As the head of Home Box Office, Michael Fuchs had a huge interest in boxing matches that were key to the cable network’s success. And as a Hawaii real estate developer, the former HBO chief is showing the spirit of a prizefighter by refusing to be counted out despite being knocked down several times.
A hearing in state Circuit Court was held Thursday to finalize a June foreclosure sale of a $100 million luxury home subdivision called Ke Kailani that Fuchs started but failed to complete on Hawaii island.
Typically, foreclosure sale confirmation hearings complete a case.
But in the Ke Kailani case, an attorney representing Fuchs objected to the purchase by a creditor, criticized the foreclosure as flawed and said the creditor "stole" the property from Fuchs.
"There is no other justice in this case but to deny the confirmation of this sale," Gary Dubin, a local attorney representing Fuchs, said to Judge Bert Ayabe.
Dubin also filed a lawsuit last week containing eight inches of documents in a separate effort to block the foreclosure sale on similar grounds.
An attorney representing the creditor and buyer, a firm affiliated with Texas-based development firm Hunt Cos., called Dubin’s efforts the latest in a string of delay tactics filled with falsehoods.
"Mr. Dubin is a master of fiction," Sharon Lovejoy, a local attorney representing the buyer, told Ayabe.
The judge didn’t immediately rule on the matter, taking the dueling positions under advisement and suggesting he would soon issue a ruling.
The exchange was the latest in an already drawn-out foreclosure case that began nearly two years ago and bounced into and out of U.S. Bankruptcy Court.
Like a championship boxing match, stakes are high. It’s possible that Fuchs will have to pay $20 million to the foreclosure buyer. That’s on top of roughly $35 million that Fuchs claims he already lost on the project.
Fuchs, a big boxing fan, has been an investor since his oversight of HBO ended in 1995. He became a Hawaii real estate developer about a decade ago after searching for a site on which to build himself a home on Hawaii island.
A 65-acre parcel fronting three Mauna Lani Resort golf fairways leading to the ocean was attractive but would be costly to develop as a single residence. So Fuchs bought the site in 2002 for $15.5 million and planned to develop 12 condominiums and 39 house lots for sale to offset the hefty cost of land and infrastructure.
To help finance Ke Kailani, Fuchs obtained a $52 million loan from Bank of Hawaii, Central Pacific Bank and Finance Factors Ltd. The three local banks no longer have a stake in the project.
Fuchs partnered with local developer Will Beaton to create the ultrahigh-end subdivision with a community clubhouse with a saltwater pool overlooking the ocean, and a 5.5-acre inland park with a freshwater pond, pools, hula mound, jogging trail and courts for basketball, tennis and sand volleyball.
Sales, however, faltered with the economic recession after a strong early start that included selling one oceanfront lot for $8.5 million in 2005 and two condos that went for nearly $4 million each in 2007.
Fuchs sold 14 lots and two condos for a combined $38 million, according to property records. Sale proceeds helped pay down the loan, but a $22 million balance went into default in 2008. So the lenders initiated foreclosure in October 2009 to repossess unsold portions of the project — 25 single-family home lots, land planned for eight condominium units and two completed condo units.
Because Fuchs made a personal guarantee on the loan, he was liable for the unpaid balance.
Texas-based Hunt Cos. bought the bad loan from the lenders for $17.5 million and pressed on with foreclosure as the project’s main creditor.
In January, Fuchs placed his development firm in bankruptcy one day before auction. That stopped foreclosure.
Fuchs tried to find a buyer to pay more for the project, but ran out of time to reorganize under bankruptcy law. The bankruptcy case was dismissed and foreclosure proceedings resumed in May.
A preliminary auction in June didn’t attract any competitive bids. Hunt used the value of its debt, which has grown to $30 million with penalties and interest, to make a $10 million "credit" bid. Now Hunt seeks to collect $20 million — the difference between its credit bid and what it is owed — under the personal loan guarantee from Fuchs.
Dubin said a $20 million judgment would ruin Fuchs. Dubin also indicated that he would appeal any confirmation of Hunt’s purchase, resulting in more protracted litigation. "It would be foolish to confirm a sale," he said to Ayabe.
Lovejoy suggested Hunt is considering pursuing sanctions against Dubin or Fuchs for making improper or frivolous representations in the foreclosure case or the suit alleging wrongful foreclosure.
