The First Presbyterian Church of Honolulu has sold its church in Makiki and is in negotiations to buy the Ko'olau Golf Course and clubhouse for about $20.5 million to be the new Windward home for its growing congregation.

A contract has been signed to sell First Presbyterian Church to another church-related entity, according to a person involved in the deal who asked not to be identified because the golf course purchase has not been finalized.

The potential move from urban Honolulu to the rainy base of the Ko'olau range has deeply divided the church's 1,200 members. Church members debated the issue for more than two hours at a Nov. 20 meeting that concluded with more than 200 people voting by ballot for the sale and purchase and more than 100 voting against.

"It was rough," said Nancy Schroeder, who voted against the plan. "I thought the congregational meeting was going to come to fisticuffs."

Leon Williams attended the meeting and favors the move.

"You didn't have anyone getting hit," Williams said, "but individuals got heated. Other individuals like me got discouraged watching the display."

The church began looking for a site about four years ago to house its expanding congregation.

Dan Chun, First Presbyterian's pastor, said he was bound by a confidentiality agreement and could not comment. David Tongg, an attorney representing owners Ko'olau Golf Partners LLC, also would not comment.

The 200-acre, 18-hole Ko'olau Golf Course was rated as the most difficult course in the nation by the U.S. Golf Association. The 110,000-square-foot clubhouse features a two-story waterfall and Japanese baths.

The surrounding 1,300 acres of conservation land would not be part of the sale.

Golf courses on the Mainland generally sell for $8 million to $15 million, said Keith Carter, managing editor of Golf Inc. magazine, and for $12 million to $18 million in Hawai'i.

But the 36-hole, Troon North Golf Club in Scottsdale, Ariz., went on the market last week and could sell for $90 million, Carter said. Other courses vary in price, depending on location and "what kind of return the owners are getting."

"Twenty million dollars is on the high end," Carter said. "The golf course market has been pretty soft, to be perfectly honest. But Ko'olau is an atypical course."

'PROBABLY MAKES SENSE'

Jeff Woolson, managing director of the golf properties group of CB Richard Ellis, said buying a golf course and clubhouse could make financial sense for a church because of its tax-exempt status.

"They play with tax-free dollars so the seller can take all kinds of deductions," Woolson said. "The Presbyterians, as a nonprofit organization, don't pay taxes on the income they receive. So a $20 million purchase can turn out to be more like $15 million. If they ran the numbers, it probably makes sense."

Woolson recently was involved in a deal between a Jesuit-funded church that wanted to buy a golf course from Japanese sellers. The sale fell apart, he said, because the sellers were more interested in cashing out than receiving tax deductions by selling to a church.

If the Ko'olau deal goes through, First Presbyterian leaders are expected to hire professional managers to run the golf course.

They also would hold church functions in the Ko'olau clubhouse, which would continue to generate revenue through banquets, weddings and other profitable functions.

The church's negotiations to buy the golf course and clubhouse represent the latest twist for the once-troubled golf operation, which cost $82 million to build during the height of the Japanese investment flurry in the Islands in the late 1980s and early 1990s.

The course was carved out of conservation land bought from Iolani School for $9.9 million. The clubhouse cost another $20 million to build.

Minami Group (USA) Inc., opened the course behind schedule and over budget in 1992, intending to market it to free-spending Japanese visitors.

But as the Japanese economy went bust, Minami racked up tax delinquencies, bad debt and drawn-out bankruptcy proceedings, and struggled with $104 million worth of outstanding debt on the golf course operation.

The course fell into receivership and was bought for $12 million in 1997 by CCL Holdings (USA) Ltd., which was owned by a Hong Kong family.

The combination of the course's restrictions on golf carts, ravine-ravaged terrain, rainouts, muddy conditions and the time needed to play through the difficult course meant Ko'olau averaged only 24,000 rounds of play per year, said Joseph Toy, the former court-appointed receiver and foreclosure commissioner.

Wild boars occasionally come out of the mountains and surrounding land to roam the fairways and greens.

"When we sold the property, we got it up to 32,000 rounds annually, which was an improvement," Toy said. "But you can still only generate so much revenue. The golf course operations were at a loss or not quite breaking even. The banquet business began to turn a profit."

California-based American Golf Corporation, has a contract to manage the golf course operation until July 1, 2006, and may continue if First Presbyterian buys the course.

Mark Friedman, American Golf's general counsel, would not specify the terms of the group's current contract.

"If we have a new landlord," he said, "we look forward to working with them."

what about alcohol?

Church member Schroeder, 63, voted against the move in part because she worries about elderly church members who need to take TheBus to attend services. Schroeder uses a wheelchair and said her 1986 Toyota Tercel overheats when she and her husband, Ken, drive it over the Pali.

But her main objection is conducting church services in the same building where clubhouse members are drinking alcohol.

"I don't care if it's a shed that we worship in," Schroeder said. "However, I don't like the idea that we will be in a ballroom worshipping and just a few feet away the golfers will be consuming alcohol."

Williams, who attends First Presbyterian, feels that too many church members are focused on the financial future of the investments and other issues such as changing their commute patterns to attend church.

"My feeling is that if there's ever a possibility for growth, it should be now," Williams said. "If the opportunity presents itself, I don't see why you shouldn't take it."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.