A manager of the Grand Naniloa Hotel pleaded to the state Board of Land and Natural Resources on Friday to give him a third chance to settle the hotel’s financial problems.
Ed Bushor, president of Tower Development — primary partner in WHR LLC, the corporate entity which owns the Grand Naniloa — appeared before the BLNR last week to request that he be allowed to refinance the $50 million mortgage on the hotel with a $54 million loan.
It was not Bushor’s first time pleading his case to the board over the hotel’s finances, nor was it the second. Last year, Bushor made a similar request, asking to refinance WHR’s mortgage with a $62 million loan from another lender.
And in 2021, the BLNR threatened to terminate WHR’s lease of the property — which is state land managed by the Department of Land and Natural Resources — unless it paid the state more than $600,000 in unpaid rent.
Bushor appeared at Friday’s BLNR hearing to explain the terms of the proposed loan, saying that all he wants at this early stage is a preliminary approval by the board regarding the amount of the loan and the interest rate, with finer details to be negotiated later in the process.
“We need you to work with us so positively, so that the employees that we care about — our employees love our team, and we got them through COVID without firing them, and we don’t want a foreclosure and a New York firm coming in and cleaning house,” said Bushor, audibly choking up. “These are our people that have been with us for seven years.
It’s important to us, our relationships with Hokulea, Merrie Monarch, these are things that improve Hilo. We do not want to lose one ounce of those relationships.”
But the loan was still a tough sell for the board, which grilled Bushor and his team about concerns raised by Russell Tsuji, administrator of DLNR’s Land Division.
Tsuji told the board Friday that he recommended that Bushor’s latest request be denied for several reasons, but primarily because the proposed terms of the $54 million loan were too risky for the state.
“If the board was to approve this loan, it provides the lender the absolute right to split up the loan into one or more mortgages and designate those,” Tsuji said. “… And they could sell those individually out. So, what you’ll have is more than just one mortgage on the property, but conceivably five or six.”
Tsuji also said the lender selling off such sub-mortgages would not require further approval from the BLNR.
Tsuji concluded that the new mortgage would not solve the Grand Naniloa’s financial woes, but would merely “kick the can down the road.”
“Most of our loans, the proceeds go back to improvements of the property, or maybe improvements of the operations of the company,” Tsuji said. “That is not occurring in this case. … It does not pay down or liquidate any of the principal balance. It basically is in a distressed mortgage situation … and it’s really to pay off that.”
An attorney representing WHR, Michael Lam, acknowledged that the history of the property and WHR’s relationship with the board has been tumultuous.
“There has been history, but what’s important is where this project came from,” Lam said. “I sat here 15 years ago … and at that time, nobody believed the hotel had any chance in hell to do anything. And the vision WHR had is where we are today.”
Lam agreed that all the loan documents could be made subject to board and attorney general approval, and subject to any reasonable terms proposed by the board.
Jordi deHoyos, vice president at Colliers International, explained that the terms of the loan are reasonable and typical of the industry, but added that the Naniloa’s situation is itself atypical.
“It’s a catch-22. It’s in a state of default, but it’s also a performing property,” deHoyos said.
“That’s usually not the case … everybody absolutely got hammered during COVID, everybody shut down. Naniloa is one of the few places that didn’t, and because they did that, they’ve actually put themselves in a position where they’re performing better than they ever have in the past.”
The board briefly went into a private executive session to discuss confidential details about Naniloa’s financial status.
Bushor also revealed that, should the loan be approved, he would step down from managing the property, to be replaced by hotel executive Ben Rafter as controlling partner. Lam said that leadership change was a requirement by the lender.
Due to the uncertainties regarding the status of WHR’s leadership and its financial capabilities, the board voted Friday to postpone the issue until its meeting on June 9.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.