Hokulia CEO to move on

By ERIN MILLER

Stephens Media

After 11 years as the public face of one of West Hawaii’s most litigated developments, John De Fries is headed back to private practice.

De Fries joined 1250 Oceanside Partners in late 2000, initially in an interim capacity, a consultant helping developer Lyle Anderson find a new CEO. In June 2001, De Fries took on the job full-time.

It wasn’t an easy time to join the company, which was developing the 660-lot, luxury Hokulia subdivision.

“I knew we were in uncharted waters,” De Fries said late last week. “We were already 10 months into the lawsuit.”

That first lawsuit, brought by Jack Kelly, James Medeiros, Patrick Cunningham, Michele Wilkins and Charles Flaherty, challenged the developers’ right to create a high-end residential subdivision on agriculture-classified land. The plaintiffs prevailed, leading to what De Fries said was likely the biggest blow to the project, which suffered a series of setbacks in the last decade.

Third Circuit Court Judge Ronald Ibarra issued an injunction, shutting down the work for two-and-a-half years, until the parties settled in 2006.

“(The project had) $330 million already invested in the ground,” De Fries said. “There’s a handful of us who knew at that time the project had been damaged. Once you bring a system that immense down, the cost to remobilize is also immense.”

In essence, Ibarra told county officials they didn’t have the authority to let Anderson proceed with the project as proposed. Anderson was supposed to have known better, even though the county and state had been letting developers do just what Anderson proposed for decades, De Fries said. At issue was the use of land zoned for agricultural use that was not agricultural in nature, a practice, he added, the county allows still. While cultural concerns were cited and repeated in the community as the underlying factor in the suit, it was land use issues that framed the case, he said.

Two unusually heavy storms, about five months apart in 2000, led to significant runoff into the ocean.

“Clearly, the runoff of silt and mud into the ocean was a clear violation,” De Fries said “Five miles north and five miles south (also) had brown water, but that wasn’t relevant because we had a construction plan that imposed certain conditions.”

The project’s erosion control measures were in compliance with that plan, De Fries said. They just couldn’t hold back the runoff.

The court absolved the project of allegations of burial desecration. De Fries learned, while working on the project, of a personal connection with at least one burial on the property. His 93-year-old grandmother died in June 2001. Several months later, his cousins showed him documents his grandmother had kept referencing the lava tube in which his great-grandmother had been buried.

De Fries never entered the site, but he did cross reference his grandmother’s papers with archaeological studies and confirmed the lava tube had been marked as a burial site.

The company, he said, never showed disrespect toward the burial or other cultural sites. The standards for protecting the cultural sites were in place before he began working for 1250 Oceanside, he said.

The injunction aside, the beleaguered project faced other challenges. One was the cloud of more litigation, including lawsuits regarding the condemnation of land for the Mamalahoa Highway bypass — which has yet to be completed.

When Anderson went to begin implementing the terms of the settlement agreement in late 2007, he spoke to the project’s bank, taking a new business plan to the London financiers. Bank officials told him to come back after the holidays, in early 2008. He did — and was told he was in default.

De Fries is leaving — his last day is March 31 — but the project may begin moving forward again, he said.

Lloyd’s Banking Group and Hokulia lot owners have negotiated an agreement to let the lot owners take over the golf course, clubhouse and other amenities.

“The decision-making is moved to Kona,” he said. “I expect them to start amending the members’ policy to encourage cash flow. The success of managing that club well is going to have an impact on land values.” While in receivership, Hokulia has been answering to a New York-based legal group, De Fries said.

Absorbing the operating costs is a bold move for the members to make, he added. To help offset costs, the bank has also agreed to give the landowners additional property. The bank is trying to sell the remaining property, and has talked to two or three investment groups.

“The bank is prepared to take a major write-down on the portfolio,” he said.

Any new owner will need to meet with county officials, lot owners and the settlement partners. That 2006 settlement agreement and its provisions remain in place, no matter who owns and develops the project, De Fries said.

De Fries said he’ll take some time off, then he’s got a few projects in the works, one on Oahu, another on Maui. Kona will remain his home base, he said.

Kona may not have seen the last of Anderson, either. He remains the largest landowner at Hokulia, De Fries said. He considers Anderson a good friend.

If he could do things over again, De Fries said, he would have tried to have Anderson be more visible during the project’s early stages.

“He typically operates under the radar,” De Fries said. “He should have been the face of Hokulia. I don’t think he deserved to be injured in this way by a court hearing.”

Email Erin Miller at
emiller@westhawaiitoday.com.