Both sides now.
As director of Kauai's planning department, Tom Shigemoto once insisted that a proposed fountain and porte-cochere for the Sheraton Mirage Princeville Hotel be redesigned. The concept was too massive and garish, looking more like a Las Vegas casino than a Hawaiian resort, Shigemoto told officials of Princeville Corp. During his two-and-a-half-year tenure as county planning director, Shigemoto also opposed Princeville's plans to expand its shopping center by 100,000 square feet and to add a $17-million tennis complex, claiming both projects violated certain zoning provisions. He questioned the company's proposal to build affordable housing for its employees, saying the targeted site was in an area prone to flooding. "You might say I was Princeville's worst enemy," says shigemoto.
On May 3 of this year, Shigemoto - an 18-year veteran of the county planning department - resigned his civil service job. The next day, he announced that he was accepting the position of planning director at none other than Princeville Corp. According to 42-year-old Shigemoto, it was time for him to move on in his career, and he had entertained a number of offers from the private sector. But, in the end, it was his knowledge of Princeville's projects and a desire to take on new challenges there that steered him in the direction of the North Shore resort.
"Some bad decisions were made in the past that have to be rectified," says Shigemoto, referring to actions by Princeville's former owner. Qintex Corp., which filed for bankruptcy in November. "They tried to push too many projects through the planning commission, and many of their design proposals were out of character for a rural community. But we have to live with the Qintex experience and go on from here. It's a new era with new owners."
Shigemoto may be in for the challenge of his career. Kauai's North Shore and, in some ways, the entire island are still reeling from the collapse of Australian-based Qintex Corp. key multimillion-dollar construction projects at Princeville were abandoned, and about 600 resort workers were laid off. Subcontractors working on the project filed more than $20 million in liens, and were forced to reassign or lay off a total of 300 workers. North Shore merchants watched helplessly as business receipts plunged an average 30 percent within months. "This community screeched to a sudden halt," says Hanalei Realtor Susan Wilson.
Wilson, who has been involved in North Shore planning issues for more than a decade, is a member of the Hanalei-Princeville Improvement Advisory Committee. The seven-member HPIAC was appointed by Mayor JoAnn Yukimura in 1989 to make recommendations on permit applications for development on the North Shore to both the county planning commission and county council. In the six months prior to Qintex's bankruptcy, Wilson says the group reveiwed more than 15 applications by the company for projects at Princeville, ranging from movie theaters to expansion of the airport. "Some were outrageous proposals that were completely out of character with the rural look of this area, and showed a blatant disregard for the North Shore Development Plan," she says.
During a public hearing on November 8, 1989, HPIAC members testified before the county planning commission and requested that a moratorium be placed on all permits issued to Princeville Corp., citing its parent's tenuous financial condition. The group submitted as proof Qintex's February financial report as well as newspaper articles from Australia, both indicating that the highly leveraged communications company was on the brink of collapse. But the Kauai commission rejected the moratorium request, claiming the county was not required to consider financial accountability in the process of issuing permits. It was a ruling with which planning director Shigemoto concurred at the time. "There are no county-mandated regulations that require financial statements from developers, so we just assume they are capable of doing the projects," he says.
As a result of the planning commission's decision, the North Shore was thrown into total disarray, says HPIAC Chairwoman Nanette Kaaumoana. "We now have a half-finished Princeville hotel and an aborted golf course clubhouse laying vulnerable to the weather. It has obliterated ocean views, and caused erosion and runoff problems. The entire fiasco has had a very negative effect on the community at large," she says. HPIAC members charge that county officials, Shigemoto included, were manipulated by Qintex. Says Kaaumoana, "The excessive number of permits sought by Qintex was an attempt by the developer to use the county planning process for their own commercial marketing and resale gain. Qintex was not an economically healthy corporation. Unfortunately, our concerns were validated."
Shigemoto, of course, has a totally different perspective on the matter. Qintex did have an unusually large number of applications before the planning department during the year before its fall. "But from the county's perspective, we though they were on an accelerated scheduled and nothing more," he says. "Nobody except (Qintex Chairman) Christopher Skase really knew what its financial condition was."
Difficult history. The conflict between community residents and county officials over operations at Princeville has been going on since the early 1980s, when community groups like the 1,000 Friends of Kauai, the North Shore Ohana, the North Shore Belt Road Citizen's Advisory Committee, and the Hanalei School Parents Association asked the resort to slow its near-frenzied pace of development.
In 1983, Princeville's Colorado-based parent Consolidated Oil & Gas spun off Princeville as a separate company. After the restructuring, the Princeville Development Corp. started to move ahead with new resort and residential projects, and the next year, proudly announced the opening of its $54-million, 300-room Sheraton Princeville Hotel (HB July 1986, "Teed Up For Growth"). The scenic, 7,000-acre North Shore resort had finally added what many considered to be the critical missing element needed to push Princeville into profitability. Ever since its predecessor, Eagle County Development Corp., had paid $8.8 million to acquire the 11,000-acre ranch from Amfac Inc. in 1969, the resort had drowned in five years of red ink. Although Princeville had built condos in the area dating back several years, a hotel could be the drawing card to attract more visitors who might fly in Princeville Airways, shop at Princeville Center, eat in Princeville restaurants and even purchase a Princeville condo.
