Distressed condos on Banyan Drive in Hilo may soon get a $20 million renovation

On Friday, the Hawai’i State Board of Land and Natural Resources will decide whether to approve a $20 million renovation of the former Country Club Condominiums complex by Banyan Drive Management LLC.

The complex is one of six buildings on state-owned land along iconic Banyan Drive in Hilo on the Big Island. 

Banyan Drive Management plans to do a complete makeover of the 152-unit residential property, including the lobby, restaurant space, elevators and swimming pool. Additionally, the firm plans to repave all parking and driveway areas and put in new landscaping, according to a press release from the state Department of Land and Natural Resources.

Once the renovation is complete, the company proposes operating the structure at 80% long-term rental and 20% extended stay hotel rooms. 

The company was one of two to submit bids, after the state Land Division issued a request for proposals. The highest-ranked bidder was Savio SB Growth Venture LLC, but earlier this month the company withdrew from the process citing a recent and ongoing downturn in mainland lending markets. This precluded the company from securing financing for renovations of the building, according to the state Department of Land and Natural Resources. 

Last December, the state land board approved a revocable permit and interim right-of-entry permit to Banyon Drive Management to manage the property, but the company notified the state in March that it would surrender its revocable permit. The company cited the poor condition of the property and problems with squatters, vandalism and sabotage of the building’s equipment. 

However, once Banyan Drive Management learned of Savio’s withdrawal, it reiterated its interest in a long-term lease of the Banyan Drive property. It also retracted its notice of termination for its revocable permit. 

Banyan Drive Management indicates it is open to renovating and operating the building as a 100% short-term, transit hotel, if requested by the state to do so. 

With the land board’s approval, the state Land Division will negotiate a development agreement for the demolition, repair and renovation project, as well as a 65-year lease based on fair market rents.

Once the development agreement is negotiated and the rent is determined, the division will return to the land board for approval. Banyan Drive Management also won approval for reduced current rent from $4,635.74 per month to $100 per month.  

In its submittal to the land board, the Land Division noted: “This is a distressed property requiring a significant capital outlay just to maintain day-to-day operation. BDM has gone above and beyond the call of duty in managing the property under a month-to-month permit at a significant financial loss. The Land Division believes a reduction in rent is in the best interests of the state to facilitate continued operation of the property and avoid it becoming another Uncle Billy’s.”  

The former Uncle Billy’s Resort and Hotel is condemned and has been the site of numerous arson fires and sweeps by law enforcement to keep people out of the crumbling, unsafe structure. The Land Division is hoping for approval to spend $12 million to demolish the building. The future use of that parcel of land has not been decided. 

While the Department of Land and Natural Resources does not expect the former Country Club Condominiums property to be a revenue source for many years to come, the two major hotels (Hilo Hawaiian and Grand Naniloa), the Reeds Bay Hotel and Bay View Banyan apartments produce approximately $800,000 in revenue for the state on an annual basis. 

Gordon Heit, the Land Division’s Hawai‘i Island Land Agent, said: “I do have a vision, like many others, for Banyan Drive. I’d like to see it retain its former glory as a resort/hotel destination for east Hawai‘i. I think it can be done.”