KAPAA, Kauai, Hawaii – Clinton Owen looked around the newly refurbished Islander on the Beach lobby and felt very confident about future rental possibilities.
“This property did very well as a budget hotel,” said Owen, the local rental coordinator for Aston Hotels and Resorts, who attended Meadowdale High School in Edmonds. “With all the rooms being completely redone, I’m sure the new owners will have no trouble finding people to stay here.”
There soon will be 198 new owners. The former Aston Hotels and Resorts property, www.islanderonthebeach.com, underwent a $10 million conversion and was resurrected as condominium-hotel or “condotel.” While the concept is not new in Honolulu on the island of Oahu and in some Canadian cities, the Islander conversion is a first for the island of Kauai.
While the units are selling very quickly by conventional standards, the pace is nothing near the one-day sellouts experienced in Honolulu.
This is the so-called affordable second home. Given the $575,000 median price in March for a home on Kauai, investors and vacationers are coming out of the woodwork – mostly from the Lihue Airport 10 minutes down the road – to peruse all alternatives.
Units are selling from $220,000 in the main lobby building to $360,000 for oceanfront. But don’t expect to find a kitchen in your well-appointed, 372-square-foot unit. It’s basically a hotel room with amenities, including travertine stone flooring, wet bar, granite countertops, under-cabinet lighting, onyx tile backsplash, Sony stereo system, 27-inch Panasonic flat screen television and stainless steel refrigerator.
“They didn’t sell out as fast as the properties in Honolulu because many of the Realtors didn’t understand the concept,” said Barry Kaplan, project manager for Hawaiian Island Homes Ltd., the development group hired to promote and sell the units for new owner Brian Anderson.
“When the agents understood that the next best oceanfront available was very close to the highway for $675,000, these began to make sense.”
There are three distinct vacation areas on Kauai. The Wailua/Kapaa area, on the island’s east side, has the most shopping and restaurants. The 6-acre Islander complex is just a nine-iron from the Coconut Marketplace, which includes art galleries and local vendors. Within walking distance is a Safeway supermarket, natural foods store, Internet cafe and the usual swim and dive shops. The residential area is far enough away from the retail and street noise.
Sunita Nepo, a Hawaiian Island Homes Ltd. sales associate, said investors have been her main clientele.
“Investors come in here, see how close the property is to the beach and know what a good hotel would cost for a night,” said Nepo. “They use that information to help make a decision. These are people who might come for a total of four weeks a year and rent it out the rest of the time. The size of the room really isn’t a factor. People stay outside in Hawaii.”
Owen, who grew up in a hotel management family, moved to Kauai after his sophomore year in the Edmonds School District. He now coordinates Aston’s rental program with individual owners who wish to enter their units in a rental pool rather than renting by themselves.
“It is a 50-50 optional program,” Owen said. “The owner gets 50 percent of all rental income, and we handle all the chores. Similar properties have averaged about $139 a night, and I think we will eventually be able to do that and more at this property.”
Peter Savio, who finds and develops hotels into condominiums for Hawaiian Island Homes Ltd., was one of the first to fine tune the conversion process.
“A lot of the first conversions were buildings off the water that really needed some work,” Savio said. “But what you are seeing now is really evolving and improving. The Islander on the Beach was a fee-simple property right on the sand. You didn’t see those in the past, and there was competition from developers for that property.”
But a 372-square-foot hotel room for $360,000, even if it’s on the beach?
I’m afraid I’ll be forced to stay in the rental pool. Years from now, I can tell my grandchildren, “I remember when you could get ‘em for less than half a mil.”
Tom Kelly’s new book “The New Reverse Mortgage Formula” (John Wiley &Sons) is now available in local bookstores and on Amazon.com.
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