The Department of Land and Natural Resources has been under pressure in recent years to transition, where appropriate, long-held revocable permits to a long-term disposition, be it a lease or an easement. But in the case of a nine-acre lot at the Honokohau small boat harbor in West Hawai\u2018i, which had been under a revocable permit for 17 years, that transition has been anything but smooth. <\/p>\n\n\n\n
Barely a year into their 10-year lease for a boat storage yard at the harbor, the two men who formed the new lessee Pacific Marine Partners, LLC (PMP) were suing each other over their respective ownership interests. <\/p>\n\n\n\n
That dispute, between Jason Ho\u2018opai and Jonas Ikaika Solliday, led at one point to frozen bank accounts and both men trying to kick each other out of the company via competing filings with the state Department of Commerce and Consumer Affairs. <\/p>\n\n\n\n
The company fell behind on its rent, which led the state Board of Land and Natural Resources to vote in May to cancel their lease. In June, the board rejected their requests for a contested case hearing. <\/p>\n\n\n\n
But last month, the board approved a recommendation from the DLNR\u2019s Division of Boating and Ocean Recreation (DOBOR) to rescind the lease cancellation. What\u2019s more, the board approved a proposed $423,641.66 settlement with the company over alleged problems with the property, including an illegal cesspool, incomplete fencing, damaged utilities, and difficulties evicting a company that had been on the property for years. <\/p>\n\n\n\n
DOBOR noted in its report to the board that despite the rent arrearage, PMP had cooperated with the division on cleaning the property, improving operations, and growing revenue. It also reminded the board that PMP \u2014 which had continued to pay some of its rent despite the May lease cancellation \u2014 is paying five times more in rent than the previous tenant, Gentry’s Kona Marina (GKM), was paying. And once the settlement is paid off via rent credits, PMP will have paid more than $1 million to the state, it stated. (The settlement will cover PMP\u2019s rent arrearage of $58,641, and for the next 20 months, reduce the company\u2019s minimum monthly base rent by $17,000.) <\/p>\n\n\n\n
While DOBOR\u2019s report states that PMP has agreed to the settlement, the controversies surrounding the management of the parcel are far from settled. In approving DOBOR\u2019s recommendations, the board directed the Department of the Attorney General to investigate who else might be responsible for the costs incurred to address the problems identified by PMP and to pursue recovery of those costs. <\/p>\n\n\n\n
DOBOR stated in its report to the board that it was denying \u201ceach and every one of [PMP\u2019s] claims in both liability and amount.\u201d But at the board\u2019s meeting a month earlier, deputy attorney general William Wynhoff conceded that the division would agree that some of the problems that had been identified were PMP\u2019s fault, while others were DOBOR\u2019s. He added, \u201cGKM has played a very pernicious role.\u201d <\/p>\n\n\n\n
In addition to the state\u2019s investigation into other potentially liable parties, PMP faces a lawsuit filed by a man whose welding business was evicted from the parcel after PMP took possession. And with regard to the lawsuit between Ho\u2018opai and Solliday, one of Solliday\u2019s attorneys, David Swatland, said that the parties had an arbitration meeting scheduled for October 19-20. \u201cDuring the coming month they will be engaged in discovery,\u201d he stated in an email. <\/p>\n\n\n\n
On August 17, 2017, the Land Board voted to approve a request by DOBOR to hold a public auction for a ten-year lease of the parcel. <\/p>\n\n\n\n
GKM, which has a lease from DOBOR for adjacent state land, operated the boat yard under a revocable permit since 2003. At the board\u2019s meeting then, GKM manager Tina Prettyman urged the board not to proceed with an auction, especially with the proposed upset rent of 50 percent of gross revenue or a base rent set by an appraisal, whichever was greater. She said 15 percent of gross revenue was more reasonable. <\/p>\n\n\n\n
She also claimed that a previous administrator for DOBOR had years ago assured GKM that the department would try to issue a long-term lease to the company. This, despite a requirement under state law that public lands be disposed of through a public auction, except in very limited circumstances. <\/p>\n\n\n\n
Years later, when the current DOBOR administrator, Ed Underwood, tried to make good on his predecessor\u2019s representations, the Office of the Attorney General advised him that a direct negotiation of a lease would not be appropriate, according to DOBOR staffer Dana Yoshimura. <\/p>\n\n\n\n
