Waikiki 'condotel' planned
By Andrew Gomes
Advertiser Staff Writer
The owner of the former Waikiki Parkside hotel closed by mold more than a year ago is planning to sell the property unit by unit to investors after anticipated completion of extensive repair and remodeling in July.
The 260-room hotel at 1850 Ala Moana across from Kalia Tower has been closed since February 2003 after management firm Aston Hotels & Resorts refused to continue operations out of concern for guests and workers.
LaeRoc Partners, the Parkside's California-based owner, is working with Coldwell Banker Pacific Properties on the sale effort, and has an agreement in principal for Aqua Hotels & Resorts to manage units for buyers who elect to put their units into a hotel rental program.
Coldwell and Aqua officials confirmed plans for the property, though an executive with LaeRoc, which is embroiled in lawsuits with Aston and the Parkside's former owner, declined comment.
"It's going to be a beautiful new property once it's completed," said Mike Paulin, managing director of Aqua. "It's a complete rebuild except for the skin."
The repositioning of the Parkside is one of several recent conversions of typically low- to mid-grade Waikiki hotels into so-called "condotels" by owners finding they can sell units individually for significantly more than hotel operators are generally willing to pay.
Ron Watanabe, hospitality adviser for local real estate firm Chaney, Brooks & Co., said unit buyers have been willing to pay more per room than a hotel operator — in some cases twice as much.
"The economics are there so long as there is continuing demand, which appears to be very strong," he said.
Condotel brokers and managers say buyers are mainly local and Mainland investors, most of whom rent out the units through a hotel rental program. Others use units for long-term rentals, and some keep units for personal use.
Properties being converted for condotel sales include the former Ohana Ala Wai Towers now operating as the Aqua Marina, part of the Hawaiian Monarch Hotel, part of Kuhio Village and the Bamboo Hotel.
At the former 242-room Waikiki Terrace hotel being converted into a 217-room condotel with an $11 million renovation, sales were in escrow for all units in about a month without any major advertising, according to Kevin Showe, vice president of National Housing Corp. of Hawaii Inc., a partner in the conversion.
Showe said the average sales price is about $155,000 for studios, and $310,000 for one-bedroom units.
"It's a very strong market right now," he said. "If you provide the customer a quality building and quality location, there's a lot of potential there."
Prices for Parkside units have not yet been determined, according to Kai McDurmin, Coldwell Pacific projects director. She said sales are expected to begin around midyear.
McDurmin said the seller will make needed disclosures pertaining to mold. The National Association of Realtors urges members to ask sellers about past mold problems, and the standard Hawaii Association of Realtors property disclosure form addresses mold.
The Parkside has roughly 150 studios that range from 246 square feet to 360 square feet, and eight larger one-bedroom units.
Paulin said the goal for repair and renovation completion is July 4, though LaeRoc recently decided to change architects and is still working on permits for the bulk of the remodeling project, according to the city Planning & Permitting Department.
LaeRoc has submitted permit applications for $2.7 million of estimated work, including replacing the roof, emergency mold repairs to guest rooms, and air-handling system repairs. The majority of the work has not started, though substantial interior demolition has been done.
Meanwhile, LaeRoc is pursuing the former owner of the hotel and its affiliated management company for damages including mold, termites and air-conditioning problems.
LaeRoc bought the hotel in August 2001 for $12.7 million from K.S.K. (O'ahu) LP, a subsidiary of Honolulu-based Hawaiiana Group Inc. Hawaiiana is the parent company of the hotel's former management firm, Hawaiiana Resorts Inc., and is a subsidiary of Tokyo-based Kenchiku Shiryo Ken-kyusha Co. Ltd.
In LaeRoc's suit against K.S.K., filed in August 2002, LaeRoc said it relied on representations by K.S.K. and Hawaiiana that the hotel air-handling system worked properly and that the hotel was free of roof leaks and termites.
In recently filed court documents, LaeRoc said K.S.K. representatives failed to disclose a 1997 mechanical engineer's report that found the hotel's air-handling system was in poor condition with inefficient or outdated major components.
LaeRoc through its suit also found a few references to mold and air-conditioning problems recorded in hotel management meeting minutes the company said is further evidence the seller and its representatives knew about extensive mold and air-conditioning system problems but withheld the information from LaeRoc.
K.S.K. disputes LaeRoc's allegations. "Our position is it was a sale of an old hotel and we did not make any false representations," said Paul Aoki, an attorney representing K.S.K.
Lissa Andrews, an attorney representing Hawaiiana and its officials, said the company also denies LaeRoc's allegations that it made misrepresentations regarding the hotel.
In a separate suit, Aston is suing LaeRoc for damages relating to terminating its management contract. Both suits are pending. A third suit filed by LaeRoc against Aston for withholding management fee payments was dismissed, but is being appealed by LaeRoc.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
