“The Ranch needed the purchase price to pay its other creditors.”
That quote, taken from a footnote to Jawmin’s statement opposing Hokukano Ranch’s motion asking the bankruptcy court to stop Jawmin’s logging operations, sheds some light on possible motives for Hokukano Ranch’s efforts to sell off not just the three parcels at the top of the ranch but much of the rest of the ranch’s mauka acreage. According to the legal memorandum, Tom Pace acknowledged as much in a deposition taken July 20.
A review of records at the state Bureau of Conveyances bears out the view that Hokukano Ranch has serious cash flow problems. At the moment, it faces two lawsuits seeking foreclosure on properties purchased by the ranch – one, a lot in the stalled-out Hokuli`a subdivision, another, the house where John and Gussie Pace lived near Keauhou Bay.
The Hokuli`a lot was purchased by the ranch in 2004 for $850,000 (the seller was the Pace-owned Cardinal Investment Co.); in 2007, the ranch pulled a building permit for a new dwelling estimated to cost $1.5 million, and then took out a construction loan of $3 million from La Jolla Federal Savings Bank (now One West Bank). In July 2009, the bank sued the ranch, seeking to foreclose on the Hokuli`a property. The balance owed on the Hokukano loan, the bank claimed at the time, was $3,663,570, with interest accruing
Also in 2007, the ranch purchased the house in Keauhou for $9.75 million, giving the seller, Margaret Joye of Australia, a promissory note for $6 million at 6 percent interest (that’s $30,000 a month), with the principal amount due on or before August 2 of this year. Judging from other transactions recorded the same date as the Joye deed was transferred, the down payment appears to have come from a $3.3 million loan and a line of credit of up to $750,000 from Pacific Rim Bank. To secure the loans, the bank took a mortgage on three Hokukano Ranch lots, including one of the lots later sold to Jawmin.
A week after the note came due, Joye sued for foreclosure.
The Joye and One West loans together come to nearly $10 million.
In addition to those loans and the mortgage for the Joye down payment held by Pacific Rim Bank, Hokukano Ranch lands are burdened by additional encumbrances.
Other lenders, like PayDayAllDay.Org, whose loans have ranged from the low six digits to more than seven, and which are secured by claims on ranch property, include Entrust Hawai`i (a private investment company for people wanting to “self-direct” their own IRA accounts) and, at times, Island Land Co., a real estate brokerage owned by Ed Rapoza. (As of last month, Rapoza included several of the mauka Hokukano lots among his listings: a 979-acre parcel was for sale at $3.2 million, $3.58 million was the asking price of a 481-acre lot; and the price of a 400-acre lot was pegged at $2.98 million.)
Tom Pace told Environment Hawai`i that “economic conditions in general and the aging (and recent death) of members of the senior Pace generation have prompted the sale of ranch parcels. The foreclosure actions off the ranch have had little bearing on the sale of ranch parcels (the Joye foreclosure was filed just last month [August] and we are seeking to achieve a modification of the mortgage on the property at Hokuli`a.”