Prettyman said she worried that if the Land Board voted in favor of an auction, boaters who owe GKM back rent simply wouldn\u2019t pay. She said GKM had $300,000 in uncollected debts. She added that her company had put in close to a half million dollars in improvements to the property over the years. \u201cThere was a lot of gravel that needed to be brought in,\u201d she said. <\/p>\n\n\n\n
Prettyman said that GKM took in a little less than $50,000 a month in revenue from the property. Its monthly rent under the revocable permit was $7,800. Based on the current revenue, Land Board member Chris Yuen seemed to think that a rent of 50 percent of gross revenue was doable. <\/p>\n\n\n\n
\u201cIf somebody continued this business and grossed close to $50,000 and paid 50 percent as the upset … that would leave $25,000 a month left. Your operating expenses are more than $25,000 a month?\u201d Yuen asked. <\/p>\n\n\n\n
Prettyman said the expenses were significant. \u201cThere is a huge administration side of it that people don\u2019t recognize,\u201d she said. <\/p>\n\n\n\n
In response to Prettyman\u2019s concern that a new lessee on the parcel could start competing with GKM\u2019s businesses on its adjacent parcel, Yuen said, \u201cI would understand why you wouldn\u2019t want competition. I don\u2019t understand why we wouldn\u2019t want competition.\u201d He added that GKM had had a permit for the property for 14 years. \u201cThat\u2019s a lot of time to recover investment,\u201d he said. <\/p>\n\n\n\n
Before the board\u2019s vote, there was some discussion about whether or not GKM could take its improvements, such as fencing, with it when its permit expired. Kaua\u2018i board member and former DLNR land agent Tommy Oi pointed out that improvements become state property upon termination of leases, but remain the permittees\u2019 property under revocable permits. <\/p>\n\n\n\n
Apparently, prospective bidders were not made privy to the board\u2019s discussion regarding existing improvements on the property. <\/p>\n\n\n\n
DOBOR\u2019s public notice for the auction, held July 13, 2018, described the land as an unimproved gravel lot, fenced with a chain-link fence. The upset rent was 50 percent of gross revenue or $423,000 a year, whichever was greater. <\/p>\n\n\n\n
PMP, which had formed just a few days before the auction, was not allowed to inspect the property before bidding. It was the only bidder. <\/p>\n\n\n\n
In late August, according to testimony Solliday submitted to the Land Board this past June, he was granted permission by GKM to do a post-bid partial inspection of the property with the DOBOR harbormaster. He stated that he saw that the property had water and electricity, but that there was also a business, Hotspots Welding, operating on the parcel. He said he also found that only about six of the parcel\u2019s nine acres were graded and graveled, \u201cwith approximately 10-12 feet high berms littered with tires and debris.\u201d The fencing was incomplete and there were hazardous waste barrels, construction debris and derelict vessels throughout the property, he stated. <\/p>\n\n\n\n
\u201cPMP\u2019s counsel Duane Fisher notified DLNR and deputy Hawai\u2018i attorney general William Wynhoff of the false advertised conditions of the leased parcel. In short, the leased property was not what was advertised,\u201d Solliday wrote. <\/p>\n\n\n\n
GKM vacated the property in November 2018, taking with it the motor for the front gate, Solliday claimed. GKM submitted a Phase 1 environmental site assessment of the property, but PMP, which questioned the reliability of that report, hired Environmental Science International to conduct its own assessment. Before doing so, PMP confirmed in writing that between PMP and the DLNR, PMP would not be liable for any pre-existing environmental conditions found on the lot. <\/p>\n\n\n\n
PMP\u2019s consultant wound up finding a number of environmental conditions in need of remediation, including an unpermitted cesspool associated with Hotspots Welding; uncontrolled dumping; minor releases of oil, paint, or other hazardous substances and solid wastes; and abandoned or derelict vessels. <\/p>\n\n\n\n
In a February 2019 letter to Wynhoff, attorney Ian Sandison, who was representing PMP at the time, described how the identified hazards, especially the illegal cesspool, might violate state and federal environmental and health laws, exposing it to tens of thousands of dollars a day in fines. Remediating the hazards would cost between $1.1 million and $4 million, according to his letter, which asked Wynhoff and DLNR director Suzanne Case to meet with him and his clients to discuss matters. <\/p>\n\n\n\n
