Kailua center
lessee files for
bankruptcy
Capital Resources
By Peter Wagner
International lists $239,729 in
debts to eight creditors
Star-BulletinA Kailua corporation that took over Kailua Town Center last year has filed for bankruptcy, pre-empting its first rent payment on the leasehold property.
Capital Resources International Inc. filed a Chapter 11 petition in U.S. Bankruptcy Court on Jan. 11 -- the day its $180,000 rent was due, according to landlord Kaneohe Ranch Ltd.
The first $90,000 semi-annual rent payment had been overdue in July, triggering a lawsuit by Kaneohe Ranch. But the landlord later agreed to extend the deadline for Capital Resources to Jan. 11.
An initial filing in U.S. Bankruptcy Court last week showed $239,729 in debts to eight creditors. The largest creditor, Kaneohe Ranch, is owed $184,500, followed by the city property tax division, owed $27,365.
Kailua Town Center, on 100,475 square feet of land off Hekili Street, was acquired by Capital Resources by sub-lease last year from the Pacific Association of the Seventh-Day Adventist Church. The property includes a 46,000-square-foot building that has been losing tenants in recent years, most recently Foodland Super Market which pulled out last year leaving a small pub as the only tenant.
Leaking roofs, a weathered parking lot and a lease due to expire in 2009 are among problems cited at the property, developed by Dr. Robert C.H. Chung.
Chung's widow, May Chung, later donated the property to the Seventh-Day Adventist Church, in which she and her husband -- a former chairman of the Honolulu Police Commission -- had been active.
Capital Resources is headed by Kailua businessman Norman F. Frank Sr., who also heads Trans-Oceanic Group, Inc. He recently was cleared of illegal activities by the Hawaii Supreme Court.
Frank did not return repeated telephone calls from the Star-Bulletin.
A former Honolulu police officer, Frank last year was convicted by a Circuit Court jury of operating Trans-Oceanic with stolen money. He was sentenced to 10 years in prison and to pay $393,000 in restitution to five investors over a failed land deal in North Carolina.
But Frank, free on $40,000 bail pending appeal of the ruling, was cleared of all charges by the high court last month.
The action came at the request of city prosecutors, who recently found the jury's verdict inconsistent -- finding Frank guilty of operating Trans-Oceanic with stolen money while innocent of theft.
Frank argued in court he solicited short-term loans -- not investments -- for a planned recreational development on 7,000 acres in Boiling Springs Lakes, N.C. He promised to repay some contributors up to three times the face value of their loans.
Meanwhile, Pacific Union Association of the Seventh-Day Adventist Church, which holds the master lease on the Kailua property, was surprised by last week's bankruptcy filing.
"I see it as a delaying tactic," said Frank Cornwell, president of the Western Adventist Foundation, administrator of the Pacific Union Association trust.
Cornwell said he understood Capital Resources planned to use the property in connection with environmental cleanup projects in eastern Europe.
The Town Center property has been passed around like a hot potato in recent years. According to Kaneohe Ranch, Capital Resources promised to make about $600,000 in repairs to the property as part of its lease agreement.
Kaneohe Ranch would not discuss future development plans in the area but notes that Town Center is among 10 leasehold properties in the neighborhood with leases that expire in 2009.
