Kalia Properties on Ena Road (Honolulu: real estate, apartments, leases)

[WannaGo2]

Aloha. We've been perusing the real estate web sites for condos on Oahu. We've noticed an alarming number of listings for the Kalia property on Ena Road. We are aware that this is a leasehold property and have even asked the property manager why so many units are on the market, with no answer given. Does anyone know the story behind this exodus? Thanks!

[Jonah K]

Originally Posted by WannaGo2

Aloha. We've been perusing the real estate web sites for condos on Oahu. We've noticed an alarming number of listings for the Kalia property on Ena Road. We are aware that this is a leasehold property and have even asked the property manager why so many units are on the market, with no answer given. Does anyone know the story behind this exodus? Thanks!

I briefly scanned some of the Kalia listings and most of unit are "owner occupant only," which probably means that you can't rent them out. In addition, the building was constructed in 1958. I wouldn't be surprised if the original lease is a 50-year one that's up for renegotiation in 2008.

[WannaGo2]

Thanks for the response Jonah. Since all of the listings are only for owner-occupied, but what is going to happen to the current owner's investments in their condos if the leases are not made available for purchase or they can't sell? Do they just get dumped out and lose their investments?

[Judy Barrett]

Originally Posted by WannaGo2

... what is going to happen to the current owner's investments in their condos if the leases are not made available for purchase or they can't sell? Do they just get dumped out and lose their investments?

That's entirely possible. The building is a leasehold coop. The lease expires in 2018. The Association of Apartment Owners is attempting to negotiate either a fee purchase or a lease extension, but neither is guaranteed. The land owner could, in fact, boot all the current owners out. They could then demolish the building and build something else, rehab the units and resell them for higher prices, or let the building sit vacant....anything they want to do with it.

Additionally, anyone who DOES want to buy one of the available units will likely have to either come up with the full price in cash or find a seller willing to finance. Lenders typically will not lend for a term longer than the remaining lease period minus 5 years (or more). It's not that easy finding a mortgage lender for a coop, but WAY more difficult to find anyone willing to lend on property with only 10-years left on the lease.

[Donald Carrico]

As former owners at The Kalia (2000-2006) we witnessed the events unfold which have lead to the current mass selloff. Back in 2000, most owners thought the land owners would sell the fee within a few years per the City & County of Honolulu ordinance which forced such action when a majority of units in a building were owner-occupied and most such owners sought to purchase the fee. Unfortunately, in the midst of a heated election campaign, the ordinace was repealed (for political gain) and the leasehold apartment owners were left without a means to force a sale. At that point, we saw the handwriting on the wall and made preparations to dispose of our investment expeditiously. Most apartment owners seemed convinced that the fee renegotiations set for June, 2008, would yield either a lease extension beyond 2018 or an agreement to purchase the fee. From what we understand, neither outcome occurred. The landowner apparently stuck to his long standing position of having no interest in selling the fee. Now that reality has sunk in, it appears the current owners are in a bit of a panic to sell-off quickly. One issue that has made resales more difficult is the current homeowners' association position that all resales must now be to persons intending to occupy the apartments and not rent them out. This has narrowed the market for buyers, as noted in previous posts regarding the ten year window for ownership before the landowner might take back the land plus all improvements. We "bought low" and "sold high" before the real estate bubble burst, but current owners probably won't be as fortunate.