Metropolitan Mortgage & Securities Co. sold its idyllic Hawaiian properties and netted $16.7 million, a bit of bright news for creditors of the bankrupt company.
Proceeds bested the company’s initial estimate by more than $4 million, making the auction a rare success in what has been a bankruptcy full of distressed sales and disappointments.
“We’re very pleased about this,” said P.J. Grabicki, the attorney representing thousands of burned investors in the bankruptcy case.
Among the buyers was an heir to the Campbell Soup fortune, Bennett Dorrance. He paid $18 million for 32 acres of land that included about 1,100 feet of white sandy beach.
“I’ve been buying Campbell’s Soup every day,” said Maggie Lyons, who has managed Metropolitan as CEO during its liquidation.
Sealed bids for Metropolitan’s Hawaiian holdings were due Aug. 11. The bidders were then given an opportunity to submit final and best offers. The process, overseen by real estate advisor Kennedy Wilson Inc., went smoothly, even though some of the properties were saddled with zoning problems, Lyons said.
Lyons said money from all but one of four separate property sales has been deposited and will be part of the initial distribution to creditors once a bankruptcy plan for Metropolitan has been approved. That is scheduled to happen by early next year.
The Hawaiian properties were among the crown jewels of Metropolitan’s holdings and were coveted by developers and paradise seekers.
Sitting within a 45-minute drive of Honolulu, the oceanfront lots were acquired several years ago by Metropolitan as part of its Dillingham Ranch project, a development that was envisioned to provide an equestrian center and housing development on a historic ranch.
To make it all work, Metropolitan used its insurance affiliates to back the purchases in the sort of questionable intra-company financing arrangements that have come under scrutiny from a court-appointed special examiner.
Despite the unusual financing scenarios and zoning issues, Lyons said she believed early on that the company and its affiliates could all emerge financial winners on the deal because of a red-hot Hawaiian real estate market and the beauty and desirability of the properties.
The biggest problem has been the poor, if not hostile, relationship between Metropolitan and its Western United Life Assurance Co. affiliate, now overseen by Washington State Insurance Commissioner Mike Kriedler.
Regulators seized the company from Metropolitan’s control in early 2004, amid allegations of accounting fraud, to ensure it complied with state insurance laws.
Regulators have since reorganized the company, written off tens of millions of dollars in investments and are now attempting to sell the firm.
Lyons said Metropolitan finally grew tired of Western United’s reluctance to come up with a joint sales plan and decided to auction its property to get the money to creditors.
The lands sold include:
“ Kaena North, the 32 acres purchased by Dorrance for $18 million.
“Ocean Shores, a 13-acre property purchased by Bill Hansen, a Seattle boatmaker, for $3.05 million.
“ Mokuleia Estates, a lot less than an acre in size purchased for $1.075 million.
“ Coastal View, 55 acres in two parcels that sit on the hillsides overlooking the coast, bought for $1 million. This property once housed a munitions dump during World War II.
Metropolitan also attempted to sell another parcel called Mokuleia Shores, which has been used for decades as a polo grounds and private beach access for the adjacent Dillingham Ranch.
The company solicited bids for the property and was offered $9.5 million, but that offer did not meet the minimum requirements necessary to repay the $15.9 million note held by Western United.
Lyons said Metropolitan is now negotiating to forfeit the property because the debt far exceeds its market value.
Western would likely pair the polo grounds with its Dillingham Ranch holdings to enhance its sale of the Hawaiian real estate.
Regulators announced last spring intentions to sell Western United. Little information regarding bids, amounts or a timeline has been released.
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