A Colorado-based luxury condominium and time-share management firm has taken over operations of a resort project in Kapalua, Maui, that appears on the verge of emerging from foreclosure and other financial difficulties under a new owner.
Timbers Resorts announced Friday that it assumed management of the former Ritz-Carlton Club and Residences at Kapalua Bay effective Jan. 1, replacing Ritz-Carlton Management Co.
The switch is expected to help revitalize what is now being called the Residences at Kapalua Bay, where most of 84 condos and interests in 62 time-share units remain unsold and in foreclosure three years after the project was completed.
A sale of the unsold inventory and commercial pieces of the property, which include a spa, beach club and retail stores, is expected to be finalized soon after a Jan. 17 court hearing in the foreclosure case.
George Van Buren, a local attorney appointed to sell the unsold units and commercial assets, said a new owner that isn’t overburdened with debt will have a better opportunity to make the Residences at Kapalua Bay a successful resort community.
"It’s a beautiful project," he said. "It’s a beautiful asset."
Maui Land & Pineapple Co., The Ritz-Carlton Hotel Co. and Exclusive Resorts LLC developed the $355 million project in 2009, replacing the oceanfront Kapalua Bay Hotel with nine condo buildings spread over 24 acres.
Sales began in 2006, and condos priced from $4 million to $7 million represented some of the priciest resort homes on Maui.
The time-share component under the Ritz-Carlton Club name also had some eye-popping prices — from $350,000 to $850,000 — and became the first "fractional" vacation condo project developed in Hawaii. (Each fractional condo unit is shared by 12 buyers who each get three weeks of annual use, while Ritz-Carlton kept the remaining 16 weeks mostly for use by its club members for an additional cost.)
But the financial market meltdown forced the project’s main lender, Lehman Bros., into bankruptcy in 2008 and put kinks in project sales and construction.
The developers managed to complete the project a year later, but sales languished due to the financing uncertainty and deteriorating real estate market. Subsequent financial constraints also have held the project back from any rebound.
As of Sept. 30 only 28 of 84 condos had been sold, according to Maui Land. That tally includes 15 condos bought by Exclusive Resorts, which operates its own vacation home club. Of 744 fractional interests in the 62 time-share units, 177 had been sold.
Maui Land reported that operating expenses for the project during the first nine months of last year totaled $37 million, which was offset by just $873,000 in revenue.
Last June a group of lenders that largely replaced Lehman and are owed about $300 million sued to foreclose on the property. A group of condo owners also sued the developers in June, alleging fiduciary duties were breached. And in July, Ritz-Carlton said it would pull out because operating costs were not being sufficiently funded.
A new management firm and owner are expected to breathe new life into the property unburdened by financial constraints of the past.
Last month, Island Acquisitions Kapalua LLC made a high bid of $55 million at a foreclosure auction to acquire the unsold portions of The Residences at Kapalua Bay. A hearing to accept any significantly higher bids or confirm the purchase by Island Acquisitions is scheduled for Jan. 17.
It is unclear who formed Island Acquisitions.
On the management side, condo owners praised the installation of Timber Resorts, which operates 12 other resort condo and residence clubs on the mainland and in Mexico, Italy, the U.S. Virgin Islands and Ireland.
"We are extremely pleased that we are able to retain a management company with the reputation and service level of Timbers Resorts and we are really looking forward to working with them in 2013," John D. Chaney, president of Kapalua Bay Vacation Owners Association, said in a statement.
"We hope to duplicate the success here that they have achieved at so many of their other resorts around the world."
David Burden, founder and CEO of Timbers Resorts, said in a statement that the company is honored to help reposition the Kapalua property. "Our vision is to bring Timbers Resorts’ high level of service and hospitality to the property while providing unparalleled amenities and an overall wonderful experience for the owners," he said.
