On June 30th 2009, Iolani School announced that it purchase a large parcel of leasehold land owned by Lum Yip Kee Ltd. and Lum Chang Tai Inc. The price - $23 million dollars.
The highlighted area below shows the property purchased by Iolani School. Map courtesy of Google Maps.
The land consists of approxmately 21 properties situated on a block of land in a prime area of Honolulu. It's bordered by Date and Laau Streets, near the Ala Wai Golf Course and Kapiolani Blvd. Nearby neighborhoods include Waikiki, Kaimuki and Kapahulu.
The purchase includes a private road (Laau Street), four vacant lots, two individually-owned apartment buildings and nine coop buildings - Iolani Banyan, Lani Home, Laau Gardens, Iolani Gardens, Princess Anne Apartments, Canal House, Hale Laau, Hale Laau II, and Diana Apartments.
The lessors are selling the property in fee simple and are not offering the fee to current lessees. Many of the lessees are owner occupants.
Leases expire in early December, 2012. That leaves three years and several months for current lessees to use their properties or sell them. Iolani School has indicated that it will convert the area to other uses in a gradual manner. This may mean that occupants will have a chance to extend their leases under the new lessor.
Obviously, many lessees were hoping to see the fee offered on the units they purchased. It's not clear whether the purchase complies with section 514-C2 of Hawaii State Law.
§514C-2 Right of first refusal. When the leased fee interest in land under a condominium project or cooperative project or any part thereof is to be sold to any party other than the association of owners or the cooperative housing corporation, the seller shall first provide the board of directors of the association of owners or the cooperative housing corporation with written notice delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to any two of the president, vice-president, or managing agent (if any), of its intent to sell that interest, together with a complete and correct copy of the purchaser's written offer, which offer shall contain the full and complete terms thereof. The association of owners or cooperative housing corporation shall have a right of first refusal to purchase that leased fee interest for the same price as is contained in the written purchase offer. [L 1988, c 298, pt of §1; am L 2008, c 28, §33]
There may be hope yet for lessees on Date and Laau Streets. I imagine some of the lessees are going to start making some noise about getting their first right of refusal to buy these properties. This could be in interesting show! It's a prime area for affordable living in town, close to the beaches and Waikiki. In recent years, lease prices of properties in the area have been in the $20,000 - $50,000 range, making them good investments for owner occupants as well as investors.
This year's liveable city ratings have been published by Monocle Magazine. Honolulu ranks first in the United States! Many Hawaii residents have known it for a long time, it's still nice to hear it from another source though!
The top city worldwide was Zurich, Switzerland. Honolulu is 11th worldwide.
Monocle Magazine noted Honolulu has a "combination of big-city excitement and natural beauty."
Here's a photo of the shoreline along Kahala and into Waialae. Natural beauty is showing every day in Honolulu!
If you're looking for your own piece of paradise in Honolulu or other ares in Hawaii, please contact me!
I received an interesting e-mail yesterday regarding a listing at Waialae Iki. Check it out below. Note - I deleted some of the contact info, just in case the scammers used the phone and e-mail address of an innocent person:
The INTERNATIONAL MONETARY FUND contacted us for your compensation of $850.000.00 USD directed in cash credited to file KTU/9023118308 at the owner of this email address a couple of hours ago due to your allocated security code.
We are unable to complete a transfer directed at an email address, so we require some more information in order to complete this transfer. In order to resolve this problem,please email via Western Union Solicitors Fund verification Department; E-mail (customercare111) As soon as this information is received,and you have complied with the requirements of payment of the western union charges $250USD, payment will be made to your nominated bank account or at the counter directly from The Western Union Transfering Bank.
Sincerely, Rev.John Hillary. Direct Line +xxx-xx189407
So let's see, someone wants to wire the full purchase price of the house, sight unseen, no questions asked? They didn't even sign a purchase contract! Oh, and I see they want me to send $250 so I can collect $850,000.
Why would the International Monetary Fund get involved with a wire transfer? They are busy doing research, lending money to countries in need and gathering statistics. I can't imagine that the IMF would contact someone about a wire transfer that didn't go through.
In a television special on CNBC the other day, reporters visited Nigeria, where many of these scams originate. Rumors are that one scammer made $40 million so far this year through transactions like this, promising money after they get your bank account number. Don't do it!
This week I had two customers inquiring about condo hotel (condotel) units for sale. Both customers are investors, hoping to take advantage of lower prices in Hawaii's weak real estate market.
We looked at several condotel buildings and the buyers decided on the Ala Moana Hotel Condo. This is one of the highest-quality condotels around. In the $100k price range, it is hands down the best.
