Royal Kunia Phase II gets financing
Almost $100 million will help Herbert Horita build 2,000 units overlooking Pearl Harbor
Two California lenders have teamed up to lend Herbert Horita $97.9 million to develop the long-stalled second phase of the Royal Kunia Phase II housing project.
The loans -- which come from California Mortgage & Realty and Canyon Capital Realty Advisors -- will pull Horita's Halekua Development Corp. out of debt and provide close to $20 million in pre-development and infrastucture costs.
Royal Kunia Phase II gets funding
Approximately 2,000 more homes are once again slated for Royal Kunia, in the long-awaited second phase of the master-planned community in central Oahu. The project had been stalled since 2003 when developer Herbert Horita's company, Halekua Development Corp., filed for bankruptcy.
Yesterday Horita said he had won 97.9 million in backing from two California lenders -- Canyon Capital Realty Advisors and California Mortgage & Realty -- to build Royal Kunia Phase II.
Horita -- the winning bidder at a bankruptcy auction for the 161-acre project site in August -- also announced yesterday that he has arranged for Stanford Carr to manage the pre-development phase of project as well as develop some parts of Royal Kunia II.
A third of the homes, slated for 161 acres of residential-zoned land overlooking Pearl Harbor, will be affordable. The first delivery of homes is expected in late 2009.
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Royal Kunia Phase II, which was stalled in 2003 by Halekua's bankruptcy, is expected to provide 2,000 homes on 161 acres of residential-zoned land overlooking Pearl Harbor.
Phase II is the long-awaited second half of a master-planned community that also is to include an elementary school, county park and recreation center. One-third of the homes are slated as affordable.
Horita still must obtain building permits and build infrastructure before proceeding with the housing.
Horita, who has built thousands of homes in Hawaii, was the top bidder in a bankruptcy auction for the long-delayed project in August. He offered $50.2 million, topping Stanford Carr Development by just about $100,000.
Bankruptcy attorney Jerrold Guben said the sale closed this week.
Castle & Cooke, which led the development team that completed Phase I of Royal Kunia, was expected to put forth a bid, but did not do so, according to Guben.
Stanford Carr will be the project manager for the pre-development phase, as well as parts of the project.
San Francisco-based California Mortgage offered $42.9 million, while Los Angeles-based Canyon Capital offered $55 million.
California Mortgage arranged the deal, bringing Canyon in as a second lender. It is the first deal they have funded together.
"What we really got excited about is it's on one of the last few large parcels of entitled land that is still available," said Canyon principal Jonathan Roth. "We believed this project would not only make a sound investment, but enable us to do something good for the community."
Greg Smith, senior officer at California Mortgage, said the deal was made during the summer of last year, and that it was able to back Horita during his bid at the bankruptcy auction.
"When we saw this project, we saw the underlying value," said Smith. "We believe in the strength of the Hawaii housing market, and we're happy with the community benefits this project will provide."
Horita's company has obtained approvals to move forward from the state Land Use Commission, though it is still required to transfer 150 acres for an agricultural park. The first homes should be delivered in late 2009.
Real estate analyst Ricky Cassiday believes the homes have potential, despite today's slowing residential market.
"Any time you have a good location like that, with a good product, you'll find a market, especially the single-family market," said Cassiday. "It's always been pretty steady."
