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The Honolulu Advertiser
Posted on: Tuesday, October 2, 2007

Kailua condo residents running out of time

Photo galleryPhoto gallery: The Kailuan condo

By Catherine E. Toth
Advertiser Windward O'ahu Writer

Hawaii news photo - The Honolulu Advertiser

Sara Way makes jewelry at home in The Kailuan. Way, who is disabled and lives on a fixed income, has lived there for 12 years and is uncertain where she will go if no solution comes before Dec. 31. See more photos.

JOAQUIN SIOPACK | The Honolulu Advertiser

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AT A GLANCE

Median price of single-family homes and condominiums for second quarter of 2007:

(Geographic area, single-family homes, condominiums)

Entire island: $665,000, $328,000

Metro O'ahu: $736,500, $320,000

Diamond Head: $1,025,000, $504,500

Hawai'i Kai: $910,000, $546,500

Kailua: $850,000, $491,000

Kane'ohe: $735,000, $394,000

North Shore: $902,500, $407,500

Central O'ahu: $595,000, $305,000

Leeward Coast: $375,000, $191,000

'Ewa Plain: $510,000, $294,900

Makakilo: $612,000, $305,000

Waipahu: $575,000, $300,500

Pearl City: $634,000, $299,000

Source: Honolulu Board of Realtors

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Hawaii news photo - The Honolulu Advertiser
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KAILUA — The effort by residents of a two-story walkup on Kailua Road to save their homes has come to a crossroads, leaving them facing the prospect of paying far more than they do now in a real-estate market gone sky-high.

Residents at the 18-unit The Kailuan are caught between the expiration of the condo's ground lease and the landowner's rejection of their bid to buy the property.

They have until Dec. 31 to vacate their condos and enter a real-estate market they say they can't afford.

"I'm concerned and I pray a lot," said Sara Way, a 59-year-old resident of The Kailuan who's disabled and living on a fixed income.

Way bought her condo 12 years ago for less than $80,000 with a land lease that expires Dec. 31. In today's market, $80,000 would be a typical down payment for a Kailua condo.

"I try to put prayer in place of worry and fear because that comes up a lot," Way said.

The tenants of other nearby buildings have already moved out to make way for a new development, but The Kailuan residents have decided to fight.

This week, with their options limited and time running out, they plan to submit another proposal to buy the property from landowner Kaneohe Ranch Co.

Their first proposal — substantially less than the property's value, according to the landowner — was rejected. It also didn't outline how they would deal with a federal mandate to close the building's cesspool, which needs to be done by Dec. 31.

NEIGHBORHOOD HOLDOUT

The Kailuan is part of a cluster of two-story walkups — mostly affordable rentals — across from Kailua District Park.

Last year Kaneohe Ranch Co., which owns the 6.5 acres under the buildings, sold most of this property — but not The Kailuan — to the local Schuler Division of Texas-based home builder D.R. Horton.

The plan is to demolish these affordable rentals starting in January and replace them with mid-priced, for-sale condos.

Kaneohe Ranch Co. has offered the residents of The Kailuan $10,000 each to help with relocation costs if they move out by Nov. 1, and $5,000 if the move by Nov. 30.

The company hasn't decided what it will do with this piece of property once the building, which is located in the middle of the area where Schuler plans to build its condos, is demolished.

"We realize it's a hard situation for them," said Mitch D'Olier, president and CEO of Kaneohe Ranch Co. "We've tried to figure out how to ease the transition for these Kailua residents."

Residents of the other buildings — including the Kailua Palms, Coral Apartments, Kailua Arms and Countryside Apartments — have already moved out and into a high-priced rental market in Kailua.

Monthly rents in the area can range from $825 for a small studio to upwards of $12,500 for a five-bedroom beachfront home. Some of the former tenants in the now empty affordable rentals were paying as little as $700 for a two-bedroom unit.

"The rents have continued to stabilize or even wander up a bit," said Richard Carvill of Carvill & Co., a Kailua real estate firm. "And as you tear down, these people have to go somewhere."

As it is, Kailua doesn't have much to offer in the way of affordable housing, Carvill said. And whatever is available is usually snatched up quickly.

'MANY ... HAVE SUFFERED'

"There's such an issue of affordable housing in the community," said Vishaka Jokiel, a single mom of a 12-year-old son who bought her leasehold unit in The Kailuan in 1999. "Many people up and down this street have suffered as a result of having to move out."

Way doesn't have firm plans on where she'll go if Kaneohe Ranch rejects the tenants' offer to purchase the land. She doesn't want to think about it.

"I feel there's a chance," said Way, who's been living in Windward O'ahu since 1983. "In my heart and mind, I believe we deserve to be here, and that there's no better place for us to be. There's no reason to knock this structure down, and Kailua needs affordable housing."

The owner-occupants say they have the financial backing of a silent investor to make an offer on the property that includes the costs for the cesspool closure and any renovations that need to be done.

They hope that Kaneohe Ranch Co. will consider them viable buyers and take their proposal seriously.

"If Kaneohe Ranch is selling the land, we're asking them to sell it to us for the fair-market value," said James Severson, 53, an architect who owns a unit at The Kailuan in which his daughter-in-law and two grandkids live. "It was something we could afford when we bought it, and to lose it would be a huge financial loss. For some people, they're getting kicked out with no place to go."

And they would be entering a real-estate market significantly different from a decade ago.

Single-family homes in Kailua — with its desirable location near some of the state's best beaches — sold for a median $850,000 in the second quarter of 2007, according to Honolulu Board of Realtors data, compared with $665,000 islandwide.

The median price of a condo in Kailua was $491,000, compared with $328,000 islandwide.

That's a significant jump for resident Way, who bought her condo leasehold for $75,000 back in 1995.

But she's holding out hope.

"I'm one of those positive thinkers (who) doesn't stay up all night crying and worrying," Way said. "But that doesn't mean there aren't people who are. I'm sure that some of the people in our building are really terrified."

Reach Catherine E. Toth at ctoth@honoluluadvertiser.com.