To improve our financial health and upgrade Waikiki Shore we must carefully execute a well-considered plan for the ground floor retail space. Historically, the retail rental income pays for almost half of our annual operating budget. If retail rents continue to decline, as they have been, we must make up the difference in increased HOA fees or lay off staff. It's that simple. If we do not dramatically improve the retail space, along with the quality of the tenants and the rent they pay, we will be stuck with declining rental income that does not meet our future expenses as they rise. More hot dog and T-shirt shops stacked from the beach to the lobby will not provide the income we need nor position Waikiki Shore as the prime and unique property that it is.

Unfortunately, the ground floor retail renovation was not thoroughly studied from the start and it was not based on a professional business plan. The architectural plan was presented to owners as a concept drawing in 2012 along with a rough estimate of $1.5 million dollars and a cautionary statement that there was no guarantee of higher rent income.
 
No large capital investment should begin without a solid written plan that includes a creative vision, expected tenants and projected rents, and a payback calculation that compares the growth in expected income with the investment needed.  Every Waikiki Shore owner should have had the opportunity to see, question, and “stress test” the business plan in the concept stage before a final plan was voted up or down.
 
We all know what has happened over the last four years -- virtually nothing -- and we were reminded of the stalled project every time we walked through the lobby. For years, the ground floor improvements were nothing more than a tattered paper drawing taped to the lobby wall and unsightly raw 2x4s and unfinished drywall leading into our AOAO office. Not a great first impression for our guests and an obvious eyesore for owners.
 
Delays were blamed on Hawaiian Electric employees who allegedly required bribes in order to proceed with the electrical upgrade. This was an accusation that HECO vehemently denied. When pressed, our AOAO admitted in writing that “there were no requests of bribes from any HECO or City/County employees.” From 2013 on, one electrical contractor after another was hired to do the electrical work and then let go. $300,000 of our maintenance and operating funds were spent on electric upgrades that to date have provided little, if any, return on our investment.
 
We all know time is money. We wasted almost four years without seeking competitive bids or developing an enforceable construction schedule which would have been part of the general contractor’s agreement. In the meantime, the $300,000 is spent, and the space languishes in disrepair. As retail rents decline, so has our operating cash.
 
Faced with criticisms and a contested election, our management recently jump-started work without the general contractor by sending unlicensed AOAO employees to work on mailbox relocation, moving door and walls, and electrical fixtures. The Honolulu Building inspector issued a verbal Stop Work order in late February to prevent work under the original building permit without a licensed general contractor on the job. And now that the space between the lobby and the retail area has been opened to through traffic for beach pedestrians, owners are faced with new security questions between the lobby, elevators and retail areas.

Without a guaranteed construction schedule and with tenants inevitably disrupted during construction, our retail income is likely to be impacted further, at least in the short term.  What is the plan for replacing lost retail income now that our reserves and operating funds have been largely depleted? And how will we repay the $1.5 million line of credit once it is used? Owners should remember the January 10, 2007 letter that we received from our current Board president which gave two reasons for imposing upon owners a surprise special assessment of $2.6 million that “must” be paid within 60 days. Reason one was that interest rates were expected to increase and reason two was that the operating budget could not keep up with the increases in “utilities, insurance and various maintenance categories”. We were told that without a special assessment our HOA fees would rise 43%. The Board simply mandated a huge special assessment requiring an immediate payment and then our Board president concluded his letter by stating that “they have not increased the maintenance fees…in 15 years”. Rising interest rates, keeping up with ever increasing costs – does this sound familiar?  What is our board’s plan to avoid a repeat of 2007?

Remember, we owners are 100% financially liable for any delays, mistakes in cost estimates, execution of the project and retail vacancies. Our management's panicked February start of this project with unlicensed AOAO employees, after almost 4 years of delay, seems like an ill-considered knee jerk reaction to the critical proxy materials sent out in January. Is this how we want to run a $1.5 million commercial construction project? Pushing ahead without the protections of a licensed general contractor actively supervising the job, without the contractor’s insurance, indemnity protection, safety precautions, without a contractual construction schedule and without a guaranteed maximum price is a bad omen of things to come. Waikiki Shore is indeed at a critical crossroads, and we are all on the hook for any debt and operating income shortfall.
 
