Commercial Real Estate

Hawaii’s Legacy Land Conservation Program helping secure 752 acres

The Hawaii Department of Land and Natural Resources’ Legacy Land Conservation Program is giving part of the money that will be used to purchase more than 750 acres of land deemed to have significant natural resources.

The Legacy Land Conservation Program will give $3.3 million to acquire lands that are valued for archeological, cultural and natural resources. Each dollar from the state will be matched with $3 in federal, private and county funds for a total of another $9.5 million, according to a statement from the Department of Land and Natural Resources.

The approximately 752 acres of land include areas on Oahu, Kauai, Molokai and the Big Island.

Established in 2005, the Legacy Land Conservation Program provides grants to local agencies and organizations that purchase and protect lands that contain valuable resources.

Source: PBN

Castle & Cooke sells prime site with long term lease to Home Depot

Texas company buys prime site from Castle & Cooke

Castle & Cooke Hawaii quietly sold a prime plot of land in Honolulu — specifically, the nine acres on which sits the Home Depot store in Iwilei — to a Texas company for $23.2 million this summer.

The buyer, identified in the deed as HD Hawaii 421 Partnership Ltd. of Houston, is said to have been interested in buying the property for several years.

Castle & Cooke marketed the property several years ago, and ultimately sold the land at 421 Alakawa St. fee simple to the HD Hawaii partnership, whose president is Howard B. Chapman.

No word on how interested Home Depot might have been in buying the land underneath its Iwilei store, which opened in 1999. Home Depot’s long-term lease on the property runs through Jan. 31, 2025, according to the deed. No real estate brokerage firm represented the seller or buyer.

At $23.2 million, the sale ranked No. 7 on PBN’s commercial real estate transactions list, which listed the biggest deals closed between July 1, 2009, and June 30, 2010.

“It’s a really big deal because there just hasn’t been much out there and my guess, though not knowing the buyers, they probably own some other Home Depots on the Mainland or felt comfortable with the tenant to make the deal,” said Steve Sofos, president and CEO of Sofos Realty Corp., who was not involved in the sale. “I think [the sale] is surprising because I always thought that for Castle & Cooke, that was one of their crown jewels.”

Source: PBN

Amerasian Land Co Inc. Sells Pepper Tree Apartments

Pearl Dragon LLC has purchased the Pepper Tree Apartments from Amerasian Land Co. Inc. for $5 million.

The Aiea apartment complex consists of 40 two-bedroom units and eight one-bedroom units that are 95 percent occupied, according to Doug Davis Realty, which represented the buyer.

Sale of Pepper Tree Apartments closed on July 30.

Source: PBN

Hawaii Commercial real estate market shows signs recovery

Oahu’s commercial real estate market is showing signs of recovery, but it could take at least another year before it is back on firm footing.

That’s the assessment of leaders of three large Hawaii commercial real estate companies as the industry moves into the final five months of the year. With commercial real estate taking a beating as Hawaii and the rest of the world struggled to survive the global recession, industry leaders here believe that the worst is likely over and recovery is on the horizon.

The impact of the financial crisis is evident in the dramatic decline in commercial real estate transactions over the past four years. In the first quarter of 2006, there was $1.4 billion in transaction activity, 88 percent higher than the first quarter of this year, said Mike Hamasu, consulting and research director at Colliers Monroe Friedlander.

“Financing is the lifeblood of the investment market,” Hamasu said. “If you can’t get money to purchase or develop your properties, it makes it very difficult to move forward on hardly anything.”

But he said there are signs that the commercial real estate industry is improving.

The industrial and retail markets are stabilizing, with retail vacancy rates hovering around 3 percent. Hamasu said there appears to be increased interest in real estate investment, but office market vacancy remains about 4 percentage points higher than it was two years ago.

Hamasu said he’s optimistic that the worst is over, but said it will take a while before the recovery is complete.

“We’re starting to see a slow transition from a market that’s been fairly devastated to one that’s starting to consider real estate as an opportunity,” he said. “The optimistic people are saying the bottom has hit, but the pessimistic ones are saying we haven’t had enough proof yet to say that.”

Steve Sofos, CEO of Sofos Realty, agreed that commercial real estate activity picked up in the latter part of 2009 into early 2010, but he said the market is still flat. He said he believes this trend will continue through 2011 because of the long-lasting impact of the recession.

“The problem is there is no pent-up demand in the office market, there’s no pent-up demand in the industrial market, there’s no pent-up demand in the retail market,” he said.

