Bank Forecloses on Kohala Preserve Conservation Trust – What Next?

It will come as no surprise to readers of my previous blog posts about the pending foreclosure auction on the 7,000 acres of Kohala Preserve Conservation Trust (KPCT) in North Kohala to learn that the bank’s credit bid was accepted at the confirmation hearing last week. While the aggressiveness of the lender in pursuit of foreclosure has left knowledgeable heads shaking in amazement “Do they really know what they’re getting themselves into as owners?”, the real question is: What happens next?

The Kohala Ditch runs through much of the mauka property in the sale, affecting irrigation water users downstream

How will the bank sell these prime Kohala lands? Who will buy?

Normally, the lenders we deal with say they are not in the business of owning real estate. They often hire an asset management firm or real estate brokerage to care for and dispose of their REO “real estate owned” portfolios. 

The first question is how will the new owner of KPCT’s huge acreage manage these complicated lands, which have on them portions of the Kohala Ditch irrigation system, ecotourism businesses, and culturally sensitive oceanfront structures. It is my understanding that in the near term it will be business as usual, with Surety Kohala continuing in a management role.

While the foreclosure auction was for the entirety of the more than 50 parcels, as that was the security for the loan, once the bank has possession they can sell in any manner they choose. They could sell everything to one of the parties that has shown interest and ability to buy the package and be done with it, or they could try to maximize value by selling portions separately.

For example, the eleven parcels at Mahukona could be sold to a resort developer or an individual seeking a legacy oceanfront home site. The forty parcels mauka of Akoni Pule Highway in the Halaula, Halawa, and Makapala areas could be sold as a 6,600-acre ranch.

It is hard to imagine smaller parcels being sold individually. Many are landlocked; many are without water. My guess is the bank owner will maximize the value of their assets by packaging for buyers with the wherewithal to develop or at least deal with the costs of managing thousands of acres.

The Kohala community prays for a Hawaii real estate buyer who is more Oprah than Larry Ellison. By that I mean someone whose interest is more in conservation and personal use (like what Oprah has done with her series of purchases on Maui, Hana and Upcountry) than in investing in luxury resorts or development (as one assumes is the plan Mr. Ellison has for the island of Lanai).

Top Alternatives for the Qualified Buyer

While the Mahukona parcels are spectacular, a buyer who just wants a superb resort-quality oceanfront parcel has a much less complicated option with existing modest structures in place and without the long history of community opposition to development. Mau’umae consists of only 8.39 acres, but that includes 1,500 feet of oceanfront and a white sand beach just north of the Mauna Kea Resort.

White sand beach property near Mauna Kea Resort offered for $32,994,000 (MLS# 257494)

If the Kohala large mauka acreage appeals to the grass-fed cattle ranch buyer out there, consider one of the established legacy-quality Big Island ranch properties for sale. Moving from Mauna Kea Resort to the slopes of Mauna Kea the volcano, on the Hamakua Coast near Hilo (Pauuilo) is the Kukaiau Ranch. I get “chicken skin” driving through the old ‘ohia forest on this working ranch of 9,390 acres.

Although it is listed as “vacant land,” the property actually consists of 22 parcels and the 14 homes and ranch headquarters at Umikoa Village, with a herd of 890 cattle included. Part of the land is leased as a koa plantation. If I’m not mistaken, at one time the seller considered trying to grow wine grapes…and Hamakua coast coffee is my favorite.

Over 9,000 acres, the Kukaiau Ranch is listed for $16,800,000 including cattle (MLS# 253657)

There are other oceanfront parcels and large ranches currently for sale on the Big Island. Call or email if you’d like to discuss which would be the best fit for your objectives.

A hui hou,

Beth Thoma Robinson, R(B)
Direct: 808.443.4588  
Email: beth@hawaiilife.com