Six months later, on August 21, PMP attorney Fisher asked the Land Board to approve a rent abatement, given all of the property\u2019s defects. He claimed that PMP had incurred damages totaling $415,505 since November 2018, including lost revenue due to waste, derelict vessels and an illegal tenant occupying space that could otherwise be rented, as well as costs incurred to complete the fence around property, to hire security in the meantime, to install a new power system and security gate, and to grade and level the lot. <\/p>\n\n\n\n
While GKM was under no obligation to leave any of its improvements on the property, Fisher described the company\u2019s decision to disconnect utilities and remove the motorized security gate as property damage. <\/p>\n\n\n\n
Fisher wrote that PMP knew there was a functioning security gate when they bid on the property and expected it to still be there when it took possession. <\/p>\n\n\n\n
He also asked that the Land Board agree to reimburse PMP the costs to remediate the environmental hazards on the property, such as the cesspool. Fisher estimated those costs could range from $474,000 to nearly $2 million. <\/p>\n\n\n\n
Before the month was over, however, PMP had begun to unravel. <\/p>\n\n\n\n
According to Solliday, he had learned that Ho\u2018opai had taken out more than $100,000 in loans without Solliday\u2019s knowledge or consent, which was a violation of their operating agreement. The agreement requires unanimous consent of all members to take on liabilities greater than $10,000. <\/p>\n\n\n\n
That same agreement allows for a member to be involuntarily withdrawn and dissociated from the company, so Solliday filed a notice with the state Department of Commerce and Consumer Affairs that he was the sole owner. Ho\u2018opai followed suit with a similar filing, which led to Solliday filing another. And on it went. <\/p>\n\n\n\n
To the court, to DOBOR, and to various banks, Ho\u2018opai has represented that he owned 95 percent of PMP, with Solliday holding the remainder. And, he stated, because he believed Solliday owns a less than ten percent interest in the company, he did not list Solliday as a co-owner or provide any of Solliday\u2019s financial information to DOBOR when he submitted PMP\u2019s lease bid in 2018. Such information would have been required from any owner with more than a 10 percent interest. <\/p>\n\n\n\n
Solliday, on the other hand, has argued that it was his idea to bid on the harbor lease and that both had signed an operating agreement that gave each of them a 50 percent ownership interest. A shareholder agreement they also signed, which includes the 95-5 percent split, is invalid, Solliday\u2019s attorneys have argued, because PMP is a limited liability company, and LLCs do not have shareholders. <\/p>\n\n\n\n
In October, after banks had frozen PMP\u2019s accounts and would only allow expenditures approved by both men, Ho\u2018opai sought Land Board approval to identify him as the sole owner of PMP. By then, the company had failed to pay its rent for several months. <\/p>\n\n\n\n
The Land Board denied Ho\u2018opai\u2019s request. And a few weeks later, 3rd Circuit Judge Melvin Fujino held a hearing on a petition Ho\u2018opai had filed for a temporary restraining order and preliminary injunction against Solliday.<\/p>\n\n\n\n
At the November hearing, Ho\u2018opai\u2019s attorney, Sunny Lee, conceded that PMP\u2019s shareholder agreement had \u201ca lot of things in there that were not intended to be. It was a document that Mr. Ho\u2018opai downloaded off the internet and cobbled together.\u201d <\/p>\n\n\n\n
Lee warned that Solliday\u2019s contestation of the ownership percentage might lead to PMP being stripped of its lease. Lee said that any assignments of interest need to be approved by the Land Board beforehand. In PMP\u2019s case, its bid application showed a company owned by Ho\u2018opai to be the 95 percent owner. \u201cNow Mr. Solliday is claiming 50\/50. It is a violation of the terms of lease because that was not what DLNR agreed to when they assigned the lease to Pacific Marine Partners,\u201d Lee said. <\/p>\n\n\n\n
Solliday\u2019s attorneys countered that the operating agreement contains a clause that invalidates any other agreements. It states, in part, \u201cOnly the written terms of this agreement will bind the members.\u201d <\/p>\n\n\n\n
Judge Fujino sided with Solliday. \u201cMr. Lee admits that his client was the one who prepared [the agreements]. At best, there is ambiguity. We believe that the shareholder agreement doesn\u2019t apply,\u201d Fujino said. <\/p>\n\n\n\n
