The 347-room Radisson Kauai Beach Resort will soon become Kaua‘i’s second condominium hotel, or “condotel.” A $38-million deal to finance the purchase and conversion of the property closed Friday. The units are to be converted, sold to individual investors, and
The 347-room Radisson Kauai Beach Resort will soon become Kaua‘i’s second condominium hotel, or “condotel.”
A $38-million deal to finance the purchase and conversion of the property closed Friday.
The units are to be converted, sold to individual investors, and managed under the Radisson brand, officials close to the deal said.
Officials at Winston Hotels, Inc., a real-estate investment trust out of Raleigh, N.C., announced yesterday that they closed on a deal to contribute $6 million to a $38 million “senior loan” to purchase and convert the Radisson. Leaders at Canyon Capital Realty Advisors LLC of Los Angeles funded $32 million of the senior loan, and Brickman & Associates funded $12 million.
The $50 million in financing from the three will go toward the $67 million needed to complete the project, according to Jerry Daly of Winston Hotels, Inc.
With condotel conversion, hotel units are renovated and sold to individual investors, then typically released into the island’s rental pool.
“When they aren’t being occupied by the owner, they’re rented out as hotel rooms,” said Jerry Daly of Winston Hotels.
During the conversion, the new owners of the Radisson will be the Anderson family, the same entity that, in August 2004, announced the purchase and conversion into fee-simple condos of the 197-unit Islander on the Beach hotel in Waipouli, behind the Coconut Marketplace.
“It’s a tremendous concept,” said Brian Anderson of the condotel craze in an earlier interview with The Garden Island.
Anderson, who is head of Big Island-based Anekona Properties on Hawai‘i and son of businessman and politician Andy Anderson, will lead the development of the Radisson.
No one from the Radisson, or any of the new owners, could be reached for comment earlier this week regarding when the Radisson conversion would be complete, or when the units would be placed on the market.
But a consultant on the deal, Peter Herndon of Herndon Business Consulting LLC, said the partnership intends to spend around $5 million on renovations, mostly to the back area of the resort. It will remain open as a hotel during the condo conversion.
Herndon was a former general manager of what is now the Radisson Kauai Beach Resort, and also worked for a period for Haseko, a Japan-based company that owns or owned land adjacent to the hotel and the property under the hotel.
The purchase and conversion of the Islander on the Beach in August for $40 million by Anderson’s Puluwai LLC was the first such conversion on Kaua‘i, and was an indication that other owners of aging Kaua‘i hotels could follow suit.
Within weeks of the announcement of Islander on the Beach’s conversion, reservation lists were established for studios under 400 square feet and selling for between $210,000 and $340,000.
Anderson spent $8 million for renovations to the Islander on the Beach, installing improvements including marble floors and hardwood furniture. Studio units sold for between $210,000 and $340,000, and two, one-bedroom units for $570,000 each.
The Radisson Kauai Beach Resort will probably undergo similar changes.
“The Radisson Kauai is situated on a well-located site, benefited by an increasingly robust leisure market on the island of Kaua‘i,” said Joe Green, president and chief financial officer of Winston Hotels. “The developer, led by Brian Anderson, has a proven track record in the Hawaiian hospitality market, and has successfully executed similar condo hotel projects in Waikiki and Kaua‘i. This is an exciting financing opportunity for a unique hotel asset.”
Driftwood Ventures bought the hotel, then known as the Outrigger Kauai Beach Hotel, in April 2000. Driftwood brought in Radisson to manage it after $10 million in renovations.
Anderson is fast becoming the one of Hawai‘i’s most experienced developers in the process of hotel conversion. Earlier this year, Anderson, along with partners from the National Housing Corp. of Hawaii Inc., converted the 242-room Waikiki Terrace hotel into 217 condotel units. After an $11-million renovation, sales were in escrow for all units in about a month.
The strategy has two obvious benefits, Daly said. First, the new owners can convert and quickly sell units, turning a tidy profit. For example, in August, all 248 condotel units at the Palms at Waikiki sold in nine hours. The hotel was bought in 2001 for $12.7 million, underwent $2.7-million worth of work, and raised at least $28.8 million through the sale of the individual units.
Another benefit to conversion is that the new individual owners often see the property as an excellent investment property that is typically far less expensive than a home or newly built condominium. They can use the rental income to finance the purchase of the property.
For example, after the conversion, a room at the Waikiki Terrace that once went for $60 to $200 per night was renting at daily rates of $210 for a studio, $325 for a one-bedroom suite, and $600 for a two-bedroom suite.
The beauty of the condotel concept, Anderson said, is that typically few permits are needed for hotel-to-condo conversion, and they add no density to neighborhoods.
Properties now being converted for condotel sales in Hawai‘i include the former Ohana Ala Wai Towers now operating as the Aqua Marina, part of the Hawaiian Monarch Hotel, part of Kuhio Village, and the Bamboo Hotel, all on O‘ahu.
Anderson said he considers the converted units as “entry points” for investors interested in property.
“It’s real hard to find fee-simple land in Hawai‘i these days,” he said.
Just as Aston Hotels and Resorts leaders continue to manage the new Islander on the Beach condotels, Radisson will manage the Radisson Kauai Beach Resort condotels under the Radisson brand.
Phil Hayworth, business editor, may be reached at 245-3681 (ext. 251) or mailto:phayworth@pulitzer.net.