When James Augustine met Scotty Martinson at Channel Islands Surfboards, a shop in Santa Barbara, CA, the two bonded over being from the Big Island.
“I was going to college in Santa Monica and bought a surfboard from Scotty, the shop’s manager, in 1998,” says James, owner of Big Island Commercial Properties.
“You bought more than one,” Scotty says with a chuckle. Neither could have anticipated that 20 years after James invested in a surfboard, he would help Scotty with his own investment.
“In 2017, Scotty contacted me about Kawaihae Shopping Center, a property that had been in his family for generations. I thought it would be a valuable asset and asked him to call me for help when he got it back,” says James of the property that Scotty’s great-grandmother initially purchased.
“The harbor had yet to be built, and that was beachfront property, with 16 different mango trees on the land. The property was passed onto my grandmother,” says Scotty, whose family were commercial fishermen. “I remember staying down there with my grandparents and fishing every day, with my little bucket and bamboo pole. Whatever I caught, Grandma would cook up. My grandpa would fish from his boat, just offshore. And my mom was actually born on the property!”
When the harbor was built in 1959, the family property became commercially zoned, causing property taxes to rise significantly. In addition to commercial fishing, Scotty’s family sold pickled mangoes to pay taxes until his grandmother had to lease the property to a developer in 1986.
After putting up a building, the developer sold his interest to an investor who took out a large loan against the property and got a cash-out refinance in 2001. The investor never made a single payment, and a few years later, the property went into bankruptcy and then receivership.
“Then it went to somebody else who tried to sell it,” Scotty explains. “In 2017, my mom called to say that the property was going to be auctioned off, and she wanted to buy it back. So I flew home and we went to Kona for the auction. My Mom and I were the only ones who showed up. The bid started at $1.5 million, which mom didn’t want to pay, so we waited. Finally, the attorney said they’d contact us, and we left.”
Scotty and his mother were in negotiations with the bank to buy the property, but before they could finalize the deal, his mother passed away. Eventually, Scotty’s attorney, Randy Vitousek, got the property back, and he made another call to James in 2019, sharing the news.
“That's when the fun really began,” says James. Over a decade of neglect left the building with numerous issues, including holes in the roof, electrical problems, and termite damage. James and Scotty made a list to address these issues and got to work. “Since then, we’ve spent over seven figures on fixing it up. We've been through multiple contractors and the COVID-19 Pandemic. The process took a lot of work, time, and money. But after five years, we saw the light at the end of the tunnel.”
“I didn’t give up on bringing the property back to life because I saw it down there in its heyday. My family has lived in Kawaihae for over 100 years, and it's part of our heritage,” says Scotty. “No matter what, I couldn't let it just fall apart.”
Today, Big Island Commercial Properties handles the day-to-day management and leasing for Kawaihae Shopping Center. James says the goal is to build a long-term relationship and increase revenue and profitability.
“Since management requires physical maintenance and a nuanced understanding of tenant dynamics, insurance, and financial considerations, it’s important to have an on-site representative,” James says, adding that many people attempt to save money by doing it themselves. “They seek our help when they're facing significant issues. Scotty was smart and contacted us early on.”
Scotty retired from the surf shop, focusing on a new venture. As a result of the collaboration between him and the Big Island Commercial Properties team, Kawaihae Shopping Center went from 50% to over 90% occupied. Scotty's cousins even moved their business, Kawaihae Marketplace, into the building, carrying on the family legacy. And the rent Scotty collects will eventually outpace what the building is worth, as well as the money he invested to get it back.
“I just wanted to fix it up and have something there that's part of our family's legacy. Something the community can be proud of,” says Scotty. “Now James and his team handle the day-to-day management, and it’s a place that families are stoked to visit. It's nice to come home to the Big Island and see that. And I can pass on that legacy to my family.”
Discover more at BigIslandCommercialProperties.com.
Big Island Commercial Properties is located in West Hawai'i on the Big Island. If you have a question about investing in commercial property, selling commercial property, or commercial property management, call us at 808-751-2427. Our offices are located at 75-240 Nani Kailua Drive, Suite #11, Kailua-Kona, HI 96740.
"I didn’t give up on bringing the property back to life because I saw it in its heyday." — Scotty Martinson.