When i first moved to Kauai in Feb. 2004, I became a realtor after 20+ years of successfully selling technology and media in California. One of the first new developments I saw after I got my real estate license that summer was the Waipouli Beach Resort. A couple of folks setup a big tent on an empty lot adjacent to the ocean and started promoting and selling this complex of 190 units. As a Kauai newbee, it was hard to get my head around the notion that where this vacant lot and tent were standing, there would one day be a big condo complex. One day our local paper, The Garden Island published an article about how the Waipouli Beach Resort (WBR) would have some affordable housing. The fine print noted that a couple of units were available for the low 400s. That was "affordable" amidst the current market run up. Shortly thereafter the same paper ran an article about how expensive the units were going to be.
Well, the project is beautiful and built to perfection. Merbau crown molding and doors, travertine floors and counters with onyx backsplashes. Hurricane Category 4 doors on the lanai so the units are superbly quiet when the doors are shut, and the finest amenities in the kitchen like Wolf ranges and Sub-Zero fridges. Not your average condo eh? I always did feel that the prices were a bit over the top. BUT, in the market run up of the pricing of Kauai Real Estate investors were willing to speculate and that's what they did? Track forward three years and the project is complete. The WBR opened in January 2007 and is managed by Outrigger who manages a lot of the units for the owners there. But my, how times have changed.
Without the fervent runup in prices, investors have no interest in this type of project. There are almost 50 of the units for resale PLUS word on the street is that the developers are still holding around 20 units. Now this week come two articles in the newspapers, one in the Honolulu Star Bulletin and one yesterday in our Garden Island with possible charges against the developer for misdirecting AOAO fees, that's the acronym for the homeowner's association.
According to one of the articles, "An audit by a forensic accountant turned up more than $2.2 million in "questionable" charges to condo owners, former and current members of the condo board said recently." You can read about the storied tale in the Honolulu Star Bulletin.
I always had this notion that the developers were sort of holding the market hostage. In today's Kauai market, buyers want to make financial sense out of their condo investments. I'm not talking about positive cash flow or anything. That is only possible if you bought 6 or more years ago. However when an owner at the Waipouli Beach Resort purchased a condo for 1.25 million and put 20% down, they would have to debt service a $1 million loan, pay 1500 a MONTH maintenance fees, plus electricity which on Kauai is currently a whopping .49 cents a kw hour. In order for that investment to make any sense, the hotel room condos would need to rent for $700-800 a month. The market won't bear that. That type of buyer is probably losing about $5,000 a month and with tourism numbers down from higher travel and oil prices, that loss is sure to increase. The high maintenance fees which were recently lowered a bit,have always been a bone of contention with the owners. Now it appears there may be foul play. I hope the situation gets resolved because the resort is beautiful with its natural salt water pool, but the pricing from the beginning appeared artificially inflated by developers who were riding the bubble for all it was worth.
Ron Margolis, RA, CDPE, ABR Hawaii Life Real Estate Services 808.346.7095 email: firstname.lastname@example.org