Mariana Resort rejects DPL decision

In a formal letter to the Department of Public Lands, Kan Pacific Saipan president Yoshihiro Kitami rejected DPL Secretary Pete A. Tenorio’s decision to solicit competitive bids on Mariana Resort & Spa’s expiring public land lease.

Kitami revealed in his letter that DPL was contractually obligated to give notice of intent to transition the subject land that Kan Pacific has to DPL five years “before the expiration of the lease” in accordance with Paragraph 2(a) of the Fourth Amendment to the Lease Agreement entered in March 2003 between Kan Pacific and DPL’s predecessor, Marianas Public Lands Authority.

Paragraph 3(a) for “provision for transition” states that “at least five years before the expiration of the lease Extension Term, the Lessor shall inform the Lessee whether it intends to initiate the transition of the management of the facilities to Lessor.”

Kan Pacific’s lease expiration date is April 30, 2018. Instead of informing Kan Pacific of an intention to do a transition of the property back to the DPL, DPL informed Kan Pacific that it was the intention of the DPL to grant another lease.

Kitami stated in his letter that in May 2013, DPL expressed a desire to grant an additional lease term and encouraged the company to continue investing in the leasehold beyond the termination date.

DPL also sent a letter in May 29, 2013, advising that a“plan was being developed for advance approval of lease extensions by the Legislature and the Governor’s Office and also mentioned the existence of an effort to amend Article 11 of the CNMI Constitution to increase the limits of lease terms to 99 years.

“It is undeniable that, at the time at which the DPL was required to give notice of any intention to transition the land from Kan Pacific back to the DPL, the DPL indicated to Kan Pacific that it was not intending to transition the land back to the DPL and, instead, informed Kan Pacific that it was the intention of the DPL to enter into another lease with Kan Pacific. The DPL actually encouraged Kan Pacific to move forward accordingly—and we did,” Kitami stated.

Kan Pacific took no steps to disengage from the enterprise at Marianas Resort and no steps to ease up on investing efforts and expenditures on the property and made no budgetary adjustments to facilitate any transition out for the facilities.

Instead, counsels for DPL and Kan Pacific had a discussion regarding preparation for a lease agreement.

On Feb. 2014, DPL’s counsel and Kan Pacific’s counsel communicated about forms that could be used for the lease, and DPL’s counsel actually sent lease agreement forms for consideration, while Kan Pacific proposed lease form to DPL’s counsel as well.

Kitami added that DPL’s counsel’s email sent to Kan Pacific on June 2014 stated “In general, DPL is hoping Kan Pacific will invest in improvements to the property as soon as possible, which is why DPL offered to enter into a new lease before the natural expiration of the current lease. Correct me if I’m wrong, but it seems that waiting until the old lease expires before entering a new lease would mean that Kan Pacific would postpone making any real investment in improvements until sometime after 2018.”

The email adds “The DPL secretary also indicated that, to be safe, DPL may consider doing an RFP for the property if there is no concrete agreement in effect between DPL and Kan Pacific as we head into the last years of the current lease. So, it seems DPL’s preference is to enter into a new lease as soon as possible so that Kan Pacific will invest more money into the property as soon as possible.”

The Kan Pacific president said DPL requested a lease proposal entering into a lease with Kan Pacific. Kan Pacific provided an initial proposal on or about Aug. 4, 2014. It included a plan for $30 million in additions, renovations, and improvements. Kitami said Kan Pacific submitted an amended proposal that included a plan for $75 million. He said the proposal is still pending with DPL.

On May 22, 2015 Kan Pacific provided DPL with a legal memorandum upon its request.

“Kan Pacific has been a good, reliable, trustworthy, honorable tenant for the past 37 years…Kan Pacific has earned the right to stay in business at the location that it has developed and sacrificed for…and it would be unfair to place Kan Pacific on par with any newcomer that might come along with a little more capital and some lofty promises…We are not saying we should be granted another lease…we are saying that we have been good, reliable, and productive tenant and we have worked hard and sacrificed to make that so,” Kitami said.

If awarded a lease extension, Kitami said Kan Pacific is poised to immediately enter into a lease agreement and commence a $75-million improvement project that would “substantially improve the property, greatly enhance its value, increase rental and tax income for the CNMI, and create a considerable amount of new jobs.”