Private equity giant Blackstone and a team of undisclosed financiers plan to invest $415 million to add a 350-foot time-share tower to the Hilton Hawaiian Village, which is the state’s largest single resort property.

The new tower, which will be called The Grand Islander by Hilton Grand Vacations Club, will be the sixth new tower of its size planned for Waikiki, and it will be Blackstone’s single largest Hawaii hotel improvement since the company entered the market about 15 years ago. Hilton Grand Vacations will supply marketing, sales and operational support for the project, which will be constructed adjacent to the Tapa Tower at the corner of Kalia Road and Paoa Place.

The 37-story project, which was slated to break ground Tuesday, will add 418 one-, two- and three-bedroom time-share units to Waikiki’s lodging inventory as well as hundreds of construction jobs and some 900 time-share-related jobs.

Tyler Henritze, senior managing director in Blackstone’s Real Estate Group, said the project reflects the company’s bullishness on Hawaii’s hospitality market.

“Hawaii and Oahu, in particular, has been one of the best-performing lodging markets nationally over the last several years. We’ve had tremendous success partly as a function of the fact that it’s been very challenging to build new hotel inventory,” Henritze said. “We are big believers in Hawaii and Waikiki, and we’re glad to work in partnership with Hilton to develop a new time share to meet the demands of what seems to be an ever-increasing visitor market.”

Blackstone made a big splash in Hawaii in 2005 with the purchase of two neighbor island properties, the Waikoloa Beach Marriott Resort & Spa and the Wailea Beach Marriott Resort & Spa. In July 2007, Blackstone significantly expanded its local interests with the $26 billion purchase of Hilton Hotels, which included the Hilton Hawaiian Village Waikiki Beach Resort and the Hilton Waikoloa Village, and last year acquired the leasehold interest in the Hyatt Regency Waikiki Beach Resort and Spa. While Blackstone took Hilton public in December, the company remains its controlling shareholder.

“All of our time-share activities have been in partnership with Hilton,” Henritze said. “It’s our hope this tower will be every bit as successful as its predecessor tower, The Grand Waikikian, which is close to selling out … about two years ahead of schedule.”

Jerry Gibson, area vice president of Hilton Hawaii, said he views this latest partnership between Hilton and Blackstone as a key milestone in the resort’s 2010 master plan, which previously included major renovations at the Tapa Tower, Rainbow Tower and the Ali’i Tower.

“This project will bring the number of accommodation units at Hilton Hawaiian Village to about 4,000. We’re excited to see it get started. We’ve spent the last five years getting ready for this project by enhancing the rest of the property,” Gibson said. “By the time that The Grand Islander opens in the next couple of years, almost everything will be brand new.”

Despite the fact that The Grand Islander will be staffed by union workers, Unite Here Local 5 said it remains concerned that more Hawaii investors seem to be building time shares and condotels instead of full-service hotels.

“Time shares, condotels and vacation rentals simply don’t create as many good, local jobs as full-service hotels do,” said Eric Gill, financial secretary-treasurer of Unite Here Local 5. “We are also concerned about the impact that this increased density will have on parking in Waikiki. This is a concern we have not just about the Hilton Hawaiian Village project, but about many condotel and time-share projects in Waikiki.”

Hensel Phelps Construction Co. will serve as general contractor for the project, which is slated to be completed in early 2017. Group 70 International Inc. is the project architect, and Indidesign will supply the interior design. Hilton Worldwide will be the development manager, and Rider Levett Bucknall will provide project management services.

The footprint of the new tower is not expected to jeopardize the village’s parklike setting, which will maintain 50 percent of its 22 oceanfront acres in open space.

Interval sales of The Grand Islander, which will be the fifth Hilton Grand Vacations Club on Oahu and the eighth in all of Hawaii, will begin late this year, said Mark Wang, executive vice president of Global Sales and president of Hilton Grand Vacations for Hilton Worldwide.

The Grand Islander will provide a modern, upscale experience with the average price about 10 percent higher than The Grand Waikikian, Wang said. Weekly interval prices at The Grand Islander are expected to start around $40,000. However, weekly intervals for the average 862-square-foot units will sell for around $70,000 with buyers spending up to $200,000 to purchase peak interval weeks in the three-bedroom penthouse units.

Wang said about half of the buyers will come from Japan with the other half coming from the mainland and international destinations like South Korea and Australia.

The latest Blackstone and Hilton partnership is good news for Waikiki’s hospitality market, said Joe Toy, president and CEO of Hospitality Advisors LLC.

“Blackstone can place its capital anywhere in the world. … The fact that they chose to come here and are long-term players bodes well for the state of Hawaii,” Toy said.

George Szigeti, president and CEO of the Hawaii Lodging and Tourism Association, said he favors the project, which will create lots of jobs while alleviating some of Waikiki’s lodging supply constraints.

“Time share is a model that appears to be working for Hawaii,” Szigeti said. “These people that are investing will become stakeholders, and they’ll be here through good times and bad times creating more tax revenue and visitor spending.”

(c)2014 The Honolulu Star-Advertiser