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Due Da Due......But Be Quick About It!!!!!

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Due Da Due......But Be Quick About It!!!!!

Of the hundreds of companies that have graced Hawaii Business' Top 250 list over the past 20 years, only Amfac has the distinction of being the first-ever No. 1 company. Debuting on the list in the top spot in 1983, Amfac was at the height of its glory: 28,000 employees strong, it earned $2.21 billion in gross annual sales from its businesses in retail, agriculture, hotels, property management and development in 1982.

WHERE IT ALL BEGAN: Former Amfac Hawaii Inc. Chairman Robert Ozaki sits in front a gate erected in memory of his former leader and friend, Henry A. Walker Jr. The site is also the location where the original Amfac Inc. was built. Photo: Kent S. Hwang

As Chris Kanazawa, former president of Amfac's Hawaii real estate division, puts it, "Those were mighty good days." That they were. Henry A. Walker Jr., revered by many as one of Hawaii's great business leaders, was still at the helm of the company. Amfac had successfully developed Kaanapali on Maui. And its flagship retail store, Liberty House, was turning over huge volume.

However, while the company had lots of assets, it wasn't generating much cash flow, other than random land sales here and there. It was losing money in Mainland ventures (primarily resort operations), and sugar plantations were beginning their inevitable descent. In short, Amfac was racking up huge amounts of debt.

AMFAC

Rank '83 1
Sales '82 ($Mil) $2,208
Rank '03 N/A
Sales '02 ($Mil) N/A

Meanwhile, in Chicago, executives at JMB Realty Corp. became aware of Amfac's hand-to-mouth existence, and decided that what the company really needed, to thwart its heavy bleeding, was a dose of modest, steady development planning - and JMB would serve up the prescription. In 1988, JMB Realty Corp. purchased the Big Five company for $920 million, and it was renamed Amfac/JMB Hawaii Inc.

Several local Amfac execs - among them, then-chairman of Amfac's Hawaii group, Robert Ozaki - countered JMB's bid unsuccessfully, which set the stage for a sticky transition. The changeover of a 135-year-old Hawaii institution to a Mainland-controlled firm was delicate at best, and difficult for most of Amfac's thousands of employees.

"When JMB came in, Amfac was in need of capital, and I think JMB did infuse the company with capital. But like any other takeover, they brought a whole different culture, and a whole different approach to business," says Kanazawa. "It was hard on most people, because they didn't know what to expect. Change is a threatening thing."

Since the buyout, Amfac has undergone its biggest changes, with the closing of its three sugar mills and the company's dramatic and very public bankruptcy in 2002, which concurrently knocked the company off of last year's Top 250 list. The company divested nearly everything - including its name. What was once Amfac is now Kaanapali Land LLC. Today, the company is a fractured remnant of its former self. Its holdings include small, diversified agriculture plots on Maui, the Waikele golf course on Oahu, and 5,000 acres of land in Kaanapali. In June, the state foreclosed on two of the company's Maui-based golf courses, which Amfac used as collateral against a $66 million loan.

"Clearly, our 5,000 acres on Maui will be the focus of the company over the next 10 to 15 years," says Gary Nickele, president of Kaanapali Land LLC. "We're no longer the Big Five company we once were. We're really pretty simple."

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Due Da Due......But Be Quick About It!!!!!

The pension fund for state employees will take ownership of two 18-hole resort golf courses in Kaanapali, Maui, from Amfac Hawaii as part of a settlement of a nearly 3-year-old lawsuit.

The property, the Royal Kaanapali Golf Courses, is worth a fraction of the $96 million Amfac allegedly owes the state, based on previous sales of Hawaii links.

The state Employees' Retirement System and Amfac reached a settlement agreement earlier this month after nearly a year of talks. The agreement, a public document, is scheduled to be heard next week at U.S. Bankruptcy Court in Chicago. If approved, the settlement documents will be filed in state Circuit Court in Honolulu, where further approval is required.

The state pension fund loaned Amfac $66 million in 1991, then sued Amfac in 2000 to foreclose on the golf courses, alleging Amfac had defaulted on the loan. The Employees' Retirement System says it is owed approximately $96 million by Amfac, including penalties, interest and various charges.

Amfac countersued last year, alleging the state had engaged in wrongful conduct and had been "fundamentally unfair," among other things. Amfac, saddled with more than $300 million in debt, then filed for Chapter 11 bankruptcy protection in Chicago.

Both sides have denied the various allegations, and the foreclosure has been pending in Circuit Court.

Under the settlement, the state will bid for the Royal Kaanapali Golf Courses at a public foreclosure auction, in which the state is expected to emerge the winning bidder.

Once the state has ownership of the roughly 305-acre golf courses, it has no other recourse for the $96 million debt.

All claims in the litigation will be dropped.

The settlement talks took nearly a year because the golf courses are surrounded by lands owned by Amfac, and issues such as easements and water rights had to be resolved, said Ted Pettit, attorney for Amfac.

The auction could take place as early as June, said Don Gelber, attorney for the state Employees' Retirement System.

A Chicago real estate investment consultant to the state's retirement system is reviewing the financial potential of the golf courses, and the state hasn't decided what to do with the property, said Richard Humphreys, a trustee of the pension fund.

The Royal Kaanapali Golf Courses have been operated for the past year by court-appointed receiver Joseph Toy, who declined comment.

The two Kaanapali golf courses generated $8.6 million in revenue in 2001, $10.4 million in 2000 and $10.3 million in 1999, according to the last annual report filed by Amfac with the U.S. Securities and Exchange Commission. More up-to-date information was not available.

As part of the settlement, Amfac's successor company, Kaanapali Land LLC, will pay $250,000 to the state.

Attorneys for the state and Amfac declined further comment on the settlement.

Amfac, a former Big 5 company that once owned nearly 60,000 acres in Hawaii, now has a much smaller presence here. Its main project in the islands is a residential development planned for several thousand acres in West Maui.

The state pension fund provides retirement, disability and survivor benefits for more than 90,000 city, county and state employees, retirees and their beneficiaries.