Lingle’s Ludicrous Land Grab

Rick Hamada
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Wednesday - February 06, 2008

I wrote last week that the governor’s proposal to purchase the resort property sounded the “death knell” for Turtle Bay’s parent company, Oaktree Capital, to secure a financial partner in satisfying existing debt and expanding its facilities. I want to clarify that Oaktree’s financial issues and pursuit of investors were well-documented before the governor’s State of the State address announcing her intentions.

However, if there were a pursuit of a financial partner, I maintain that Turtle Bay, et al., will now find it virtually impossible to find any investor given the increased instability and controversy swirling around the project.

Why is this significant? It signals the role of government ingratiating itself into private enterprise, even giving the appearance of capitalizing on the distress and difficulties of others. According to those close to the process, there was no communication between the administration and the principals. Yes, there was a conversation between Oaktree representatives and the administration in 2006, when Turtle Bay was seeking support from the governor’s office, but that support was not forthcoming. It was the recent foreclosure proceedings levied against Oaktree that signaled an opportunity for the state to jump in.

And why not? The lands in question are highly desirable and valuable.

It just seems to me that the government seems to be akin to the corporate raiders who would seek out troubled companies and then strike when they were most vulnerable. T. Boone Pickens, Carl Icahn and even the celebrated Donald Trump employed this strategy to great success. And they were vilified by many for their calculated actions, where acquisition and profit came first and human capital came further down the road. Didn’t Gordon Gekko (the fictional character portrayed by Michael Douglas in the film Wall Street) say “Greed is good”?

Instead of profit, the government is seeking preservation of lands. The premise is that we are losing our rural areas and development must be contained before we lose our Hawaii.

This is a laudable objective. However, in this particular case, the owner of this land, codified with the 1986 zoning decision rendered by the City and County of Honolulu, still retains the right to this property. This company, which has invested millions of dollars and employs hundreds of people, should be given the opportunity to make this venture work without the incursion of government making their challenges even more challenging. If Oaktree fails, then at least allow it to throw in the towel, and not the state.

There has been much attention paid to the expansion of Turtle Bay and its addition of “3,500” rooms to the North Shore. Government officials, more than anybody, should know that what you propose usually is far different than what you end up with. Case in point: the recent Ka Iwi cabin controversy. In order to appease neighborhood opposition to its proposal, the developer offered to scale down the project size by half. Although the offer to compromise was rejected, it demonstrates that all situations are fluid.

The same holds true with Turtle Bay. Yes, plans were drawn, but there was hardly a commitment to the size and scope of the expansion contained in media reports.

Ironically, state officials acknowledge the necessity to accept a degree of expansion in order for the hotel/golf course operations to survive. Why not work with the existing owner instead of pursuing a purchase?

I hear the lamentations of so many that we are an overdeveloped island. If this is truly the case, then the plans for home construction by the Mormon Church on the North Shore, the thousands of homes on the Ewa Plain, development of waterfront luxury homes on Molokai, the continued development of Ko Olina and any other addition or expansion should be stopped. The governor and county officials should call for an immediate moratorium on all construction projects in order to preserve land for future generations.

Sound ludicrous?

Of course it is. But to spend hundreds of millions of your tax dollars in purchasing a resort property and potentially displacing a troubled, yet vested private company does not seem to be the answer either. It appears the next step in this saga is Oaktree’s. In light of all that has transpired, it may simply take the state’s offer and cut its losses.

And then what?

The ball will be in the state’s court, and it will be interesting what its next shot will be.

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