Permitting stalls
Waikiki condo
conversion

Roughly 45 of the units
in the Palms at Waikiki
are back on the market

Demand for studio and one-bedroom condominium hotel units at the Palms at Waikiki was so strong when they went on sale in August that the 248-unit building sold out in nine hours.

But construction delays and buyer cancellations have created an unusual situation in Oahu's overheated real estate arena: About 18 percent of the property is back on the market.

Several thousand buyers stormed the property for its sales launch last year, but most had to settle for being placed on a backup list. Then a six-month delay in getting a building permit to upgrade the air-conditioning system postponed the building's January opening date, said project manager Earl Hulse of Coldwell Banker Pacific Properties.

Some buyers, especially those seeking tax-advantaged exchanges or immediate returns on their investment money, pulled out of the project. There also was fallout from overzealous buyers who had problems with financing or who scaled back on their investments. Prices for the roughly 45 fee-simple units that are back on the market range from $116,000 to $225,000.

"The developer is going to be in town Monday doing a walk-through with the contractor to get the final timelines," Hulse said. "We're hoping that it will be open this summer."

Millions of dollars worth of projects have been delayed all over the island as Oahu's construction boom has increased the workload on an already backlogged office, said Henry Eng, head of the city's Planning and Permitting Department.

"We already have a backlog and the number of permits is increasing," Eng said. It isn't that unusual for permits that were submitted Jan. 1 to take until June to process.

"Every industry group we speak to says that we need it faster," he said, but some delays are the result of incomplete paperwork from applicants and others are due to increased building demand coupled with an understaffed department.

The department has hired additional workers, but is having trouble bumping up its staff because of Oahu's tight job market, Eng said.

"It's difficult to compete with the private sector," he said.

The department has added online services and streamlined payment systems to help reduce customer wait.

In the meantime, buyers waiting to cash in on hotel-room rents at the Palms will have to wait.

The Palm's owner, California-based LaeRoc Partners, allowed some buyers to close on their units before they could be occupied to accommodate property exchanges to avoid tax penalties, Hulse said. Other buyers are waiting for the building to be completed before they close, he said.

"The delay really hasn't hurt sales. We are expecting the remaining units to sell out, too," Hulse said.

The company expects to release another dozen larger studio and one-bedroom penthouse units in the summer.

"These units will be more upscale and they will have full kitchens," he said.

LaeRoc Partners bought the Palms in 2001 for $12.7 million when it was known as the Waikiki Parkside Hotel. After purchasing the property, located on Ala Moana across from Hilton Hawaiian Village, the company began extensive renovations and submitted permit applications for nearly $3 million worth of work.

The company had planned to operate the Parkside as a hotel but changed direction after Waikiki's condotel market began sizzling. Condotel units have been a popular investment for frequent vacationers, parents looking for dorm rooms for their children and investors who hope to cash in on the tourism market.

Local interior designer Terrence Burke was hired to coordinate a tropical theme and Aqua Hotels and Resorts was brought in to manage the hotel units.

"We don't anticipate opening for another 60 days," said Mike Paulin, Aqua's chief executive. "They got behind schedule for various and sundry reasons, but we are ready to go and anticipate about 90 percent of the buyers will subscribe to our services."