Mahalo for supporting Honolulu Star-Advertiser. Enjoy this free story!
A roughly year-old state effort to have the private sector repair or redevelop two dilapidated hotels on oceanfront public land in Hilo has produced four competitive proposals.
The state Department of Land and Natural Resources received the bids in November after issuing a request for proposals in August 2020, and an evaluation panel is now recommending that one developer be selected to revive both the former Uncle Billy’s Hilo Bay Hotel and the former Country Club Condominium Hotel.
The panel’s recommendation, announced Wednesday by DLNR, is to select Tower Development Inc. led by Ed Bushor for both revival projects under long-term land leases.
If the agency’s board agrees, the deal would give Tower control of three adjacent hotel properties on state land along Banyan Drive fronting Hilo Bay on Hawaii island.
Tower owns and operates the Grand Naniloa Resort, which is between the old Uncle Billy’s and Country Club sites.
The two Tower bids, which were somewhat packaged as a joint bid, won the evaluation panel’s recommendation over two other bids made for only the Country Club site — one from local developer Peter Savio, who for a short time operated Uncle Billy’s, and one from Tacoma, Wash.-based MacDonald Ladd Development LLC.
Savio proposes converting the 152-room Country Club property into an initial mix of hotel rooms and rental housing that would be followed by a closure and extensive renovation after two years to create a revamped full-service hotel under the Pagoda brand.
MacDonald Ladd proposes turning the same property into 65 affordable rental apartments for seniors over four years and partly financed by tax credits.
In its bids, Tower said that it is best positioned to improve the two hotel properties and deliver benefits to the state.
“Through its extensive
experience in demolition, renovation, environmental remediation, construction, development, financing, its relationship with DLNR and its experience working on the Island of Hawaii, and specifically Banyan Drive makes this project and Tower a unique and rare match,” the company said
in its proposals.
Bushor’s firm repositioned the 320-room Naniloa in 2016 following a $30 million renovation after a prior owner defaulted on DLNR ground lease payments and other debts.
Tower estimates that
it would invest between
$53.4 million and $58.4 million to rehabilitate the two hotels, which would possibly be operated under Hilton brands, as is the Naniloa.
The company projects that it would take 30 months to complete design work, permitting and construction after reaching a detailed agreement with DLNR.
As an option, Tower said it could operate both properties as rental apartments if DLNR has a preference for housing instead of hotel rooms.
Tower also pledged to provide public benefits if its plan is selected, including possibly dedicating the Naniloa’s adjacent golf course to DLNR and Hawaii County for conversion into other kinds of public use, while also providing three acres of golf course land to create more access to Hilo Bayfront trails and parking for Reed’s Bay Park and Liliuokalani Park.
The development firm also said a key element in its plan is to use a portion of the golf course’s parking lot to provide enough parking for the two hotel properties, which lack space to meet parking requirements.
Under Tower’s plan, each of the renovated hotels would end up having 100 to 125 rooms, refurbished pools, a restaurant and retail space.
The former 146-room Uncle Billy’s property would become a Hampton Inn &Suites by Hilton employing 30 to 50 workers. The former Country Club property would become a Home2 Suites or other Hilton limited-service brand hotel employing about 50 workers.
Hilton Worldwide has previously expressed interest in such plans, according to letters from 2016 submitted as part of the Tower bids.
Tower said it anticipates having to demolish a third
of the buildings on the Uncle Billy’s site at a cost of $5.5 million, which would be part of a total project cost between $33 million and $38.5 million. The Country Club site renovation work is estimated at $20.4 million.
The company is offering to pay DLNR $75,000 a year to lease the Country Club site for the first decade, and then 1.5% more per year over the next two decades.
For the Uncle Billy’s site, Tower is offering to pay annual ground rent of $10,000 during the first decade, $20,000 in the second decade and $30,000 in the third decade.
Both offers include a first-year rent waiver as part of 65-year leases.
DLNR has been challenged for about seven years to inject new life into the two hotel sites initially developed over 50 years ago.
Uncle Billy’s, which was built in phases from 1966 to 1970, was forced to close in 2017 due to safety concerns, a year after Savio stepped in for the property’s original operator and tried to keep operations going as the Pagoda Hilo Bay Hotel.
The Country Club hotel was built as the TraveLodge Hotel in 1969. It became a run-down short-term apartment and hotel operation after its land lease expired in 2015, and units remain in use under a month-to-month revocable DLNR permit.
A 2016 analysis by Erskine Architects Inc. for DLNR concluded that both badly deteriorated hotels should be demolished, though the assessment also noted possibilities for repair and reuse.
“We believe that the renovation of the properties under new long-term leases, as with previously renovated hotels on the peninsula, will contribute greatly to the revitalization of Banyan Drive, making it a destination for residents and tourists alike,” DLNR Director Suzanne Case said in a March announcement.
The evaluation committee includes representatives of DLNR, Hawaii County’s Banyan Drive Hawaii Redevelopment Agency and the state Department of Business, Economic Development and Tourism.
DLNR previously expected to make a tentative selection in December, then later said an announcement was expected in April. Now the agency said the panel’s recommendation could be presented to its board as early as Sept. 24.
78