2018 Spring WS News
Spring Issue 2018

  Aloha, Waikiki Shore owners. The events surrounding this year’s Annual Meeting were like no other in recent memory. The question of what is the best path forward to develop the first-floor retail space took center stage. Besides the Annual Meeting, several additional meetings were held to bring owners up to date on our various first-floor options.

On Thursday, the MacNaughton Group made an updated and revised presentation to Waikiki Shore owners followed by a question and answer session.  Then, immediately after Saturday’s Annual Meeting, an Owners’ Forum was convened, presided over by vice president Jon Gilbert, who chaired the First Floor Renovation committee. Jon discussed the various pros and cons of the first-floor retail options accompanied by power point slides. His presentation was followed by a thorough owner discussion about the financial implications and other considerations of each option. The Owners’ Forum was also videotaped so that those not present will be able to see Jon’s presentation along with owners’ comments and questions. The Owners’ Forum videotape link along with the power point slides follows Jon’s article entitled First Floor Renovations Update.

Soon, the owners will be polled about which renovation option they prefer. It is extremely important that you answer this poll, because we are depending upon your views to help the Board decide how we should proceed with the next steps in this process. To assist you in this decision-making process, CBRE was asked to perform another financial analysis that compared the advantages and disadvantages of the first-floor retail options as presented by Jon Gilbert at the Owners’ Forum and this most recent analysis may be found in the link following his article entitled First Floor Renovations Update.
 
Finally, at the Annual Meeting, Richard Elliott decided to resign from the Waikiki Shore Board of Directors after almost a quarter century of service. Several Board members took this opportunity to publicly thank Mr. Elliott for his service, his commitment to our building, and especially for his foresight to purchase the building’s leasehold and the first and second floors.  As was noted, without Rich’s leadership, the current first floor retail space opportunities would simply not exist. At the meeting, Mark Shorter was elected to fill the vacancy created by Rich’s resignation with a term ending next year in 2019 and Terry Block was elected to fill a three-year term ending in 2021.

Bob Warren, Unit PH-1 – AOAO Board President   

First Floor Renovations Update

Jon Gilbert, Unit 1302 - AOAO Board Vice-President

Authored the following three articles 


The last few weeks leading up to our AOAO annual meeting have been very productive in terms of clarifying 3 remaining options for First Floor Renovations. Option 2, implementing the 2014 Ushijima Plan to relocate existing tenants to a remodeled area between the elevators, has been eliminated from further consideration as it results in a reduction of rentable square footage and rental income. Owners will be polled by email on the following options within the next 2 to 3 weeks. For owners who don’t use email, we will do our best to contact you by phone or by mail.


Option 1: (Status Quo) This model defers renovations to an undetermined later date, and continues efforts of the Board to maximize income. Increased operating budget funds would be needed to maintain the current condition of the commercial areas. Any driveway, lobby or other improvements would need to be separately approved and funded.


Option 3: (Self Financed, Self Operated) This model was further refined through owner and Board input to a hybrid approach in which the estimated $6 million cost would be raised 50% through financing and 50% through a series of 3 special assessments beginning in 2018. This model would maximize potential rental income without a partner, but would carry the risks of delays, cost overruns, occupancy and economic downturns, which would be borne by owners in addition to the sizable assessments required. Any driveway, lobby or other improvements would need to be separately approved and funded.

 

Option 4: (Master Lease to The MacNaughton Group)  The MacNaughton Group significantly improved their financial offer as outlined in my April 17 notice to owners, committing to spend at least $8 million in renovations to the commercial areas, lobby, driveway, and the Kalia Road entrance, in exchange for a 30 year master lease that guarantees Waikiki Shore over 85% of current commercial area rents to start, including the construction period, with 5 year periodic increases averaging 13% and potential profit sharing after year 15. Waikiki Shore owners will retain full flexibility, control, and rent income from front desk operations.


Click here to download Power Point presentation.
The MacNaughton Group Hosts "Waikiki Shore: A Proposal For The Future”

After several rounds of negotiation with The MacNaughton Group resulting in a proposal deemed worthy of owner consideration, CEO Ian MacNaughton and his team were invited by the Board to host a presentation to owners which was held on April 19 at The Halekulani Garden Terrace Room. It was an overflow crowd with over 50 owners in attendance. Ian recounted the three generation history of his family-owned development company, and showed slides of their many Hawaii-based retail and hospitality projects, ranging from Kapolei Commons, The Hokua luxury condominium project, and culminating in their recent development of Park Lane at Ala Moana, a project of over 200 private residences at the corner of Ala Moana and Piikoi Street. Ian and his team reviewed their vision for the reimagined entrance, lobby and retail spaces at Waikiki Shore as described in the Business Plan. The proposed ocean front restaurant would be self-operated by ex-Halekulani chef Vikram Garg, and would have a “smart casual” ambiance, and not be a dressy “white tablecloth” restaurant. By limiting hours and not allowing loud music, the restaurant would establish a casual upscale environment intended to improve the visitor profile in our commercial areas. Other shops might include a convenience store, a wedding boutique, and a re-imagined and upgraded beach services offering.

For the most part, owners reacted positively to the reputation for excellence earned by The MacNaughton Group. Much of the discussion following the presentation involved important design issues pointed out by owners, such as relocating bathrooms from our Diamond Head walkway to the Ewa side shop area, concerns about the restaurant encroaching too far into our Diamond Head walkway, and ensuring that our beach shower and surfboard rack would remain. Ian MacNaughton explained that the initial drawings were conceptual, and expressed a willingness to make adjustments to suit owners. Thereafter, President Warren and I followed up with a meeting at The MacNaughton Group office to emphasize these owner concerns, and new Board member Mark Shorter and I held a meeting on site with several concerned owners. The MacNaughton Group brought their design team back to the site on May 7 to see how owner concerns could be addressed.

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