Two weeks before The Lotus at Diamond Head hotel was scheduled for a foreclosure auctnio, the local developer Brian Anderson placed the boutique hotel in bankruptcy. Anderson filed the Chapter 11 petition for his firm that owns the hotel, Anekona W LLC, on Wednesday in an attempt to forestall the auction and sell the property in bankruptcy court after more thorough marketing.
The 50-room boutique hotel, formerly known as the W Honolulu-Diamond Head, was scheduled for auction on June 12. The bankruptcy effectively cancels the auction.
Anderson said he was concerned that interest to buy the property at 2885 Kalakaua Avenue would be low, thereby reducing the price someone might pay for the hotel that he said was appraised at US$16 million in February.
“We sought protection under Chapter 11 to give us time to properly market the hotel and thereby protect our equity,” he said.
Anderson said a sale at US$16 million would pay off lenders, creditors, and possibly leave him with a return on the investment. Anderson bought the hotel, which is on a mix of fee-simple and leasehold land, for US$8 million in August 2004.
The Lotus is one of several properties acquired in recent years by Anderson that have faced foreclosure as the real estate and tourism market turned. Other properties include the 216-unit Aloha Beach Resort on Kauai, the 350-room Kauai Beach Resort hotel, and residential property at the Kukio oceanfront golf resort on the Big Island.
Last week, Anderson lost 203 condominium units and commercial space at the Ilikai hotel in Waikiki at a foreclosure auction to lender iStar Financial after no one bid anything close to the roughly US$73 million he owed on the property.
On the Lotus, First Hawaiian Bank filed a foreclosure lawsuit in October, claiming Anderson failed to pay back a US$5 million loan that matured that month. Central Pacific Bank also claimed that Anderson defaulted on other loans it made to the developer that were in part secured by the Lotus property.
It will be up to a bankruptcy judge to decide whether a sale should be in US Bankruptcy Court or in state Circuit Court where the foreclosure suit was filed.
More immediately, local property management firm executive Richard Emery will continue to ensure that the hotel managed by Castle Resorts & Hotels operates normally. Emery was appointed foreclosure commissioner for the Lotus last month and is entrusted with the title to the property.