Sometimes, you shoot for the moon.
And sometimes, you hit the ceiling.
Hawaii Island builder Scott Watson and his partner had big dreams when they purchased a coastline property in Ninole and set about building what they called “the ultimate playground for the rich and famous”
At 8,100 square feet on 9.44 acres, with its own golf and tennis courts, two rooftop helipads, its own private waterfall and a 250-million-gallon infinity pool, Water Falling Estate was unique along the Hamakua Coast.
So was its asking price — $26.5 million.
But when Watson, the builder, and partner Laurie Robertson, who provided the funding, opted to sell the property in March at auction with no minimum bid, the property sold for less than $6 million.
“It was a big disappointment,” Watson said during a Thursday phone interview. “When you gamble, sometimes you lose. But, the other option is to do nothing, and that’s not me. I’m going to keep doing what I’m doing. I’m going to keep building them.”
At a sales price of $5,750,000, and an additional $500,000 in related auction fees, Watson admitted the buyer, whom he identified as a retired banker from Missouri, got a really good deal.
“What the auction company had led us to believe, as far as the number of bidders and the excitement over the auction, wasn’t what they promised us,” he said. “It just wasn’t as strong a field as we had hoped. … I’d rather not get into the numbers, but we didn’t make any money on it. In fact, I’m going to say we lost some money on it.”
Hilo Brokers owner Kelly Moran, who served as listing agent for Water Falling Estate, said Thursday he estimated Watson and his partners put as much as $12 million into the property before the auction. Moran sold them the undeveloped property several years ago for $1.3 million.
“I had my professional recommendations to them, but the price they were asking for was not my suggestion,” Moran said. “Then the owners decided to do a no-reserve auction. And the auction house, Concierge Auctions, they’re professionals, they’ve done a lot of auctions. … But if you’re going to do a no-reserve auction, you have to be very, very careful. I think from a sales perspective, it would generate a lot of excitement. As to why it didn’t, I don’t know. … It’s a high-risk business. It’s nothing I would advocate for. I’m pretty conservative.”
Watson explained his partner, Robertson, 83, recently struggled with health issues, and he decided after about 270 days on the open market it was time to unload the property at auction requiring no minimum bid. The thinking behind the move is by not requiring a minimum, more bidders will be attracted by the chance of getting a good deal, thereby creating more competition and driving up the final sales price.
That wasn’t what happened in this case.
“Laurie, he’s a self-made man, and he’s a pretty experienced auction-goer. He’s real familiar with the auction thing,” Watson said. “I wanted a reserve on it, but he was mainly the money in it (the house), so I went along with it. Unhappily, we didn’t get as much as we wanted.”
Moran said there are many roadblocks to selling ultra-high-end properties in East Hawaii, including the weather.
“I think the east side, with its reputation for rainfall, is going to have a little bit of a negative appeal. The people who buy these types of places want to go to places in the beautiful, tropical sun, and unfortunately this side has a rainy reputation, one that’s not entirely true, in my opinion,” he said. “But, if you’re gonna build these big places, you need to look at the tried and true markets, like Kukio, Mauna Lani, Mauna Kea. Those are vetted areas for real estate. The east side, it just hasn’t happened yet.
“The main lesson for me is, if you’re going to use auctions to sell, you need to drill down deeply and look at the nuances of what could happen.”
Email Colin M. Stewart at firstname.lastname@example.org.