STAR-BULLETIN / 2000
Golfers finish up on the 18th green at the Royal Kaanapali Golf Course on Maui. The state is likely to take over the course as part of a settlement with former Big 5 company Amfac.
Court OKs
Amfac settlementThe deal paves the way
for the state to acquire
two Maui golf courses
A nearly three-year controversy between the state and former Big 5 company Amfac is over, with court approval yesterday of a settlement that paves the way for the state pension fund to acquire two 18-hole Maui golf courses out of foreclosure.
State Circuit Judge Karen Blondin approved the settlement yesterday morning and praised attorneys on all sides for their work. The settlement talks took nearly a year because of real estate complexities.
The controversy stems from a $66 million loan to Amfac from the state Employees' Retirement System in 1991.
Amfac stopped making loan payments three years ago, and the state sued to foreclose on the collateral, the Royal Kaanapali Golf Courses on Maui.
Amfac countersued the state, then filed for Chapter 11 reorganization bankruptcy in Chicago, carrying more than $300 million in debt. The golf courses were not part of the bankruptcy.
The state has said it is owed approximately $96 million by Amfac, including penalties, interest and various charges.
Other than the 305-acre golf courses, the state has no recourse for the loan.
The end of the legal dispute is welcome news to the Kaanapali resort area of West Maui, which supports 5,000 hotel and resort units. The Royal Kaanapali Golf Courses are the only courses in Kaanapali, though there are others in nearby Kapalua and elsewhere on Maui.
The Royal Kaanapali North Course, designed by Robert Trent Jones Sr., is 41 years old, while the South Course is nearly 30 years old and both need a large capital infusion, observers said.
A Senior PGA Tour event, the EMC Kaanapali Classic, was held at the North Course until 2001, when the tournament moved to the Turtle Bay Resort on Oahu.
The two courses have been managed since March 2002 by court-appointed receiver Joseph Toy, who has been able to make limited improvements.
"Let's just say that they are not up to the world-class standard of the resort itself, but the courses are still great to play," said Shelley Kekuna, marketing director for the Kaanapali Beach Resort Association, which represents six hotels, four condominium developments and other resort businesses.
"We're not having people coming back and complaining about (the golf courses), which is a big improvement for us," Kekuna said. "We're very glad there's been some resolve."
Under the terms of the settlement, the state will bid for the Royal Kaanapali Golf Courses at a public foreclosure auction that is tentatively scheduled for June 25, pending a court order. The court named Toy as the property's foreclosure commissioner yesterday.
For those who think the auction poses a chance to win discounted real estate, note this: The upset price has been set by the court at $60 million, and bidders need financial qualification.
The state is expected to emerge the winning bidder, though a sale requires court confirmation.
A Chicago real estate investment consultant to the state's retirement system is reviewing the financial potential of the golf courses, and had no comment yesterday.
The state pension fund provides benefits for more than 90,000 city, county and state employees, retirees and beneficiaries.
The fund primarily invests in stocks, bonds and other securities, but its investments also included $709.3 million in real estate as of June 2002, about 9 percent of its $7.8 billion portfolio.
Amfac, which once owned nearly 60,000 acres in Hawaii as well as the former Liberty House department store chain, has emerged from bankruptcy as a much smaller land development company.
It is planning a residential project for several thousand acres in West Maui.
