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The Honolulu Advertiser

Posted on: Friday, March 25, 2005

Aloha Surf to be sold unit by unit

By Andrew Gomes
Advertiser Staff Writer

The recent buyer of the Aloha Surf Hotel plans to renovate the 204-room property fronting the Ala Wai Canal and resell the investment room by room.

The Waikiki hotel at 444 Kanekapolei St. is the latest in a booming trend of so-called "condotel" sales by real estate investment firms selling upgraded hotels by the room, typically to small investors and frequent visitors who usually keep their units in a hotel rental program.

An affiliate of Carmel Partners, a San Francisco-based real estate firm that owns more than 30 multifamily apartment projects on the Mainland, bought the hotel in December for $15.7 million, according to property records.

Carmel has retained Aqua Hotels & Resorts to manage the property and oversee a $2.5 million renovation anticipated to be complete by mid-summer while the hotel remains open.

Coldwell Banker Pacific Properties expects to market the rooms and begin sales in the next month or two at prices roughly ranging from $90,000 to $200,000.

The Aloha Surf will be added to about 3,000 rooms at Hawai'i hotels that have been sold or are for sale since the recent wave of condotel sales began about four years ago.

Some industry observers question how such a large number of individual owners of hotel rooms might affect Waikiki's hotel industry, but condotel operators say 90 percent or more of the rooms continue to be rented to vacationers through hotel management companies.

Mike Paulin, managing director of Aqua Hotels, said the repositioning of the Aloha Surf will improve another small piece of Waikiki's aging visitor plant, which for several years has undergone a gradual renewal as tourism improves and property owners renovate or redevelop their holdings.

"The visitor plant's getting better and better," he said. "You get a better overall product when it's over."

The Aloha Surf, formerly managed by Aston Hotels & Resorts as the Aston Aloha Surf, is a budget-class property that will be upgraded to a "mid-price" product, according to Aqua.

The 15-story hotel built in 1967 underwent a more modest renovation in 2000 after LaeRoc Partners of Manhattan Beach, Calif., bought the property for about $5 million in 1999 from Southern Cross USA Inc.

Southern Cross, once known as Kitamura Hawaii Inc., bought the hotel around the height of the Japanese investment bubble, paying $22.3 million in 1990.

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