Kauai hotel lease
sold for $18.3M

The new owners plan to
convert Islander on the Beach
to an oceanfront condo-tel

The conversion of hotel properties into residential condominiums and rental units, which has been a popular concept in Waikiki for the past few years, has begun migrating to the neighbor islands.

Part-time Garden Isle residents Steve and Gloria Cohen have sold their leasehold interest in the Islander on the Beach hotel for $18.3 million to Old Island LLC, a company that plans to turn the 197-unit hotel into Kauai’s first oceanfront condo-tel, said Christine Camp Friedman, who advised the sellers for Avalon Development & Consulting.

The Cohens, who have owned property on Kauai since 1986, acquired the property lease for the hotel in 1999 along with minority partners real estate broker Terry Kamen and his wife Helene.

They bought the lease for $5.2 million from Pacific Rim Partners, an affiliate of San Diego-based lender First Commercial Corp.

Pacific Rim had acquired the hotel for $3.8 million in a foreclosure auction after prior owner Nansay Hawaii fell on hard times. Nansay Hawaii paid $13.1 million for the six-acre property in 1989 during the height of the Japanese investment bubble. But financial troubles in Japan and a tourism downturn brought on by Hurricane Iniki in 1992 forced the property into foreclosure.

Built in 1969, the Islander on the Beach is located in Kauai’s Coconut Plantation Marketplace, an area between Waipouli and Kapaa that includes several hotels as well as a resort shopping center. The hotel includes eight low-rise buildings, a gift shop and a swimming pool.

Peter Savio, who is known for having converted several thousand leasehold apartments to fee-simple condominiums since 1981, has been chosen to market the properties for the new owners.

More than half of the properties, which retail for between $210,000 to $345,000, have been sold, Savio said, adding that he expects the condo-tel concept to hit the neighbor islands with the same intensity that it found in Waikiki.

“This is one of the first real significant condo-tels on the neighbor islands, but it won’t be the last,” said Savio. “The movement of condo-tels to the neighbor islands is confirmation that this market is still hot.”

With the residential real estate market continuing to boom, the properties are attracting investors, as well as owner occupants and those looking for long- and short-term rentals, Savio said.

The buyers, who plan to spend about $34,000 per room to upgrade the property, will continue having Aston Hotels & Resorts manage the property, said Barry Kaplan, of Hawaiian Island Homes Ltd., who brokered the deal.

“This is the only condo-tel on the beachfront and it has got a unique Hawaiiana type of style,” Kaplan said. “It’s the type of property people think of staying at when they come to Hawaii — it’s not a concrete monolith.”