A New York-based banking corporation has filed an $86 million foreclosure suit claiming the owners of the iconic Kona Village Resort have not made good on their loan agreement.
Deutsche Bank Trust Co. Americas filed suit Nov. 4 in 3rd Circuit Court seeking to foreclose on the North Kona resort claiming that Kona Village Investors has “failed, refused and neglected” to repay more than $86.4 million in loans the bank provided the property owners in May 2012.
Kona Village Investors, the suit claims, failed to make the scheduled interest payment on Aug. 9, 2012, and monthly payments thereafter, as well as failing to repay the loan at full maturity on May 9 of this year.
“Although demand has been made by Plaintiff with respect to said principal and interest due and payable to Plaintiff, KVI has failed, refused and neglected to pay the same,” the lawsuit filed by Honolulu attorney James A. Stubenberg and Kealakekua-based Olson & Sons on behalf of Deutsche Bank said.
Deutsche Bank is seeking a judgment in its favor for the loan’s principal, interest, advances and attorney’s fees. The suit also asks the court instate a receiver to handle the resort immediately to “protect and preserve the property” and a commissioner appointed to sell the property. The bank has asked that the case be exempt from arbitration.
A hearing to determine whether a receiver will be appointed has been slated for 8 a.m. Nov. 26 before 3rd Circuit Court Chief Judge Ronald Ibarra.
Should the property’s sale by a court-appointed commissioner fail to cover the amount owed, Deutsche Bank is requesting a deficiency ruling — meaning Kona Village Investors would be held responsible for the difference.
The suit also names as defendants Valleycrest Landscape Development, Valleycrest Design Group, Consilium Partners and various John and Jane Doe entities. The parties may claim lien rights in the property, prompting Deutsche Bank to request the court make their claims, if any, subordinate to Deutsche Bank’s claim.
The resort, which opened in 1965, sustained significant damage, estimated in the tens of millions of dollars, in the March 2011 tsunami. The 82-acre resort has been closed since. Two hundred employees lost their jobs shortly after the tsunami and an additional two dozen were laid off in September.
According to the suit, in March 2007, Deutsche Bank executed a loan and security agreement. Deutsche Bank thereafter advanced loan funds to Kona Village Investors, including two, valued at $77 million and $10 million, in May 2012.
In addition to failing to pay interest and repay the loan at full maturity, Kona Village Investments ceased paying property taxes, ground rent and contractors, in violation of the loan agreement, according to the suit.
Kamehameha Schools, from which Kona Village Investments leases the land upon which the resort is situated, filed a notice of default, demand for cure, and notice of imminent termination against Kona Village Investments on Oct. 2.
As of Oct. 24, according to the suit, Kona Village Investments owes Deutsche Bank a principal balance of $81.38 million, accrued interest of $1.91 million, and default interest of $2.98 million for a total of $86.4 million.
Messages left for Kona Village Resort CEO Pat Fitzgerald, Kona Village Investors attorney Steven Lim, and Deutsche Bank attorney James Stubenberg were not returned as of press time Friday.
