Posted on: Tuesday, December 21, 2004

San Diego firm buys 2 hotels

By Andrew Gomes
Advertiser Staff Writer

San Diego-based real-estate firm eRealty Cos. plans to purchase and renovate the Ohana Waikiki Surf and Ohana Waikiki Surf East hotels in an effort to reposition the two properties, which have a combined total of 405 rooms.

The hotels, at 2200 Kuhio Ave. and 422 Royal Hawaiian Ave., are being acquired from Japan-based Katokichi Co. Ltd., which also is selling eRealty an Iwilei office and industrial complex.

A total sale price for the three properties was not disclosed, but is estimated to be more than $40 million.

Meanwhile eRealty is selling Airport Center, a 14-story office building near Honolulu International Airport, to Los Angeles-based real-estate investment firm Arroyo Realty Partners for about $20 million. By buying properties soon after the sale of another property, eRealty will be able to defer taxes on the profit from the Airport Center.

The Airport Center sale is expected to close today, followed by the Iwilei commercial complex purchase tomorrow. The two Waikiki Surf hotel purchases are expected to close in February, according to a person with knowledge of the transaction, who asked not to be identified.

Airport Center, recognizable by its Wyland whale mural, was purchased by eRealty in 1998 for $7.5 million, according to property records. The company spent $2.5 million to renovate the building, and increased occupancy from 40 percent to 95 percent.

It is expected that eRealty will try to improve operations and value of the Waikiki Surf hotels and the 100,000-square-foot commercial complex at 720 Iwilei Road next to the Dole Cannery office building.

Katokichi bought the two hotels from Outrigger Hotels & Resorts in 1989 for an undisclosed price.

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