The Surfrider Fondation released this to the press yesterday to keep their spirit of resistance alive. From my point of view the Superferry has benefits and significant risks. We have not heard much about the Environmental Impact Study that the Supreme Court mandated before the SuperFerry resumes service. The SuperFerry is operating successfully between Oahu and Maui and with rising airfares, business is growing and more people are traveling on the ferry. On Kauai, the groups opposed to the Superferry remain more vocal in the community and continue to champion their cause.

The press release info is listed below:

SURFRIDER FOUNDATION CELEBRATES ONE YEAR OF NO KAUA'I SUPERFERRY!

WHO: Surfrider Foundation, a national and international coastal environmental group,

WHAT: an informal family picnic get-together at Nawiliwili Park and Kalapaki Beach. Pot luck, bring your music instruments. Bring your surfboards and canoes for a symbolic paddle out at Kalapaki Beach to commemorate the one year anniversary of the Superferry's entrance to Nawiliwili. We will paddle just past the surf zone, but will not enter the harbor. All laws will be observed.

WHERE: Nawiliwili Park. Paddle-Out at Kalapaki Beach.

WHEN: This Sunday August 24. Informal get together starts at 1 PM. Paddle-out starts at 2 PM. Noon - 6 PM is an informal pot-luck gathering of residents.

WHY: One year ago, a thousand people met at the park to give a strong message that our island does not want the superferry. We will be having family picnics at the park to renew our energy and strength and prepare for any future attempts by the superferry to return.

CONTACT: Gordon LaBedz, Surfrider Foundation, Kaua'i chair 808-337-9977

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.

Today, TGI reported that Quintus is selling their timeshare business to Celebrity Resorts at the Hanalei Bay Resort. The luxury 22-acre resort which sits right on Hanalei Bay ( you know the place where PUFF the Magic dragon lived by the sea,  And frolicked in the autumn mist in a land called honah le) is a combination of timeshare and fee simple owners. Currently, the fee simple units range in price from 1B units for 700,000, all the way up to units for 1.5 million that have great Hanalei Bay views. The Bali Hai Restaurant and adjoining Happy Talk Lounge are rumored to be being sold to Jim Moffatt who owns and operates the successful Bar A Cuda, a tapas restaurant in downtown Hanalei.

The acquisition comes nine months after 40 resort and restaurant workers were laid off when cash shortages left Quintus unable to pay for front desk and bell services. Celebrity Resorts has developed and managed projects in the U.S. and Caribbean. It currently has 17 resorts in six states, conducts business in more than 30 states and provides vacation services for more than 80,000 families on an annual basis.

The Happy Talk Lounge is the home of the friendly Sunday Jazz Jam from 4-7PM where my friends and myself often play great jazz, funk and blues. While the lounge and restaurant are still in the transition, the JAM resumes this Sunday at Saffron, another fine Princeville Restaurant.

Overlooking the pool to Hanalei Bay and the view of the mountain peak known as BALI HAI, taken from the movie South Pacific

Magical waterfalls part of the tropical hanalei bay resort pool complex

Happy Talk Lounge sunday jam with regulars Randy Carnavali on bass, Kirby Keough on guitar, and Coco (can't spell his last name) on skins.

Last week my wife and I went down to the Kauai Lagoons golf course where the  Marriott and Ritz Carlton have been getting their extensive development project off of the ground. It was almost two years ago when the Honolulu Advertiser first reported about the sale of this project that includes:

     1. Multi-million dollar lots crafted out of what was formerly the Kauai Lagoons golf Course (27 holes of the Jack Nicklaus course will remain in tact).

     2. Grand Residence by Marriott condos - fully furnished and top-of-the-line units with elegant amenities beginning at around $1.7 Million

     3. Ritz Carlton luxury homes - 14 homes ranging from around 5 to 7 million in price. CLICK to view the floorplans of the luxury homes
    4. Ritz Carlton Club Timeshare - starting at around 200k for a three week interval period. The Ritz-Carlton Club is a fractional ownership real estate offering combining the benefits of second home ownership with personalized Ritz-Carlton services and amenities. Designed as a private club, Members have the opportunity to access their luxuriously-appointed home Club or other Ritz-Carlton Clubs through reciprocal use privileges in accordance with reservation procedures. Members also have the ability to utilize additional time as available.

The Grand Residence condos are divided in phases A, B, and C. Phase A is almost sold out and then come the next two phases. We took a little boat tour on the Kauai Lagoons, one of the delineating features of this entire 580 acre development, and drove out to view the condos from the lagoon itself. Building A is expected to have "Heads on Beds", as the sales reps liked to keep saying, by January of 2009.

4 Story Grand Residences, building A will be finished by year's end

Taken from the view tower just in front of Grand Residence condos, this is the view to the north east: white water, palm trees, and lots of blue ocean.

