HILO — Two hotel owners on Banyan Drive could go to head-to-head over the future of the former Uncle Billy’s Hilo Bay Hotel.
Ed Bushor, developer and part owner of the Grand Naniloa Hotel, said he plans to compete with Peter Savio if the state seeks a short-term lease for the property now named Pagoda Hilo Bay Hotel.
Savio received a month-to-month revocable permit for the 145-room hotel, located next to Naniloa, last February during direct negotiations with the state Department of Land and Natural Resources (DLNR). That was intended to keep it running after the land lease expired with the previous owner.
But since WHR, LLC, owner of the 383-room Naniloa, also expressed interest in the property, the department is now considering seeking competitive bids for a temporary lease or new revocable permit.
In a Dec. 9 report to the state Board of Land and Natural Resources, Hawaii Island District Land Agent Gordon Heit said DLNR will bring a proposal for it to review in early 2017.
Bushor confirmed in a text message the company would submit a proposal.
DLNR would consider a short-term lease since the aging hotel is estimated only to have a few more years of useful life left.
The property’s future will likely be determined by Hawaii County’s Banyan Drive redevelopment plan, which is being drafted.
WHR submitted its own proposal for a revocable permit last February.
In the report, Heit noted DLNR also is investigating a claim made by WHR that Savio violated the permit by renting rooms as dorms to University of Hawaii at Hilo students. A law firm representing Naniloa requested the Pagoda’s permit be terminated.
“A third party website advertising dorm-style rooms at the hotel has since deleted any reference to the availability of these rooms for students,” Heit said.
Savio said the previous owner had rented to students. He said he was honoring the existing agreements before he ended the short-term rental program last October.
A letter Naniloa’s lawyers sent to DLNR in August claimed its neighbor was hurting its business by renting rooms below market rate. The letter, which also noted delays in obtaining a redevelopment loan, requested a one-year deferment of Naniloa’s $500,000 annual lease.
That request has not been presented to the Land Board, and the Naniloa remains current in its lease payments, Heit said.
“It is not clear why WHR would want to obtain a lease on another hotel property requiring the payment of additional rent, when it is seeking rent deferment for Naniloa,” he noted.
Bushor said in a text that the lease deferral was no longer needed.
The Naniloa has partnered with DoubleTree by Hilton.
Bushor said in November that $30 million is being invested as part of its renovations, which includes a hula theme.
WHR acquired the hotel in 2013.
DLNR says a site evaluation of the former Uncle Billy’s hotel in 2014 estimated it had 5 to 10 years left of useful life.
“Based on the Erskine Report, the hotel improvements cannot be refurbished and should eventually be torn down,” Heit said.
A staff inspection on Nov. 3 found that several rooms on the top floors were closed due to roof leaks.
Savio said he eventually wants to build a “Pagoda” hotel at Waiakea Villas. He said he is using the former Uncle Billy’s to test the market and is not making money.
Savio speculated other parties could be interested in the Banyan Drive property in order to be in a good position to redevelop the site if that is included in the county’s plan.
Email Tom Callis at tcallis@hawaiitribune-herald.com.