The gigantic pension plan that serves Los Angeles County government employees is putting up for sale the St. Regis Princeville Resort and Makai Golf Club in Princeville, which have been part of the fund’s assets since 2005.
The decision has major financial and other ramifications for Kauai. The hotel, which originally opened in 1979 as the Princeville Resort, has 252 rooms — the largest on the North Shore — and employs about 600 island residents, according to a hotel spokesperson and Marriott International, the hospitality conglomerate that merged last year with Starwood Hotels and Resorts. Starwood has managed the St. Regis since 2009.
Obviously, many hundred more Kauai people are affected since they work for suppliers of a host of goods and services to the hotel and golf course. The property has changed ownership at least three times since it opened, which is typical of the hotel industry. The resort was heavily damaged in Hurricane Iniki in 1992 and remained closed for many months.
The Los Angeles County Employee Retirement Association (LACERA) acknowledged last week that the hotel and golf course properties are going on the market — the first official confirmation from the actual owner of the real estate that a sale may be impending. The hotel covers 23 oceanfront acres and the golf course 290 acres.
LACERA confirmed that it has retained Barings LLC, a global asset management firm with a portfolio worth more than $271 billion and operations in 17 countries, to handle the transaction.
The confirmation comes after months of rumors and speculation among St. Regis employees, where the grapevine apparently reflects a consensus that the hotel may close as early as next month for renovation before takeover by another hospitality industry conglomerate. This informal internal communications mill also speculates that the hotel will be shuttered for up to a year when a new owner takes over, leaving many — if not most — of the staff unemployed. Employee speculation has centered on Four Seasons Hotels and Resorts, which already operates luxury properties on Maui, Oahu and Hawaii Island. None, part or all of this may be accurate.
But at the same time LACERA has officially confirmed that the sale process has begun, seemingly contradictory messages have emerged from LACERA, Barings, the St. Regis itself and Marriott. The hotel released two statements on the same day in response to timing of any sale that seemed close to contradictory.
And that means confusion about what’s actually happening continues to roil morale within the complex and among Kauai families that depend on it for their livelihoods.
Before I describe this in more detail, a necessary disclosure: I am a pension beneficiary of LACERA, meaning I receive monthly income from it. Confirmation of LACERA’s decision to move the St. Regis onto the market came not as a result of an official announcement from the pension plan but in response to an email I sent to LACERA member services last Tuesday.
This back-door acknowledgement came several months after an initial media report in Honolulu speculated that such a sale was imminent and that Marriott’s contract to run the hotel would lapse in May — a detail that Marriott and the hotel emphatically dispute.
LACERA holds nearly $51 billion in total assets, of which about 11 percent make up its real estate portfolio. It paid out about $2.8 billion in benefits in 2016. LACERA purchased the St. Regis in 2005 from developer Jeff Stone. As a result, Stone has no current involvement in the St. Regis or Makai and has proposed his own new 80-room hotel project overlooking Hanalei Bay, on a site immediately next door to the St. Regis. The proposal has already stirred substantial community opposition in Hanalei.
Here’s what I know about this in addition to the fact that LACERA anticipates sale of the hotel and golf course and has brought Barings in to handle the transaction:
w John Kolb, the Barings official handling the firm’s interaction with LACERA, said on Friday that “we can confirm that the resort owners (LACERA) are exploring options with their investment. This includes gauging interest and value of the assets. There is no required timeframe associated with this process.” I had asked Kolb what the potential asking price is.
w On Wednesday at about 3:45 p.m., Stephanie Reid, the hotel’s in-house public relations representative, denied that Marriott’s contract ends in May and that, in fact, the contract does not lapse “for a few years.”
w But on Thursday at 4 p.m., the situation appeared to have changed, suggesting things are more fluid. This came after I asked her why she thought employees appear to be under the impression that the hotel is about to be sold out from under them and could change hands as early as next month. “As we are in the process of our ownership group reassessing the resort’s value,” she said, “it is impossible to predict any outcome at this point.”
w She added, in the same email: “We have proactively communicated with our staff throughout this entire process and will continue to do so. Our ownership group also supports the assurances to our staff to keep them informed.”
Now, the problem with that is it appears the employees have been left to speculate for themselves and many — if not most — of them are convinced the hotel is about to be sold and closed, taking their jobs with it.
To further confuse the situation, both Reid and Marriott’s media relations office have released statements that: “The St. Regis Princeville Resort has experienced several years of improving performance. When a property or asset experiences this type of success, it is common practice for ownership to be proactive in reassessing value. This does not mean that the property will be sold; however, it is a normal part of the investment process.
“As the management company, Starwood/Marriott is working closely with the current owners to provide the information needed. We expect business to continue as usual at the resort and no changes to staffing and operations are anticipated.”
Reid added that the St. Regis has had about an 80 percent occupancy rate average for each of the last five years.
Now, if I was a St. Regis or Makai Golf Club employee, guest, member, supplier or customer, I’d be scratching my head pretty hard trying to figure out what’s actually going on. I hear the hotel conducts periodic staff meetings, but that none have been held in many months.
I was puzzled enough that I asked Reid what I think is actually the pivotal follow-up question: “Why hasn’t management acknowledged these fears and moved to provide accurate information?”
Taking her comments above — which incorporate her response — at face value, the only clear conclusion is that employees have been left in the dark. More broadly, this leaves the whole island in the dark.
Allan Parachini is a former journalist and PR executive. He is a Kilauea resident.