Realtor Ron and Gwen standing on the view tower at the Ritz Carlton-Marriott joint venture overlooking Kalapaki Bay.

According to James Barry, the sales manager, the individual lots - around 40-50 of them were all sold to one developer on the mainland. 12 of the 14 Ritz luxury townhomes have reservations on them, and most of phase A of the Grand residences are sold out. The developer is offering great incentives to agents for a sale before the end of the year, including, a week stay at any Ritz Carlton in the US. Refer us a buyer if you know someone who might like this luxury resort and I'll share some of the rewards.

View the Ritz Carlton Kauai residences online and let me know what you think

Paul Brewbaker has often been regarded as having a crystal ball when it comes to the future of real estate. So much so that when Paul stepped forward to address the quarterly meeting of the members of the Kauai Board of Realtors, he began by repeating the mantra of  “October 26, 2012”. Again, he repeated, “October 26, 2012”.

It’s true that he was simply kidding. But, in this phase of the real estate cycle, everyone likes to have a crystal ball or an answer as to when the Kauai real estate market will turn around. Economists of course can be wrong 99% of the time and yet,  we still respect them.

As is often the case once or twice a year, Paul Brewbaker thoroughly entertained the crowd of close to 150 Kauai realtors while sharing the pertinent data about Kauai’s economy and real estate markets as seen from an economist’s point of view. In his macro roundup, Brewbaker noted that domestic arrivals are down. He quipped that 4 months after the airlines shut down, the Honolulu Advertiser finally put the tourism  numbers in the paper. Brewbaker showed the graph of visitor arrivals and pointed out the big down turn in tourism that occurred with the break of the Koloko Dam on March 14, 2006. This current  downturn is even more significant in term's of range drop.  This is where it starts and then the repercussions radiate out through our tourism ecosystem. This  effects both the  numbers of visitors and all the adjunct businesses that serve the visitors to the island. Read yesterday's article in the Honolulu Advertiser about Maui’s tourists and yesterday’s article in the Garden Island business section regarding the numbers on Kauai.

The payroll employment trend may show up in a few months. It has not yet been reflected. Unemployment has been drifting upward. This will continue to go up until  the current cycle that we are in peaks. So much for the macro view.

Brewbaker always reminds us realtors to remember to think about real estate as an asset class, similar to stocks, commodities and the like.  Brewbaker provided an insightful context into how the real estate cycles get exaggerated in the islands. He noted that our supply is constrained by the geography. There’s a big ocean between us and a lot of the resources required for building, materials and such. The state and the county with their limited resources for permitting and the slow pace at which the bureaucratic system move, prevent the islands responding as elasticly when there is big demand such as what started back in 2000 and 2001. These dynamics create a rapid rise in valuation since the production levels don’t scale as quickly as they might on the mainland.

Brewbaker began reviewing the state numbers. He presented Oahu, which represents Hawaii’s urban market, then the neighbor islands, and usually has some charts comparing and contrasting to mainland areas, primarily California, whose markets are quite intertwined with ours here on Kauai. On Oahu, appreciation is basically done but nobody is really bailing.  Last August through this July, the fed has taken a lot extraordinary measures to maintain liquidity in the housing system. Brewbaker sees us as continuing to work out the credit crunch over the next year and a half. He quipped ”If you don’t have subprime toxicity, as a bank, you do not have to do every much.” He was referring to Bank of Hawaii, where Paul serves as the chief economist. Last quarter Merrill Lynch wrote down a number that is as large as the entire balance sheet of B of H. Ouch! Downward compression on pricing in Kauai is modest, moving from the high six hundreds to the low six hundreds. Brewbaker pointed out that Post Hurricane Iniki, values on Kauai were much lower than on Oahu, then, values gradually escalated so that Kauai’s pricing is basically on–par with Oahu. Right now, our volume is compressing and distribution is stationery.

L to R: Ian Emberson B of H, Paul Brewbaker B of H and Realtor Ron with the shiny head.

Economists describe economic cycles by defining the higher order moments which mark different phases of the cycle. Brewbaker described tranquility as that part of the cycle where business stops and then gradually starts to go again. From his perspective we are still in the stop phase of the tranquility part of the real estate cycle. Based on current data sets and not withstanding any particular catastrophic event, the go stage of tranquility is expected to begin in about two years, with prices beginning to rise a couple years later. One needs to note that since real estate is supply and demand, if a given offering or project has excessive demand and limited supply, prices can go up there sooner rather than later.

While contrasting our markets in Hawaii to say San Diego, where prices have dropped 25% in one year., Brewbaker noted that since 1975, Hawaii has traditionally ranked lower in past due mortgage payments. Delinquency rates on mortgages in the US is currently 3.24%. That number is 1.9% in Hawaii. In the opulent 2nd home/vacation home market of Kauai, we do not see a lot of sub-prime type borrowers and thus, do not have the type of volatility that one would find in markets like Florida, Arizona, Las Vegas.

