Posted on: Wednesday, June 8, 2005
Kahala hotel likely to be sold
By Andrew Gomes
Advertiser Staff Writer
The Kahala Mandarin Oriental Hawaii, O'ahu's only AAA 5-Diamond resort, is likely to be sold by its Japanese owner.
Japanese businessman Katsumi Iida, majority owner of the Kahala Mandarin, bought out his partner's interest and is expected to seek a buyer for the 364-room property.
Kahala Royal Corp., a Hawai'i firm owned by Iida, said yesterday it paid $97 million to a unit of Hong Kong-based Mandarin Oriental Hotel Group for its 40 percent stake in the hotel on land leased from the Kamehameha Schools.
The hotel will continue to be managed by Mandarin Oriental for the immediate future, although Kahala Royal as part of its purchase acquired the right to terminate Mandarin Oriental's management contract.
The immediate plan is to continue hotel operations as usual, said Kahala Royal spokeswoman Cheryl Tamura with Bright Light Marketing Group.
She added that Kahala Royal has retained international real-estate investment banking firm Secured Capital Corp. to pursue "options."
Those options are focused on selling the hotel, according to a person familiar with Kahala Royal's plans but who asked not to be identified so as not to harm business relations.
Secured Capital representatives did not return requests for comment yesterday.
Local real-estate experts said they expect Kahala Royal to seek a buyer because of Iida's personal troubles in Japan, and that offers have already been made on the hotel.
Among companies expected to be interested in the Kahala Mandarin are Fairmont Hotels & Resorts, Ty Warner Hotels & Resorts and Four Seasons Hotels and Resorts.
Local real-estate experts estimate the hotel could sell for between $100 million and $200 million or more.
The hotel's value is difficult to estimate because the $97 million price for 40 percent of the property was largely set 10 years ago as part of a buyout option, whereas the hotel's present value has mostly to do with operating income.
Kahala Royal, which was originally headed by Iida in partnership with local developer Bill Mills, bought the hotel in 1993 for about $54 million.
In 1995, the company made Mandarin Oriental a 40 percent partner to pay for about $40 million of a $75 million renovation that was completed in 1996.
Mills no longer has a stake in the hotel. Iida ran into trouble as the president of Fukuoka-based commodity futures trading firm Tokyo General Corp., which failed last year.
Iida, whose investments in a diverse portfolio of other businesses including Hawai'i hotels, has been cited in Japan press accounts as playing a part in Tokyo General's failure, which led to creditor claims and government allegations that the company faked financial statements.
Kahala Royal, however, is solvent and not a party to Iida's bankruptcy-like proceedings in Japan, even though Iida is the Hawai'i company's sole shareholder.
Kahala Royal financed the Kahala Mandarin buyout with help from giant financial services firm Citigroup Inc. after Mandarin Oriental exercised an option in January to sell its interest in the hotel to its partner.
Mandarin Oriental is an international hotel investment and management company with 26 hotels and resorts.
It is 75 percent owned by Hong Kong-based conglomerate Jardine Matheson Holdings Ltd., which last year sold its Hawai'i businesses under the Theo H. Davies & Co. name, including six automobile dealerships, a heavy equipment distributor and about 80 Pizza Hut and Taco Bell restaurants.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
