Hawaii Local's Inside Play

A Hawaiian condominium converter by the name of Peter Savio recently purchased Honolulu's fading Pagoda Hotel for a mere $7 million. The price that he paid for the 359-room hotel is deceiving. The Pagoda, like hundreds of other buildings in Hawaii, sits on land leased from a trust established more than a century ago by a descendant of the ruler who united the major Hawaiian islands (Sadovi). When the property was put on the market its value was greatly reduced because the hotel's lease had less than 10 years to run.

The Pagoda was developed in the 1960s by Herbert T. Hayashi, a Hawaiian developer who died in 2005 (Sadovi). He created the property after seeing a need for an affordable hotel for locals. It is located in a residential neighborhood several blocks from the beach. This helped keep the rates lower than many beachfront hotels aimed at tourists from outside Hawaii. The daily room rates are in the $80 range. A spokeswoman for Mr. Hayashi's HTH Corp. declined to comment about why the property was sold, but some analysts said the company may have begun reassessing its portfolio in the wake of Mr. Hayashi's death (Sadovi).

The purchase of this Pagoda also comes in at a good time as the Hawaiian hotel market is recovering from the financial crisis. This year through September, hotel occupancies in Hawaii have risen to about 71.2%, from about 65.2% in the year-earlier period, according to Smith Travel (Sadovi). The Pagoda, in its prime, might have had a price in the $16 million range before the downturn. Mr. Savio plans to spend about $6 million in the next few years updating the hotel, starting with its restaurant kitchens.

This was a great buy for the 63-year-old Mr. Savio is a Hawaiian who closed his first real-estate deal at the age of 15. The low room rate should spark travelers from all over the United States with less money to visit Hawaii and stay in this hotel. Mr. Savio is also considering renting out some free rooms to college students which will make college more affordable for them.

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