The economic climate for condotels has changed dramatically recently
Here's what we learned as we looked at condotel listings.
These days, lenders are very conservative. There are just a handful of lenders that will make a loan for a condotel unit and those who do will typically require a 40% downpayment!
When room occupancy rates were high and loans were easy to get, prices were higher and investors could get a return on their investment. The Ala Moana Hotel Condo has suffered significant price declines. Units are selling for about 50- 60% of what their owners bought them for a couple of years ago. What happened?
1) Maintenance fees have risen. In late 2005, the 246 square foot units had $386 monthly maintenance fees. Now those units have fees in the $456 - $630 range. Causes for the fee increases include oil prices, which affect electricity costs, and budget revisions to keep the reserve fund at adequate levels.
2) In good times, occupancy rates were 80-90%. These days (May 2009), Ala Moana Hotel Condo is running around 30-40% occupancy. The recession is affecting travel to Hawaii and these unit owners are seeing their monthly revenue fall.
The Bottom Line for Ala Moana Hotel Condo Buyers
If you're planning to get a loan and buy here, do not expect to have positive cashflow on a monthly basis. In time, occupancy levels will rise and revenue will increase which may result in positive returns.
If you're a cash buyer, your unit can probably break even on cash flow for now.
These days, many investors are selling off assets and moving to cash. When the economy turns around and lending standards change, properties like the Ala Moana Hotel Condo will be more appealing and prices will most likely rise. Personally, I think prices will rise QUICKLY as the economy recovers. Just take a look at what happened in the period after 9/11! We had steady growth for about five years.
Looking for other buying opportunities? Contact Mike and tell us what you're looking for. We'll search the Oahu MLS listings and show you where the price declines are!
Who wants a home on a sandy beach in Hawaii? Any takers? How about 3/4 acres of land, is that okay too?
Now comes the more difficult question - the price! How much are you willing to pay or how much can you afford?
We have the lowest priced sandy beach frontage house with land for sale on Oahu and yes, there's a catch.
This land is leased and whoever "buys" it actually becomes a lessee. The lease has 18 years remaining, expiring on September 30, 2027. Monthly lease rent is fixed at $3,000.
The property was listed on April 3, 2009 for $175,000 and we recently reduced the price to $140,000. Think that price is too high for a lease? Take a look at the listings of homes for sale with sandy beach frontage, priced up to $1,000,000 by clicking the link below.
The next lowest priced house is on 5,000 square feet of land and priced at $549,000. All of the other listings in this price range have small lots in the 5,000 - 12,500 square foot range.
A. Someone who either doesn't want to tie up large amounts of money in real estate and can afford the $3,000 monthly lease rent.
Plenty of people love the idea of having a sandy beach close to their front door. This house in Punaluu offers that beach.
Q. Is there a potential for profit in the future?
A. Yes, however it's not as certain as a fee simple purchase. If the lessor decides to offer the fee simple interest in this property, the lessee can buy it and hold then later sell at market prices. When a lessor sells "the fee" it is usually at a favorable price. There's no guarantee on it though.
Another possibility is that the real estate market will pick up in the next cycle (say in the next five to ten years) and everything real estate related in Hawaii goes up in value. Should that occur, this property might appreciate handsomely, even if the fee is not offered.
Think that's ridiculous? Think again. We can e-mail examples of specific leasehold properties, showing how their values went up and down during market cycles.
What About the House - is it in Good Condition?
The house itself is in fair condition, built in the 1930's. The current owners made extensive renovations without obtaining permits. Perhaps because this is a beachfront property, the building permits department has been very tough with the owners and has not allowed him to obtain permits "after the fact."
The house is habitable (the owners have lived there for years), although it's likely that the buyer will either fix the house up some more or perhaps tear it down and start all over.
On May 5, 2009 the City and County of Honolulu held its first tax lien auction in two years. Two properties were advertised. One parcel had a upset price of $20,023.87 and another had an $8,169.45 upset price.
You know how people get excited about buying foreclosures! Some friends of mine were interested in placing a bid, however they were going on a vacation in early May. They asked me to bid on their behalf and I said "Okay!"
How a Tax Lien Auction Works
Tax lien auctions are different from the auctions held at the courthouse. At the tax lien auction, the winning bidder must immediately pay the full purchase price. Methods of payment include cash, certified check, cashiers check or wire transfer arranged prior to the auction. In other words, don't plan on bidding and then going to your bank for a mortgage loan.
