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The Honolulu Advertiser

Posted at 5:43 p.m., Thursday, October 26, 2006

Kauai Lagoons begins selling luxury condos

By Andrew Gomes
Advertiser Staff Writer

The new owners of the Kauai Lagoons resort yesterday unveiled a refined development plan that includes selling million-dollar house lots, multimillion-dollar condominiums, luxury time-share and even a few small private islands.

For sale at the high end: a pair of small islands in the man-made 38-acre lagoon for $8 million.

At the low end: a time-share permitting 21 days of annual use for about $300,000 and up.

The roughly estimated $1 billion redevelopment plan for the former Chris Hemmeter resort near Lihu'e is one of the biggest resort expansion projects in the state.

Jobs, shoreline access, more tax revenue as well as more than $1 billion in real estate sales are expected to come from completing the partially developed resort.

The plan involves selling 750 vacation accommodation units — a mix of time-share units, condos and single-family home lots — largely on a site Hemmeter originally envisioned for a second hotel.

Kauai Lagoons LLC, a joint venture between a partnership led by local developer Kevin Showe and Marriott Vacation Club International, has been formulating project details over the last year, and is now bringing the first parts of the expansion to market.

The developer recently began marketing two pairs of small islands — one pair for $5.5 million and the other for $8 million — as exclusive home sites.

On Wednesday, sales are slated to begin for a 78-unit condo complex named Kalanipu'u where prices for furnished units start at $1.7 million.

Early next year, the developer plans to start selling 14 condos under the Ritz-Carlton Residences brand for prices starting at $4.5 million.

Showe said Marriott's branding and the property's navigable waterway filled with fish will create a unique second-home and vacation resort that he believes will better weather the slowing real estate market.

"Clearly the real estate business is always a cyclical business," he said. "There is a slowing of resort developments in terms of demand, but this is a resort experience that is incomparable."

Showe projected that complete buildout of the plan could take 10 years and cost around $1 billion. He also estimated that at full capacity the resort will accommodate 2,000 to 2,500 visitors and have 500 to 600 employees.

The initial development phases include demolishing some of the decaying parts of the resort such as the abandoned retail center Fashion Landing and Inn on the Cliffs restaurant site, and building condos and time-share in their place.

Other initial work next year will involve moving the 14th and 15th holes of the Kiele Golf Course away from the lagoon and closer to the ocean to provide room for condos.

Two other Kiele holes, Nos. 9 and 10, will be relocated to make room for 50 single-family house lots along the golf course mauka of the lagoon.

Later phases of development will include roughly 300 furnished condos and 300 time-share units.

Of the condos, 252 are to be developed under Marriott's Grand Residences brand and 46 under Marriott's Ritz-Carlton Residences brand. Buyers have the freedom to use the units or rent them out through Marriott or outside management firms.

Prices and maintenance fees have not been determined, though average annual maintenance fees for Ritz-Carlton Residences are $36,000.

Of the time-share units, 72 are to be developed under the Ritz-Carlton Club operation affording 21 days of annual use, and 224 under the Marriott Vacation Club affording the more traditional one week of annual use.

Prices and maintenance fees have not been determined. The average Marriott Vacation Club time-share in Hawai'i costs $40,000. The average maintenance fee for the Ritz-Carlton Club on Maui is $16,500.

The Ritz-Carlton Residences and Grand Residences are new to Hawai'i, and essentially provide condo owners hotel-style services by Marriott, which can manage the units as nightly vacation rentals if owners choose.

Robert Calhoun, regional sales and marketing vice president for Marriott Vacation Club, said the project is the most diverse integration of Marriott brands at one resort.

"This is an absolute first for the company," he said, regarding the endeavor as greater than the company's hotel and 750-unit time-share at Ko Olina Resort & Marina on O'ahu.

Other parts of the Kauai development plan are 82 affordable rentals with one to three bedrooms at Waipouli, and 31 two-bedroom affordable condos to be for sale at Kauai Lagoons.

The rentals will be available to those earning 65 percent to 120 percent of Kaua'i's median income, or roughly $40,000 to $73,000 for a family of four. For-sale affordable condos will be available to first-time homebuyers earning 80 percent to 120 percent of Kaua'i's median income, or about $51,700 to $73,000.

Public shoreline access is being created from Kiele's 16th hole, which will lead to a planned comfort station with bathrooms, showers and picnic area. Access to a larger 4-mile stretch of shoreline from Kalapaki Beach to Ahukini Landing near the airport is being discussed with the county.

If completed as expected, development at Kauai Lagoons will largely complete development of the resort that has been difficult for other owners to finish.

Hemmeter opened Kauai Lagoons in 1987 with an ornate 840-room Westin Kauai hotel, a Jack Nicklaus-designed golf course and wildlife-populated islets surrounded by the lagoon plied by gondolas.

A second Nicklaus golf course and two high-end shopping centers also were developed, but Hemmeter ran into financing problems that halted plans to build a second hotel, condos, time-share units and a third golf course.

Japanese firm Shinwa Golf Group acquired the golf courses, retail centers and expansion sites for about $200 million in 1991, but its effort to build on Hemmeter's grand vision was ruined the next year by Hurricane Iniki, whose damage forced the hotel and retail centers to close and hurt golf operations.

The hotel reopened in 1995 after it was bought by Marriott and converted to hotel and time-share use, but Shinwa abandoned its development plan and in 2002 was forced to sell its Hawai'i assets to help reduce debts.

Canada-based GolfBC acquired Shinwa's Kaua'i property in 2003, and partnered with Showe in 2004 to develop the resort, which already had most of the needed zoning for expansion.

Showe said he saw much of the property's potential in its lagoon, which he said would be impossible to develop today largely because of cost.

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