A hui led by local real-estate investor Joe Leoni has bought the 143-room Continental Surf Hotel, but it won't necessarily follow through with plans by the previous owner to resell the Waikiki budget property by the room as condominiums.

Instead, Leoni's group retained local management company Cadmus Properties Corp. to operate the Continental Surf as a mix of hotel rooms for vacationers and dorm rooms for Hawai'i Pacific University students.

Joss Hotel Partners LLC, which includes Leoni and Joseph Daneshgar of Beverly Hills-based 3D Investments, recently bought the hotel at 2426 Kuhio Ave. for $11.6 million.

The seller was a partnership involving GE Capital and San Diego-based hotel firm American Property Management Corp., which acquired the property three years ago as part of a foreclosure action initiated by GE Capital.

GE Capital and American Property planned to renovate and sell the hotel by the room to individual investors, a trend in Hawai'i where visitor and real-estate industries are booming.

Converting hotels to so-called condotels is attractive to developers who aim to make money by purchasing, usually renovating and reselling the hotel by the room to individual investors who usually continue renting units to visitors through third-party hotel managers.

An estimated 2,000 rooms in the past few years have been bought by Mainland and Hawai'i investors, and more than 1,600 units are available for sale or are being prepared for sale.

A. Joel Criz, a local real-estate broker and consultant who worked with GE Capital and American Property on the condotel conversion and the subsequent sale to Joss Hotel, said the sellers completed room renovations but decided to sell to Joss Hotel instead of going through with condotel sales that would have involved more work and risk.

"They took the safer route," Criz said.

Leoni said his group plans to complete renovations to the hotel by improving the lobby and other common areas at an estimated cost of around $1 million.

"The property is in remarkable shape," he said. "It just needs a little bit of sprucing up."

At some point, Leoni's group may go ahead with the condotel conversion, but that remains a possibility, not a certainty, he said.

The Continental Surf becomes one of several recent Hawai'i real-estate investments by 3D, which bought Wai'anae Mall in March for $14 million and is trying to develop homes in Kunia and a 22-story condo downtown across from 'A'ala Park.

Leoni, former president of local development firm Gerell Management, has been involved in many Hawai'i real-estate projects, including residential development and starting a plan to create a cemetery in Hawai'i Kai. He owns Maunakea Market Place in Chinatown and an interest in Bay View Golf Course.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.