BLNR awards disputed Coco Palms state land to developer over nonprofit group

The state Board of Land and Natural Resources (BLNR) granted two contested state-owned parcels of Wailua land to the developer of the Coco Palms Resort, denying the application of a nonprofit organization opposed to the development at a recent meeting.

Utah developer Reef Capital Partners expressed gratitude for the board’s April 26 ruling, while nonprofit group I Ola Wailuanui (IOW) was left considering next steps.

“We’re hugely disappointed in the BLNR decision,” said Fern Holland, an IOW board member who presented at the meeting. “There were options that could have benefitted and protected community interests. But they really decided to completely side with the developer.”

As previously reported, the meeting revolved around two parcels of state-owned land adjacent to Reef Capital’s private property, measuring 0.12 acres and 0.855 acres, respectively. Reef Capital is actively working to reconstruct the Coco Palms Hotel, destroyed by Hurricane Iniki in 1992, as a 350-room resort estimated to cost $400 million.

Reef Capital plans to use the two parcels for access, parking, landscaping and other hotel development-related purposes.

“We are grateful the board supported our requests for an opportunity to utilize these parcels to provide community benefits such as public beach access, parking and improved traffic flow, while also allowing restoration of public access to the historic Seashell restaurant (part of Coco Palms),” said Jon Day, Reef Capitalʻs chief financial officer, in a statement following the meeting. 

“As stewards of these lands, we recognize we have a responsibility to restore Coco Palms in a way that honors the history and culture of this place while ensuring the area can once again become a gathering place for all Kauaʻi.” 

Holland stated that IOW has roughly $45,000 for the educational and cultural space, as well as grants underway and other organizations interested in providing support.

At the meeting, Reef Capital attorneys Mauna Kea Trask and Cal Chipchase emphasized the hotelʻs cultural elements, including the construction of a cultural center, workforce housing, and agricultural preservation. 

While Reef Capital plans to build the hotel with some cultural components, IOW had hoped to use the parcels to create a cultural and environmental educational space while maintaining the area for the community’s use of the cultural site, including restoring the ancient fishponds and coconut grove.

IOWʻs application for the parcels was part of a larger restoration effort to preserve and protect the history of the entire area and return public lands to the community, according to Holland. Instead of a hotel, the group envisions the historic property as an educational center and agricultural park.

Council Member Felicia Cowden, who is opposed to the hotel, told the board she had concerns about the safety of the property in flooding events, as well as hurricanes, storms and fire emergencies. 

“I urgently ask you to defer the approval of the assignment of these leases until we can demonstrate that we can clean up the waterways so that we have appropriate drainage and we don’t risk our first responders and all of our residents, as well as visitors and staff employees who might be working in these buildings,” she said. “Because these lease assignments have a lot to do with the continuation of the building.” 

After extensive discussions, presentations from both parties and numerous other testimonies opposing a new hotel at the site, the board voted to grant both parcels to Reef Capital Partners, also known as RP 21 Coco Palms LLC, following two separate motions initiated by board member Karen Ono. Both motions had been the recommendations of Reef Capital attorneys.

The motion for the 0.855 acre parcel, involving the sale of the lease at public auction, passed in a 4-2 vote, with one member abstaining from voting.

Notably, Board Chair Dawn Chang, who was one of two to vote against the motion, stated she supported the option that would have granted the parcel to both parties and required Reef Capital and IOW to work together. 

“Option B3 would have permitted I Ola Wailua Nui to have a presence at the site, and still a hotel. But that’s passed,” she said. 

Moments later, Chang voted to support Ono’s motion for the 0.12-acre parcel, which granted that land to Reef Capital through non-exclusive easements. The motion passed in a 5-1 vote, with one member abstaining. 

The board was given various options to consider, including those favoring Reef Capital, I Ola Wailuanui, or both parties. However, ultimately, Ono proposed the options solely in favor of Reef Capital, claiming that IOW lacked the authority to the parcels due to its nonprofit status and standing with the Department of Commerce & Consumer Affairs (DCCA)

Ono claimed at the meeting that IOW is a 501(c)(60), which is designated for “environmental education and outdoor survival programs,” suggesting that their proposed work to the parcels does not align with the nonprofit’s registered purpose.

However, Kaua’i Now found that the organization is listed as a 501(c)(3), according to a letter dated Aug. 8, 2023, available publicly on the IRS website. 

“We have all the paperwork that shows we’re a 501(C)(3), so I don’t know what Karen Ono was trying to say with that,” Holland said.

Additionally, Ono and District Land Agent Alison Neustein pointed out that IOW is “not in good standing,” as their 2024 tax returns had not been filed.

Holland attributed the negative standing to a “$12 or $15 mailing issue.” As of Monday, IOW is listed in good standing, according to the DCCA website, which says their tax filings were received as of April 26, the day of the board meeting. 

Holland expressed surprise about the board’s decision but believes members had already made up their decision before the meeting.

“I really thought that we would get at least shared access. I didn’t think that they would just completely rule in favor of the developers, considering how much conversation has gone into this,” she said. “It’s just a significant cultural site. It’s such a significant archaeological site. And it’s just business as usual. Money talks.”

Despite IOW’s concern for preserving the cultural aspects of the site, Reef Capital attorneys Trask and Chipchase refuted claims of the community’s lack of interest in a hotel, presenting a poll from over 1,000 registered voters in Kauaʻi who were asked to vote whether or not they support Coco Palms.

“There is more than a majority support for the restoration of Coco Palms today,” Chipchase said.

According to their survey, 61% voted to restore the property, 24% voted for the property to remain in its current condition, and 15% said they donʻt know.

However, Holland was critical of the survey.

“They say restore, but they never say what they’re restoring,” she said. “What does restoration mean, and they only gave restoration or leave it as is. And I think nobody wants to leave it.”

Some board members said they were disappointed by the fact that the two parties had been unable to work together to find a mutually agreeable solution. Specifically, Neustein stated that IOW had been unwilling to meet with Reef Capital and had not been responsive to email efforts to coordinate a meeting.

But Holland denied those claims, stating Reef Capital refused to meet without their legal counsel. 

“We were specifically told by the BLNR to take the lawyers out of the room, and to have this conversation one on one, and they refused to do that. So then to turn around and say that we were not willing to meet is completely hypocritical,” she said. 

Holland and IOW plan to regroup over the next couple of weeks to consider next steps and options for the future. “My phone has not stopped ringing,” Holland said. “People are asking me whatʻs next? How do we stop this from moving forward? I donʻt have an answer for that right now.” 

Day maintained that Reef Capital has always been willing to work with IOW.

“We have always been, and continue to be, willing to collaborate with IOW and other members of the community,” he said. Still, amid the contention, Day estimates that the new hotel will be fully complete and ready to open in 2026.