More good news came for Princeville Corp. in 1986, when a five-year contract was inked with the Ladies Professional Golfing Association to host the Women's Kemper Open. The first year of the event pumped some $4 million in visitor expenditures into the North Shore economy and drew an estimated 14 million television viewers. The publicity generated worldwide attention to the Kauai resort, and caught the fancy of a 38-year-old Australian hotel developer eager to add another holding to his chain of five-star quality hotels, the Mirage Resorts in Queensland.
Christopher Skase, the flamboyant chairman of Qintex Australia Ltd. - owner of Mirage Resorts - saw Princeville as the Pacific key to opening worldwide markets in the visitor industry. In 1987, the Aussie engineered a series of tender offers and private deals amounting to more than $100 million of the purchase of 51 percent of Princeville Development Corp. Skase then embarked on a $250-million refurbishment and expansion plan that included tripling the size of the resort's shopping center; building a nine-acre tennis and fitness center, a movie theater and thousands of residential units; and completing an 18-hole championship golf course and clubhouse.
But Skase's primary goal was to upgrade the existing hotel - which he renamed the Sheraton Mirage Princeville - to the tune of $35 million. In December 1988, Skase bought 3.9 million shares of Princeville Development, enough to effect a 93 percent takeover of the company. A few months later, Skase went looking for a financial partner to help finance his grandiose vision on the Garden Island. In March 1989, Mitsui & Co. Ltd. and Nippon Shinpan Co. Ltd. paid $350 million for a combined 49 percent interest in the Mirage Resorts, the subsidiary of Qintex Australia Ltd. that owned the Sheraton Mirage Princeville and two resorts in Australia. That investment created a $160-million cash surplus, which most observers though Skase would put into fixing up and expanding his Kauai resort.
Instead, Skase shocked investors around the world with his decision to buy MGM/UA Communications and its Hollywood studio for more than $1 billion. Within a few months, rumors began to fly about the financial instability of Qintex's three commercial television networks in Australia. Analysts worried that Skase's debt-fueled buyouts were in trouble. On October 10, MGM/UA called off the agreement with Qintex, saying the company had failed to deliver a $50-million letter of credit that was security in the transaction. Skase said the firm had been hurt by high interest rates and a strike by domestic airline pilots that crippled business at the firm's Australian resorts.
In October 1989, Skase put Princeville and his other Mirage resorts in Australia on the selling block, Princeville officials said the sale would not affect its local development, but Mayor Yukimura called the whole episode "very distrubing, particularly in light of all the existing commitments that Princeville has with the county and the number of outstanding land use applications that are currently pending." The proposed sale ground to a halt many projects already under way or proposed by Qintex on Kauai. They included the rebuilding of the Sheraton Mirage Princeville and creation of a one-acre swimming lagoon, construction of a 216-unit apartment hotel on the site of the old Hanalei Plantation Hotel, the addition of 100 employee housing units in a valley alongside the Princeville Shopping Center, expansion of the Princeville Airport, and the addition of a large tennis and fitness center.
On November 17, about 300 construction workers at the Sheraton Mirage Princeville were sent home by primary contractor Kiewit Pacific. The layoff eventually extended to 248 fulltime and part-time hotel employees at the property. Three days later, local managers announced that the company's development projects were being suspended, because of the delay in obtaining permanent financing. The next day, November 21, Qintex was placed in court-appointed receivership, similar to a U.S. Chapter 11 bankruptcy that would give it protection from its creditors.
New Japanese owners. For five months, the fate of Princeville's hotel and the entire resort remained in question. Then on April 25 of this year, Japanese credit card giant Nippon Shinpan Co. Ltd. agreed to buy out the majority share in Princeville for more than $50 million. The company already owned 24.5 percent of the company and the new agreement added 51 percent, bringing its total share to just about 75 percent. Mitsui continues to hold a 24.5 percent stake in Princeville, with the two firms jointly owning 49 percent of Qintex's two Australian resorts.
According to Walter Challenger, Princeville's new CEO, the resort's first priority is to settle its debts with lienholders and creditors, and to remobilize the crews on the Sheraton Mirage Princeville and the resort's two golf courses. Tanya Bova, director of corporate communications and marketing, adds that the company will not be on the same fast track as it was before its recent buyout by Japanese interest. As proof, Princeville withdrew its requests to the county planning commission in May for permits to expand it airport to accommodate larger commute planes.
Despite past conflicts, members of the HPIAC are hopeful that they can work with Princeville's new owners to restore harmony between the community and the hotel. "Great potential exists for a wonderful marriage between Princeville Development Corp. and the community," says Wilson. "We need to get together on a plan that allows Princeville to make a profit and the community to preserve its rural lifestyle."
As for Shigemoto, he's busy doing what he does best: planning. "Princeville has a lot of land left to be developed," he says. "Everything starts with a plan, and my role is to coordinate Princeville's planning efforts with the consultants and the new owners." His top priority is to get the hotel renovation and golf course project under way as soon as possible. Then he plans to examine Princeville's Phase II, which encompasses 1,178 acres of land east of the current residential area. But it may take a while before Shigemoto is fully comfortable in his new position, he admits. "Moving from a public policy position to corporate procedures is difficult," he says. "It's hard shifting gears."
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|Title Annotation:||Tom Shigemoto leaves Kauai planning department for job with Princeville Corp., a real estate developer|
|Date:||Jul 1, 1990|
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