RICHARD WALKER / RWALKER@STARBULLETIN.COM The Ala Moana Hotel Condominium has released the first of 1,154 units for sale.

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Hundreds jockey
to buy into condotel

Investors are fueling demand
for off-beach hotel conversions

Hundreds of prospective investors lined the lobby of the Ala Moana Hotel Condominium, one of Oahu's most-talked-about hotel-to-condo conversions, vying yesterday to grab one of 1,154 units being chased by as many as 17,000 potential buyers.

It was pandemonium as Florida-based Crescent Heights, which purchased the former hotel from Japanese-based Azabu USA in July 2004, released the first batch of condotel units for sale. By 3 a.m., early-bird buyers had started to fill the property's lobby, and it remained packed at the end of the business day.

Buyers from Asia, the West Coast and the neighbor islands spent hours waiting with Oahu investors for the chance to jockey for available condotel units, which are hotel rooms that have been converted into fee-simple condominiums.

Demand for Hawaii resort real estate has gotten so hot that prospective Ala Moana buyers might as well have been playing the odds in Las Vegas, said Mike Hamasu, director of research and consulting for Colliers Monroe Friedlander, one of Oahu's commercial real estate firms.

"That's about a 1-in-17 chance to buy," Hamasu said. "I don't know that I've ever heard of anything like this."

Hot sales of homes and lagging demand for off-beach budget hotel rooms have fueled a cycle of hotel-to-condominium conversions, with developers seeking higher returns on their investments.

Evidently, the concept is popular with buyers, too. While getting a unit might come down to the luck of the draw, some people see condotels as a sure bet from an investment standpoint.

"People are looking for an alternative to the stock market, and real estate has been a consistent performer," Hamasu said.

Crescent Heights, which has fielded inquiries from buyers since announcing the project in February, is still inundated with requests for information about the conversion, said Kathryn Acorda-Strona, regional marketing director for Crescent Heights.

Yesterday's buyers were pulled randomly from more than 300 candidates who each had put down $10,000 for the chance to buy a piece of paradise. That is more than $3 million in pre-sale deposits.

Steve Young, an investor from Orange County, Calif., said he flew to Hawaii this week to participate in the offering at Ala Moana. Compared with Orange County prices, the $100,000-to-$500,000 price tag to buy into the project seemed reasonable, he said.

"There are still some good buys in Hawaii, but prices in Orange County are very inflated," said Young, who recently made more than $200,000 flipping a Big Island resort condominium in Waikoloa.

Young, who arrived seven hours early to ensure a good spot in the sales line, left happy after plunking down $270,000 for a condotel on the 29th floor at the Ala Moana.

"I'll probably keep this unit for the long term," Young said. "I think it's going to be a strong investment."

Other randomly selected buyers will have a chance to buy remaining inventory Tuesday, Thursday and July 31, Acorda-Strona said.

"We've had a phenomenal response from a hot market," she said. More than 3,500 potential buyers toured the property during a sneak preview in April. "We had lines snaking out the door."

Crescent Heights got a similar response for Koolani, a luxury high-rise the company is building nearby in Kakaako.

"We only have a few units left," Acorda-Strona said. Interest in Koolani is one of the reasons that the company bought the Ala Moana for conversion. Crescent Heights does not have any more conversions on the table, but the company is in the initial stages of developing another Kakaako residential tower, similar to Koolani, she said.

While units in Koolani and the Ala Moana likely will be purchased by second-home buyers, the $700,000-to-$2 million price tag is too high for others. Condotels are particularly appealing to baby boomers and investors, who need to offset the expense of staying part of the year in Hawaii, Hamasu said.

Ken Martin of Pasadena, Calif., was among those waiting to talk to sales agents at Ala Moana yesterday. He said he is thinking of buying a unit to use when he comes to visit his sister, who lives in Waimanalo.

"I come to Hawaii often, but I'd probably rent it out 11 months out of the year," Martin said. His seat mate on the flight from California was another prospective condotel buyer, Akira Shigenaga, who also has family in Waimanalo. "Apparently, there are a lot of people who are interested in buying one of these," said Shigenaga, who waited in the lobby yesterday with family members, even though his number will not come up until Thursday.

"This is kind of a dry run for me," he said.