The elevator debacle is another good example of a much needed improvement that has not worked out well due to a poorly conceived and executed plan. The AOAO spent over $400,000 of our money without getting competitive bids in writing. And we didn't even get new elevators or new elevator warranties. We are just learning that critical components and recommendations were not followed. Now we have partially refurbished elevators that seem to be failing as much as the old ones did, expensive service calls, and angry guests leaving poor reviews on Trip Advisor. Upon investigation, the Open Forum recently discovered that our service contract with ThyssenKrupp only covers about 27% of the hours in a 24/7 week; service calls during the other 73% of hours are either subjected to premium costs or are simply deferred. We all know the consequences of both elevators being out of service. Recently, elderly and disabled guests were forced to climb as high as 15 stories. This is just wrong.
 
To make matters worse, our management decided to take on the task of decorating the elevator cars themselves with camouflage-style Corian, excessive mirrors, and blinding flourescent lights. The results might be appropriate on a military base or in a hospital, but they certainly don’t enhance the ambiance of a prime vacation resort.  We need professional help from an elevator expert with recommendations as to what went wrong and what needs to be done to make our elevators work reliably. What we don't need are more defensive notices from our management blaming the outages on a storm of biblical proportions, especially when the rest of the elevators in Waikiki functioned normally.
 
On another front, the new owners of Outrigger recently approved a $90 million development plan that will bring a new in-fill tower that will block views for many of our apartments. There has been no response to the Board's written requests for meetings to discuss the project. This is unacceptable. Why haven't we taken steps to make sure that our voice is heard? We may not be able to stop the project, but we can win important concessions and noise protection by showing Outrigger that we are serious about enforcing our rights.
 
Without new leadership on March 25th, we cannot have confidence that these and other serious issues facing Waikiki Shore will be effectively addressed. While our hearts tell us to thank and appreciate our management for all that they have done for Waikiki Shore (and I too had given my proxy to Rich Elliott up through the 2016 annual meeting), our heads tell us that, as with most things in life, Waikiki Shore is due for a change by electing new and independent board members.

My offer to join with Bob Warren, Carol Laechelt, and all the other concerned Open Forum sponsors was borne out of deep concern over the myriad of issues facing Waikiki Shore. These neighbors and colleagues are not motivated by power, but by their love of Waikiki Shore and a desire to pitch in collaboratively to get the job done and done well. We have not seen a team effort like this at Waikiki Shore for decades. None of us should take it for granted that this team will be reassembled at any time again in the near future. We are here now, offering to serve at this critical juncture, and it is up to all of us to listen to our heads and take the opportunity that has been presented to us.
 
Waikiki Shore is indeed at an important crossroads. Despite our history, one person, no matter how hard working, cannot have all the knowledge and skills to do everything that needs to be done without help from other board members and consultants. We will get the best results from a team of professionals who are open to consult with owners, experts, and each other. As new board nominees, we cannot help to bring about these positive changes unless each and every owner stands up and exercises their right to determine the future of Waikiki Shore. This is not the time to cower in the shadows fearing retaliation or to secretly hope we succeed without your proxy. Change does not come from abstaining. There comes a time when each of us needs to stand up for what we know is right. That time, for the good of Waikiki Shore and all of us, is now. If you haven't already done so, please click on the link below for a new proxy form and join us as we begin a new future at Waikiki Shore on March 25th.

WAIKIKI SHORE OWNERS ASSOCIATION PROXY INFORMATION
Waikiki Shore AOAO Annual Meeting – March 25, 2017

If you haven't already done so, please review the following section, "Meet the Board of Director Nominees" and complete the attached proxy. Send it to us at WSOA Proxy Return, PO Box 8485, Honolulu, HI 96830 or as an attachment by email at WSOA.hawaii@gmail.com.  Standing together we can positively influence the changes needed at Waikiki Shore.
 
Mahalo