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iStar Financial Plans to Re-open the Ilikai Hotel as Soon as Possible Under a
 New Management Team and a New Contract with UNITE HERE Local 5


By Gordon Y.K. Pang, The Honolulu AdvertiserMcClatchy-Tribune Regional News

Jul. 11, 2009--About 50 of 75 unionized Ilikai Hotel workers celebrated the news yesterday that they will be able to return to their jobs, likely in the coming weeks.

Hotel management and labor officials made separate announcements about the deal hours after workers said what they thought were their final farewells to each other and the Ilikai.

The Ilikai owner, iStar Financial LLC, shut down the 203 hotel units of the renowned Ala Moana property at midnight Thursday as scheduled.

New York-based iStar initially said it would have to close the hotel portion of the property for an indefinite period due to operating losses of hundreds of thousands of dollars a month.

"Yesterday (Thursday), we were so sad, we were in tears all day," said Joli Tokusato, a service center clerk who has been at the hotel 18 1/2 years. "Today (Friday) we are so relieved that we're going to have our jobs back eventually."

Tokusato said one of the first things employees will do will be to put up the farewell photos they had taken of each other the previous day.

Terms of the new contract are confidential but Eric Gill, secretary-treasurer for UNITE HERE Local 5, said previously negotiated wages and benefits for what are front desk, bell desk, housekeeping, reservations, maintenance and telephone operation employees are being preserved although there are some changes in the contract timetable.

The bulk of the roughly 25 positions being eliminated are expected to be food and beverage jobs. Gill said the company has stated it will not be operating food and beverage services. "They don't want to operate food and beverage, I can't force them to," he said.

The agreement is subject to ratification by members of the union.

"Once it is ratified, the Ilikai Hotel will reopen as soon as practically possible under a new management team and operational structure," iStar said in a press release.

A ratification vote has not yet been scheduled but is expected soon.

"We are pleased that this new agreement will allow all of us to move forward," said Andrew Backman, iStar Financial's senior vice president of investor relations and marketing. "We are optimistic that this new agreement will not only help to preserve jobs but also to help achieve the operational efficiencies that are needed to succeed."

contract until 2010

iStar is actually rehiring employees under a new contract that would run through the end of 2010. Rehiring must be done by seniority, Gill said. Future owners of the hotel would need to honor the contract, he said.

Gill estimated that hotel operations will begin again "in a couple of weeks on the outside ... it won't be long. They need to get this place up and running after all the bad news. We're ready to do whatever it takes to make that happen."

iStar had a reason to settle with the union because a functioning hotel is more attractive to potential buyers than an idle one, Gill said.

"The bank and the union were both strongly motivated to settle," he said. "We wanted to ensure that these workers were carried, and of course the bank wanted to avoid a fight with this union and these workers."

Gill and other union people said they were ready to walk the picket line after yesterday's scheduled shutdown but were surprised to hear about iStar's latest offer on Thursday.

Guests staying at the hotel on Thursday were relocated elsewhere in Waikiki.

At Local 5's new headquarters in Pawa'a, Thursday's tears of despair were transformed into tears of joy as gathered Ilikai employees learned the details of the contract.

Tammy Omoso, a front desk service agent who has been at the Ilikai for the past 22 years, said she and other Ilikai employees are "going to help iStar make the hotel into the wonderful place it used to be and could be again. That's what we intend on doing when we get back to work, that's for sure."

Dina Castro and Cynthia Soon, who have been banquet wait help employees 10 and 20 years, respectively, said they don't expect to get their jobs back but were happy for their co-workers.

"Even though we don't have our jobs, we're just here to support our fellow workers because we're family," Soon said.

Both hope to get jobs in the "other half" of the Ilikai property that's not part of the hotel or the union-iStar agreement.

some compensated

The 203 hotel rooms at the Ilikai closed yesterday. The 806 condominium and timeshare units in the Ilikai complex were not directly affected.

Those employees not being rehired are being given compensation packages that will be administered by the union, Gill said.

The company said that the new agreement "will not by itself ensure the long-term viability of the hotel and that the benefits of a more efficient hotel operation need to take effect along with improvements in the overall economic conditions and the Hawai'i tourism industry."

iStar acquired the hotel portion of the campus from developer Brian Anderson's Anekona Development through a foreclosure action.

iStar filed a foreclosure suit against developer Anekona in August 2008 after it defaulted on the loan.

iStar is a publicly traded real estate investment trust that's not in the hotel management business. The company's subsidiary, iStar FM Loans LLC, acquired the $141 million mortgage on the Ilikai in 2007 from Fremont Investment & Loan.

According to iStar's foreclosure lawsuit, iStar was owed about $72.7 million at the end of October on loans that Anderson defaulted on. In April, iStar bid $35 million for the 203 condominium units that make up the hotel portion. iStar doesn't have to pay $35 million for the hotel, but just needs to deduct that from the $72.7 million it is owed.

The Ilikai was built in 1964 by developer Chinn Ho as part residential condominium, part hotel.

Advertiser Staff writer Robbie Dingeman contributed to this story. Reach Gordon Y.K. Pang at 525-8082.

Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com.

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Copyright (c) 2009, The Honolulu Advertiser

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