A foreclosure auction for more than 5,800 acres of Kau land is scheduled to be held at noon on May 21, 2013 at the First Circuit Court Building in Honolulu. The land includes pastures, coffee farms, coastal land, as well as several homes and lots. The county appraised the value at $13.6 million and the remaining mortgage is $59.7 million. There is no upset price on the property.
How did such a large amount of land end up in foreclosure? Well, it all started in 2006. Alan Worden led a resort development group which included Windwalker Hawaii and WWK Hawaii Holdings to purchase the Kau land. They had planned to subdivide the land into 20 acre lots, build infrastructure such as roads, and acquire permits to construct high-end homes on farm land. In order to develop the land Windwalker Hawaii borrowed $44.7 million from Lehman Brothers Holdings against the property.
In 2008 Lehman Brothers filed Chapter 11 bankruptcy protection (the largest bankruptcy in US history) and stopped funding the loan. Without the required monies Worden and his development group were unable to continue developing the project or even pay many contractors who had already done a fair amount of work for them.
Worden’s group filed a motion with the US Bankruptcy Court in New York asking permission to seek an alternative form of funding. The motion stated, “Lehman’s failure to fund the project’s operating costs has thus severely disrupted the project’s ability to obtain necessary permits and has been so devastating that the Hawaii borrowers’ damages may exceed the amount borrowed.”
After six years of struggling the project has finally come to a halt and the Kau land will be auctioned off. Chris Manfredi of Windwalker Hawaii said, “I was here before Lehman, and I will be here after… The community has treated me as `ohana, and I will continue to do all I can to continue to advance our community through agriculture.”