Hotel Wailea owner Black Diamond Resort & Spa Maui sued for foreclosure by Japanese investors
Wailea hotel’s legal fight: Who pays to upgrade?
reprinted courtesy Pacific Business News 2/19/10
by Janis Magin
The new owners of a Wailea resort that was built 20 years ago as a private club for Japanese investors are embroiled in a lawsuit with minority owners who were outraged to be asked to foot part of the bill to renovate the aging, dated property.
At the same time, the new owner, Honolulu-based Black Diamond Hospitality Investments, is being sued for foreclosure by a Virginia-based fund that took over a $16.5 million mortgage that the investors had borrowed from Central Pacific Bank in 2008.
Black Diamond Hospitality Investments holds 1,049 of the 1,400 tenant-in-common fee-simple interests created more than 20 years ago when the property, formerly known as the Diamond Wailea Resort & Spa, was built on 15 acres on a hillside overlooking Wailea and sold to Japanese investors.
The entity, whose majority owners are investors Jerry Lynch and Jonathan McManus, purchased the 1,049 interests in 2008 for a total of $27.2 million, which was the top commercial real estate transaction in Hawaii that year, according to PBN research.
reprinted courtesy Pacific Business News 2/19/10, original link http pacific.bizjournals.com/pacific/stories/2010/02/22/story2.html?ana=tt3245
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2003 Historical archive:
Friday, April 11, 2003
BayWest investors like Hawaii's real estate market
Pacific Business News (Honolulu) - by Steve Jefferson, Pacific Business News
BayWest LLC has purchased $35 million in real estate investments so far this year, with a budget to spend up to another $100 million in the next 18 months.
The company, which has headquarters in both Hawaii and San Francisco, is targeting its hunt for commercial properties in both states, said managing member Jon McManus, a 34-year-old kamaaina who returned to the islands in 1999.
The other three partners include founder Jerry Lynch, who also lives in Hawaii, and San Francisco-based Craig Vallily and Patrick Sammons.
In Hawaii, the group is looking for residential apartment buildings and industrial properties, McManus said.
"Condos are super hot, especially under $300,000," he said. "You can't build them fast enough -- the low-interest environment has been awesome. One of the byproducts that has been satisfying is the pricing pressure: High demand in the price point has pushed them up, better than 20 percent, in the past 18 months. It's been substantial."
Elsewhere, "the industrial market is very happening right now; the office market is a tragedy; and the retail is sluggish at best," McManus said.
The group, which currently holds more than $200 million in real estate, has found a niche in giving old buildings new life. Beyond simple restorations, there are large profits to be made in converting them into different uses.
"Where we see the biggest opportunities are in the repositioning of properties; [converting] apartments to condos is a good example," McManus said. "Or depressed assets that can be given a new life, such as the Bamboo [a Waikiki hotel BayWest purchased in 2001]."
Recent projects in Hawaii include the Diamond Head Condominiums at Pualei Circle, the Royal Palm in Waipio and the Kailua Bay Resort on the Big Island.
McManus hints that his being part of Generation X has influenced the group's investment philosophy.
"We feel that over the next 25 to 50 years there will be more opportunities in redevelopment than in development due to land constraints, oversupply of office and the general climate for ground-up development," he said. "We've always been more in tune with taking existing buildings and recycling them."
Besides, helping to conserve open space and resources is good business, he said, adding that those types of investments yield returns of more than 25 percent.
Although the industrial market is red hot, deal flow in Hawaii is seriously hampered by the leasehold situation, McManus said, adding there's little incentive for an investor to plunk down a substantial investment.
"We've been looking in Hawaii but so far have been unsuccessful," he said. "The leasehold issue here is inhibiting a normal, healthy atmosphere. Frankly [the large trusts that offer only leasehold interest in their properties] suppress a lot of value in the marketplace. If it was fee-simple and there were no shortage of deals, we have the capacity to place up to $100 million here over the next 18 months. Given the reality, we'll place maybe $25 million."
reprinted courtesy Pacific Business News 2/19/10, original link www pacific.bizjournals.com/pacific/stories/2010/02/22/story2.html?ana=tt3245
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