Amfac, ERS near
suit settlement

State must decide to sell or keep
foreclosed Maui golf course

By Tim Ruel

The state Employees' Retirement System is nearing a settlement of its foreclosure lawsuit against Amfac Hawaii, potentially posing a quandary for state officials.

The ERS sued Amfac in state Circuit Court two years ago, saying the former "Big 5" company defaulted on $77.4 million from principal and interest on a 1991 loan.

Repayment of the loan was secured by a mortgage on two 18-hole resort golf courses in Kaanapali, Maui, owned by Amfac Property Investment Corp. Amfac has contested the foreclosure and countersued the ERS.

If the settlement gives ownership of the Royal Kaanapali golf courses to the ERS, the deal poses a question. Does the state sell the courses now and take a loss, or keep the golf courses, operate them and sell later?

Andres Albano Jr., vice president of CB Richard Ellis Hawaii, estimated that Maui golf courses could sell for $1 million per hole. Assuming the state could get that much for the Royal Kaanapali Golf Courses, the sale price, $36 million, would be less than half the $77 million Amfac allegedly defaulted on in 2000.

The board of trustees of the ERS plans to discuss the settlement in a closed executive session during its regular meeting Monday. Terms would likely become available if the settlement is finalized and filed in Circuit Court.

Amfac and the ERS have been in active settlement discussions for the past several months, according to a court filing in the Chapter 11 bankruptcy case of Amfac. Late last month, a Chicago bankruptcy judge approved an agreement between Amfac and the ERS that paved the way for settlement talks to continue while Amfac goes through the bankruptcy process. Days after the agreement was accepted, Amfac's reorganization plan received final confirmation.

The ERS has a deadline of Oct. 15 to object to Amfac's reorganization plan, should settlement talks break off.

"We are continuing to work on a settlement and appear to be making some progress," ERS attorney Don Gelber said in a recent interview. It's not clear exactly when the settlement will be finalized.

As of last year, the ERS reported having $516.3 million in real estate investments, $101.4 million in mortgages and $59.5 million in possessed property. That accounted for 7.3 percent of the system's $9.28 billion in total investments.

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