Company pays $79.5 million
for Barbers Point units

Carmel Partners of San Francisco also owns
the Aloha Surf Hotel and plans to sell the rooms

A California-based real estate firm has made its second major Hawaii investment in six months by buying 520 former Barbers Point military housing units for $79.5 million.

Carmel Partners Inc. also has bought the 202-unit Aloha Surf Hotel for $15.7 million, raising its stake to about $95.2 million in two of Hawaii's emerging commercial real estate markets -- redevelopment of closed military installations and the condotel market, where private condominium units are rented in a hotel pool.

Based in San Francisco, Carmel Partners is a private investment firm specializing in multifamily transactions within the United States. The company has offices in Irvine, Calif.; Denver; Seattle; Washington, D.C.; and Honolulu, said Chief Investment Officer Chris Beda.

"We are focused on a small number of markets where we look for above-average economic growth and single-family home prices," Beda said. "Hawaii is a supply-constrained housing market. We also like the economic prospects for Hawaii, such as its strengthening tourist economy and military economy."

Recent Hawaii acquisitions by Carmel Partners capitalize on Hawaii's housing crunch, as well as its booming tourist and military economy.

"We continue to be very interested in the Hawaii market," Beda said. "The ideal opportunity that we are looking for is a value-add apartment renovation deal."

Plans for Carmel Partners' most recent Hawaii acquisition call for substantial renovation. Carmel plans to spend between $5 million and $8 million to renovate Orion Housing, Orion Park and Makai on the former Naval Air Station in Kalaeloa.

"We'll invest in the common areas and we'll renovate the interiors as the units turn," Beda said, adding that rents in the mostly occupied complex may rise.

Carmel Partners plans to continue operating its Barbers Point investment as apartments, Beda said. However, he added that selling the homes individually could happen in the future "if that were someone's exit strategy."

After investing $2 million to renovate the Aloha Surf Hotel, which was built circa 1967, Carmel Partners has announced plans to sell the units individually. The Aloha Surf was formerly managed by Aston Hotels & Resorts, but Carmel has retained Aqua Hotels & Resorts, Hawaii's largest condotel manager, to operate the resort.

"Sales will begin soon," said Beda, adding that about half of the condotel's units are still available.

"Our initial interest in that property was actually to convert it into apartments," he said. "But, we found that as we got in deeper into the deal that there were limitations to developing it like that, so we decided that the condotel market was the best strategy to pursue."