Hotel owner defaults on Nani Mau loans

The owner of Hilo’s troubled Naniloa Volcanoes Resort is facing foreclosure on a separate property, Nani Mau Gardens, a 53-acre botanical garden, restaurant and event venue.

Local businessman Ken Fujiyama, owner of Nani Mau Inc., has defaulted on two mortgages totaling $3 million for the property and an adjacent parcel that was planned for a subdivision, according to documents filed in federal court earlier this year.

The Hawaii island entrepreneur is facing pressure by business leaders to speed restoration of the Nani­loa hotel, which is on state property in the middle of Hilo’s Banyan Drive tourist area. Fuji­yama has blamed a depressed economy and tight credit markets for slow renovations.

Fujiyama said the foreclosure lawsuit, filed by mortgage holder Edmund C. Olson Trust, does not affect the continuing restoration of the Nani­loa, one of Hilo’s most prominent hotels.

Fujiyama said Thursday the hotel and gardens are separate businesses. He declined to comment further on the litigation.

Fujiyama is still operating the Nani Mau Gardens, which first opened to the public in 1972, though the trust is seeking to replace him with a court-appointed receiver to oversee operations. Fuji­yama stopped paying the mortgages in June and owes a substantial amount of interest, as well as attorney and late fees, according to court documents.

“(Nani Mau Inc.) has failed to pay, and Mr. Fuji­yama is a guarantor of thedebt and he’s failed to pay,” said Hono­lulu attorney Paul Alston, who represents the trust. “It’s a very popular place, as I understand it. We’ve asked the court toappoint a receiver because we see he’s not taking care of the property.”

Fujiyama is also struggling to pay rent on Nani­loa Volcanoes Resort.

The businessman, who signed a 65-year lease with the state that requires he pay a minimum of $500,000 a year in rent for the Hilo hotel, failed to come up with last month’s $250,000 semiannual payment, prompting the Department of Land and Natural Resources to issue a notice of default. He has an April 2 deadline to make a payment.

Meanwhile, a separate lawsuit filed by Nani Mau investors is pending to recoup their money on an subdivision project, a 30-acre property adjacent to the garden.

In May 2008, Don J. Hoota and Joni Y. Uemura, and Maka­lika 521 LLC, invested a total of $490,000 with an option to purchase lots from the subdivision, which hasn’t come to fruition, according to their attorney Henry Naka­moto.

“They put that money in, but the subdivision hasn’t been completed as of yet,” he said. “There might have been some clearing, but nothing’s built yet.”

He said the investors tried to work out a deal to buy the property and complete the subdivision, but the parties weren’t able to finalize a sale.