He said one solution would be for landlords to adjust their lease rents to make them more affordable and attractive to small businesses. He said owners need to decide if they want to maintain rents, but deal with vacant property, or lower rents and have an income from their tenants.

“The smart landlords are wheeling and dealing to get tenants,” Sofos said. “The bad ones are sitting there and holding their prices.”

Joseph Haas, president and senior managing director of CB Richard Ellis, said the commercial real estate market in Hawaii is “fundamentally strong.” He said there still is some softening in the office market sector in Honolulu, but that the retail market is tightening and the industrial market has bottomed out.

Haas said he believes the worst is over for the industry, although he acknowledged there still is a lot of uncertainty. The key, he said, is the need for marked improvement in the Hawaii job market.

“We haven’t had job growth, which directly affects commercial real estate,” he said. “You don’t need to expand your office if you’re not bringing new people on. We won’t know we’re out of the woods for sure until we see positive job growth.”

He added that one positive sign that commercial real estate is on the rebound is the recent purchase of Bishop Square by Douglas Emmett Inc. The California-based real estate investment trust bought the downtown property for almost $230 million.

“If you want to make a statement that the commercial real estate industry is strong in Hawaii, that’s putting your money where your mouth is,” Haas said. “There’s only one Bishop Square, unfortunately. But they are a Mainland real estate investment trust who believes in our market and the future of our market.”

Source: PBN

Hawaii’s largest owner of industrial land will change its name

Hawaii’s largest owner of industrial land will change its name next month to CommonWealth REIT, HRPT Properties Trust said Tuesday.

HRPT Properties Trust (NYSE: HRP), which owns more than 400 acres of land in Hawaii, also said that as of July 1, its common shares would be traded on the New York Stock Exchange under the symbol CWH instead of the current HRP.

The real estate investment trust also announced a reverse stock split, effective July 1, which would reduce the number of its common shares outstanding by three quarters. For every four existing common shares, shareholders will receive one share.

As of March 31, HRPT owned 518 properties with approximately 66.8 million square feet in more than 60 markets in 34 states and Washington, DC, representing total investments of $6.6 billion.

That includes the 220 acres of commercial and industrial land in Mapunapuna, Kalihi and Sand Island that HRPT purchased in December 2003 from the Estate of Samuel Mills Damon for $480 million and the 200 acres in Campbell Industrial Park it purchased from the former Estate of James Campbell in mid-2005 for $115 million.

HRPT also said Tuesday that it has agreed to sell 15 properties leased to the federal government to Government Properties Income Trust (NYSE: GOV) for $231 million by March 31.

Government Properties Income Trust was once a 100 percent-owned subsidiary of HRPT but is now a separately traded REIT.

Hawaii commercial real estate sales drop

Investors spent a little more than $122 million on commercial real estate in Hawaii during the first quarter of this year, which was $12 million, or 9 percent, less than commercial sales a year ago, according to a new report.

There were just 17 transactions of $1 million or more during the first three months of 2010, according to the report released Friday by Colliers Monroe Friedlander.

The report attributed the low number of sales to investor cautiousness, tighter underwriting, tenant demand and seller hesitancy, but also noted that capitalization rates are expected to increase.

The report forecasted that commercial investment sales will begin to increase over the next few quarters as investors capitalize on a buyer’s market, and that the market recovery will happen slowly over the next two to three years.

One of the most notable transactions early in the year was Alexander & Baldwin’s $50 million sale of the Mililani Shopping Center to Stoneridge Capital partners.

The foreclosure sale of the former Hawaii Raceway Park in Kapolei to a group of investors called AC/CW Raceway Owner LLC for almost $14 million was another notable sale, but was also at a price of about $5 per square foot, which was significantly below the $35 to $40 per square foot that land was commanding at the peak of the market, the report said.

Source: PBN

Court rejects commercial tenant rent law

A judge rules that the law giving commercial renters greater power is unconstitutional

A U.S. District Court Judge has struck down a Hawaii state law that gave commercial tenants greater leverage to negotiate rent with their Massachusetts-based landlord.

Chief Federal District Judge Susan Oki Mollway ruled that Act 189, which was enacted in 2009, violated the U.S. Constitution and could not be enforced. The law had been extended by Hawaii lawmakers to 2013, but still awaited Gov. Linda Lingle’s signature.

HRPT Properties Trust, which owns more than 200 acres of industrial and office space in Mapunapuna, Sand Island and Kalihi Kai, sued shortly after the law was enacted. The property owner challenged what it called an “unconstitutional amendment” to the 180 or so ground leases it had acquired for $480 million from Damon Estate in 2003.