He pointed out that the shareholder agreement included provisions that are not applicable and that Ho\u2018opai had submitted a document to the Bank of Hawai\u2018i in August 2019 that stated that Solliday owns more than 25 percent of the company. <\/p>\n\n\n\n
Fujino then denied Ho\u2018opai\u2019s request for a temporary restraining order and preliminary injunction against Solliday. In April, the judge granted Ho\u2018opai\u2019s request that the case be stayed and that the parties be ordered into arbitration. Solliday\u2019s attorneys appealed Fujino\u2019s April decision to the Intermediate Court of Appeals, but no hearings have been held. <\/p>\n\n\n\n
On May 22, the Land Board cancelled PMP\u2019s lease for non-payment of rent. Ho\u2018opai asked the board hold off, pointing out that PMP has had to spend money curing faults with the property. \u201cWhen I bid and won at the auction, I was anticipating this high price would come with all the bells and whistles…. It was very much not the case,\u201d he said. He pointed out that PMP\u2019s rent is many times more than previous ground rents. <\/p>\n\n\n\n
Despite owing substantial back rent, \u201cPMP has paid more in one and a half years than [GKM did] in the past five years,\u201d he told the board. <\/p>\n\n\n\n
\u201cThese issues down at Honkohau Harbor have been festering, for lack of a better word. [We\u2019re] stepping up to the plate to take this on,\u201d he said. <\/p>\n\n\n\n
When pressed by board members to specify how much PMP has paid to clean up the property, Ho\u2018opai could not answer. \u201cA lot of those numbers are with my attorney,\u201d he said. <\/p>\n\n\n\n
Board members also could not get Ho\u2018opai to tell them how much gross revenue PMP had generated. <\/p>\n\n\n\n
\u201cPercentage rent requires accounting to DLNR for your income. Have you delivered any of that information to DLNR?\u201d asked Land Board chair Suzanne Case. <\/p>\n\n\n\n
Ho\u2018opai said his attorneys had been in the process of delivering gross receipts. <\/p>\n\n\n\n
\u201cYou haven\u2019t actually given it to the DLNR,\u201d Case said. <\/p>\n\n\n\n
\u201cDo you know your gross receipts for 2019?\u201d board member Chris Yuen asked. <\/p>\n\n\n\n
Ho\u2018opai said he could contact his bookkeeper.
\n<\/p>\n\n\n\n
Before voting to cancel the lease, deputy attorney general Wynhoff reminded the board that, under PMP\u2019s lease, it would still have 60 days to cure its default. <\/p>\n\n\n\n
On June 26, the Land Board rejected Ho\u2018opai\u2019s and Solliday\u2019s petitions for a contested case hearing. Solliday had submitted testimony to the board that criticized the actions of DOBOR, Ho\u2018opai, and GKM. He blamed DOBOR for failing to inspect the property and ensure it was suitable before auctioning it. He blamed GKM for not fully disclosing site conditions and for Hotspots Welding\u2019s unpermitted warehouse and cesspool, and the dumping of hazardous materials and construction waste, among other things. <\/p>\n\n\n\n
He also blamed DOBOR for Hotspots remaining on the property for years without authorization and without addressing the environmental hazards. <\/p>\n\n\n\n
\u201c[U]pon PMP\u2019s acquisition of the lease, DOBOR claims PMP got an \u2018as is\u2019 property and directs PMP to tackle the illegal trespassing business Hotspots Welding, including entering its trespass lawsuit. PMP is still embroiled in and at risk in expensive litigation with Hotspots Welding thanks to DOBOR,\u201d he wrote. <\/p>\n\n\n\n
Solliday recounted that on November 15, 2019, he had to call the police after finding a man who had sneaked into the boat yard \u201cnaked with a woman out in the open.\u201d The police found the couple hiding at Hotspots and gave them a warning against trespassing, he wrote, adding that less than an hour after the police left, PMP\u2019s two surveillance cameras outside Hotspots\u2019s warehouse went offline. The camera wires appeared to have been intentionally cut or damaged, Solliday wrote. <\/p>\n\n\n\n
\u201cPMP\u2019s water service was also turned off as the water lines ran through Hotspots. I ended up installing new water lines that went around Hotspots,\u201d he added. <\/p>\n\n\n\n
When Land Board member Jimmy Gomes asked Wynhoff about the issues Solliday had raised, Wynhoff said, \u201cThese claims are worthy of consideration and worthy of respect.\u201d Even so, he said the parties were not entitled to a contested case hearing. <\/p>\n\n\n\n
But a month later, after negotiation with PMP\u2019s attorneys, DOBOR recommended Land Board approval of the $423,600 settlement and rescission the lease cancellation. <\/p>\n\n\n\n
