Herbert Horita, who built thousands of homes in Hawai'i only to see his fortunes crumble during the Japanese investment downturn of the 1990s, is getting a second chance at developing one of his largest residential projects.

Horita was the surprise top bidder in yesterday's bankruptcy auction for the long-stalled, 2,000-home second phase of the Royal Kunia development in Central O'ahu.

Horita offered $50.2 million, topping local homebuilder Stanford Carr Development's $50.1 million bid for the 161-acre property. Bidding in the open auction started at $47.4 million and proceeded in increments of $100,000. The two developers were the only bidders.

Horita was a major figure in Hawai'i's 1970s and 1980s building boom. In those years, he began the planning for the Ko Olina resort on O'ahu's Leeward Coast and the Maui Lani housing project on Maui only to lose those projects when the Japanese investment bubble burst. Horita's Halekua Development Corp, the original Royal Kunia developer, filed for bankruptcy in 2003.

Bankruptcy Judge Robert Faris expressed doubt that Horita would be able to complete construction of all 2,000 homes, but approved Horita's bid, saying the developer only had to demonstrate that he could complete the land purchase.

"I do have doubts about the party's ability to finish off the project," he said.

Faris also approved Carr's offer as a back-up should the Horita deal fall through.

NEW DEVELOPMENTS

Royal Kunia is just one of several planned developments in the Central O'ahu and Leeward O'ahu communities, which is expected to see the construction of more than 40,000 new homes during the next two decades.

Richard Oshiro, chairman of the Waipahu Neighborhood Board, said he was concerned the development would add to the area's already congested traffic problems. Area residents have said Kunia Road, the main artery connecting their community with the H-1 Freeway, is already overwhelmed and cannot handle more traffic from several thousand new residents and businesses.

Oshiro also said he hoped Horita would follow through on plans to build a new elementary school, which he said is badly needed since the nearby Kaleiopu'u Elementary School in Village Park is the only school in the vicinity.

"We don't want to be left short in as far as our infrastructure, our roadways and our schools go," Oshiro said. "We have to make sure that those things will be built so that we don't run into a real crunch."

Horita, 75, appeared in bankruptcy court yesterday but referred all questions to his attorney Jonathan Durrett.

HORITA'S COMEBACK

Durrett said Horita has secured financing from San Francisco-based lender California Mortgage and Realty Inc.

Horita plans to complete the land purchase in the next several months and will start construction shortly after that, Durrett said.

Nick Ordway, professor of financial economics and institutions at the University of Hawai'i, said Horita's comeback attempt isn't unusual in the boom-and-bust world of real estate development. Some of the world's most successful builders such as Donald Trump and the Reichman brothers of Canada have had major financial setbacks, only to bounce back, he said.

"Smart real estate entrepreneurs don't let setbacks destroy them. They come back, and Herbert Horita is one of those people," Ordway said.

Royal Kunia's second phase broke ground in 1994, but construction came to a halt when Horita's Halekua Development ran into financial difficulties. In April 2003, Halekua filed for bankruptcy protection with debts of more than $40 million.

Royal Kunia's first phase, which includes about 1,900 homes and a commercial center, was built by a partnership led by Castle & Cooke Hawaii, which invested in the venture after Horita encountered financing and permitting delays.

Castle & Cooke Hawaii representatives attended yesterday's auction but did not participate in the bidding.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.