, bank statements had not been reconciled for two years,”; he said. “;The last financial statement (Anderson's company) Anekona Management did wasn't until September 2008 and even that was unreliable.”;

In addition to a lack of cash controls, Anekona co-mingled money from other businesses and set up an elaborate cash system of about 20 different bank accounts, according to court records. The receiver has recovered about $200,000 in customer credit card charges that was never paid to the hotel or reconciled.

“;All of those very complicated time-consuming operations had to be untangled,”; Toy said.

Anekona LLC bought 343 units and the Ilikai's common areas in July 2006 for $218 million with ambitious plans to reposition the property into an upscale condominium hotel, but Anderson's dreams came crumbling down when units sales failed to materialize, battles with homeowners and investors mounted and the economy took a severe turn for the worse.