Tuesday’s auction on the Courthouse lanai
Aunty was again at the Courthouse steps (actually it is the lanai fronting the courthouse) to try her hand at bidding for an Ala Moana Hotel room unit this Tuesday at noon. The foreclosure notice was found in the classified section of the Honolulu Star-Advertiser – the bank was due $215,458 with arrears, late charges, etc.
Aunty went to its Sunday open house about a month ago, met Jenny the commissioner in charge there, and decided to attend the auction.
Fortunately, Aunty’s credit union is just across the street from the Courthouse, so it was easy to stop there earlier in the day to withdraw a cashier’s check for 10% of the max of what Aunty might be bidding. (All that is required of the winning bidder on the day of auction is 10% of the bid. The rest of the bid is due after the closing.) Proof of funds must be verified by the commissioner, so Jenny took Aunty’s name, phone number, and noted the proof of funds on her worksheet at noonish of the auction day.
After all prospective bidders were signed in on her worksheet, Jenny read off the conditions of the property being auctioned, as well as general rules and procedures. Then, without much ado, the auction began.
Whenever banks or associations are involved in foreclosures, they try to recover what is owed, and so they bid the total sum due, and then they own the property. To Aunty, this seems like a matter of them moving the asset from one pocket of what they are owed to the other pocket of keeping the asset for themselves. Like paying yourself off on behalf of yourself.
So the opening bid was by the bank – for $150,000. Hmmm! That was interesting, and also left some room for us regular people to bid. Aunty dove in at $155,000, hoping no one else would bid. Sadly, someone did, at $156,000. A fair price for the unit would have been $160,000, but Aunty looked at the woman bidding, kinda liked her, and so the auction went going, going, gone to the lady for a very nice price for a rather good unit.
Hawaii’s judicial foreclosures require a confirmation hearing before a judge so this was not the end of this auction. At the confirmation hearing, bidding can begin anew if anyone decides to start a new bid at 5% over $156,000. Hmmm. Aunty just might go to that confirmation hearing just to watch and learn more about the process.
Meanwhile, how is the cash flow from the Ala Moana Hotel?
Aunty had posted about “Buying a piece of the Ala Moana Hotel” back in April of this year, and this is an update of how it has been doing. It has been doing pretty well!
Some months like April and May are rather sparse, and months like February and August are very good. Property taxes are paid semi annually, working out to be about $200/month. So, on average, after the AOAO of $800/month, property taxes, and the hotel management fees of 60% are taken from room rentals, Aunty averages about $800/month, net. ROI (return on investment) is 6%. Not that great, but not too shabby, especially when compared with the piddly rate of return on savings accounts.
Changes in the works
In July, the hotel ownership changed from the Outrigger Hotel chain to an Australian firm, Mantra Group. This may be good for us – though not sure how much they will shake up the existing structure of management and employees currently still in existence at the hotel, or if hotel rates will change, or what new ideas and policies will be implemented. The Mantra Group does seem to want to woo owners with making us feel special, offering 50% off parking services while staying there as well as discounts to other hotel chains under their umbrella.
One very evident improvement is an art gallery/store next to Starbucks in the lobby. For years that glassed store space was covered up and vacant, and now it looks beautiful with quality merchandise reflecting the diversity of things Hawaiian.
More?
If Aunty could, she would buy more units. The 07 and 26 one bedroom end units have a mini kitchen complete with a cute dishwasher, but are priced over double of the studio units and have a higher AOAO. These would be perfect for people who want to stay in Hawaii for a couple of months, and then rent out their units when they are gone.
The studio units in the Kona Tower are the least expensive, with poor views on the mountain side, and these views will get worse during the next year because of construction for the 45 storied Kapiolani Residences that is soon breaking ground.
Units in the Waikiki Tower are more expensive and quieter.
No matter which unit, the amenities for all are the same, and the advantage of being right next to the Ala Moana Center is wonderful and convenient. Target (Aunty’s favorite!) will be a new neighbor in the old Nordstrom wing. With all the new condominiums coming up in Kakaako, this hotel will be less congested and more desirable than there, or Waikiki.
It would be great to have more units in this hotel, so Aunty will keep on watching and jump in again if possible because it is reasonably priced cash flowing real estate in a great location.
Please let Aunty know if you get a unit in the Ala Moana Hotel, and we can meet at their annual owner meeting!
Jan 2017 update: Aunty tried to win at another auction last month. The bank representative started off the bid just below Aunty’s planned target price, so Aunty bid above him, and THEN! da buggah shot Aunty down with a bid $20,000 higher than Aunty – what a rotten buggah to tease with the low opening bid.
Also, cash flow from the “cheaper” units in the Kona tower is dropping. Perhaps the new owners of the hotel operations (Mantra Group) are offering cheaper booking rates to contract guests. It is affecting the monthly cash flow for these units, in a junk way.
Towards the end of 2016, fewer and fewer units in the hotel were available to buy because the offerings were being snapped up like hotcakes. However, this trend of lower rental income might have current owners dumping their units on the market. The Ala Moana Hotel Board meeting is scheduled in February. It will be interesting to see and hear from the new owners, and Aunty will definitely be there.
I’m so bad at finances that this was difficult for me too. It sounds like a really good deal though.
I was trying really hard to understand, but got lost around 1/3 way in.
Sorry for the confusing post. Not enough information in the introduction and I rushed posting it. I did a few edits to it just now.
This is about a foreclosure auction for a rental unit at the Ala Moana Hotel. These auctions are held for various properties when the bank (usually it is a bank) is not paid the mortgage for months or years, and they file against the property owner so they can get their money back by having a sale of the property in a judicial foreclosure auction. Hawaii’s auctions are very very low key – people milling around until the commissioner in charge of the auction arrives and starts the bidding.
The bank took a long long time on this one – over 7 years! – before they brought it to this point. The owner wasn’t paying his $195,000 mortgage balance from October 2009, and the interest, fees, late charges kept adding up so the total due to the bank from the former owner was $215,458.42. These units are not worth that much – probably between $150,000 to $175,000, so why should the former owner pay on a lose money deal. His situation would be called being “underwater” – when what is owed to the bank is more than the property value is worth. His interest was 6.5% per year which was over $1000/month, so he would also be having negative cash flow (when you are paying out more than you are receiving as income).
Hope that clears it up a bit better. I appreciate your input. I think I talk a different jargon and I need to know when my words don’t make sense. Mahalo!