Waikiki property on Kalakaua for sale

By Andrew Gomes
Advertiser Staff Writer

The 2.2-acre parcel of land, seen in the center of this aerial photograph, is largely vacant, with a parking lot, the Wave Waikiki nightclub, an empty lot and two empty low-rise apartment buildings. Joel K. LaPinta photo

A sale could lead to another condominium project in O'ahu's booming residential real estate market, relocation of the nearly 24-year-old Wave and add to the revitalization groundswell in Hawai'i's tourism core by improving a prime vacant site along Kalakaua Avenue.

The 2.2-acre site is largely fallow, with a parking lot, two empty low-rise apartment buildings, a big empty lot and the Wave.

Real estate observers said timing is good for a sale to a residential developer, though two private lanes that run into the property but are not included in the offering could complicate a purchase.

The seller is Oaktree Capital Management LLC, a $28 billion investment fund that acquired mostly distressed assets in Hawai'i since the mid-1990s, including Turtle Bay Resort, a stake in former department store chain Liberty House and the mortgage on the Waikiki Landmark condo across from the site it is now trying to sell.

Oaktree acquired the property around the Wave for $12.6 million in 1995 from a Japanese firm, Japan Building Project Hawaii, that bought seven parcels from several owners for $38 million in 1990, property records show.

Oaktree acquired the parcel under the Wave in 1998 for $2.3 million from another owner. But two private lanes running into the site are owned by a local family named Chun.

The lanes, Pau and Makaoe, can be used by the surrounding property owner, but could not be built on unless acquired from the Chuns, who have entertained offers in the past to sell the access roads.

Joel LaPinta, a Hilo-based real estate broker marketing the Oaktree property, said a few prospective investors have expressed interest in the site, which has resort-commercial zoning that allows multifamily residential use but not hotel or time-share use.

LaPinta said he expects a buyer to be a residential developer given the intense demand for condos in Ho-nolulu and low interest rates driving home buying and construction.

"There's a lot of new projects coming on the market, but I don't think the market's going to be disappearing," he said.

Ongoing condo projects being sold and under construction or preparing for construction include at least two in Waikiki and four in nearby Kaka'ako.

At least two more in Waikiki are planned, including a project on Kuhio Avenue at Kalaimoku Street and one on Lewers Street as part of a time-share/hotel/condo redevelopment project by Outrigger Hotels & Resorts.

LaPinta said he expects O'ahu's condo market to remain strong at least through 2007 or 2008 with help from baby boomers looking to simplify their living arrangements or buy vacation property.

"They'll be at the cusp of their peak earnings and interest in owing second homes," he said. "It'll still be a good market."

Jack Law, a part owner of the Wave, said the nightclub has been on a month-to-month lease since early last year, but he's not thinking about relocation until his landlord makes definitive redevelopment plans.

"I wish I knew what's going to happen in six months, but I know enough about real estate to know that you don't develop a property like this overnight," he said.

Law, a real estate broker since 1975, went through a similar process about seven years ago when a developer evicted his Hula's Bar & Lei Stand from its spot on Kuhio Avenue after 23 years to make way for what eventually became the luxury retail development 2100 Kalakaua.

Hula's moved to the Waikiki Grand Hotel on Kapahulu Avenue, and its old site is slated to become either a time-share or residential high-rise under recently disclosed plans.

"I'm just grateful I'm here month to month," Law said. "I'm going to sit tight until I can't run the Wave from this location any more."

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.