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The Honolulu Advertiser
Posted on: Wednesday, July 31, 2002

Hilton estimates cost of mold fix to reach $10M

By Andrew Gomes
Advertiser Staff Writer

Hilton Hotels Corp. yesterday estimated that ridding its Kalia Tower in Waikiki of mold will cost the company at least $10 million, making it the most expensive mold problem for the hotel company and the largest ever faced by a Hawai'i hotel.

Hilton, which closed the 453-room tower last week, said $10 million should cover a team of private consultants investigating the cause of the mold, which has not yet been determined, and any repair work needed to correct the problem. It also covers testing employees for possible mold-related allergic illness.

The company warned, however, that actual costs may differ from the estimate, "given the inherent uncertainties in evaluating these types of situations."

In 1995, the military's Hale Koa Hotel, which is next to Hilton's Waikiki complex, developed mold in a new 12-story addition because of design and construction faults. Remediation work to replace the air-conditioning system and remove mold trapped behind walls cost $5.5 million.

Hilton's estimate of its costs did not include lost business while the Kalia Tower is closed. The company would not say how much that may total but did say it should not significantly affect earnings because most guests can be transferred to other rooms in the 3,432-room Hilton Hawaiian Village. The $10 million estimate also did not include anticipated costs to replace hotel furniture on which mold is growing.

Pat Terwilliger, Hilton's senior vice president of architecture and construction, said yesterday in a conference call with analysts that it is too early to speculate who may be liable for the problem at Kalia Tower, which was built at a cost of $95 million and opened in May 2001.

Terwilliger said his guess is that a number of factors contribute to the humidity in guest rooms that is causing mold to grow, but what they are remains to be determined.

Air Quality Sciences Inc. of Atlanta was hired about three weeks ago to investigate the mold problem and on Friday reported that diagnosis of the source of the elevated humidity was just beginning. Bryan Ligman, director of building consulting for Air Quality Sciences, said that identifying the humidity cause could take a week or a month, but that it was impossible to predict how long the job might take.

The Beverly Hills, Calif.-based Hilton said yesterday that the $10 million mold repair bill will be taken out of second-quarter earnings. Hilton reported a second-quarter net profit of $76 million, an 11.6 percent drop from $86 million a year earlier. Earnings per share came in at 20 cents for the quarter, compared with 23 cents in the year-ago quarter.