Case Study – Castle & Cooke Resorts, LLC

Case Study

Securing California DRE approvals for sales of Hawaiian resort property

Client: Castle & Cooke Resorts, LLC

Background: HechtSolberg has a long history of providing legal expertise to the land owner/master developers of the Hawaiian island of Lana’i. Today, Lana’i is essentially owned by Castle & Cooke Resorts, LLC, a Hawaii limited liability company, which is developing the two large-scale Lana’i master-planned communities of Koele and Manele Bay.

As the first resort subdivision on Lana’i, the 749,413-acre master-planned community of Koele is envisioned to include 502 single-family lots and 132 condominiums to complement its very popular and luxurious resort hotel known as the Four Seasons Resort Lana’i, Lodge at Koele complete with an equestrian facility, a tennis facility, a clubhouse and two golf courses: the 18-hole private “Experience at Koele” and the 9-hole public “Cavendish” course.

Manele Bay is the second master-planned community being developed on Lana’i. Upon its completion, Manele Bay is planned to include approximately 325 single-family lots and 100 condominiums in addition to the prestigious Four Seasons Resort Lana’i at Manele Bay resort hotel situated adjacent to the Manele Bay Conference Center and the 18-hole “Challenge at Manele Bay” private golf course and the clubhouse.

Koele Challenge: In 1994, a master association was formed to govern all of the residential properties to be developed on Koele which become subject to the master declaration. Separate neighborhoods were created for single family lots and sub associations were created for condominium projects. HechtSolberg was retained by land owner and master community developer to help register the community with the California Department of Real Estate so that lots and condominiums could be sold to California residents.

At that time, it was quite onerous to register out of state projects than in-state projects with the California Department of Real Estate because out of state subdivisions were subject to “fair, just and equitable standards,” and as such, the California Department of Real Estate regulated, among other things: (i) the master developer’s control over the Koele community and its members (i.e, membership on the Board of Directors, architectural control and veto rights); (ii) the Koele budget (i.e., budgeting for reserves under California standards, how much assessments could increase, how much the master developer paid, and providing financial assurances for any financial commitments promised by the master developer); and (iii) the price of lots and condominiums offered for sale to California residents.

Solution: Working with both in-house counsel and Hawaii counsel, HechtSolberg’s role was to educate and advise the land holder/master developer as to California Department of Real Estate requirements and then craft the community structure of Koele in order to meet California’s fair, just and equitable standards while complying with Hawaii laws. In order to honor the long-term land use objectives for Koele, HechtSolbeg effectively negotiated with the California Department of Real Estate to reconcile California laws, Hawaii laws and most importantly the objectives of the land owner/master developer.

Manele Bay Challenge: In 1996, the laws governing out-of-state subdivisions were drastically overhauled and the registration was simplified. As a result, the decision was made to register Manele Bay with the California Department of Real Estate in 1997. Although Manele Bay no longer had to comply with the burdensome requirements which were repealed, the master developer wanted to incorporate key requirements of California law into the Manele Bay governing documents. The intent was to provide a balance of rights between the master developer and the homeowners and thereby protect the master developer.

Manele Bay Solution: Based on HechtSolberg’s extensive knowledge of California real estate law, the residential and resort components of Manele Bay and the governing documents for both were structured to achieve the goal of the master developer.

Today, HechtSolberg is pleased to be able to continue its relationship with the land owner/master developer of both Koele and Manele Bay by providing expert counsel to Castle & Cooke Resorts, LLC.