Another important thing to know is that the taxpayer whose property was auctioned off may redeem the property from the winning bidder! The taxpayer can do this by repaying the winning bidder the price he paid at the auction plus all costs he was required to pay, such as the deed recordation fee. Interest will also be added on at the rate of 12% per year. The taxpayer has one year to buy back the property from the winning bidder.
Hmmm. So a winning bidder should be very careful about the improvements he makes to a property in the first year. Extensive repairs and renovations might end up going back to the previous owner if he happens to get the money together to redeem it.
Tax Auction on May 5, 2009
The auction was held at the Mission Memorial Auditorium at 550 South King Street, near Honolulu Hale downtown. I entered the auditorium, registered and went behind a curtain to show the organizers my "proof of funds." Actually, it was "proof of funds" for my friends, whom I was bidding for. They gave me one of those paddles with a number on it, to hold up when I place a bid.
When everyone was registered, the Director of budget and Fiscal Services for Honolulu went to the podium and announced the auction. He read a prepared statement and asked if there were any questions. Several hands went into the air.
One bidder had done some research on the first property, located on Hanalei Street in Waianae. The bidder said he had talked with the City building permits department. He said the property owner had made unpermitted additions which need to be removed or permitted. Fines were piling up at around $150 per day. He asked if the successful bidder would be purchasing the property "free and clear of all liens" as described in the public notice. The Director was unsure and he called a recess.
After conferring with other officials, the Director returned and said there is no guarantee that the building permit fines would be waived. Another bidder asked about mortgages. If the property had a mortgage, would the winning bidder own it be free and clear of the mortgage? The Director conferred briefly with others and then announced that "free and clear" means the bidder owns the property free and clear of property tax liens and that's all that's warranteed from this auction.
There seemed to be other issues and the Director announced that the first auction would be postponed for a short time. The second auction, with the $8,169.45 upset price would be held now.
This was the auction my friends were interested in. They gave me $8,200 to bid with. They had hoped that the bidding audience would be small and we'd "get chance." I could see about 30-40 potential bidders in the room and I wasn't sure how it would go!
The property being auctioned was a three bedroom, two bath home in Makakilo, built in 1968. Its tax assessed value was $425,700.
Bidding started at $8,269.45 and several paddles went up. The next bid was $9,000 and several more paddles went up. We were already out of the running!
I watched the bidding escalate. Most bids were in $1,000 increments. Once in awhile when there were lots of paddles going up, the auctioneer raised the price in $5,000 increments.
How High Do You Think the Price Went?
As the bidding price escalated, the number of bidders went down to a handful. The bids got up to $145,000 and there were two bidders left. Coincidentally, they were sitting a few feet apart from each other. The bids went up in $1,000 and 5,000 increments. Finally, the guy in the red won at $226,000!
Although I haven't seen the house, you can be pretty sure it was a good deal. There are just a handful of homes for sale on the entire island of Oahu in this price range. Basically, the bidder bought a house for a condo price. With some conditions, such as the one year redemption period mentioned above.
After the auction, the winning bidder went and sat with the officials for a quite some time as they did whatever they had to do to take care of his payment. I wanted to stay and see the results of the other auction but I had to go.
What I Learned at the Honolulu Property Tax Auction
Successful bidders CAN get a great deal. As with foreclosure auctions at the courthouse, cash is KING. And be careful about that one year redemption period! You don't want to completely remodel a house and then have the old owner come back and buy it for the winning bid price plus interest nine months later.
Looking for House Deals on Oahu?
There are plenty of MLS foreclosures, short sales, lender sales and even regular sales that are very attractive these days. Lower prices, lower interest rates and that $8,000 Federal tax credit to first time homebuyers can be a great buyers incentive.
This is based on a true story which happened recently.
Seller fixed up his condo very nicely. Seller puts the property on the market and gets an offer, which is accepted.
Buyer decides to conduct his own home inspection. He has some experience in the construction business and decides the unit is okay.
Seller's disclosures are delivered to the buyer. Seller describes in great detail the improvements made. Some of the things mentioned are:
- Electrical outlets and fixtures replaced by seller, who is not a licensed electrician, no warranties expressed or implied.
- Plumbing pipes changed from galvanized to copper by seller, who is not a licensed plumber, no warranties expressed or implied.
- Seller removed a shoji door (sliding divider) and added fixed divider wall to the studio condo, now calling it a one bedroom and listing as a one bedroom on the Oahu MLS. In the sellers disclosures he notes that he doesn't know if he needs permission from the condo association, nor did he obtain building permits.
