Punalu‘u Village developers avoid foreclosure

A foreclosure lawsuit against developers of a controversial proposed commercial development near a popular black sand beach in Ka‘u has been withdrawn by the mortgage lender.

The order stipulating dismissal of all claims by S M Investment Partners against Black Sand Beach LLC was issued Wednesday by Hilo Circuit Judge Henry Nakamoto.

The dismissal was with prejudice, which means the lender is not allowed to refile the claims in this case.

Hilo attorney Lincoln Ashida, who represents Black Sand Beach, said his clients have paid off the $3.4 million mortgage on the 147-acre property inland of Punalu‘u Bay in Ka‘u, and there will be no public auction of the property.

”They own the property free of any encumbrances or outstanding loans or anything,” Ashida told the Tribune-Herald.

Black Sand Beach had sought a Special Management Area permit to build Punalu‘u Village, which would consist of 225 residential and vacation rental unit, a wellness center, retail shops, plus rehabilitation of the dilapidated Sea Mountain golf course. About 30 acres of the property would be dedicated to conservation.

In May, Nakamoto had granted summary judgment in the foreclosure case to S M Investment. Three organizations granted standing to intervene if a contested case hearing occurs — the Center for Biological Diversity, Native Hawaiian Legal Corporation and the nonprofit community group, ‘Iewe Hanau O Ka ‘Aina — hailed the bankruptcy judgment in a press release as a “hard-fought win … pausing plans for a sprawling luxury development that faced sustained public opposition.”

Hundreds of Ka‘u residents showed up to protest the development at a public hearing by the Windward Planning Commission on March 7, 2024. That hearing continued for a second day because of the volume of testimony.

Asked if his clients still intended to build Punalu‘u Village, Ashida replied, “That’s always a possibility, but not at the present time.”

“I think that there are certain aspects of that entire property that need to be taken care of — some security and safety issues on the property that need to be addressed,” Ashida said. “For example … one thing that I think has always been a concern, I think to the public at large … there shouldn’t be any vehicular parking on the beach, itself.

“If you go down there at any given time, there are cars that are actually parked on the beach. There’s a dedicated parking lot, but it’s not used. People, whether it’s tourists, locals or what have you — those cars shouldn’t be on the beach. It’s not healthy, and it’s not a good thing.”

In October 2023, Zendo Kern, then the county’s planning director, conditionally approved an SMA minor permit for a farmers market and fire break roads.

“I think the focus of our clients is that they already have the go-ahead to construct a farmers’ market, a people’s market across the street from the beach area,” Ashida said. “They’ve already procured the necessary approvals for that. They want to focus their energies on developing that, because the big benefit is for the local community members, the area residents to have a place to sell and display their goods and their wares — not only to the locals but to the tourists who visit the area.”

Black Sand Beach had earlier acquired 434 acres, including the parcel designated for the Punalu‘u Village development.

Opponents have called for an updated environmental impact statement to address a deteriorating wastewater system and its potential negative impact on coastal water quality.

According to the state Department of Commerce and Consumer Affairs, Black Sand Beach LLC was registered in April 2020 as a real estate development company. The manager is listed as Xiaoyuan Liu, and the trade name Punalu‘u Village has been registered through July 2027. The company’s mailing address is in Dublin, Calif.

“Our clients, Black Sand Beach LLC, it sounds like a big company or something, but really, they’re just three friends, at least two living in California, who hui’d their money together to get this property,” Ashida said. “Their concern right now is they’ve already dedicated almost the entirety of the shoreline to conservation. It was something they didn’t have to do but they did. They are very much aligned with preservation of the area.

“In order for the cleanup to occur, as a practical matter, it cannot happen overnight. Because the extent and duration of the neglect over the years prior to our clients taking ownership was so severe. There were squatters. There was alleged drug activity happening in the decrepit buildings up by the old restaurant. So gradually, through the help of local law enforcement and community volunteers, that’s being cleaned up.

“But any proposed development is on pause now.”

The Tribune-Herald reached out to the Center for Biological Diversity, Native Hawaiian Legal Corporation and ‘Iewe Hanau O Ka ‘Aina, but none replied in time for this story.

Email John Burnett at jburnett@hawaiitribune-herald.com.