Knowledge Leader Colliers International Property Magazine, Spring 2012
The Andaz by Hyatt is well under way in Wailea. This new Maui hotel is sure to please upscale customers with its luxurious rooms and the beaches in the area are the best on the island. We are very blessed to have this construction work and large investment in our backyard. The hotel will be opened to the public in 2013.
Wall Street Journal: Goldman in Talks On Hotel's Debt
By KRIS HUDSON And ELIOT BROWN
Goldman Sachs Group Inc., GS -1.50% which purchased the massive Marriott Waikiki Beach Resort & Spa in Honolulu in 2005, is in talks to extend or modify the hotel's debt, which is probably more than the property is worth, according to people familiar with the matter.
No matter how the talks end up, though, Goldman's Whitehall Real Estate Funds won't suffer a loss. That is because it essentially cashed out in 2007 when it put a $375 million mortgage on the 1,310-room hotel.
Goldman wants to extend or modify the debt on the Marriott Waikiki Beach Resort & Spa in Honolulu.
The hotel's debt comes due May 9, and there are no remaining options included in the loans for extensions of the due date without consent from various parties, according to Fitch Ratings. A Goldman representative declined to comment.
The hotel's mortgages are divided into multiple classes, with a $194.4 million securitized mortgage senior to all other claims. Junior to that is a series of loans held separately by creditors such as Square Mile Capital Management LLC, Capital Trust Inc. CT +2.59% and BlackRock Inc., BLK -2.76% among others. The most junior loan is a $25 million mezzanine piece managed by principals of Realty Finance Corp.
The Marriott Waikiki spans two towers, one built in 1971 and the other in 1979. The property includes a spa, 50,000 square feet of meeting space, two pools, 20 shops and a scuba-diving center.
Goldman purchased the hotel from the former CNL Hotels & Resorts Inc. in 2005 for $279 million and then spent more than $80 million renovating it.
The hotel was appraised at $480 million when Goldman refinanced at the height of the real-estate boom in 2007. Now the hotel might not be worth half that. Morningstar Credit Ratings LLC calculates the hotel's value at $186.4 million, based on the hotel's 2011 net cash flow of $17.7 million.
Fortunately for Goldman, Honolulu's Waikiki resort district has bounced back strongly from the recession and the March 2011 Japanese tsunami. The average occupancy for Waikiki hotels was a heady 88.5% in the first two months of this year, up nearly 15 percentage points from the same period in 2009, according to Smith Travel Research. In the same span, average nightly revenue per room increased by 34.1% to $156.10.
"When there's a market downturn, Waikiki falls the least [of Hawaiian hotel markets]," said Joseph Toy, chief executive of Hospitality Advisors LLC, a Honolulu-based hotel-consulting firm. "And when there's an upturn, it recovers the fastest. There are a limited number of hotel rooms in Waikiki, so it recovers easily."
Ready or not, the city will auction off a total of 6 buildings on May 8th if property taxes are not paid. Read more here:
Star Advertiser: City readies auction of Waikiki building
POSTED: 01:30 a.m. HST, Apr 19, 2012
The city will seize and sell a derelict three-story Waikiki apartment building if its owners do not pay the taxes on the property that has sometimes been used by squatters and drug abusers in recent years.
George and Peggy Yamashita, who own the vacant building at 2240 Waikolu Way, owe the city $113,636 in back taxes, interest, penalties and costs.
The property, along with five others outside of Waikiki for which owners owe the city a combined $33,043, will be put up for sale at 9 a.m. May 8 at the Mission Memorial Auditorium, 550 S. King St.
The city schedules a sale for failure to pay real property taxes once every fiscal year, said Louise Kim McCoy, Mayor Peter Carlisle's spokeswoman. Taxes must be at least three years' delinquent for a property to go to auction, McCoy said.
City officials had posted a government seizure notice outside the Yamashitas' property, but McCoy disputed the use of the word "seize" and said the sign was hung in error and would be removed.
"The city does not seize properties," she said. "Instead, the city sells properties for failure to pay delinquent real property taxes."
Regardless of what the city calls the pending action, many members of the surrounding neighborhood say it is long overdue.
"Thank heavens the city is finally taking some action. The building has become a magnet for undesirables," said Bill Lofquist, whose Royal Kuhio condo overlooks the trash-riddled property, which the city has appraised at $1.58 million.
