Naniloa Volcanoes Resort intends to seek support in federal bankruptcy court to continue business operations with the intent of eventually finding a buyer for the Hilo property.
David Farmer, bankruptcy trustee for Hawaii Outdoor Tours Inc., which holds the state lease and operates the resort, said that he has received two letters of intent to purchase the 65-acre property for $12 million and $14 million, respectively. Farmer, who last week was weighing whether to shut the hotel and lay off its 56 employees, said Monday that it is in the interest of the owners of the resort and the general community to operate the property until it is sold.
"We are not closing, nor do we have plans to close at this point," Farmer said.
On Friday the state Board of Land and Natural Resources denied a request to delay the payment of a $250,000 semiannual lease payment for a second time. The hotel had previously received an extension from Aug. 1 to Sept. 16.
The state, which owns the land and the 329-room hotel and golf course, issued a 65-year lease about seven years ago to Hawaii Outdoors Tours Inc.
The firm defaulted on its $10 million construction loan to First Citizens Bank & Trust of North Carolina, forcing it into Chapter 11 bankruptcy reorganization.
Big Island Mayor Billie Kenoi supported the state land board’s decision not to delay the lease payments and described the property as in "shambles."
In a news release issued Monday, Kenoi said, "We strongly agree with the decision by the Board of Land and Natural Resources to enforce the terms of its lease with Hawaii Outdoor Tours, and we think that decision should stand."
Kenoi added, "It is time to cancel this lease and start over. It is time for us to start fresh with a new, responsible partner who will operate this facility properly. It is time for the restoration of the Naniloa to finally begin."
Kenoi said no special consideration should be given to Hawaii Outdoor Tours or to its lender, First Citizens Bank & Trust.
He said the lessee has failed to maintain the $1 million performance bond required by the lease and previously failed to stay current on the lease rent.
"While all of this was going on, this lessee allowed the historic Naniloa property to dramatically deteriorate," Kenoi said. "That in itself is a violation of the lease, which requires that this important state asset be properly maintained. Obviously, that didn’t happen. … It is not in the best interest of our state or our community, and we hope the court will reject this proposal."
