LIHUE — A Utah-based corporation is taking legal action against the real estate developers who defaulted on a loan to restore the former Coco Palms resort.
Private Capital Group — a Utah-based corporation that put together a $22.2 million loan on behalf of several investors to finance the initial stages of the project — filed a complaint for foreclosure this week, asking the court to force the sale of the property and distribute the proceeds to the lenders who backed the deal.
Chad Waters and Tyler Greene purchased the hotel ruins several years ago through a corporation they formed, Coco Palms Hui LLC. Their plans to revitalize the once-iconic resort — Coco Palms regularly hosted some of the world’s most famous celebrities before it was damaged by Hurricane Iniki in 1992 and subsequently abandoned — fell short.
The Honolulu real estate developers ran into roadblocks that included people claiming ownership by ancestral rights who moved onto the property and stayed more than a year before finally being evicted. Three years into the project, the hotel remains little more than a blighted shell of concrete facing Wailua Beach.
The foreclosure lawsuit, filed in Fifth Circuit Court on Tuesday, names Coco Palms Hui LLC and its managers, Waters and Greene, as defendants.
According to the civil complaint, Waters and Greene took out the loan in May 2016, agreeing to pay back the principal plus 12% interest by February of the following year. But the lawsuit alleges the developers violated the terms of the loan within months of borrowing the money.
Attached to the foreclosure complaint is a letter sent to Waters and Green last month stating that the loan entered default status in October 2016, when the borrowers failed to deposit $5 million into an escrow account as required by the loan agreement.
The default notification letter goes on to accuse Waters and Greene of making “false representations” to their financier and says the entire balance of the loan remains unpaid, “despite repeated attempts to work with you on a solution,” and a long period during which the loan servicing company delayed instigating foreclosure proceedings.
Greene could not be reached for comment, but Waters said via email Thursday that he does not own Coco Palms Hui or the property registered to the corporation’s name. The land parcels containing the former Coco Palms are owned by Coco Palms Hui, according to Kauai County property records, and the Hawaii Department of Commerce and Consumer Affairs names Waters and Greene as the sole managers of the LLC.
In a phone interview Thursday, Honolulu attorney Scott Batterman, who filed the foreclosure suit on behalf of Private Capital Group, said that the matter could be resolved in a number of ways other than a court-ordered foreclosure sale.
For instance, the development project could get financing from another investor who agrees to take on the debt and move forward with construction or a third party might decide to purchase the land, providing the capital necessary to pay off the loan.
Caleb Loehrer, staff writer, can be reached at 245-0441 or email@example.com.
Editor’s note: The loan amount was changed to $22.2 million from $23 million.