Brewbaker mentioned towards the completion of his roughly one hour talk that right now production on Kauai is sustaining and that appears like a train wreck waiting to happen. Time will tell. We hear mixed reports about the larger newer projects. I have heard that Kukuiula, the large project on the South Side of the island will be starting to have layoffs and cutbacks. However, when I visited the Marriott/Ritz Carlton project at Kalapaki Bay, they seem to be going gangbusters in terms of sales and reservations.

To me, if we place stock in Hawaii’s most noted economist’s perspective, it continues to be a good market for buyers, and sellers that are “waiting for the market to turn” need to settle in for a good four or five years.  If you are a seller today, you need to price your property at its market value, independent of what you may feel it’s worth.

On Thursday morning I attended the monthly meeting of the Lihue Business Association. The guest speaker was Peter Arsenault. Peter is the National VP of AIA (American Institute of Architects) from Syracuse, NY. Peter has been interested  in environmental protection and sustainability for a long, long time.

It was just about a year ago that Pat Griffin from the LBA got together with other notables including former Honolulu mayor Jeremy Harris and Dr. Clark Llewellyn, the dean of UH school of Architecture, and this team began to write Lihue’s application for an SDAT – that is, a sustainable design assessment team. The SDAT program provides broad ASSESSMENTS to help frame future policies and sustainability solutions. SDATs bring a diverse team of experts to work with community decision-makers.PETER ARSENAULT AT THE LBA Meeting at Duke's Canoe Club Restaurant in Lihue

Lihue, Kauai was selected as one of ten cities in the United States to participate in this process. The district of Lihue runs from the north fork of the north bank of the Wailua River down to what is known as the “Tree Tunnels”, the entryway to the Poipu –Koloa area of the island. The SDAT process is an expansion of the R/UDAT (pronounced ROO Dat) for Regional Urban Design Assistance Program, which was started in 1967. SDAT began in 2005 and it is a progressive approach to creating sustainability in a region or area. Lihue was one of 10 cities selected for the SDAT process and by the end of the year there will have been 31 SDATs completed. I’m excited that a small town on Kauai, an island with rich natural resources like sun and wind, and with its diversity of populus, has been selected for this process. Kauai’s population was around 63,000 according to the latest census and is project to grow to  66,000 plus by 2012.

The three main principles applied to the SDAT process are:
     1.    Multidisciplinary approach – experts from multiple disciplines form a team to provide specific expertise in a given area. The AIA currently has enrolled over 100 expert volunteers who get involved in the SDAT process.
     2.    Community participation – this is probably the most important principle since the team is comprised of outsiders to our locale, but they get info by listening to community. As Erin Simmons, the Director for Communities by Design put it, the team members perform their best “sponge impersonations” to learn what people love, what are the areas weaknesses, what is the communities’ vision. This includes an “open mike night” where any community voice can have a forum
     3.    Objectivity – there are no preconceived answers/solutions. All the volunteers will return to Lihue after this initial visit by the team leaders. The expert volunteers receive no compensation and must sign an agreement not to take any paid work in their field of expertise for at least three years after the SDAT work. The volunteers will arrive with a blank slate and without any hidden agendas, and then reflect back what they hear while here on assignment.

The SDAT team’s use the UN definition of sustainability which is the ability of a community to “meet the needs of the present without compromising the ability of future generations to meet their own needs.” Arsenault talked about adopting a precept from  the Iroquois Nation who have a belief that they must make their decisions based on how those decisions will affect not only the current  generation, but also seven generations from now. That’s what I call LONG TERM.

The SDAT will focus the consulting task into three elements. Review the chart below to get an understanding of the elements. 

In November, actually right after Veteran’s Day, the team will bring 6 volunteers from around the country and work for three days to develop  a presentation that will present the basic scope of the areas the SDAT intends to address.

After the presentation, about twenty minutes was spent interacting with LBA members and guest and questions were answered. One person stated they were happy that the SDAT’s work involved Lihue, but how would that interact with the rest of Kauai.  Peter Arsenault responded by saying that any local community impacts its surrounding area. The SDAT process will look at a bigger picture and that will include the rest of the island too. The SDAT teams have already encountered dealing with the Latino community, Indians, and cultural groups that feel like they are invisible and silent. Hopefully the native Hawaiian community will be proactive in this process and represent their heritage and culture so that influence is integrated into the SDAT process.

Be looking for some exciting community-focused sustainability work when the SDAT group returns to Kauai for their meetings from November 12th to 14th. I'll be sure to let you know when the schedule of events is firmed up.

The Islander on the Beach is a 198 unit condominium/hotel AKA condotel located on the east shore of Kauai in Kapaa, just behind the eclectic Coconut Marketplace shopping center. Anekona Management bought the property in 2003 and did a total facelift of the property. The developers then sold the units in 2004 and 2005.

