KAILUA-KONA — Aina Lea Inc., developer of The Villages at Aina Lea, has filed for Chapter 11 bankruptcy.
Company CEO and chairman Robert Wessels said Monday the move will allow the company to reorganize so development at the 3,000-acre South Kohala property can move forward.
“It gives us the chance to do what we set out to do,” he said.
Wessels declined to elaborate about the reorganization.
The filing came June 22 in U.S. Bankruptcy Court in Honolulu. It lists the company’s assets between more than $100 million and $500 million. Liabilities were estimated at more than $10 million and up to $50 million.
Among the top 20 creditors listed in the filing was TruStyle Pacific Builders of South Jordan, Utah, with an unsecured claim of more than $1.1 million.
West Hawaii Today reported June 19 about the development’s financial issues, legal woes and Hawaii County ordering Aina Lea Inc. to cease work for violations of a 2013 court order that required the developer to complete a supplemental environmental impact survey and conditions the county imposed when rezoning the land to allow for development.
The company also disclosed in financial statements filed earlier this year that its sustained losses from the get-go and has doubts about its future.
As previously reported, all work at the South Kohala site was again ordered to cease and Hawaii County notified Aina Lea Inc. in late May that it plans to start the process of reverting the land’s zoning “to its original” (unplanned) or a “more appropriate designation.”
On Monday, county Deputy Planning Director Daryn Arai said he wasn’t aware of last week’s filing. He said no work is going to be done until the company satisfies the requirements of the court.
The recent moves come amid a flurry of litigation, including foreclosure proceedings.
Earlier this month, a 3rd Circuit Court judge granted a foreclosure on a 23.559-acre area after Aina Lea Inc. failed to make good on a $6 million, two-year loan from Libo Zhang, a Chinese national, payable in November.
Zhang’s financing covered part of the $24 million that Aina Lea Inc. said it spent to acquire 1,011 acres from Bridge Aina Lea in 2015. Aina Lea Inc. also defaulted on a $14 million land loan it took out from Bridge Aina Lea in November 2015 for the purchase.
Bridge Aina Lea filed a suit against Aina Lea Inc. in April seeking to foreclose on the 1,011 acres and sell it to cover the $18.37 million it’s now owed by Aina Lea Inc. No details about the outcome of a motion for summary judgment scheduled to be heard Monday in 3rd Circuit Court were filed on the state court’s website by press time.
A third foreclosure lawsuit will be heard in August in 3rd Circuit Court. Canada-based Romspen Investment Corp. filed lawsuit in May seeking to foreclose on 37.863 acres that was a guarantee to a $12 million 2015 loan on which Aina Lea Inc. defaulted. The loan was to be used to develop, design, construct, furnish, market and sell 40 townhomes. The 37.863-acre parcel it is seeking to foreclose on has the construction of townhomes and other related improvements underway.
Bridge Aina Lea, based in Saipan, currently owns a 1,927-acre area classified agriculture and Aina Lea Inc., based in Waikoloa, owns 1,072 acres, of which about 1,060 acres is designated urban by the state. That urban classification was granted in 1989 when the development was first proposed and approved by the state Land Use Commission and has been the subject of numerous legal disputes since.
In Aina Lea Inc.’s most recent quarterly report to the U.S. Securities and Exchange Commission filed in February, the company said its initial project, phase I of The Villages at Aina Lea, includes plans to construct 384 townhomes (to be called Lulana Gardens) and 48 villas (to be called Whale’s Point) and develop 70 single-family residential lots (to be called Hoolei Village). The company said it already developed substantial infrastructure and commenced construction on 64 townhomes and was working with a leading golf course architect.
The future of Bridge Aina Lea, owner of the agricultural-classified land, is less clear. In March 2016, when the county revoked a use permit for six golf courses, county Planner Maija Cottle said Bridge Aina Lea had no plans for its acreage in the “near future.”
Email Tiffany DeMasters at tdemasters@westhawaiitoday.com.