In its July 24 report to the board, DOBOR listed the 11 issues with the property that PMP found problematic. GKM was blamed for most of them, including interfering with the transfer of boat storage customers to PMP, destroying the electrical connection and interfering with the water supply to the property, abandoning vessels, and installing an illegal cesspool. <\/p>\n\n\n\n
In testimony submitted on July 21, GKM\u2019s Prettyman rebutted the accusations. <\/p>\n\n\n\n
With regard to the problems PMP has had getting water and electricity to the property, she explained that there never were utilities on the property. \u201cGKM had been making do with a small amount of power supplied from GKM\u2019s electric at its adjacent property,\u201d she wrote. <\/p>\n\n\n\n
She pointed out that on October 24, 2018, before PMP took possession of the property, GKM and its attorney met with Land Board chair Case and Wynhoff. GKM was told that PMP wanted to buy GKM\u2019s assets. \u201cGKM made an offer and our offer was rejected at the last minute leaving GKM scrambling to remove GKM\u2019s improvements and some of GKM\u2019s equipment,\u201d Prettyman wrote. <\/p>\n\n\n\n
As for interfering with the transfer of boat storage customers, Prettyman stated simply that once GKM got notice from DOBOR to vacate the premises by October 31, 2018, the company gave all of its tenants similar notice. <\/p>\n\n\n\n
DOBOR then posted a notice at the harbor office, and made calls and emails to GKM\u2019s tenants telling them they did not have to leave, she stated. That \u201ccompletely undermined GKM\u2019s move-out process and eliminated any management and GKM\u2019s ability to collect any rents owed. … [V]ery few tenants moved out and all remaining tenants continued to ignore any and all further requests from GKM,\u201d she wrote. <\/p>\n\n\n\n
She continued, \u201cThere were no abandoned vessels as all vessels had owners and GKM was in communication with the owners. GKM also gave notice to Hotspots Welding to vacate the premises. After receiving our notice to vacate, Cameron Noftz, Hotspots Welding, approached me in the parking lot and told me that he was told by both DLNR and PMP that he did not have to vacate. Cameron Noftz completely ignored our notice to leave and became very hostile.\u201d (Solliday and even Hotspots employees have sought temporary restraining orders against Noftz, who claims he was robbed of his interest in the company through forgery. He is suing his former partner, Stacie Horst, as well as Ho\u2018opai and PMP. Ho\u2018opai and PMP deny Noftz\u2019s allegations against them.) Prettyman also contested the claim that GKM left PMP with an unsuitable property. GKM\u2019s Phase 1 Environmental Assessment found no recognized environmental conditions. She said that GKM never allowed vessels to be worked on at the boat yard, but that PMP has. She added, \u201cGKM is also unaware of any cesspool at Hotspots Welding.\u201d<\/p>\n\n\n\n
She also stated that when GKM attempted in November 2018 to remove some property that had been left, PMP reported the incident as trespassing. \u201cWe made at least five attempts to remove GKM\u2019s equipment starting as early as November 13, 2018, without access,\u201d she wrote.<\/p>\n\n\n\n
She concluded that GKM, when it managed the property, paid its rent on time, prohibited vessel work, offered fair prices (\u201cRents have quadrupled for some tenants,\u201d she said), and left the facility in a \u201cclean and in very good condition.\u201d <\/p>\n\n\n\n
\u201cGKM continues to cooperate with DLNR-DOBOR despite GKM being unfairly targeted,\u201d she wrote. <\/p>\n\n\n\n
DOBOR and attorneys for Noftz and Ho\u2018opai did not respond to questions by press time. <\/p>\n\n\n\n
\u2014 Teresa Dawson<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" The Department of Land and Natural Resources has been under pressure in recent years to transition, where appropriate, long-held revocable permits to a long-term disposition, be it a lease or an easement. But in the case of a nine-acre lot … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":12774,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[472,13,338,17],"tags":[3],"class_list":["post-12773","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-august-2020","category-board-talk","category-land-use","category-marine","tag-teresa-dawson"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/12773","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12773"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/12773\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/media\/12774"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12773"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12773"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12773"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}