An embattled owner of the Grand Naniloa Hotel is asking for a second chance after the Board of Land and Natural Resources denied him a request to refinance the mortgage for the building.
The BLNR on June 9 denied a request by Ed Bushor — president of Tower Development, the primary partner in WHR LLC, the corporate entity that owns the Naniloa — to refinance its current $50 million mortgage with a $62 million mortgage from another lender.
During that meeting, board members expressed concerns about WHR’s finances, and with Bushor not present to address their questions, they ultimately concluded that denying the request was in the state’s best interest.
However, Bushor is calling for a do-over, claiming that he had missed the June 9 meeting because he had been misinformed about its date.
According to a letter that representatives for Bushor and WHR submitted to the BLNR, Bushor “mistakenly believed that the hearing was to be held at the end of the following week.”
Department of Land and Natural Resources officials dispute that claim, however.
In correspondence with Bushor, DLNR Land Division Administrator Russell Tsuji stated that there was no way Bushor — who was present at a May 31 board hearing regarding the same issue — wasn’t aware of the next hearing date.
“Mr. Bushor was present in the boardroom when board member Chris Yuen made a motion to defer action on all three items until the next meeting of June 9, 2022,” Tsuji wrote in a letter. That letter goes on to list several other pieces of correspondence between Bushor and the DLNR since May 31 that all clearly state that the next hearing would be on June 9.
“Clearly Mr. Bushor received notice of the June 9, 2022, board meeting on multiple occasions but chose not to attend to present testimony or answer questions, perhaps for some strategic or other tactical reason,” Tsuji’s letter concludes.
Neither Tsuji’s letter nor subsequent correspondence between Bushor and Tsuji addresses the remainder of Bushor’s letter, which goes on to make rebuttals to concerns raised by board members and Tsuji during the June 9 hearing.
In particular, Bushor’s letter claims that the lender for WHR’s current mortgage — Wilmington Trust — has forced WHR into its current position by insisting that WHR refinance its $50 million loan.
According to the letter, Rialto Capital Advisors, a service in the employ of Wilmington Trust, assumed financial management of the Naniloa in October 2021 and demanded that WHR consent to a court-appointed receiver to take control of the property, which WHR protested because, the letter claims, the hotel was profitable at the time.
Since October, the letter claims, all “all cash generated by the hotel has been swept into accounts exclusively under the control of Rialto.” It goes on to allege that Rialto refused to pay any utilities, vendors, suppliers, hotel management, employee payroll or franchise fees in order to increase pressure on WHR to agree to the court-appointed receiver.
“All of the monetary defaults from October 2021 forward were manufactured by Rialto through its control of the hotel’s cash as a mechanism to force WHR to allow a receiver to take over the hotel, notwithstanding the fact that the hotel’s financial performance has generated sufficient cash to pay hotel obligations as they become due,” the letter states.
WHR then entered an agreement to pay off the existing loan by refinancing through another lender, but that process has been delayed by Rialto repeatedly imposing further financial burdens upon WHR, such as retroactive default interest fees, the letter claims.
Bushor’s letter partly served to deflect criticism from the BLNR that implied he and WHR had mismanaged the property. The letter insists that the hotel had returned to profitability after the worst impacts of the COVID-19 pandemic, but was forced into its current predicament by unreasonable demands from Rialto.
The letter also addresses concerns by the BLNR that the current loan had been transferred from its initial lender, Wells Fargo, to Wilmington Trust without the knowledge or consent of the board. Those concerns are countered by the claim that WHR also was unaware of that transfer until after the fact.
Finally, the letter lists several reasons that the proposed $62 million loan is actually viable, of which Tsuji was skeptical at the June 9 hearing. Those reasons include assurances that the loan’s interest rates, while adjustable, do have a maximum limit, and that Hilton — of which the Naniloa is a franchise — approves of the new loan.
“All of the pieces are in place to move forward with a new partner that will allow WHR to continue operating what has, due to WHR’s efforts, become a highly profitable operation that brings an enormous benefit to the local community, the Big Island, and State of Hawaii,” the letter concludes. “As such, we believe that the board’s consent to the refinancing is both reasonable and appropriate, and is the best outcome for all parties, as it avoids the time, expense, and uncertain outcomes that a foreclosure would have.”
In his correspondence with Tsuji, Bushor requested that the BLNR take up the matter yet again at its next meeting on Friday, and promised to send pertinent documents to Tsuji by June 14.
Tsuji, responding to that request on June 15, wrote: “The 14th came and went, and we did not receive anything from you or on your behalf. You will not be on the agenda.”
Despite this, and following an apologetic email Bushor sent last Thursday, the Naniloa’s mortgage issue is now on the BLNR’s June 24 agenda.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.