By Tim Ruel
Star-Bulletin
It's the kind of real estate that dreams are made of.The Royal Plaza Resort, a five-star hotel built in 1983 on Oahu, was recently listed for sale. The asking price: $320 million, in cash, to buy the note on the property and foreclose.
That's about the same price that the Big Island's upscale Mauna Kea Beach Hotel sold for in 1988, near the height of the Japanese real estate bubble.
Only serious buyers need apply, said the advertisement. No brokers allowed. The rate of return estimated from the property's net income is 10 percent.
The Royal Plaza Resort is at 2343 Paradise Ave.
Paradise Avenue?
The address is phony. The zip code, 10837, doesn't exist. If there's a Royal Plaza Resort in Hawaii, nobody here knows where it is.
The property listing, which recently appeared on a popular real estate Web site, is now at the heart of a movement among some commercial real estate agents in Hawaii who want properties advertised on the Web to be held to the same standards of truthfulness as regular listings.
It doesn't matter if potential customers learn the truth with a phone call. It's not fair for brokers to attract attention through misleading practices, they say.
"People are not applying the same standard to the Internet," said Douglas Pothul, senior vice president of commercial real estate firm Colliers Monroe Friedlander.
But cracking down may not be so easy.
The agent who listed the so-called Royal Plaza Resort is George Turanich, a real estate broker with an office in Saskatoon, a city in the Canadian province of Saskatchewan, 186 miles north of the U.S. border.
In the past couple of months, Turanich has listed four commercial properties in the United States for sale on a fast-growing real estate Web service called LoopNet. Two of the properties listed by Turanich have Hawaii addresses. One of the zip codes, 47335, is a bit off the mark. It's the zip code for Dublin, Ind.
In an interview, Turanich acknowledges that he made up the addresses, but swears all the properties exist, somewhere, and that the rest of the information in the ads is true.
"They're for real, for real, for real, without a doubt," said Turanich, who runs his own company, Turanich Acquisitions Management, a licensed brokerage in Saskatchewan.
Turanich describes himself as a quiet real estate deal maker who has worked with wealthy clients around the world. They demand strict privacy, he said. He made up the addresses of the properties to protect his customers and his business. Advertising on the Web is a way to generate interest.
"We work with a lot of billionaires and they're very wealthy," Turanich said. "I will only talk seriously to large principals."
The properties could be anywhere in the world, including Hawaii, Turanich said.
Turanich would not say whether he has the exclusive consent of the owners to market the properties. "We have to sign confidentiality agreements before anyone knows what's going on," he said.
Baloney, said Larry Paskaruk, a former commercial real estate broker in Saskatoon, a city of about 210,000 residents.
Paskaruk is not surprised by the fake addresses. It's a sales tactic, and it reveals the darker side of the real estate profession, he said.
"Realtors are known to stretch," said Paskaruk, who is now the leasing manager of Innovation Place, a 2,000-employee research and technology park in Saskatoon.
Other properties that have been listed on LoopNet as being in Hawaii are just as provocative as the Royal Plaza Resort.
A year and a half ago, Maui Realtor Que Martyn listed a $150 million hotel and a $20 million golf course, both in Hawaii. Martyn did not provide an address for either property, citing the offering as confidential.
The ad requested offers from buyers who were versed in deals with properties controlled by Japanese banks.
Other local brokers were skeptical that the properties fitting those descriptions would be advertised on a Web site.Martyn, principal broker for Quality Real Estate in Kihei, declined to comment for this article. Before being contacted by the Star-Bulletin, he had removed both properties from the listing service.
The surprising aspect of the listings is that these types of high-end properties are usually marketed quietly among a small pool of qualified investors, said Joseph Toy, president and chief executive of Honolulu consulting firm Hospitality Advisors LLC.
"You typically know who the players are," said Toy.
What's more, if confidentiality is already involved, all information related to the potential transaction is kept secret, said Pothul, of Colliers Monroe Friedlander.
"You don't put those on a Web site," he said.
LoopNet Inc., based in San Francisco, sports some 145,000 commercial real estate listings. Founded in 1995, the company merged earlier this year with Los Angeles-based PropertyFirst.com, one of its main competitors.
Most of Hawaii's major real estate firms use the LoopNet service, which posts all property listings for free on its Web site, www.LoopNet.com. LoopNet generates revenue in part by licensing its software to brokers to use on their own Web sites. LoopNet is not profitable, but said it hopes to be by the middle of next year.
"I'm probably the biggest proponent of LoopNet," said local commercial real estate agent Steve Sofos. His company, Sofos Realty Corp., sold a $5.5 million Rite Aid drugstore in Seattle to a Hawaii investor, using LoopNet to list the property and to assemble the financing for the deal, through the company's LoopLender.
"To put the whole transaction together, it took less than a week," Sofos said. The purchase closed two months later.
Another benefit is that the service creates a level playing field for all brokerage companies, regardless of size and financial backing. Listings are supposed to generate interest through the accuracy of their information, including price, size and location.
The downside of LoopNet is that the system is not regulated, Sofos said.
When contacted by the Star-Bulletin about the fake addresses on the Hawaii properties listed for sale by Turanich, LoopNet deleted the entries and closed the account.
All information must be fair and accurate on the listings, said Cary Brazeman, a spokesman for LoopNet.
"I think it's safe to say we have zero tolerance," Brazeman said. LoopNet, however, doesn't police its own listings, and relies on customers to point out false information.
To some Hawaii real estate brokers, that's not enough.
"It's embarrassing, it's misleading and it's bad for the consumer," said Pothul.
Pothul and Sofos said they hope to work with the Real Estate Commission of the state Department of Commerce and Consumer Affairs to establish standards for real estate ads on the Web.
The commission is responsible for educating, licensing and disciplining real estate agents.
Beginning in July, the commission's chairman, John Ohama, plans to look into regulations for listings on the Web and deals that take place across state lines, said Calvin Kimura, executive officer of the commission.
"We've been monitoring it over the past year," reviewing other states' rules and talking to local brokers, Kimura said. The state also belongs to national organizations that could lobby the U.S. Congress and foreign regulators for tougher laws, he said.
The commission currently issues hundred-dollar fines for traditional forms of ads that carry misrepresentations.
The Honolulu Board of Realtors, which owns a comprehensive Multiple Listing Service for real estate, also has its own rules.
A broker must either have the exclusive right to sell a property, or have what is known as an "exclusive agency" in which the owner can sell the property with another broker. In the latter case, both brokers typically split the sales commission.
Bottom line: The owner has to agree to let the broker market the property. All the information in the listing must be accurate.
Penalties range from warnings to termination of the right to use the Multiple Listing Service. That's a serious threat to agents, who would have to spend hours researching the market on their own, said Guy Tamashiro, president and principal broker of West Oahu Realty in Waipahu.
But crafting rules for the Web won't be as easy, Sofos said.
"The reality of it -- I don't see the state doing anything," Sofos said. Current laws amount to a slap on the wrist. The best thing that the state Real Estate Commission can do is to educate people about what is appropriate on the Web, he said.
Law enforcers are having enough trouble helping people who have lost money through the Web, said Holly Anderson, spokeswoman for the National Consumers League out of Washington, D.C. Protecting the public from misinformation is even harder.
Kimura acknowledged that it will be hard to forge new rules, largely because of the rugged, buyer-beware nature of the wild, wild Web.
"The good people will comply," he said. "The bad people will not."