Unity House
seeking to foreclose
on $3.7 mil loan

The union nonprofit wants
the Hanohano family to pay
$10.5 million or sell its land

By Peter Wagner
Star-Bulletin

Union nonprofit Unity House Inc. wants to foreclose on a $3.7 million loan in which a large tract of Punaluu land was staked as collateral.

According to a complaint in Circuit Court, Unity House is seeking $10.5 million or sale of the land at public auction over the 1997 loan.

Named in the complaint are Hanohano Enterprises Inc. and Hanohano Family Inc., representing about 25 heirs to the property; and Sarai Ann Kalai Hanohano Vahey, who has a separate half-interest in the property.

The 75-acre ahupuaa -- a tract of land that stretches between the shoreline to the mountains -- has been in the Hanohano family for many generations. Called Papaakoko, the ahupuaa includes property under Pat's at Punaluu hotel and the Hanohano Hale condominiums.

The court documents describe a "hybrid transaction" in which about 40 acres was transferred to Unity House on Oct. 20, 1997. The $3.7 million deal gave the Hanohanos two options to repurchase the land -- for $8.7 million within six months or $10.5 million at a later date.

Additional land, believed to be about 20 acres, was transferred to Unity House after the first option expired, bringing the total to about 60 acres held as collateral on a new loan balance of $10.5 million.

But neither option was exercised, leaving the Hanohanos in default on the loan, Unity House said in its complaint.

Unity House attorney Roger Moseley said his client never sought the property and only agreed to take it as collateral on a short-term loan after being approached by an outside party.

"It's an investment and they're wanting to make a return on it and eventually want to get out of it," Moseley said. "They don't want to be a landlord for a long time."

Unity House was set up in 1951 by late union chief Art Rutledge as an umbrella organization to benefit members of Local 5 of the Hotel Employees and Restaurant Employees Union and the Hawaii Teamsters union.

Hanohano Enterprises attorney Dennis Ing had no comment on the foreclosure action, saying he hadn't seen the complaint.

According to Robert Hanohano, president of Hanohano Enterprises, the loan deal was brokered by Kailua businessman Norman Frank, whose company Capital Resources International claims to have contracts to clean up oil spills in the Far Eastern country of Azerbaijan.

The company, currently in Chapter 11 bankruptcy, is facing eviction at its Kailua Town Center headquarters for nonpayment of rent.

Hanohano told the Star-Bulletin earlier this year he loaned Frank part of the $3.7 million Unity House loan expecting Frank would pay the $8.7 million premium to repurchase the Punaluu property.

Frank didn't return Star-Bulletin phone calls.

Rudy Tam, managing director of Innovative Financial Services, a mortgage company serving Unity House that handled the Punaluu transaction, said Frank earlier approached Unity House for a loan for his Azerbaijan venture.

"When he brought this deal to Unity House, I turned it down at that time," Tam said. "Subsequently the Hanohano family got involved and we told them to bring collateral."

Meanwhile, attorney Tom Watts, representing apartment owners at Hanohano Hale in a separate lawsuit against Hanohano Enterprises, said the foreclosure move is aimed at heading off his suit.

"This is an attempt by Unity House to preempt us," he said.

The apartment owners in March sued Hanohano Enterprises for selling the land under their building to Unity House, saying they were denied their right under state law to make the first offer on the property.