The Sheraton Keauhou Bay Resort and Spa has defaulted on the nearly $60 million remaining on its mortgage, interests and fines, and will be sold at auction July 31.

Kenneth Marcus, a commissioner appointed by 3rd Circuit Court Judge Ronald Ibarra, confirmed yesterday that the resort will be sold at an auction in front of Hale Halawai in Kailua, Kona.

"As far as the operations of the hotel, nothing is likely to change, for all outward appearances," Marcus said. "In terms of the short term, it should be business as usual."

The scheduled auction comes just over four years after the Big Island hotel completed a $70 million renovation in early 2005 that followed a nearly four-year closure of the property formerly known as the Kona Surf Resort & Country Club.

A sale also could result in a second consecutive owner of the hotel losing ownership to foreclosure.

Koa Hotel LLC, a joint venture of California investment firm Arlen Capital LLC and New York real estate investment and development company Brickman Associates, acquired the property in 2002 at the foreclosure auction of previous owner Otaka Inc.

Koa Hotel reopened the hotel under Starwood management in October 2004 as renovation work neared completion.

Marcus could not say for certain what will happen to the hotel after the sale, though he said it would be unlikely for someone to purchase it and close it. Plans for the hotel ultimately would be up to a buyer, though the owner of the land under the leasehold hotel, Kamehameha Schools, may have some say in the deal.

According to court documents, Marcus, acting as a third-party commissioner for the judicial foreclosure proceedings, assisted during collective bargaining negotiations, which wrapped up in the spring.

Cheryl Williams, regional vice president of sales and marketing for Starwood Hotels & Resorts, which manages the property under the Sheraton name, said the company will continue to manage the hotel as usual and looks forward to working with a new owner on planned improvements to the property.

The notice of foreclosure sale, which Marcus said will be advertised starting Sunday, said the auction does not have an upset price. Interested bidders must register with Marcus at least five days before the auction, and potential bidders must sign a confidentiality agreement before being permitted to review some financial documents. Marcus will take the winning bid to Ibarra's court, where overbids are allowed, and Ibarra will approve the winning bid.

Prospective buyers will be purchasing the leasehold, 521-room resort on about 20 acres of land owned by Kamehameha Schools. The resort has three restaurants and bars, 65,000 square feet of meeting space, a 14,000-square-foot fantasy pool, the Hoola Spa, 12,800 square feet of retail space, a 50-seat wedding chapel, a fitness center, a business center and two tennis courts. Marcus said the title likely would be delivered to the buyer sometime in September.

According to county property tax records, Koa Hotel LLC does not owe any back taxes. Kekoa Paulsen, a spokesman for Kamehameha Schools, said the leaseholders were not in default on lease payments.