AOAO Update April 28, 2010

[Doug]

Received via email:

Association of Apartment Owners

April 28, 2010

OWNER UPDATE:
As the Annual Meeting date is near, I felt it time to give you an update on what is happening.

Annual Meeting:
The AOAO annual meeting will be at 10:00 am on Saturday, May 15, 2010 at the Resort. We will have a Board meeting on Friday at 9:00 am, May 14th in the Aikane Room. Details on both meetings will be posted at the Resort. By now you should have received a meeting notice and proxy mailed in accordance with the By-laws. There are three Directors whose term expires in May—Joan Bettencourt, Dave Blank and Scott Craddock. Joan and Dave are running for re-election, and John Mullins is the only other announced candidate. The term is for three years.

Financial Status:
Most of our owners have paid their assessment or set up payment plans and are paying interest. Those owners who have not responded to the assessment notice and are delinquent in payment of monthly dues have been turned over to a collection agency and a lien will be filed against the unit. The by-laws also enable the Board to assess rents and deny access to Resort amenities on those units. At the end of March AOAO owners owed $89,000 that were beyond 30 days past due and the VOA owed us $290,198 from the assessment. AOAO owners still owe $16,125 in 2009 check-in fees and $1,975 in past due 2010 check-in fees. The VOA is current on its monthly dues and check-in fees. We do need the remaining funds to build back our reserves. As of March 31, we have a favorable variance on the 2010 budget of $78,629.

Celebrity Chapter 11 Filing:
Celebrity Resorts (CR) including 36 companies filed Chapter 11 bankruptcy on March 5, 2010. Currently Jared Meyers, CEO is serving as trustee. He is working on a plan to emerge and evaluating transactions that occurred over the past 6 to 12 months as to whether CR received maximum or fair market value. Our Settlement Agreement is one of those transactions. He asserts that his options are: 1) unwind the Settlement Agreement; 2)reject the ongoing Settlement Agreement; or 3)renegotiate the transactions--all requiring the Court’s approval. He has rejected a 4th option which is to allow the Settlement Agreement to stand. The main issues include the purchase price of the management agreements, the final accounting, the opinion of the arbitrator and several issues dealing with the Developers Rights which were negotiated away by CR in the Settlement. We have had discussions with our legal counsel and have engaged Florida based counsel familiar with bankruptcy law to monitor our interests.

Restaurants:
The restaurants continue to be for sale by Celebrity. We understand there are at least three offers that have been submitted; however, we do not know their status. We do know that two of the offers involve experienced restaurateurs. The Celebrity LLC that owns the restaurants is not named in the Chapter 11 filing. Fred Hodge and Henry Mayo have received responses from 9 or 10 owners interested in participating as an investment group to purchase the restaurants and eventually deeding back to the AOAO. They have a restaurateur involved and theirs is one of the offers mentioned above. Should you have any questions regarding their proposal, please contact one of them as this is not a Board activity.

2009 Audit
We expect to have a draft of the 2008 and 2009 annual audits by May 5, 2010. It is highly probable that we will receive some form of qualified statement from the auditor on the 2008 audit due to inadequate records—a problem going back to Quintus.

Check-in Fees:
Check-in fees at $25 each for 2010 check-ins are being billed to AOAO owners on a monthly basis by mail as a separate invoice. The VOA Board has told its owners, exchangers and renters to pay their check-in fees as part of their account while at the Resort. When the AOAO Board meets in October to prepare the 2011 budget, it is going to consider having the check-in fees billed to the person’s account at the Resort. This would greatly reduce our accounting tasks, billing costs and reduce the collections effort we now are undergoing. If approved, it will require those of us renting our units to communicate with our guests for those reservations made in advance of implementation.

Resort Surcharge: Guests (not owners) are charged a $5 per day energy surcharge which is added to their bill at check-out. There was a request to place a cap on the surcharge for long term rentals. The Board at its meeting yesterday reaffirmed there is no cap. Long term renters will use more energy than intermittent use of a unit, plus there is a concern regarding subletting by long term renters that could undercut normal rental rates.

Travel Desk:
We have reached agreement with Trading Places for them to operate a travel services desk in the lobby and it is now open. The full concierge desk agreement is held up until Trading Places and Celebrity agree upon a referral rate for timeshare and now with Celebrity in Chapter 11 bankruptcy.

Fitness Program:
Kauai Bodywork--Tonja and Sean from the Massage services are operating a fitness program using the Aikane Room (former timeshare sales center). The space has been cleared, a mirror added to the wall and classes have begun four days per week. Ofa has prepared a Resort calendar which will include all activities. The Board just approved purchase of three pieces of equipment: a treadmill, an elliptical/stepper, and a recumbent cycle. Delivery is expected within a couple of months.

Security:
We have had several thefts recently within the units. They have been in ground floor units, near the parking lot. The staff has moved the security stations, changed some master keys and placed more control on access to units by staff. Staff is also taking a more aggressive role in assuring that people on property really belong. We all need to be more vigilant and advise guests to lock the sliding doors when they leave the unit.

Other:
From all reports, the grounds at the Resort look the best they have in years. There are numerous new plantings. By the annual meeting we should have received our new pool furniture for both pools. The kitchen area by the lower pool has been renovated. We will be adding some new grills at the lower pool and at two other locations on the property.

Website:
Our website: hanaleibayresort.com is operational. To enter the “Owners Corner” there is a Login: hbr and Password: welcome. We have a committee working on enhancements including the possible ability for owners who rent their unit to advertise on it (at a fee).

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Kent Oehm, Board President
Association of Apartment Owners