By JOHN BURNETT
By JOHN BURNETT
Tribune-Herald staff writer
A judge has ruled that the former owners of the Waiakea Village commercial property in Hilo still owe the bank that foreclosed on the property more than $1 million after the bank bought the property back in a foreclosure auction.
According to the Dec. 14 judgment by Hilo Circuit Judge Greg Nakamura, Waiakea Waterfront LLC and Ho‘oulu LLC, both owned by Vernon and Noenoe Lindsey of Maui, owe the California-based Owens Mortgage Investment Fund almost $1.03 million.
Owens, who loaned the Lindseys money to buy the property, was the sole bidder in a foreclosure auction in May, buying the troubled property that once was a Sheraton resort for $1.497 million.
The court found that as of July 30, the Lindseys owed more than $2.32 million under the note and mortgage including $2 million in principal, with the remainder consisting of accrued interest, late charges, insurance advances and interest on the insurance advances.
The Lindseys purchased the 5.5-acre commercial complex at 400 Hualani St. in Hilo for $3 million in 2010, according to county tax records, and renamed it Waiakea Waterfront.
The court-appointed foreclosure commissioner, Hilo attorney Sandra Song, filed her final distribution statement on Nov. 28, itemizing expenditures by Owens relating to the foreclosure. Those payments include almost $47,000 to Song for her fees, almost $12,000 to Day-Lum Rentals & Management to manage the property during foreclosure, almost $72,000 to Owens’ Honolulu attorneys and a little more than $73,000 to the county to pay
delinquent property taxes. Those payments, $283,525 in all, are part of the total owed by the Lindseys.
Waiakea Waterfront LLC unsuccessfully filed for Chapter 7 bankruptcy in March. In the filing, the company estimated both assets and liabilities between $1 million and $10 million. Owens filed a motion to halt the bankruptcy and U.S. Bankruptcy Judge Robert Faris ruled in the mortgage bank’s favor on April 19. The judgment barred Waiakea Waterfront LLC from re-filing for 180 days, allowing the foreclosure sale and judgment to proceed.
“There are two LLCs involved, Waiakea Waterfront and Ho‘oulu, and the 180-day periods are different for each,” Song said Wednesday afternoon. “… They could still declare bankruptcy and discharge it (the debt).”
Tenants have said they’ve had to put up with a lot over the years, including a period of several months where they had no electrical power. The neighboring Waiakea Villas, once part of the same resort, shut off the electricity while embroiled in a dispute with the Lindseys over the power bill. Because the two complexes were once part of the same facility, they share a common meter, and Waiakea Villas claimed that Lindsey had not paid his share of the bill.
Day-Lum is still managing the commercial property, which has only three tenants remaining, Song said. Longtime tenant Miyo’s, a popular local Japanese restaurant, has moved to its new location in the Manono Marketplace.
Song said that the 12-building complex is in “terrible shape.”
“It’s old. It was built in the early 1970s and nobody’s really taken care of it for a long, long time,” she said, citing termite and water damage to the structures.
Despite that, Hilo-born real estate developer Peter Savio told the Tribune-Herald last month that he’s finalizing a deal to buy both the residential and commercial properties and is willing to spend $25 million to create a new “Pagoda-style” hotel on the property. Savio bought Honolulu’s Pagoda Hotel two years ago.
Calls made on Wednesday to Vernon Lindsey and Owens’ attorney Ryan Engle were not returned by press time.
Tribune-Herald staff writers Colin Stewart and Hunter Bishop contributed.
Email John Burnett
at jburnett@hawaiitribune-herald.com.