One investor purchased 10 of these units oceanfront and that investor is now selling the condotel units in fractions, or two-month segments for around 70,000 per two month segment. That is FEE SIMPLE ownership on Kauai, on the ocean, for two months for 70K. Since the units, hotel rooms basically, are in the Visitor Destination Area, an owner can choose to rent them him/her self when they are off island or put the unit in the Resortquest Hawaii pool. ResortQuest currently manages 90% of the units in the condo complex.

Fractional ownership is coming of age in the islands. Island Fractional Homes is a nice site by a developer who has taken the time and spent the money to help educate the buying public with regards to the benefits and the nature of fractional ownership.

If you need any materials about fractional ownership or have any questions, I would be more than delighted to answer them or get you answers that i might not know.

There's an interesting property for sale out in Haena that may provide a great investment opportunity for someone who values the North Shore of Kauai and doesn't mind a little bureaucratic challenge. This home in Haena is seven bedrooms and six and a half baths. It's currently 5 rentals. The main home rents for 3K a week and the other units for less. If a large group wants to rent the entire property , it rents for 5-7k a week.

The property is currently assessed at 2.482 Million. While the listing is at 1.7M, i believe you could buy it for less if you are patient enough to deal with the bank. The owners are upside down and are clearly walking from the property.

The challenge is the fact that the home is in the non VDA location and thusly, the owner must submit an application for a non conforming use certificate (NCUC) by September 15, 2008. Submitting the application requires proof of prior rental history, architects and engineers stamped plans, and filling out an application. Not too bad. However, we'll need to ascertain from the county of Kauai, what is legal and permitted and everything else, including several of the downstairs rentals, would need to be brought up to code, which probably means pulling out kitchens and plumbing which are not permitted. You need to know that maintaining a large home on the North Shore of Kauai close to the ocean is a big resposibility. The salt walter and winds provide wear and tear such that the home must be regularly maintained.

I'm not a contractor so I'm not sure what the cost of the demo work would be. Even if it is 100k ( and i do not believe it would be) the property still has solid value. PLUS, I've been speaking to the former property manager who has rented the property for 12 years. The manager loves and believes in the property and this property manager would be a great resourve for any buyer.

If you have any interest in pursuing this type of home, I'd be happy to guide you through the challenges of this unique property and the intricacies of a short sale on Kauai.

I am having my first experience of managing an escrow on an oceanfront condo complex on Kauai. I've just learned that a couple of owners are suing the homeowner's association for some water damage from a leak the owners feel is the association's fault. There was water damage and I am sure that those couple of owners are upset and want some remuneration.

The difficulty arises for any other owners that happen to be engaged in selling. When a condo association provides what we in Hawaii call the RR105C, the condo must disclose the nature of the complaints. Since the actual damage of the complaint/suit is unknown, lenders seem to be pretty unwilling to consider a loan on the project due to the unknown nature of the legal complaint/suit. In this case,  I am hopeful that the association's insurance company will resolve the issue. Short of that, we have asked for an opinion letter from the attorney representing the condo association.

The association wants us to pay for the opinion letter. Not sure how fair that is to my seller but that remains an option should the complaint not be resolved. It's quite eye-opening when a dynamic like this comes into play and an innocent seller is unfairly effected by the actions of some of his fellow owners. Have have you been able to deal with this issue when it's shown up?

Inquiring minds want to know.

I had the opportunity to sit open house at Kaiulani Unit 2 today. This project consists of 77 luxury townhomes built on the last 17 acre bluff parcel in PRinceville which was NOT OWNED by Princeville at Hanalei (formerly the Princeville Corporation).

The project is almost totally completed. Most of the units have sold and about 8 of the units are still being completed. The pool complex with 3 pools and barbecues and fountains and water features is complete. I am so impressed with the quality of the construction, the superior engineering and ergonomic designs, and the simple class of these units.

Today while sitting in Unit 2, a fully furnished 2800+ sq. ft unit which is selling for 2.195 Million, i had about eleven or twelve folks folks come through. That's brisk attendance for a weekday in Princeville. One family said they were looking under a million if possible so i brought them over to Unit 59, which is listed for 995K. This unit actually had very nice ocean views albeit a little smaller in size. Unit 59  is around 1900 sq. ft. It still has all the high end amenities which include solid granite slabs on all counters, and wolf range, sub-zero refrigerator, and  well, you get the idea.

If you are looking for a Princeville condo, you need to be aware of how Kai`ulani stacks up against the existing inventory, most of which was built in the 70's. And, Kai`ulani stacks up very well. The units that face this vast valley and white water ocean views are selling for 2.5 million. Not too bad when you consider all the Princeville bluff homes that were built in the prior decades are selling for over 3M.