While owners of the Coco Palms Resort remained tight-lipped Tuesday about future plans for the resort, a scuttled but not sunk would-be buyer said the owners have the financial wherewithal to rebuild the property.
Jim Reed, who announced his companies are no longer potential buyers of the resort even after acquiring Kaua’i County permits to allow the rebuilding, remained upbeat even after spending over three years and millions of dollars in an attempt to acquire the historic property.
“The current owner is a very, very wealthy group, and could do anything financially that they choose to do,” said Reed. “They own several large hotels in San Francisco and Hong Kong, and have background in developing, redeveloping and ownership (and) operation of luxury hotels.
“They haven’t chosen to do anything at Coco Palms, and yet could easily afford to if they desired to. Maybe there is a lesson in their lack of redevelopment actions at Coco Palms.”
After settling an $18 million lawsuit with its insurance company over damages the hotel sustained as a result of Hurricane ‘Iniki in 1992, current owner Wailua Associates had indicated it planned to reopen the hotel. Yesterday, a spokesman for Wailua Associates couldn’t be reached for comment.
In an interview, Reed indicated that the current owner could be waiting to see if other offers to purchase the property come in.
While not elaborating on the amount of money either he or his companies lost in the failed attempt to acquire Coco Palms, he admitted that his affection for the property and the island may have made him hang on longer than maybe he should have in the purchase attempt.
“I probably committed a cardinal sin in real estate development and fell in love with the property, its beauty, its history, its promise, and Kaua’i,” he said. “One of my early partners said if you look up the word ‘persistence’ in the dictionary, Jim Reed’s picture will be there. This can be an attribute that cuts both positively and negatively.”
He added that his “only regret is in not pulling the redevelopment through to completion.”
While also not wishing to speculate on whether potential new buyers will surface, Reed acknowledged that even before Sept. 11 hotel and resort development was a risky and expensive proposition.
“I guess the bigger question is what is the highest and best use for that piece of real estate known as Coco Palms Resort? Our hearts and emotions can dictate one thing, but at the end of the day, the economics have to pencil or the vision will remain a dream, and Coco Palms may sit fallow for a while longer,” Reed said. “Hotel (and) resort development is a very expensive and risky business. It has been said that the only investor to make money on a resort development in Hawai’i is the second owner” who acquires it from the first developer’s lenders after the first developer/owner goes bust building it.
“Witness the number of hotels that have changed hands the past few years in Hawai’i at below their cost of construction (or replacement cost). I haven’t seen anyone but Marriott building anything of size on Kaua’i recently, despite other projects gaining approvals,” Reed said. “And Marriott is unto themselves as a business and operator, having a strong marketing and sales operation on Kaua’i” and nationally.
Despite local speculation to the contrary, neither the proposed state Kapa’a bypass road nor the fact that much of the Coco Palms sits on land owned by the state had much if anything to do with the deal’s demise, Reed said.
One proposed bypass route, running behind the coconut grove, would have actually enhanced the viability of the property, he commented.
Asked if a hotel across busy Kuhio Highway from Wailua Beach is a good place for a resort, and whether someone will eventually purchase and redevelop Coco Palms, Reed said, “Several of the consultants we engaged questioned the viability of a resort in Hawai’i across a busy street from the beach. The highway presents challenges from a safety and noise perspective to any type of development at that location. There is also the issue of the flood plain.”
Reed said he doesn’t “have a clue if someone else will step up to take this process on.”
There is “nothing easy or smooth about it,” he said.
But Reed indicated that the end of the Coco Palms deal doesn’t necessarily mean the end of his interest in Kaua’i.
“I would love the opportunity to work on a project there again,” he concluded.
Staff Writer Paul C. Curtis can be reached at mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224).
