Posted on: Friday, May 21, 2004

Judge voids sale of units at Coral Reef

By Andrew Gomes
Advertiser Staff Writer

Almost 250 hopeful condominium buyers who put down money a year ago for units at the Coral Reef Hotel in Waikiki recently had their sales canceled.

A state judge has ruled that Coral Reef owner André Tatibouet cannot sell units of the leasehold property as condominiums, blocking 247 tentative sales.

The ruling, issued last week by Circuit Judge Victoria Marks, upheld an argument by the landowner, The Queen Emma Foundation, that condo ownership could force the foundation to sell its fee-simple interest in the property via the city's lease-to-fee conversion ordinance.

"The ruling protects the foundation's continued ownership of the property," said Rosemary Fazio, an attorney representing the nonprofit landowner.

Terry Lee, an attorney representing Tatibouet, said his client respects the judge's decision, but disagrees with it.

Coral Reef unit buyers will be provided full refunds, according to Hawaiian Island Homes Ltd., the brokerage firm handling sales.

Peter Savio, Hawaiian Island Homes president, said some buyers canceled because of the dispute and year-long delay, but most hoped they would be able to complete their purchases.

"It's a bummer they couldn't get a unit in that building ... but there are going to be a number of other buildings — probably a thousand units — coming up for sale in the next six or seven months," he said.

Tatibouet in May 2003 offered units for sale at the Coral Reef, which is at 2299 Kuhio Ave., mauka of International Market Place.

Buyers, most of whom either intended to live in the units or rent them out through a hotel management firm, snapped up more than 200 units in a single weekend at prices ranging from $59,500 to $150,000.

But weeks later, Queen Emma Foundation sued to block the sales that it said required its approval. The foundation emphasized that it did not intend to give such approval, which it said Tatibouet did not seek until after the lawsuit was filed.

Marks ruled that Tatibouet's lease with the foundation requires the foundation's consent to convert the hotel to condos, and noted that in the 1980s Tatibouet made a similar request that the foundation denied.

The foundation was concerned that it could be forced to sell its fee-simple interest in the property via the city ordinance that mandates sale of the fee-simple interest in leasehold condos in cases where at least 50 percent of condo owners want to buy the land.

Tatibouet's attorney Lee said the Coral Reef will continue to operate as a hotel managed by Aston Hotels & Resorts, which has managed the hotel since 1973.

According to the lawsuit, the hotel is profitable and had a value of $27 million in April 2001.

Lee said he does not expect Tatibouet to offer the Coral Reef for sale as a hotel. Tatibouet bought the Coral Reef in 1976. The ground lease runs until 2050.

The land under the hotel is part of the core real estate holdings that generate income for Queen Emma Foundation, which helps pay for operations of Queen's Health Systems.

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