Unity House Inc. emerged as the highest bidder yesterday afternoon at a foreclosure auction for the Lotus at Diamond Head in Waikiki.

The nonprofit, which serves labor workers, offered $8.5 million for the 51-room boutique hotel formerly known as the W Honolulu at the auction outside state Circuit Court.

The bid is still subject to court confirmation, although a 10 percent deposit was required.

State-appointed Commissioner Richard Emery confirmed that he received a cashier's check from Unity House. During the auction, he said he had a list of five potential bidders.

“;Traditionally, in this type of situation, you may get a bid at auction, but other people are watching,”; Emery said. “;They have another bite at the apple at the confirmation hearing.”;

At the hearing, to be scheduled in about 30 days, other buyers can reopen bidding with an offer 5 percent higher than Unity's.

Castle Hotels & Resorts continues to manage the property at 2885 Kalakaua Ave. on Waikiki's Gold Coast.

The Diamond Head Grill and bar at the Lotus, however, was closed down as of yesterday, Emery said, because it was not making money.

Unity House Chairman James Boersema, who put in the bid, said it would be an investment for the 58-year-old nonprofit, which owns several other properties on Oahu.

First Hawaiian Bank, which holds the first mortgage on the property, put in an initial bid of $5.7 million. Unity House upped it to $5.8 million.

Then Central Pacific Bank, which holds the second mortgage on the property, offered $8.1 million, and Unity House swooped in with $8.5 million.

The Lotus went into foreclosure last year under the ownership of Big Island developer Brian Anderson's company, Anekona W LLC.

Anderson filed for Chapter 11 bankruptcy in May, just 15 days before a scheduled foreclosure auction. But U.S. Bankruptcy Judge Robert Faris dismissed the case last month and, in a hearing yesterday morning, allowed the auction to proceed despite a motion for reconsideration.

Faris almost granted Anekona one more week to put together a potential deal, based on Anderson's claim that there was a buyer for his two notes. But Faris decided the buyer still could come forward in the foreclosure auction process.

Anderson said in court documents he had a February appraisal from CB Richard Ellis that gave the Lotus a market value of $16 million, and an agreement with Colliers Monroe Friedlander to list the property for $14 million.

He also said the Lotus would have greater value as a condotel, and had a letter of intent with Wilson Homecare to develop the hotel into a senior living residence.

In mid-August, Emery informed Anderson that his year-to-date losses at the Lotus through June 30 were at $529,996.03 and that he owed $207,711 in past due lease rents and property taxes.