Turtle Bay has 6 months to find buyer

If no buyer is found in six months, the property will go to the lenders

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Lenders are scheduled to take control of Oahu's controversial Turtle Bay Resort if it is not sold in six months.

Resort owner Oaktree Capital Management L.P. will lose the 858-acre property to its lenders, including Wells Fargo & Co. and Credit Suisse, which also will acquire about 472 acres of agricultural land mauka of Kamehameha Highway, said Stanford Carr, who was appointed by lenders in May to find a buyer and head resort operations as part of a foreclosure settlement between lenders and Oaktree.

However, a sale is proving difficult because of the state's involvement.

The state's participation has significantly affected marketing and valuation of the property, in addition to future bookings at the existing resort.

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The interim manager of Turtle Bay Resort has a six-month deadline to find a buyer before the controversial property on Oahu's North Shore is turned over to lenders.

If a sale isn't completed by the end of October, resort owner Oaktree Capital Management L.P. will lose the 858-acre property to its lenders, including Wells Fargo & Co. and Credit Suisse Group, which also will acquire about 472 acres of agricultural land mauka of Kamehameha Highway, Stanford Carr said yesterday to Gov. Linda Lingle's Turtle Bay Advisory Working Group, commissioned to find ways to acquire and preserve the rural property.

"In order to consummate a deal, you need a willing seller and willing buyer with agreed upon terms and price," said Carr, who was appointed by lenders in May to head resort operations as part of a foreclosure settlement between lenders and Oaktree, whose $400 million loan is backed by resort assets.

However, a sale is proving difficult because of the state's involvement, which has significantly affected marketing and valuation of the property, in addition to future bookings at the existing resort, he said.

That participation creates uncertainty since lawmakers passed this year a bill that would allow the state to condemn the property and acquire undeveloped land surrounding the resort under Hawaii's eminent domain law despite who owns it, Carr said.

"So (the state) got a trump card," he said. "It very much affects the marketability because of the risks in pursuing an acquisition. It sends the wrong message to the world about property rights in Hawaii - it's scary."

Carr is working to satisfy conditions needed to gain city approval to subdivide the property to possibly sell the resort off piece-by-piece, though that would make a sale much more complicated, he said.

New York-based Eastdil Secured LLC, a wholly-owned subsidiary of Wells Fargo, a second lien holder on the resort, is negotiating with potential buyers who have toured the property, including members of the governor's working group.

Credit Suisse filed a $283 million foreclosure lawsuit last December against Oaktree's local entity, Kuilima Resort Co. Under the foreclosure settlement, Kuilima still owns the property, while an affiliate of Oaktree holds the title to the 472 acres of mauka lands the state is seeking to preserve.

"You've got lenders that have to preserve the value of their asset," which is it's development rights, said Eric Gill, a member of the governor's advisory group. "It's important for the long-term viability of the resort to come up with an acceptable plan the community will embrace."

Controversy over Turtle Bay flared in 2006 when Kuilima announced plans to build an additional 3,500 hotel and condominium units on the property.