Homeowners
have new
lease on life
The Waikiki residents are
By Rob Perez
among the first groups to complete
an out-of-court settlement using
the city's mandatory conversion law
Star-BulletinKEITH Adamson, 81, can rest easy now.
He and his wife, Robin, 76, finally own their Waikiki apartment -- land and all. They had sought full ownership for years, mainly so they one day could give the home to their eight grown children.
For nearly 30 years, however, the Adamsons could claim ownership of only the leasehold interest in their two-bedroom Wailana at Waikiki apartment. They still had to pay a monthly ground rent because the high-rise sat entirely on leased land.
That meant the Adamsons and owners of the other 185 units in the Ala Moana Boulevard project would have been forced to give back their homes to the landowner once the lease expired in 2039. Not anymore.
The Adamsons were among 58 apartment owners who last week purchased the fee interest in their units, which essentially means they own a share of the property under the building.
The homeowners were one of the first groups using the city's mandatory lease-to-fee conversion process to complete an out-of-court settlement setting a price for their fee interest.
The price -- $81,000 for the project's typical apartment -- was roughly 45 percent less than the $146,000 the landowner, KDI Investments Inc., had sought four years ago.
And the settlement enabled both parties to avoid a costly jury trial that would have been necessary to set a price under the city's mandatory conversion process.
Under that process, the land would have been condemned, allowing the apartment owners to purchase it at the court-approved price.
''We figured it was a lot better this way than going to court for a couple years at great legal expense,'' said Adamson, a retired U.S. Foreign Service official. Added Randy Brooks, the attorney who represented KDI: ''There was a good amount of compromise on both sides.''
KDI is owned by the family that includes Malcolm Tom, the city's deputy managing director.
Some experts believe the Wailana at Waikiki case marks the beginning of a trend. They expect out-of-court settlements also to be reached for other leasehold condo projects going through the mandatory conversion process.
Mike Pang, a real estate agent who helped represent the Wailana at Waikiki homeowners in settlement negotiations, also said the outcome underscores that fee prices in disputed cases don't necessarily end up closer to values sought by landowners.
''This will start to dispel that myth,'' Pang said. ''This is the beginning of a trend (toward) fairer fee conversion prices compared with what some lessors were offering in the early 1990s.''
Adamson said Wailana apartment owners balked at the 1995 offer because they considered the prices ridiculously high. That was the same criticism leveled against Bishop Estate when the charitable trust offered take-it-or-leave-it prices in the early 1990s to thousands of leasehold condo owners on estate land.
The Adamsons paid $93,000 for their fee interest, compared with more than $160,000 that KDI offered in 1995.
Peter Savio, a real estate agent who made the original fee offer on behalf of KDI, said the settlement prices should not be compared with the 1995 proposal.
The original prices were considerably higher than what the property appraised for at the time and reflected the somewhat unique ground lease that the Waikiki project has, Savio said.
''Those are meaningless numbers now,'' he said of the 1995 offer.
Savio said the settlement was fair and that the prices were close to what the property appraised for when the 1995 offer was made.
Brooks, the KDI attorney, said one reason the settlement was lower than the original offer was that land values have fallen significantly the past four or five years.
KDI did not sell the fee interest to all Wailana apartment owners, only the 58 who qualified under the city's mandatory conversion program. To qualify, the owner must occupy the unit and meet other conditions.
By purchasing the fee, the Adamsons and other buyers were able to avoid a significant increase in their ground leases scheduled to take effect at the end of November.
Adamson said his rent was scheduled to jump from $40 to $400 a month.
Although the majority of condo and townhouse owners on Oahu own the fee interest in their homes, more than 20,000 still are leasehold.
But that number is expected to continue shrinking as more conversions take place.
