Hawaii: Find those hidden real estate gems But look closely at structure of condo hotel or hotel residence before signing on line Sep 27, 2008 04:30 AM Tracy Hanes Toronto Star Alex Gray didn't look to the Toronto waterfront, up-and-coming Liberty Village or glitzy Yorkville when was in the market for a condo recently. He looked to the white sand beaches and lush tropical landscape of Maui, where he purchased an 850-square-foot one-bedroom condo hotel residence at the Ritz-Carlton, Kapalua. The luxury resort is set on 20 hectares on the island's northwest shore overlooking a beach, amidst a 9,300-hectare working pineapple plantation. Gray, 30, owns and operates Warrior Spirit martial arts school and health club in Toronto. He is also a real estate investor through his company, Skylight Global Investments. The condo suites were part of a recent $160-million (all figures U.S.) renovation at the resort which added 107 full-ownership units, which started at $895,000 and sold for an average $1.9 million, with one penthouse selling for about $7 million. Owners of the suites have access to all the resort amenities, including two championship golf courses, a luxury spa, tri-level swimming pool, gourmet dining restaurants, as well as services such as housekeeping and room service. Gray's family was in the real estate business and he owns the building where his martial arts school is. But while the school is his passion and he continues to run it, he figured he could make more money in real estate. He took online courses at Trump University, founded by entrepreneur Donald Trump, to provide real estate and financial education to those who wish to become financially independent. Gray also networked extensively and attended real estate investing seminars. "Part of discovering hidden gems like Maui is networking and meeting the right people," he says. Gray says it's difficult for individual end-user buyers to get the best price; real estate investors negotiate better prices because they have established relationships with brokers and often buy in bulk, taking multiple units in a single project. In the case of the Kapalua Ritz-Carlton, Gray says half the units were sold to Japanese investors before any became available to North American buyers. Emily Peterson of Murphy O'Brien Public Relations in Toronto, which represents the Kapalua, says of the 97 units sold so far, about seven have been purchased by Canadians. A Vancouver-based company is handling sales and marketing for the project. Gray will hold onto his Maui condo until he hears of another great opportunity through his networks. Gray's niche market is condo hotels in vacation destinations where Baby Boomers like to purchase. However, he cautions buyers to look carefully at how a condo hotel or hotel residence is structured before signing on the dotted line. He says many condo hotels make it difficult for buyers to break even, despite putting their units in the rental pool. While such hotels take 50 per cent of the rental fee of a buyer's suite, Gray says because of various fees involved, it usually ends up more like 70/30 per cent with the larger share going to the hotel. And often, hotels will discount their room rates, which means even less money in suite owners' pockets. "If you have a mortgage, you are lucky to break even," he says. "It can be dangerous if you don't know what you are doing. Look at the structure, as one can be different than the other." He says what appealed to him about Hawaii is that it's a strong market where he believes his investment is going to hold its value and appreciate. As well, because his suite is a full ownership hotel residence, he is free to negotiate the rental fee and can rent it out for longer terms, such as one or two years. And the Ritz-Carlton name has a cachet with investors. The project sold 87 per cent of its units on opening day. Information: ritzcarlton.com.
