Seashore Properties - Case Summary

Business Description

The Debtors consist of four limited liability companies—Paia Park LLC, Seashore Properties, LLC, Paia Inn, LLC, and Paia Life LLC—which collectively own and operate a portfolio of real estate assets in Paia, on the north shore of Maui, Hawaii. The primary business is the Paia Inn, a hotel comprised of several distinct properties owned by the Debtors and two affiliated non-debtor trusts, The Paia Place Trust and The Paia Pad Trust. All debtor and non-debtor entities are controlled by a single principal.

• The Paia Inn portfolio includes the following properties:
  • 93 Hana Highway: Owned by Debtor Seashore Properties, this is the main Paia Inn building, containing nine hotel rooms.
  • 75 Hana Highway: Also owned by Seashore Properties, this vacant parcel provides the required parking for the Paia Inn.
  • 23 Nalu Place: Owned by Debtor Paia Life, this three-bedroom, two-bath beach house is operated as a hotel room.
  • 95 Hana Highway: Owned by the non-debtor Paia Place Trust, this six-bedroom, four-bath beach house is operated as three hotel rooms.
  • 40 Ae Place: Owned by the non-debtor Paia Pad Trust, this three-bedroom, two-bath beach house is operated as three hotel rooms.
• Separately, Debtor Paia Park owns the real property at 69 Hana Highway, a historic mixed-use retail property consisting of a storefront, an apartment, and a Balabe, which is adjacent to the Paia Inn's parking lot.

According to the declaration, the estimated fair market value of the Paia Inn assets is at least $28 million, while the 69 Hana property is valued at a minimum of $2.7 million.

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Corporate History

The principal's connection to Paia, Maui, dates back to 1976 when his family moved to the town. After completing his education on the mainland, he returned to Paia and, over the course of his career as an architect and builder, acquired and renovated the various parcels of real estate along Hana Highway that now comprise the Debtors' holdings.

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Operations Overview

The hotel business is operated through Paia Inn, LLC, which historically manages contracts with vendors and suppliers but does not own any real property. The Debtors engage a third-party management company, OLS Hotels & Resorts, LLC (dba Springboard Hospitality), to oversee the hotel's day-to-day functions.

• Springboard Hospitality manages the reservation system and provides a general manager, staffing, training, marketing, payroll, and other operational services.
• The Paia Inn has 12 full-time employees who are leased from Proservice Hawaii by Springboard.
• The property at 69 Hana Highway is not part of the Paia Inn's hotel operations. While currently vacant, it is slated to be made available for rent.
• Income and expenses for the properties held by the non-debtor Place Trust and Pad Trust are included in the Debtors' cash collateral budget. The budget projects that the combined entities will generate positive cash flow after accounting for debt service payments to Hawaii State Federal Credit Union.

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Prepetition Obligations

The Debtors' prepetition capital structure consists of secured loans and several financing agreements.

Hawaii State Federal Credit Union (HSFCU) Loans

• Loan #1: Approximately $2.03 million is outstanding on a loan originally issued to Paia Park in August 2018 for $1.89 million. The loan is secured by a first mortgage on the 69 Hana property and is personally guaranteed by the principal.
• Loan #3: Approximately $13.75 million is outstanding on a loan originally issued in November 2019 for $12.6 million. Borrowers include Paia Inn, Seashore Properties, Paia Life, and the principal, both individually and as trustee for the non-debtor trusts. The loan is secured by a first mortgage on the core Paia Inn properties (93 Hana, 95 Hana, 23 Nalu, and 40 Ae) and accrues default interest at 8.65% per annum.
• A prior loan from HSFCU (Loan #2) was paid off from a refinancing provided by Tango Juliet LLC, which now holds a second mortgage on 69 Hana and other properties.

Other Secured Debt

• 49 Hana LLC: This entity holds an interest in the cash collateral of the 75 Hana parking lot via an assignment of rents clause in its mortgage, which secures a promissory note with an original principal amount of $2.1 million. The 75 Hana property is not collateral for the HSFCU loans.

Financing Agreements

• The Debtors have entered into several 10-month financing agreements:
  • Seashore Properties: Requires monthly payments of $2,125. The September and October installments are delinquent.
  • Paia Park: Requires monthly payments of $725.
  • Paia Life: Requires monthly payments of $1,790. The October installment is delinquent.
  • Paia Inn: Requires monthly payments of $3,627. The October installment is delinquent.

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Events Leading to Bankruptcy

The Debtors' financial distress began with liquidity challenges stemming from the COVID-19 pandemic in early 2020, which were later exacerbated by the August 2023 Lahaina fires on Maui. Mandatory quarantine requirements during 2020 severely impacted Maui's hospitality sector, and while the Paia Inn suffered no physical damage from the subsequent fires, the resulting decline in tourism caused revenues to drop by more than a third during the 2023-2024 holiday season. The crisis also created staffing difficulties due to housing affordability issues among local residents.

Foreclosure Proceedings

• On July 23, 2024, Hawaii State Federal Credit Union ("HSFCU") initiated a foreclosure case in Hawaii state court against the Debtors. At the subsequent foreclosure auction, HSFCU was the sole bidder.
• On January 31, 2025, 49 Hana LLC also commenced a foreclosure case to foreclose on its interest in the 75 Hana property.

Chapter 11 Filing and Go-Forward Strategy

Facing mounting pressure from creditors, the Debtors filed for Chapter 11 protection on October 24, 2025, in the U.S. Bankruptcy Court for the District of Hawaii. The primary goal of the bankruptcy is to facilitate a sale of the Paia Inn assets, including the properties held by the affiliated non-debtor trusts. To consummate a sale or refinancing, the Debtors intend to transfer the trust-owned parcels into a debtor entity.