It was announced last week that the 197 “condotel” units at the Islander on the Beach hotel in Waipouli, adjacent to the Coconut Marketplace, would be turned into Kaua‘i’s first fee-simple “condotel” (condominium-hotel) units. The conversion of the Islander is
It was announced last week that the 197 “condotel” units at the Islander on the Beach hotel in Waipouli, adjacent to the Coconut Marketplace, would be turned into Kaua‘i’s first fee-simple “condotel” (condominium-hotel) units.
The conversion of the Islander is a possible indication that other aging Kaua‘i hotels could follow suit, especially considering Kaua‘i’s super-hot real-estate market. By late last week, even with an asking price for studios under 400 square feet of $210,000 to $340,000, the reservations list was filling fast.
“It’s a tremendous concept,” said owner-to-be Brian Anderson. The beauty of the condotel concept is that typically few permits are needed for hotel-to-condo conversion, and they add no density to their neighborhoods, Anderson said.
Even more, owners find they can sell units individually as condominiums for significantly more than what a property might fetch as a hotel. “It’s really tough to find fee-simple land in Hawai‘i now,” Anderson said. That desire to find a fee-simple place in the sun has people jockeying for position to get on reservation lists. Earlier this month, for example, all 248 condotel units at the Palms at Waikiki sold in nine hours. The hotel was bought in 2001 for $12.7 million, underwent $2.7 million worth of work, and raised at least $28.8 million as a condotel. Anderson said he first noticed the condotel concept in Canada a few years ago.
Today, it’s an investment strategy with which he’s getting very familiar. Earlier this year, Anderson, along with partner National Housing Corp. of Hawaii Inc., converted the 242-room Waikiki Terrace hotel into 217 condotel units. After an $11 million renovation, sales were in escrow for all units in about a month. The Terrace’s daily rental rates promise a tidy profit for their owners: $210 for a studio, $325 for a one-bedroom suite, and $600 for a two-bedroom suite.
Anderson said that the Islander’s conversion will not have any real affect for the many people who chose to stay there. It will still operate like a hotel, albeit with possibly higher rental fees. But that’s pretty much par for the course, if history proves correct.
Properties now being converted for condotel sales include the former Ohana Ala Wai Towers now operating as the Aqua Marina, part of the Hawaiian Monarch Hotel, part of Kuhio Village and the Bamboo Hotel, all on O‘ahu.
Anderson said he considers the units “entry points” for investors interested in property. The Islander has a 94-percent occupancy rate, Anderson said. At daily rental rates of about $120, a mid-priced unit sold for $280,000 could generate owners a substantial profit over time.
“Instead of one person owning 197 units, 197 people will own their own unit,” Anderson said. The Islander, along with the six acres on which it sits, is being sold for $40 million to Anderson, who is the grandson of Hawai‘i businessman and politician Andy Anderson.
Anderson will spend $8 million for renovations such as marble floors and hardwood furniture, then sell 195 studio units for $210,000 to $340,000, and two one-bedroom units for $570,000 each. Based on the minimum price, Anderson stands to generate a minimum of just over $42 million, and probably upwards of $50 million.
Aston Hotels and Resorts, which manages the Islander on the Beach now, will continue to manage the new condotels, which could be included in Kaua‘i’s hotel-room pool and managed by Aston, according to each owner’s specifications.
In other words, owners could chose to join the pool, rent longer-term, reside in them, or leave them vacant. “You get the money even when you’re not living in the unit,” Anderson said.
Phil Hayworth, business editor, may be reached at 245-3681 (ext. 251) or phayworth@pulitzer.net.