Buyer received sellers disclosures and believes the majority of the work done by the seller should have been permitted. Buyer and buyer's agent review requirements for building permits in Honolulu. The answer is not easy. City and County building permit rules attach values to improvements in determining whether a permit is required. For example, a building permit is required "For any electrical or plumbing work that is greater than $500 in a 12 month period."
The buyer figured that the electrical and plumbing work done should be valued greater than $500. The seller figured the value was less.
Buyer continues investigation, following up with the Honolulu Department of Planning and Permitting. Buyer calls several divisions within the DPP, including:
- Building Permit Issuance
- Electrical
- Plumbing
- Building Code branch
Buyer sends sellers disclosures to the DPP for opinions in determining whether permits are required. The buyer is concerned about purchasing the property and having to remove additions later on since the work was done without a permit.
Buyer asks the seller to obtain building permits or reduce the price substantially. Seller says no.
Shortly afterwards, the DPP sends inspectors to the seller's condo. They tell the seller violations were reported and they must investigate. The seller grudgingly allows the DPP inspectors to enter the property.
Finding: Inspectors tell the seller he must remove the wall he created, which was originally a sliding shoji door. All other additions do not require a permit.
Result: The transaction is cancelled. Seller must remove the wall and then puts the property back on the market.
Observations
Some sellers put very little effort into sellers disclosures, marking off "NTMK" (not to my knowledge) on nearly everything, even if it's not true. They just want to get the document completed and get past that contingency.
Buyers appreciate thorough sellers disclosures. If the disclosures are delivered prior to the home inspection, the inspector will often take a close look at items mentioned in the disclosures.
Statements such as "I don't know if it's okay with the AOAO and I am not willing to get building permits" can become a problem for the seller.
If a buyer really wants a specific property, reporting seller violations is not a prudent tactic. The seller is likely to avoid dealing with the buyer again.
I was googling around the internet recently using search terms suitable for properties here in Hawaii. Then I came across some interesting listings. Someone in Mississippi decided to name a town after Hawaii's most famous landmark, Diamond Head!
Even more interesting, the streets in Diamondhead Mississippi have Hawaiian names as well!
Examples are: Hilo Way; Analii Street; Ahia Court; Kaimuki Court; Mahalo Hui Drive; Kapalama Drive; Ala Moana Street; Kahana Street; Maili Way; Maunalani Place; Molokai Village and Lanai Village. I guess when Diamondhead Mississippi residents visit Hawaii they have an easier time pronouncing our street names!
Maili Way is in Manoa, near the University of Hawaii campus.
A search of Activerain found one member that sells homes at Diamondhead Mississippi, Tricia Cash.
I checked some listings and found Diamondhead Mississippi real estate costs a fraction of what Diamond Head Hawaii real estate goes for. I'll keep that in mind, should I know of some Hawaii residents who decide on a move to Mississippi.
Hewaii's economy is slowing and people are looking for causes. Unemployment in our state is at 7% at a 30-year high. TV news stations frequently remind us that construction employment is a significant factor in the rate of job losses.
Moana Vista construction was halted in December 2008. The developer is seeking additional financing to complete the project. Options include finding a partner with financing to complete the building and selling off other real estate investment.
Fred and Annie Chan, owners of KC Development, have the Kaiser Estate in Portlock on the market for $80 million. The price seems quite high, considering the property is in need of major repairs. On the other hand, the estate covers more than five acres of land on a prime spot in east Oahu. If the a sale of the Kaiser Estate fetches anywhere near $80 million, it should at least be a shot in the arm for KC Development to get things rolling again.
Earlier this week the project's contractor, Hawaiian Dredging filed a lawsuit stating that $30 million is owed on the project. It appears to be a public statement to other possible creditors of Moana Vista.
Moana Vista's sales office remains open and prospective buyers are driven to the affordable pricing. It's hard to make long term plans when a buyer doesn't know how long it will be until the move-in date. Another concern is interest rates. They are very favorable right now but they can't be locked in at this point in time. When construction resumes and an accurate date is determined for completion it will be time to discuss locking in a rate - and where will they be then?
Buyers can be comforted in knowing that their deposits are held in escrow. The money cannot be spent until the final report for Moana Vista is issued and the buyers have had 30 days to review and approve the report. Buyers can cancel and get their money back, less a small escrow fee.
Question: Historically, which way do prices go in Hawaii? Answer: Up.
Ten years ago, lots of us were hemming and hawing about the direction of the market and what to do. Then prices took off. I believe those times will come again. This might be the time to plant the seeds for your next residence.
Please visit our Moana Vista webpage, which includes a price list.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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