Sales strong for Queen Liliuokalani leasehold conversions
The Queen Liliuokalani Trust has seen higher-than-anticipated sales in the conversion of its Waikiki leasehold properties to fee simple, particularly among Canadian and Japanese investors.
The $390 million trust last year offered leasehold owners the fee-simple interest in the 385-unit Liliuokalani Gardens at Waikiki, 876-unit ResortQuest at the Waikiki Banyan and 435-unit ResortQuest Waikiki Sunset, the latter two of which are condominium hotels.
Sales at the three properties are expected to generate more than $100 million.
Sales for the fee interest in units at the Liliuokalani Gardens, which went on the market in early 2007, closed last summer. Between 70 percent and 80 percent of leasehold owners are expected to purchase fee interests at the Waikiki Sunset and Waikiki Banyan, which are scheduled to close today and on Feb. 15, respectively. Sales for both properties began last fall.
A larger percentage of foreign investors -- between 10 percent and 30 percent -- are scooping up the fee-simple interest in condominiums at the Waikiki Banyan and Waikiki Sunset, as compared to earlier sales of the Liliuokalani Gardens, where about 74 percent of leasehold owners purchased the fee, said local real estate developer Peter Savio, who is selling the land beneath the three properties on behalf of the trust.
The prices of the fee interest in the typical one-bedroom units are between $70,000 and $80,000 on average, he said.
Owners who choose not to buy the fee will remain under the terms of their existing lease. Lease re-negotiation is set for December 2010 for the Waikiki Banyan, April 2011 for the Waikiki Sunset and November 2014 for Liliuokalani Gardens. The lease expires in 2035 for the Waikiki Banyan, 2036 for the Waikiki Sunset and 2039 for the Liliuokalani Gardens.
Once the leases expire, owners who do not own the fee will be forced to surrender their apartments to the landowner, which is why it's important for lessees to buy the land, Savio said.
"It's a very successful fee conversion and even now, with interest rates going down, I suspect more people will buy ... because foreign owners are more likely to buy the fee," he said. "They used to be the ones least likely to buy. It's actually cheaper for them to buy because the dollar has gone down in value."
The trust may opt to re-offer the remaining unsold fee-simple properties in another two to three years, he said.
"We're very pleased with the results to date, they're better than expected," said Michelle Orian, Queen Liliuokalani Trust spokeswoman. "The sales are helping us to diversify our assets so we have a more prudent balance of Hawaii real estate and other investments."
The trust in 2001 and 2002 laid off approximately 25 percent of staff -- or about 40 people -- due to its worsening financial condition at the time, but it is now stable and has recently been increasing staffing, she said.
The trust owns 16 acres in Waikiki, including the land beneath the Foster Tower, Hilton Waikiki Prince Kuhio Hotel, Waikiki Beach Marriott Resort & Spa and the Pacific Beach Hotel. About 70 percent of the trust's income is generated from its Waikiki holdings.