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The Honolulu Advertiser
Posted on: Thursday, January 29, 2004

Hotel market's outlook 'euphoric'

By Andrew Gomes
Advertiser Staff Writer

Four Seasons Resort Maui at Wailea opened in 1990 at a cost of about $200 million.

Advertiser library photo

Add the Four Seasons Resort Maui at Wailea and the Kapalua Bay Hotel to a growing number of high-end Hawai'i hotels being offered for sale.

The two properties, which join three other hotels positioned for sale earlier this month, could make 2004 one of the biggest years for Hawai'i hotel transactions if all the efforts are successful.

Maui Four Seasons owner Shimizu Corp. retained international real estate investment banking firm Secured Capital to market the 380-room oceanfront property, according to people familiar with the effort.

In the other deal, an investment fund led by Morgan Stanley intends to market the 194-room Kapalua Bay hotel using Atlanta-based hotel brokerage firm Hodges Ward Elliott, according to someone with knowledge of the listing.

An executive with Hodges Ward Elliott said the firm could not comment, and a spokeswoman for the Kapalua Bay Hotel said she had no information regarding a sale. Inquiries made to Secured Capital in Los Angeles and the Maui Four Seasons were referred to an outside public relations firm that was not prepared to make a statement yesterday.

Local real estate brokers say a convergence of Hawai'i's tourism rebound, investor demand for hotels and lots of available capital at low interest rates has created an attractive market for hotel sellers and buyers.

"It's just very good timing right now," said F. Kevin Aucello, director of CB Richard Ellis Hawaii Inc. hotel advisory group CBRE Hotels.

Besides the Maui Four Seasons and Kapalua Bay hotel, the Grand Wailea Resort & Spa, Wailea Marriott and Waikoloa Beach Marriott are for sale. The transactions collectively could total nearly $1 billion if all five hotels are sold.

Of the five hotels, the Maui Four Seasons is the only one with an original owner, though it and the Kapalua Bay hotel were put on the market in the past several years without success.

This time the odds of receiving acceptable offers are much better, according to Ron Watanabe, hospitality adviser for local real estate firm Chaney, Brooks & Co.

"There is great anticipation that there are very motivated buyers out there right now," he said. "There is kind of a euphoric outlook about hotels right now. These are clearly going to be deals that are going to get done this year."

Watanabe, who returned last week from a lodging property investment summit in Los Angeles, said investors and lenders who didn't favor hotel deals in recent years now see hotels as good investments, and are enthusiastic about the Hawai'i market.

Douglas Pothul, principal of local real estate investment firm ABK Capital, said recent interest from 21 firms willing to spend $400 million or more to buy the Damon Estate's commercial real estate portfolio on O'ahu demonstrated how attractive Hawai'i property has become.

"That's a lot of capital that was shopping in our market," he said. "These guys wouldn't have put in a $400 million offer if they didn't believe in Hawai'i."

David Carey, chief executive officer of Outrigger Hotels & Resorts, which is selling the Marriott-branded hotels in Wailea and Waikoloa, cited the interest in the Damon Estate property, which sold for $480 million, as evidence it was an optimum time to sell.

"There was such incredible financial interest in that buy," he said. "We're on the front end of a good capital cycle."

Pothul said the five hotels being offered are different enough in class to attract enough prospective buyers to result in sales.

The last time there was so much buying and selling of Hawai'i hotels was six years ago at the tail end of a nearly decade-long state economic downturn that pressured Japanese investors — many of whom earlier overpaid for Hawai'i hotels — to sell.

In 1998, sales included the Maui Marriott Resort for $153 million; the Westin Maui for $132 million; the Grand Wailea for $264 million; and the Kea Lani Hotel for an undisclosed amount.

More recently, Host Marriott purchased the Hyatt Regency Maui Resort and Spa for $321 million, and Starwood Hotels & Resorts is close to finalizing its purchase of the Renaissance Wailea Beach Resort hotel for an undisclosed price.

The Maui Four Seasons, which opened in 1990 at a cost of about $200 million, was developed by a partnership involving Tokyo-based construction firm Shimizu, which later acquired the hotel.

Shimizu in 2000 put the hotel on the market but couldn't reach acceptable terms with a buyer, which was expected to retain hotel employees and the Four Seasons management contract.

Today, brokers estimate the property could fetch around $200 million.

The Kapalua Bay Hotel opened in 1978, and was bought for $102 million in 1990 by investors from Japan and South Korea. The investment partnership filed bankruptcy in 1995, and the leasehold hotel was purchased in 1996 by investment firm Yarmouth Group, which was merged and subsequently acquired by Morgan Stanley.

The hotel on 19 acres owned by Maui Land & Pineapple Co. is valued for county tax-assessment purposes at $49 million, including $18 million for the land. Starwood manages the hotel under its Luxury Collection brand.

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