PRINCEVILLE — After weeks of uncertainty, plans for the sale of the St. Regis Princeville Resort and the nearby Makai Golf Club to Starwood Capital Group were confirmed early Friday by a consultant handling the transaction for the large pension fund that currently owns the property.
Sale of the hotel and golf course was first reported by The Garden Island in late July, though confusion had remained about whether Starwood, based in Greenwich, Conn., was the buyer. However, in an email responding to questions about the transaction early Friday, a consultant to the Los Angeles County Employees Retirement Association confirmed the buyer’s identity.
“Starwood is the buyer, but the transaction has not closed,” he said. “A close date is targeted in November.”
In that context, “close date” means the transaction being completed, not, as has been widely speculated among hotel employees, that the St. Regis will shut down in November.
Starwood, however, had still not officially confirmed it is buying the property and had, on at least two previous occasions, denied it was doing so. However, on Friday, Starwood backed away from its previous statements somewhat, saying through a spokesperson that the company “almost never comments on assets they don’t own.
“Until then, they do not speculate on what they may or may not do with a property.”
The acquisition price was not disclosed, but LACERA purchased the properties in 2005 for $93.7 million, according to Kauai County tax records. An internal listing of all of LACERA’s real estate holdings, dated Sept. 30, 2017, put the current value of the St. Regis/Makai Golf complex at just under $212 million.
When word of the imminent sale first became public in late July, the speculated purchase price was $225 million. Starwood Capital has been developing an ultra-exclusive new brand called “1 Hotels.” It has been on an acquisition spree, with four new locations announced this year, and properties in West Hollywood, Calif.; Cabo San Lucas, Mexico; Sunnyvale, Calif.; and Sanya, China, reportedly in development.
On Thursday, many hotel employees reportedly received form letters from management confirming that the sale to Starwood was imminent. On Friday, employees said they were told nothing about what to expect after the sale is final. On at least one previous occasion when the property was sold several years ago, en route to being converted to the St. Regis nameplate, the entire hotel closed for more than a year for renovation.
Sue Kanoho, executive director of the Kauai Visitors Bureau, a component of the Hawaii Visitors and Convention Bureau, said she was not free to confirm or deny the sale to Starwood, and that “communications need to come from the new owner.”
Starwood Capital is reportedly planning to convert the St. Regis, which has lost some of its luxury lustre in recent years, into an even higher-end and more-exclusive resort catering to the extremely wealthy.
The St. Regis is the only hotel owned by LACERA and, by virtue of being in a remote location in Hawaii, is far removed from LACERA’s other operations, based in Los Angeles County, where its members include a broad range of more than 35,000 county employees, from highway workers to sheriff’s deputies.
It also handles pension arrangements for the Los Angeles Superior Court, which used to be a county agency before it was transferred to the jurisdiction of California state government. LACERA manages assets of $56.8 billion, according to its 2017 annual report.
The hotel has long been a favorite Kauai destination for Los Angeles County public employees, who receive a preferential rate of $250 per night — far less than half of the so-called “rack rate.”
It was not clear when the decision to sell the St. Regis was made. However, LACERA had been considering refocusing its real estate portfolio for months before TGI first reported the hotel was on the market and, later, was actively in the sale process to a specific buyer.
Minutes of the LACERA real estate committee dated March 19, 2018, noted that “unfortunately, (the) LACERA real estate program failed to meet the benchmark” during the 10 years ending in 2017. “Under-performance, which is mainly attributable to non-core investments, has been the subject of substantial analysis,” the report continued.
The St. Regis Resort and Makai Golf Club employ a total of about 600 people, making the complex one of the North Shore’s largest employers. The hotel has 252 rooms and, according to a spokesperson, has averaged about 80 percent occupancy over the last five years.
The hotel covers 23 acres that front Hanalei Bay. The nearby golf course covers 290 acres of prime Princeville land.
Starwood Capital was founded in 1991 by Barry Sternlicht, a veteran hotel executive. The company founded Starwood Hotels and Resorts, but spun off the subsidiary in 2015 to Marriott International for $13.6 billion.
Allan Parachini is a former public relations executive and a Kilauea resident who writes periodically for The Garden Island.