Originally published in Honolulu Weekly, November 14-20, 2007

There’s a battle brewing behind the reflecting glass exterior of the luxury 47-story Ko'olani condominium in Kakaako.
On one side is the association representing hundreds of apartment owners who paid between $540,000 and $2.7 million for units in the building which promised luxury “second to none”.

Owners say problems began when the developer pressured them to move in before construction was finished, grossly underestimated operating expenses and maintenance fees, failed to adequately respond to a long list of complaints including possible construction defects such as leaking tubs, mismatched carpets and cracks in concrete slabs, and then reneged on promised amenities, including the exclusive world-class spa for resident’s use that had been a key element of the building’s design and, more importantly, the developer’s sales pitch.

On the other side is the developer, Sunset Heights Hawaii LLC, controlled by Florida-based Crescent Heights of American, which touts itself as the nation’s largest condominium developer. The company was a major donor to Gov. Linda Lingle’s 2006 reelection campaign, with company officers and their families contributing a total of at least $62,000.

While it isn’t unusual for new buildings to experience start-up problems when first opened, the situation at the Ko'olani is unusually contentious by any standards.

The increasingly bitter feud spilled into public view recently when the condo owners won a court order requiring the developers to enter into mediation and, if necessary, binding arbitration to settle the issues.

Ko'olani board president Jeffrey Samuels referred all questions about the building’s problems to association attorney Terry Revere, who declined to comment.

Messages left at the published number for Sunset Heights and regional manager Rafael Baez went unanswered, and company attorney Kenneth Okamoto was traveling out of state and unavailable for comment last week.

Several people familiar with the project said the initial sales were scheduled to close in June 2006, but buyers were suddenly told their deals had to be finalized several months earlier.
When they received their keys, many owners found their own units unfinished or surrounded by ongoing construction, according to several sources.

“It was very frustrating for almost everybody,” one owner told Honolulu Weekly. “Our unit wasn’t finished, so we couldn’t really move in. But I came and slept on an air mattress because we had to catch them and get them to fix this, and fix that.”

Although some owners tried to file complaints with the Department of Commerce and Consumer Affairs, they were told developers and their performance are not subject to state regulation.

The building was officially turned over to the new association of apartment owners on June 1, 2006, and they were surprised to learn the association was broke and and had no financial reserves because the developer had spent all of its funds, forcing an immediate increase of nearly 40 percent in monthly maintenance fees.

Owners believe maintenance fees were improperly used for construction-related costs and are now seeking about $300,000 in reimbursements. They point to a clause in the project’s documents specifying that the developer would pay all monthly operating expenses until construction was finished, which owners say was no sooner than June 1, 2006 and may have been considerably later.

One of the main points of contention has been the spa, a key amenity described in sales brochures and on the project’s web site as “a twenty-thousand-square-foot sanctuary where the outside world dematerializes in a Zen-inspired setting of natural stone, wood, and flowing water.” According to Ko'olani’s marketing, the spa would include soaking hot tubs, a “glacial plunge pool”, and steam pavilion, with certain spa services available for additional fees.

But owners soon learned the spa is not one of the building’s standard amenities because title was retained by the developers, who hope to make a profit leasing the facility to a commercial operator. When the spa finally opened this summer, apartment owners found their use limited to the exercise room, only about one-fifth of the spa, without the payment of additional membership fees.

In documents filed in court, Ko'olani owners list other alleged problems, including thickness of concrete slabs, possible design or construction flaws with the electrical system, wireless Internet, various pumps, dehumidifiers, kitchen stove fans, garage lighting, roof drains, rusting air conditioning pans, and leaking tubs, along misrepresentation of the building’s budget.

The developer, Sunset Heights Hawaii, “does not agree that there are any deficiencies in the common elements of the project,” according to a July 13, 2007 letter included in the court record.

In addition, attorneys for the developer deny that the parent company, Crescent Heights, had any role in the development of Ko'olani, instead insisting that everything was done by its local affiliate despite years of marketing materials and press releases identifying it as a Crescent Heights project, and key positions all filled by Crescent Heights employees.

Owners fear the legal acrobatics have no purpose except to limit the company’s potential liability, and in correspondence made part of the court record the association’s attorney called it “tantamount to an admission that it (Crescent Heights) was engaging in a fraud by repeatedly holding itself out as the developer.”

-Ian Lind (www.iLind.net)