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Kona Surf
owner faces
foreclosure lawsuit

The Japan-based owner
closed the property in June,
citing large losses

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By Tim Ruel
Star-Bulletin

A California developer who failed to buy the Kona Surf Resort last year has filed a $30 million foreclosure suit against the hotel's owner Otaka Inc.

Moshe Silagi, through KSR Mortgage LLC, sued in late December to foreclose on mortgage liens against 20 acres of leasehold resort land underneath the hotel and its amenities, according to state records. Sources said Silagi has been looking to sell his interest in KSR Mortgage to another unidentified company.

Silagi, who is affiliated with Silagi Development & Management in Thousand Oaks, Calif., could not be reached for comment.

Silagi secured the mortgage to Kona Surf from the property's lender, Tokyo-based Chuo Mitsui Trust & Banking Co., on June 29, a day before Silagi said he dropped negotiations to buy the hotel.

The land under the beachfront resort is owned by the Kamehameha Investment Corp., a for-profit subsidiary of the Kamehameha Schools. The hotel had been listed at $15 million.

Tokyo-based Otaka closed the resort in late June, laying off more than 200 workers, citing annual losses of $3 million since 1991. Otaka bought the hotel in 1986 for $24 million, records show.

An Otaka spokeswoman declined comment, saying the company does not respond to inquiries about litigation. In November, Otaka sold the Hawaiian Regent Hotel, Waikiki's third largest resort, to Marriott International Inc. for $125.5 million.

The 530-room Kona Surf, built as a four-star resort in 1971 on Keauhou Bay, has fallen into disrepair.

Real estate broker John Michael White, who has previously represented interested suitors in the hotel, said the property needs several million dollars in renovations, but carries lots of potential. "It's a great property, and whoever buys it is going to have a bargain," he said.