Makena Beach & Golf Resort…Going Once, Going Twice…Sold for $55 Million

The Makena Beach and Golf Resort, formerly known as The Maui Prince, is the only resort in Makena

Well maybe not! Yes, the property went to auction and yes, it did sell back to Wells Fargo Bank, the lenders’ trustee. But, like they say in show business…it ain’t over till the fat lady sings! In this case, that would be the court confirmation hearing which will take place within 30 – 45 days from the date of acceptance.

In all of my years of selling real estate, I was never able to attend a foreclosure auction. What better auction to attend, I thought, than the “mother of all foreclosure sales”…the largest foreclosure in Maui’s history. Nothing much has changed in the past 100 years. Properties still get sold on the steps of the courthouse. Through the magic of streaming video, you can attend too. The sound gets a little weak but bump it up a bit and you should be all good.

So how did all of this come about, you ask? Here is some history to the troubled Maui Prince now known as the Makena Beach and Golf Resort.

The resort was originally built in 1985 by Seibu Holdings of Japan. It was built to add to their growing portfolio of resort properties. The site was 1800 prime Maluaka Beach front property in Makena. The plan was for 310 luxurious guest rooms and 19 suites, all with ocean views. It would also be home to two 18 hole Robert Trent Jones, Jr. designed golf courses (the north course is operational, the south needs rehab to open), a driving range, practice putting greens, golf clubhouse and pro shop, 6 tennis courts, 5 restaurants and bars, 5200 sq. ft. of meeting space, 7 outdoor locations for receptions, a swimming pool, wading pool, 2 jacuzzi’s, retail space, a fitness center, hiking trails and 1,300 acres of vacant land.

The dream was realized and the Maui Prince was a success for a decade and a half. I was fortunate enough to be a guest at the hotel for my 25th high school class reunion. Then the downturn of the Japanese economy, tech bubble, 9/11 and a myriad of other reasons forced Seibu Holdings to liquidate many of its under performing assets.

Fast forward to 2007—A hui comprised of Morgan Stanley Real Estate, Trinity Investments, LLC & Dowling Co. agreed to acquire the Maui Prince for a staggering $575 million, the largest price ever paid for a Maui hotel. The total debt for buying the property from Seibu was $411 million. The financing came from a consortium of lenders led by Wells Fargo Bank. Their plan was to develop the vacant land, building up to 1100 luxury homes, condos and apartments. Their 15 year plan was expected to cost $800 million. Woopsie—bet they never saw their demise coming so quickly!

By September 2009, the economy had declined so much and occupancy at the hotel had dropped so much that the resort announced it would shut down. The creditors were unable to guarantee the hotel the funding it needed to continue paying employees to operate the hotel. Most Maui residents remember waiting till the eleventh hour for a rescue. And indeed it happened. With the help of a court appointed receiver, the lien holders stepped in to cover the expenses of the hotel, retained Benchmark Management to oversee operations and partnered with the ILWU union. Phew, just in the nick of time!

Can you imagine what kind of ride it must have been for the 350 employees and management staff? You have a job, you don’t have a job, some of you have jobs. But as one person living through the ordeal told me that adversity made the group even stronger as a whole unit. The hotel that seemed to be slipping away is now poised for a comeback. Occupancy is up, business and pace are up year over year. Everyone feels that new ownership will bring even more job security.

18 hole Makena North Golf Course at Makena Beach and Golf Resort

Back to the foreclosure auction. As you have seen in the video, that the bidding began at $40 mil. Next bid was $50 mil then final at $55 mil. The auction was held to get the process going. The real fun will be at the confirmation hearing. You can count on MauiRealtorKen to be there. For now, the mortgage holders will be paying for the title with what is owed to them. Bidding can be reopened at the confirmation hearing if someone is willing to increase the offer by 5%. At that point all hell will break loose and who knows where if will end up.

As long as the bidding stays below$200 mil, most likely Wells Fargo Bank and it’s security holders will be the successful bidders. Anything over that, who knows. There is tremendous value in the undeveloped land. Latest figures from Chris Lau, the court appointed commissioner, was that 800 units may be developed on the property (subject to current conditions in planning). If Wells Fargo prevails, they will most likely hold on to the property until there is a turnaround in real estate prices. They, however, have no intentions of developing the land.

Soon, the saga of the Makena Beach and Golf Resort will come to a happy ending. Stay tuned for the results of the court confirmation.

If you would like additional information on the Makena area, please ready my blog, Makena, Maui’s Truly Undeveloped Paradise.

Please view some world class Makena Beach real estate at my Makena Beach Luxury Homes Gallery.

If you would like to contact me about owning or selling property in the Makena area, please contact me at ken@hawaiilife.com.