Posted at 12:20 p.m., Wednesday, October 3, 2001

Creditor buying Kona Surf hotel

Advertiser Staff and News Services

The mortgage holder of the closed Kona Surf Resort & Country Club moved a step closer to taking over the Big Island hotel today as a judge granted a motion to start the foreclosure sale process.

Koa Hotel LLC, an affiliate of California investment firm Arlen Capital LLC, requested the appointment of a commissioner who could conduct an auction of the property as early as next month.

Koa Hotel is expected to apply its $30 million mortgage as a credit bid to acquire the property.

The company anticipates spending roughly $40 million more to renovate and reopen the 535-room Keauhou resort possibly in 2003.

Koa Hotel still needs to amend the Kona Surf's ground lease with landowner Kamehameha Schools.

The Kona Surf was closed in June 2000 by Otaka Inc., which was hit with the foreclosure suit in December.