Officials at Princeville Corporation finally dispelled months of speculation by announcing yesterday that they will sell their 9,000-acre North Shore resort to a newly formed joint venture company, Princeville Associates, LLC.
Princeville Associates consists of a Honolulu-based investment consortium known as Hawaii Land Development Corporation, and Morgan Stanley Real Estate Funds, a subsidiary of Morgan Stanley investment and credit services.
Heading the deal is Honolulu-based developer Jeffrey R. Stone, 46, who purchased the failing Ko Olina Resort on O‘ahu in 1998.
“This is by far the biggest project I have ever been involved in,” Stone said. “Our goal is to play a pivotal role in supporting Kaua‘i’s economy.”
In an exclusive interview with The Garden Island, Stone said the purchase price for the world-class resort was more than $200 million.
The transaction now enters a due-diligence period, and the sale is expected to close by the end of 2004.
“We expect there will be a smooth transition,” Stone said.
He insisted that any and all employee contracts negotiated prior to the agreement will be honored, and that all 600 employees will be offered employment as a part of the sale agreement.
Members of the newly formed joint venture will be sitting down with representatives of Starwood, the hotel giant that manages the Princeville Resort hotel under a long-term contract. Stone said he expects that that contract will be honored, and that Starwood leaders would want an extension.
The acquisition includes the 252-room Princeville Resort hotel, 54 holes of championship golf designed at the Makai Course and Prince Course by Robert Trent Jones Jr., the Princeville Tennis Club and Pro Shop, Princeville Health Club and Spa, Princeville Shopping Center, Princeville Airport, and the Princeville Utilities Corporation, which provides water and sewage services.
“It is kind of like buying a city,” he said.
Stone said that the resort will undergo “controlled growth,” and that the first of millions of dollars will go to the immediate building of employee housing and, soon after, improvements to the shopping center.
“We’ll build as much employee housing as the zoning will allow,” he said.
The resort will, within the next decade, probably require a “boutique” hotel, Stone said. But Stone insisted that there was no “master vision” yet for the resort.
Representatives from Princeville Associates will be meeting Mayor Bryan J. Baptiste next week to discuss the future of Princeville.
“We really don’t have a vision for Princeville right now,” Stone said. “We’ve seen the state’s vision, we’ve seen the county’s vision, but we’ll wait until we’ve seen the community’s vision.”
Princeville Corporation, which has owned the property since 1979, began trading as a public company listed on the NASDAQ in 1984. It was taken private by the Australian-based Quintex Corporation in 1987, and acquired out of bankruptcy in 1990 by three Japanese shareholders led by leaders of beverage-giant Suntory Ltd., which owns 51 percent of the resort. The remainder is owned by diversified trading company Mitsui, and banking company Nippon Shimpan.
“The time has come to refocus on each shareholder’s core business, which means the shareholders must exit from their hotel and resort operations,” said Princeville Corporation President Takashi Nishii. “We have made a significant investment in continuing to upgrade and enhance the Princeville Resort over the last 14 years, even during tough economic times.”
Princeville had been considered an under-performing asset by industry analysts here, particularly when compared to other resort communities near Po‘ipu.
Stone said that the order to sell came down from leaders in Suntory’s headquarters in Japan. He said that he had met with representatives from Morgan Stanley in Japan recently, and that Morgan Stanley said they wouldn’t invest in Hawai‘i unless they had a local partner and the right piece of real estate.
“It’s the first time Morgan Stanley has ever invested in Hawai‘i,” Stone said. “They were interested in Hawai‘i, but were waiting for me to find the right type of deal. They really felt that it was the right fit.”
Since Stone purchased the Ko Olina Resort, 2,000 new jobs have been created, generating over $1 billion in investments, Stone said.
He expects similar economic benefits for the Princeville resort and surrounding communities.
Princeville Resort is considered one of the finest destination resorts in the world. Golf Digest ranks the Prince Golf Course among America’s 100 greatest golf courses and number one in Hawai‘i. Also, the stunning natural beauty surrounding the Princeville Resort area has been featured in many popular movies.
The Morgan Stanley Real Estate Funds (MSREF) is sponsored by Morgan Stanley, and has invested in over $30 billion of real estate globally since 1991.
Phil Hayworth, Business Editor, may be reached at 245-3681 (ext. 251) or phayworth@pulitzer.net.
