The Department of Land and Natural Resources may back out of potentially leasing a pair of defunct Banyan Drive properties because of an ongoing lawsuit surrounding the sites.
The Board of Land and Natural Resources will discuss at its next meeting on Tuesday canceling a 2019 request for development proposals for the former Uncle Billy’s Hilo Bay Hotel and former Country Club Condominium Hotel.
A submittal by the DLNR’s Land Division recommends that the BLNR rescind the request in part because of a lawsuit that has embroiled Tower Development Inc., the only developer to submit proposals for both properties.
The Edward C. Olson Trust, a partner of Tower Development Inc. in WHR LLC, entity that owns the Grand Naniloa Hotel on Banyan Drive sued Tower CEO Ed Bushor and Tower President Stuart Miller for breach of fiduciary duty and tortious interference with a contract on the grounds that Tower was contractually prohibited from acquiring or developing any properties that could compete with the Grand Naniloa.
Although the BLNR was scheduled to discuss Tower’s proposals for the property at a meeting in September of last year, the filing of the lawsuit led to the matter being withdrawn from the agenda, and it has not resurfaced at any meeting since.
Tower appears to be the only developer to still have active proposals for the sites. While no other developer submitted proposals for Uncle Billy’s, two other developers — Pagoda Hilo Bay LLC and Washington-based MacDonald Ladd Development LLC — submitted proposals for the Country Club, but have both since been redacted.
The Land Division submittal includes an April letter to Bushor enumerating the DLNR’s concerns about Tower’s handling of the proposals.
The letter claims that Bushor was reluctant to provide information about Tower’s finances despite being required to by the proposal. According to the letter, Bushor “expressed reluctance to provide personal financial information for (himself) and Stuart Miller,” and only after repeated requests from the Land Division did he submit a series of documents that nevertheless failed to fully meet the requirements of the proposal.
“You (said) that you would be willing to provide us with more information on loan commitments for the former Uncle Billy’s Hilo Bay Hotel (Uncle Billy’s) and Country Club projects,” read an April letter from the Land Division to Bushor. “However, you did not provide the additional information, and even if you provided loan commitment information, that would not be sufficient to show financial capability.”
The letter goes on to note that, Tower’s financial capabilities are directly tied to the financial health of WHR, as Tower is the majority owner of WHR. But with a fellow WHR partner suing Tower executives, Tower’s financial capabilities have been cast into doubt.
Bushor responded to that letter, calling it “unacceptable.”
“(The matter) is deserving of a Hearing at DLNR and Tower requests the hearing to present all necessary support,” Bushor wrote. “Please request a hearing as we have invested $50 million into Hilo, and no other party has. So the decision making does not support such a letter and we deserve, after award letters, the opportunity to present to the BLNR, in all fairness after 5 years of working on these projects.”
The report also notes that Uncle Billy’s was partially gutted by a fire in March, after which the DLNR sought a capital improvement project appropriation from the state legislature to fund the building’s demolition. However, at the eleventh hour, the funding source for that appropriation was switched to the DLNR’s Special Land and Development Fund, which has insufficient funds for the demolition.
Between the fire, the lawsuit and the financial uncertainty surrounding Tower, the Land Division submittal concludes that the requests for proposal for both the Uncle Billy’s and Country Club properties be canceled.
The board will discuss the issue at a meeting Tuesday that begins at 9 a.m.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.