The former Country Club Condominium Hotel may become a hotel again under new management.
The 152-unit Banyan Drive building has gone through a series of management changes over the last several years while the state tries to figure out what to do with the property.
In 2019, a business called OceanFront 121 took over management, but last year the company informed the Department of Land and Natural Resources — which owns the land — that it was unable to continue managing the building. Following that, the Board of Land and Natural Resources voided OceanFront 121’s lease and granted a new month-to-month lease to another business, Banyan Drive Management LLC, while soliciting more permanent proposals from developers.
And on Friday, the BLNR approved a recommendation by an evaluation committee to grant a 65-year lease of the property to developer Savio SB Growth Venture LLC following a review of that company’s proposal.
“This isn’t the end of the process,” said Kevin Moore, assistant administrator for the DLNR’s Land Division at Friday’s meeting. “We still have to negotiate a development agreement lease with SGV and come back to the board with that agreement for approval.”
But, Moore went on, the evaluation committee deemed SGV’s proposal superior to Banyan Drive Management’s, which was the only other developer to submit a proposal in a timely manner.
Moore explained that SGV’s proposal includes a three-phase renovation of the property that will retain the building’s shell, but otherwise completely gut the structure. SGV president Peter Savio estimated that the full construction costs of the project would be $20-30 million.
The first phase will involve a two-year-long assessment of the building to determine the scope of the following phases. Phase two, which will also take two years, will replace the building’s plumbing, electrical lines and other equipment, and require all tenants to leave the building — Moore said fewer than 100 of the building’s units are occupied at present.
Savio said a displacement plan for the tenants may be included in the final development agreement lease.
Phase three will reopen the building with roughly 40% of the units used as long-term rentals, and the remainder as transient rentals for business travelers and tourists, although Moore said the results of the first phase assessment will determine the exact ratio.
However, SGV’s proposal states that the developer’s goal is to eventually transition the property to be 100% focused on transient accommodations.
Meanwhile, BDM’s proposal for the property would have invested roughly $20 million into the property’s renovation, and envisioned the building as 80% long-term rental units and 20% extended-stay hotel units.
However, the evaluation committee determined that SGV’s proposal had greater merit, on the grounds that the business has more experience renovating and operating hotels. Moore added that SGV managed the property under a previous lessee.
Savio said he is “very much aware of the challenge” of restoring such a old building, and added that he is open to managing it either as 100% transient accommodations or 100% as affordable housing, depending on market forces.
“I am an affordable housing developer,” Savio said. “I’m going to try affordable housing. I don’t think it’s going to work because the costs are going to be too great unless we get all kinds of government subsidies. But we’re going to do what’s best for Hilo.”
SGV’s proposal would have the developer paying the state $36,000 in rent annually for the first three years of the lease, with future rent payments fluctuating based on gross revenues, but generally exceeding $100,000 per year. However, Savio noted that proposal was drafted six months ago, and that interest rates have doubled in the intervening time, so the actual rent amount is undetermined.
The Board ultimately voted to approve the evaluation committee’s recommendation, though not unanimously: board member Aimee Barnes said that neither SGV nor BDM “felt great” as options, and that the project should be more focused on affordable housing.
“As we think on future items like this, (we should) integrate considerations beyond what’s the most profitable option in our decision-making process,” Barnes said.
Board member Karen Ono also voted against the recommendation, stating that SVG would be eligible for federal funding as the Country Club is located within an area dubbed the Hilo Opportunity Zone, but, she said, SVG did not mention those funding opportunities in its proposal.
Member Wesley Yoon also voted against it, but offered no rationale for his decision.
Ryan Lee, president of BDM, also opposed the decision, saying that he believes SVG did not meet the criteria of the DLNR’s request for proposals and arguing that Savio is “not a good fit” for the property.
Lee requested a contested case on the matter, but the board rejected that request, with BLNR chair Dawn Chang arguing that Lee and BDM don’t have standing to call for a contested case.
With the motion passing 4-3, Chang said the DLNR and SGV now need to negotiate a development agreement, which will ultimately be submitted to the BLNR for final approval in the future.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.
