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The Honolulu Advertiser
Posted on: Thursday, August 30, 2001

Firm seeks state OK to reopen Kona Surf Resort

By Andrew Gomes
Advertiser Staff Writer

A California investment firm has asked a state judge to award it the leasehold interest in the closed Kona Surf Resort & Country Club from owner Otaka Inc.

The Kona Surf Resort & Country Club, once a top resort destination on the Kona Coast, has become rundown since being closed in June 2000. A Mainland investment firm is asking the state for leasehold interest so it can renovate and reopen the 535-room Keauhou resort.

Deborah Booker • The Honolulu Advertiser

An affiliate of San Diego-based Arlen Capital LLC became the plaintiff in an ongoing foreclosure suit against Otaka last month when it acquired the mortgage from another investor who acquired the $30 million note last year from original lender Chuo Mitsui Trust & Banking Co. Ltd.

The motion by Arlen's Koa Hotel LLC to take over the Big Island resort is to be heard Sept. 12.

Arlen is also negotiating to amend the ground lease on the Kona Surf with landowner Kamehameha Schools subsidiary Kamehameha Investment Corp., and plans to renovate and reopen the 535-room Keauhou resort.

Louis Kau, Kamehameha Investment president, said an extended lease with adjusted rent should be finalized by the hearing date.

"We're trying to move as quickly as we can to get that hotel reopened," he said.

Representatives of Arlen, primarily an investor in real estate and technology, did not respond to requests for comment yesterday.

Arlen is expected to invest roughly $40 million to upgrade the Kona Surf, which could reopen 15 to 20 months after the start of renovation work, according to Kau.

Once the most prominent resort destination along the Kona Coast, the 30-year-old Kona Surf has been closed since June 2000 because Otaka said the hotel was losing more than $3 million a year. About 215 employees were laid off.

Otaka was hit with a foreclosure suit in December after defaulting on mortgage payments.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.