The law required that the “fair and reasonable rent” clause in HRPT agreements must apply to the lessor and lessee. It also mandated that use should determine rent.

Mollway, who issued her ruling after a May 10 hearing, found that Act 189 targeted HRPT and did not supply a general public purpose. She also ruled that the Constitution’s contract clause prohibits states from changing historical rights.

“We disagree with Judge Mollway’s legal analysis and have made no decision yet on whether to appeal,” said State Attorney General Mark Bennett.

The not-for-profit Citizens for Fair Valuation Inc., which joined with about a dozen HRPT lessees to get Act 189 passed, said it will consider appealing.

Tenants, who typically face rental adjustments each decade, have complained that HRPT had sought to double and triple rent and institute annual increases of 3 to 4 percent, Steiner said.

Since most tenants have built out the land that they lease and are locked into long-term contracts, they cannot walk away without risk, Steiner said.

“Never before have over 20 properties been involved in arbitration proceedings at one time and this indicates that rent demands are not in line with market realities,” he said. “Damon was not an easy lessor either, but the business model was to work with tenants to avoid arbitration.”

Tenants like Servco Pacific Inc., Grace Pacific Corp., Plywood Hawaii Inc. and Bacon Universal Co. Inc. and others could be adversely affected by the ruling, Steiner said.

“The crux of what is happening here is a problem that will affect everyone of us because all the goods and services will go up dramatically to cover rent,” he said. “All the money they will be paying will be going off-island to a landlord who is not putting anything into the property.”

Source: SB

Douglas Emmett to buy Bishop Square

Douglas Emmett Inc. has been selected to purchase one of downtown Honolulu’s largest office complexes.

The Santa Monica, Calif.-based real estate investment trust is paying more than $200 million for Bishop Square, two towers that together measure 920,000 square feet, according to sources familiar with the deal.

According to city tax records, the property’s assessed value is $244.8 million. It was sold for $160.6 million to Bishop Square Associates in October 1989.

The towers at 1003 Bishop St., which have approximately 200 tenants, are being sold by New York brokerage firm Eastdil Secured LLC.

The property, owned by Northwestern Mutual and the California Public Employees’ Retirement System, was put on the market early this year in an open-bid process.

Douglas Emmett beat out The Shidler Group for the property, which includes the 30-story American Savings Bank Tower — formally known as Pacific Tower — built in 1972, and the 28-story Pauahi Tower, which was completed in 1983.

The deal is expected to close this summer, following a due-diligence process.

Calls to Douglas Emmett weren’t returned.

The REIT also owns the 25-story Bishop Place, a 472,569-square-foot office building at 1132 Bishop St.; the 31-story Harbor Court, measuring 206,768 square feet, at 55 Merchant St.; and the Honolulu Club, a 78,297-square-foot office building at 932 Ward Ave., named after a private membership athletic and social club.

Douglas Emmett also owns Moanalua Hillside Apartments, a 696-unit apartment complex at 1229 Ala Kapuna St.; and the Villas at Royal Kunia, a 402-unit apartment complex at 94-994 Eleu St. in Waipahu.

Source: PBN

Waikoloa Highlands Center for sale $19.9M

Waikoloa Highlands Center on the Big Island is on the market for $19.9 million.

The neighborhood shopping center, measuring 73,524 square feet, has 43 tenants and is anchored by Waikoloa Village Market, a subsidiary of KTA Super Stores.

Owner 3-D Investments of California has traded offers with four prospective buyers, according to property broker Mark Bratton, who expects to sell the shopping center this summer.

Other tenants include Chevron, First Hawaiian Bank, Hawaii Family Dental Center and Subway, as well as a number of doctors and dentists.

The center is 76 percent occupied, even though Hilton Grand Vacations left a significant amount of space vacant after consolidating operations about 18 months ago.

Source: PBN

Waikiki Retail Building For Sale Fee Simple

The Waikiki building that is the home to the wildly popular eatery Eggs ‘n Things is on the market for $6.2 million.

The building on Saratoga Road is part of a three-building complex totaling 4,705 square feet on a fee-simple parcel that measures 4,870 square feet.

It’s owned by real estate investor Jay Shidler and his business partner, Ronald Petty. CB Richard Ellis has the listing.

Eggs ‘n Things moved from its former home at 1911-B Kalakaua Ave. to the Saratoga Road site in November 2008 in part to be closer to its Waikiki tourist base, especially visitors from Japan.

The building’s other tenants include Hawaii’s Natural High.

Source: PBN

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