While much of the outside investment in Hawai'i in the 1990s involved businesses that bought cheap, added improvements and sold three to five years later, today's investor is taking a more hands-on management approach and may end up waiting a decade before they see a big payoff.

"They're much more patient, and they're much more willing to take much more complex risk," said Jon Miho, co-founder of local real-estate investor Trinity Investment LLC, whose affiliate is purchasing the Kahala Mandarin Oriental Hawaii hotel.

Cerberus, a major global player with over $16 billion invested worldwide, declined to comment on its Hawai'i strategy for this story. Local executives who have dealt with the company say its record in the state is mixed.

Managers of the Sheraton chain say that Cerberus is committed to improving its Hawai'i properties, while representatives of Aloha Airlines paint a picture of a demanding lender keeping a close eye on all operations.

Keith Vieira, senior vice president and director of Hawai'i operations for Starwood Hotels & Resorts, which manages the five Sheraton hotels controlled by Cerberus, said Starwood had preliminary discussions with Cerberus about renovating its local properties.

He noted that Kamehameha Schools' $84 million facelift of the nearby Royal Hawaiian Shopping Center has prompted Starwood and Cerberus to consider upgrading the properties.

"We think they're going to be a good owner of our hotels in Hawai'i," Vieira said.

David McNeil, a spokesman for Prince Hotels, said the chain's Japan-based owners haven't planned any changes at this time.

Unlike the mid-1990s "vulture" investors like Colony Capital and the Blackstone Group that bought distressed Hawai'i real estate for as little as 25 cents on the dollar, Cerberus is paying nearly the full value of the properties.

"They're not buying on a huge discounted basis; they're buying on value," said Joseph Toy, president of the local consulting firm Hospitality Advisors LLC.

With Aloha Airlines, Cerberus has been much more hands-on.

In July, Ableco, Cerberus' lending arm, abruptly increased the interest rate on its multimillion-dollar loan to Aloha from 11.25 percent to 14.25 percent, Aloha said in Bankruptcy Court documents.

The following month, Ableco stopped lending money to Aloha until management agreed to hire a chief restructuring officer and reach an agreement to sell the airline. Aloha attorney Charles Dyke stated during a Bankruptcy Court hearing in October that Ableco and Goldman Sachs would consider liquidating Aloha if a deal to sell it fell through.

Aloha, which is being sold to a group headed by California billionaire Ron Burkle and former football star Willie Gault, won approval from Bankruptcy Court last week for its reorganization plan. Aloha could emerge from bankruptcy as soon as Dec. 15.

In a recent Bankruptcy Court filing, Jeffrey Kessler, Aloha's interim chief financial officer, described the pressure Cerberus put on the airline.

"For several days, funds were withheld as the lenders made daily sweeps of cash revenues from (Aloha's) accounts while refusing to re-advance the monies so swept," Kessler said.

"The lenders began demanding, as a condition to each daily advance under the loan, a daily 'deal report' detailing the company's progress in obtaining a transaction sufficient to repay the loan," Kessler added. "They further informed the company that financing would be cut off by Oct. 15, 2005, if a signed letter of intent from an investor were not secured by then."

Cerberus has been involved in a controversy in Japan over its planned investment in the parent of the Prince Hotels.

Cerberus' investment in financially troubled Seibu, one of Japan's largest real-estate firms and owner of the Seibu Railway, has led to legal action by the sons of the company's founder, Yasujiro Tsutsumi.

The brothers, Yuji and Seiji Tsutsumi, recently lost an appeal to Tokyo's high court to essentially block Cerberus' investment and Seibu's restructuring plan. The two brothers recently filed suit in Hawai'i Circuit Court, seeking to be recognized as the rightful owners of the Prince Hotels in Hawai'i.

Founded in 1992 by Stephen Feinberg, a former Drexel Burnham Lambert manager, Cerberus began as a vulture fund specializing in bankrupt and distressed companies. The name, Cerberus, comes from the mythical three-headed dog that guarded the gates of the ancient Greek underworld.

In recent years, the company, whose executives include former Vice President Dan Quayle, has branched out to lending and investing in less-risky companies, says the Wall Street Journal.

The closely held company shies away from publicity, preferring to work in the background. It has no local office or employees based in Hawai'i.

The firm has invested in a broad range of companies, including Mervyn's department stores, building products maker Formica Corp., Italian sportswear maker Fila and DaimlerChrysler's former aircraft leasing business, according to BusinessWeek.

In more recent years, the firm has taken huge bets in troubled companies in Japan, where restrictions on foreign ownership have relaxed in recent years.

Before its investment in Kokusai Kogyo, the company paid $850 million for a controlling stake in Aozora Bank Ltd., formerly known as Nippon Credit Bank Ltd. before it was taken over by Japanese regulators in 1998.

Kevin Aucello, senior vice president at CB Richard Ellis Hawaii who worked with Cerberus Japan executives in the mid-1990s, said that Cerberus' combined ownership stake in the local Sheraton and Prince hotels has advantages.

Owning several high-end hotels in Hawai'i means Cerberus can leverage the advertising, marketing and managing efforts. "It's much more efficient to manage a larger portfolio," Aucello said.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.