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The Honolulu Advertiser

Posted on: Wednesday, July 21, 2004

Ala Moana Hotel bought

By Andrew Gomes
Advertiser Staff Writer

A Florida-based luxury condominium developer has reached an agreement to purchase the Ala Moana Hotel from a Japanese firm that was once one of Hawai'i's largest hotel owners.

Azabu USA yesterday said it signed an agreement to sell the 1,250-room property across from Ala Moana Center on Atkinson Drive.

An Azabu spokesman declined to name the purchaser, though local real estate experts familiar with the deal said the buyer is Miami-based luxury condo developer Crescent Heights.

The transaction, for an undisclosed price, is expected to be completed in mid-September, with employees rehired by the new owner under the same terms, the seller said.

A Crescent Heights representative in Honolulu declined to comment yesterday, and the company's plans for the property remained unclear. Crescent Heights is a major condo developer that has acquired commercial properties and converted them for residential use.

Last year the company purchased land and development rights for two residential high-rises in Kaka'ako from Nauru Phosphate Royalties (Honolulu) Development Inc., and is building the luxury condo Ko'olani. Construction of a second condo tower is expected to follow on a site next to Ko'olani.

Local real estate experts said there was a lot of interest in the Ala Moana Hotel from prospective buyers looking to convert the hotel into residential condos, time-share, hotel condos or some combination thereof.

The hotel, which was the tallest building in Honolulu when it was built in 1970, was part of a late-'80s real estate acquisition spree by Azabu, which spent roughly $565 million snapping up six Hawai'i hotels and other property including the Hyatt Regency Waikiki, Maui Marriott, and Kona Lagoon hotels.

But the purchases, made with highly leveraged loans, created trouble for Azabu during the state's economic malaise and Japan's financial crisis in the '90s, and the company gradually lost control of all but two of its hotels, mostly to lenders.

Azabu still owns the Hyatt Regency Waikiki, and was also able to hang on to the Ala Moana Hotel, which it bought for $70 million in 1986 and spent another $31 million renovating.

The Ala Moana Hotel, according to industry observers, has lagged the market in performance because of its location on the outer edge of Waikiki and lack of a name-brand operator.

Mac Yamaguchi, Azabu USA executive vice president, said in a statement that the company's decision to sell was strategic to take advantage of a robust market for hotel sales. "Azabu USA has been a proud owner and operator of the Ala Moana Hotel for almost 18 years," he said.

Joseph Toy, president of local tourism industry consulting firm Hospitality Advisors LLC, said the hotel presents many options for a buyer to reposition the property with renovations and operational changes. "The bones of the hotel are very good," he said. "It really affords a new owner a lot of opportunity."

Ricky Cassiday, a local residential real estate consultant, said combining hotel units for sale as residential condos stands to bring a buyer the biggest financial return.

"With (home) prices being so high, there isn't any other really immediate high-end project available for buyers," he said. "That hotel has great location and good views. It offers the chance for the condo market to expand and buyers to go somewhere."

Cassiday said converting such a large hotel for condo use is more economical and faster than building a new high-rise.

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