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Japanese tycoon has a low-cost vision of posh Oahu

He wants to rent to the poor. Critics say he aims to drive down prices.

October 29, 2006|Sam Howe Verhovek | Times Staff Writer

HONOLULU — It's not cheap to live on Honolulu's Kahala Avenue. At least, it's not supposed to be.

A "tear-down," as one broker cheerfully described it, is on the market for $2.1 million on the palm-lined, oceanfront thoroughfare just east of Diamond Head. A vacant three-lot plot on the beach sold this month for $34 million, a record price for a piece of residentially zoned land here.

So how about living in a five-bedroom beach house for $150 a month?

Japanese billionaire Gensiro Kawamoto raised plenty of eyebrows -- and hackles -- when he recently announced vague plans to rent several of his 18 posh Kahala properties to low-income "native Hawaiians" only.

"I'd like to honor what native Hawaiians say, that this used to be their land," Kawamoto explained to the Honolulu Star-Bulletin, noting that there were very few native Hawaiians among the swells living in Kahala, a neighborhood of high gates and stucco mansions. "We should honor their land."

Kawamoto said he wanted to turn some of the houses into museums for his extensive collection of Asian art, ceramics and European antiques, and envisioned others as havens for big clans of Hawaiians who could hold barbecues on the beach and bring some verve to the quiet area.

Given local zoning and fair-housing and no-fires-on-the-beach laws, just about nobody here expects that Kawamoto's plan will become reality.

So the question is, just what is Kawamoto up to?

The reclusive billionaire said in a statement that his plan was sincere, and that his "focus in Hawaii is not about making money."

His critics say that that's absurd, and that his obvious aim is to drive down prices in Kahala so he can snap up some bargains.

Whatever his motives, the fact is that the 74-year-old Tokyo investor has bought 18 homes along Kahala Avenue in the last few years, a combined investment of more than $100 million, according to local brokers. Most have not been rented out, brokers say.

Another fact is that Kawamoto is a controversial character, both here and in Northern California.

'Ethical violation'

In 1987, the Japan Economic Journal described Kawamoto as the sixth-richest man in Japan. An heir to his family's drapery and kimono business, according to articles in Japan, he sold the enterprise and turned the gains into a multibillion-dollar portfolio of buildings in marquee Tokyo districts such as Ginza, Akasaka and Roppongi.

In the late 1980s, he epitomized the Japanese frenzy for Hawaiian real-estate. Riding around Honolulu in a white limousine, Kawamoto bought houses on the spot, in cash -- 17 in one day -- sometimes without even bothering to take a look inside. He did much the same thing in Sacramento and Santa Rosa.

And in all three places, he generated negative publicity a few years later when he gave 30-day eviction notices to the renters and announced urgent plans to sell the homes.

A deputy district attorney in Santa Rosa said in 2002 that Kawamoto was "basically giving Sonoma County the finger" in his dealings with the tenants, adding that it was an "egregious ethical violation." In Sacramento, also in 2002, renters banded together in protest, and Gov. Gray Davis and Democratic Sen. Dianne Feinstein got involved, leaning on the Japanese Embassy to get Kawamoto to at least give the tenants more time to move out.

Facing political pressure and the threat of a lawsuit, Kawamoto backed off on the imminent evictions, but within a year or so had sold off the houses.

On Oahu, Kawamoto engaged in a similar sell-off of his 200 or so properties. Tokyo analysts speculated he was facing a cash crisis in his American holdings and his much larger Japanese ones.

He was, of course, hardly the only Japanese investor to run into difficulties with American real estate: Japanese buyers lost their shirts from Rockefeller Center to the Pebble Beach golf course.

Kawamoto said in a statement at the time that he was simply trying to raise money for "tremendous investment opportunities both in the United States and Japan, opportunities which present themselves only once every 20 to 30 years.

"Time is of the essence," he wrote.

Most of the properties he sold were median-range single-family homes in Honolulu suburbs such as Hawaii Kai and Kailua, as well as some midtown condominiums. Most sold for $250,000 to $450,000, with a few closer to $1 million.

Because so many of his purchases had been cash-on-the-spot, no one was sure how much money he made or lost.

Many of the houses had fallen into serious disrepair during his ownership -- a problem that he blamed on Honolulu property-management companies, of which he has hired and fired at least four over the years.

In the late '80s, Kawamoto walked away from a $42.5-million purchase he'd made of the 7.3-acre Hawaii Kai beachfront estate of steel magnate Henry J. Kaiser. The building turned out to be a "leasehold" property, one in which the building and the land are owned separately, and Kawamoto balked at the $1-million-a-year land lease for the property.

An implausible plan?

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