George Yamashita, whose taxes are more than three years in arrears, could not be reached for comment. His son Les, who was clearing debris from the building on Friday, would not comment. However, while he was there, Les Yamashita was approached by two potential buyers and by his business neighbor, Marc Litchfield, who complained about the squatters in Yamashita's building.
"I see (squatters) coming and going like cockroaches," said Litchfield, who is the contract agent for Makai Moped Rentals, across the alley from the Yamashita property. "It's bad for business. They don't want people to know they are staying there so they intimidate them."
The Star-Advertiser reported on the condition of the building on Aug. 22 as part of a series on homeless squatters in Waikiki. Residents and nearby businesses, including the Marine Surf Hotel, also have complained about the property to the city planning department, the police, fire and health departments.
Over the years, the police department has responded to multiple calls at the property, according to police spokeswoman Michelle Yu. The city Department of Planning and Permitting also has cited the owners, McCoy said.
Recent city actions at the building have included a notice of violation in March 2011 for overgrowth and litter constituting a fire, health and/or safety hazard, she said. Another notice of violation was issued on Nov. 7 for unsafe building/structures because inspectors found the property vacant and dilapidated and noticed that the doors on the second floor were open, McCoy said. The owners corrected the violations on Dec. 30, and settled their fines for $650 on March 12, she said.
"Regarding the delinquent real property taxes for this property, the real property tax collection section has been pursuing collection by phone and in person without success," McCoy said. "It is not common that properties in Waikiki are auctioned. To the best of our knowledge, there have never been any Waikiki properties auctioned."
Mark Bratton, vice president of the investment properties division for Colliers International, said if the property is auctioned it could interest as many as a dozen investors.
"It's a small, bite-sized piece so it lets a lot of investors into the game," Bratton said.
Recent amendments to the 1976 Waikiki Special District could make the property more attractive to buyers, he said. "It can be built-out bigger and fuller," Bratton said.
Owners of lots under 10,000 square feet were so hard hit by past Waikiki building rules that only three small lots were developed or redeveloped in the Waikiki Apartment Precinct in the past three decades. Without investment in the small lots, which make up the bulk of Waikiki, eyesores have grown.
"(2240 Waikolu Way) was probably a lovely jewel in Waikiki in the 1940s and 1950s, but everything grew up around it," said Stephany Sofos, a Waikiki-based retail analyst. "Now, it's in bad condition. People can get into it, so it has become an attractive nuisance."
If the property is auctioned, the total amount owed to the city is the upset price or starting bid, McCoy said. Last year, two owners paid their delinquencies in full before the sale and two were auctioned, she said.
"The city got the total amount it was owed of $31,135.47, with the surplus going to claimants entitled to the balance," McCoy said of the two auctioned properties.
Property owners also have a year to redeem their property after it has been sold at auction by reimbursing the purchaser for the sale price and all costs and expenses, including interest at the rate of 12 percent a year, she said.
Jeff Merz, an urban planner and member of the Waikiki Neighborhood Board, is among those who hope that the property goes to an investor, who will raze it or transform it into something better.
"It's not just an eyesore if it was harboring drugs and junkies and trash and vermin," Merz said. "It's been detrimental to nearby property values."
New investment would add to the $1 million enhancement already taking place at the nearby Royal Hawaiian Market Place, said Lofquist, who is also a member of the Waikiki Neighborhood Board.
The property could be redeveloped as a commercial mixed-use building with retail on the bottom and residential above, Bratton said. The building's limited parking is offset by its location in a good-walking neighborhood, he said.
A new owner also could pursue a historic designation, Merz said.
"It's got good bones," he said. "It is kind of a cool, art-deco structure."
Surrounding business owners might buy the building to expand their operations or add parking, Sofos said.
Any change would be an improvement, Litchfield said. "I'm sure all the business owners around here will be thrilled that something is finally going to happen to that building," he said.
Japanese investors bought a total of $40 billion of Real Estate Investment trusts (REIT's). Instead of buying individual properties, these older Japanese investors bought into US properties through the stock market and REIT's. The 15 REITs that focused on selling their shares through Japanese banks and insurance companies proved successful. The investors get best in class institutional properties and professional management. As long as these REIT's keep paying a similar dividend, the monies will continue to flow into the funds.