Photo by Dennis Oda, Star-Bulletin
The Kahala Beach condominium, a longtime retreat for
celebrities, is about to have its land lease renegotiated after
30 years of fixed rents. It occupies some of Oahu's
most valuable real estate.
But lately, the tranquility of the beachfront, luxury condos have given way to some unease as condo owners gear up for lease rent negotiations with landowner Bishop Estate.
"There is some concern, of course," said Tom Hinkle, general manager of the 196-unit, leasehold apartment complex. "Most of our residents are senior citizens and a lot of them have everything in trust."
Condo owners at the plush Kahala Beach likely will see a jump in their annual lease rents since they had been paying a fixed lease rent for the past 30 years.
Negotiators originally planned to meet this week to discuss lease rents, which are up for renegotiation in July, Hinkle said. But both sides agreed to hold off the talks to collect more information on the local real estate market, said Martin Anderson, the attorney for the Kahala Beach Association of Apartment Owners.
"We anticipate good faith negotiations to start shortly," Anderson said.
Bishop Estate declined comment, saying it doesn't discuss ongoing rent negotiations.
Built in 1967 at a cost of $4 million, the Kahala Beach apartments are located on some of Oahu's most valuable real estate, across from the Waialae Country Club and next to the Kahala Mandarin Oriental Hawaii hotel.
The low-rise condominium complex, which covers 6.68 acres, operates under a 60-year lease with the estate. For the first 30 years, the lease rents are fixed. Lease rents for the next 30 years are tied to property values, which have soared since 1967.
County tax records compiled by the Prudential Locations Inc. show that the land beneath the Kahala Beach apartments is worth about $40.7 million, or roughly $139 a square foot. Anderson said that apartment owners believe that those values are too high and many have filed appeals with the county tax department in the past week.
Recent real estate trends in Kahala appear to uphold that view. While Kahala properties are up sharply from 1967, they are down as much as 50 percent from their peak values during the early 1990s, according to Mike Sklarz, research director at Prudential Locations.
Due to the sluggish real estate market, beachfront lots in Kahala that once sold for about $200 per square foot during the boom years now are selling for about $100 per square foot, Sklarz said.
"Prices are trying to find a bottom," Sklarz said.
The Kahala Beach is the latest of several, high-profile Kahala properties which had leases up for renegotiation recently. In June, 1995 the Waialae Country Club reached an agreement with Bishop Estate for a 75-year lease for the 144-acre golf course.
Terms of the deal were not disclosed.
The deal came after a lease dispute with Bishop Estate forced WKH Corp. to sell the hotel now known as the Kahala Mandarin Oriental Hawaii. In 1993, WKH sold the 6.5 acre resort to an investment group then headed by isle developer Bill Mills after an arbitration panel raised the resort's annual lease rent from $96,000 a year to $5.6 million a year. Bishop Estate had proposed an annual rent of $13.5 million while WKH offered to pay $1.3 million a year.