City requirements deter potential buyer of Makaha hotel

MAKAHA -- A local developer who wanted to breathe new life into the former Sheraton Makaha hotel, which is closed, backed away from a plan to buy the Oahu property from ANA Hotels Hawaii.

Ko Olina Partners president Jeffrey Stone said his company decided not to buy the hotel and the Makaha Golf Club after learning about $6 million in improvements that the owner of the property would be required by the city to make to the surrounding area.

The Sheraton Makaha has been closed for the last five years. ANA Hotels, a subsidiary of All Nippon Airways of Japan, has kept the golf course open during this time.

ANA Hotels Hawaii vice president Millie Takesue said the hotel and golf course are still for sale and the company is talking to other interested parties.

The hotel and golf course are worth $10 million to $12 million, according to local sources familiar with the property.

Stone said he backed away from buying the property because of improvements required by the city attached to its sale.

"There are some promises to the community that ANA made that still need to be worked out," said Stone. "We think it's [ANA's] obligation to work out the promises."

A 1991 agreement between ANA and Honolulu required the owners of the property to widen and repave local roads, add street lights and traffic signals and build 45 units of affordable housing before making additions to the property.

At that time, ANA wanted to add 360 new rooms to the resort's original 200 as well as add a conference facility, condominiums, a health spa, tennis courts and retail space.

But ANA never went through with its enhancement of the property and never made the improvements to the local area.

Stone said those improvement requirements would most likely be his responsibility if he bought the property and would cost too much.

"They're willing to sell it, but I think they are going to talk to other people," said Stone.

In the meantime, a Honolulu city councilman introduced a measure to change the zoning of the property from resort to residential.

If this goes through, any new owner of the property would have to get the zoning changed back to resort, and local improvements would likely be a condition of getting the zoning change.

Stone previously said that if his company did buy the Makaha property, "there is no question that Marriott would be the manager for the golf course, and we would talk to them about managing the hotel, too."

Stone brought in Marriott to manage the nearby Ihilani hotel at the Ko Olina resort, which his company bought in October.

In that transaction, Ko Olina Partners and Mass Mutual insurance company bought the 387-room Ihilani Resort & Spa from Japan Airlines Hotels.

Since both the Ko Olina and the Makaha property are on the same side of Oahu, Stone had plans to have both resorts complement each other's guest amenities, such as golf.

Local hotel broker and consultant Ron Gilligan of R.F. Gilligan Realty in Honolulu said the 200-room hotel at Makaha is in relatively good shape after sitting for five years. "You could salvage 150 units of the 200," said Gilligan.

The real asset, though, is golf, Gilligan added.

A second hurdle for any company looking to buy the Makaha property will be the perception that the area is dangerous, said Stone.

The Waianae Coast, where the property is located, differs from the rest of Oahu in two ways: Its appearance more resembles the Baja Peninsula in Mexico than the typical tropical image many people have of Hawaii, and it is somewhat more economically depressed than the rest of the island.

Visitors coming from the airport to the town of Makaha on the Waianae Coast must drive a 20-mile stretch through an economically depressed area where tourists sometimes get a chilly reception from residents.

"The first stage will be to clean up the impression that the west side of the island is unsafe," Stone said when his company first began negotiating the purchase of the Makaha property.

"It's not unsafe. Yes, that coast has some depressed areas, but it's no different than any other place. The important part is you really have to have community support."

Stone said the Waianae Coast might have suffered some image damage from robberies that took place on golf courses in the area.

And he said staff at hotels in Waikiki, about an hour-and-15-minute drive from the Makaha property, are said to show visitors a map of the island, point out the beginning of the Waianae Coast and discourage guests from visiting the area.

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