Investment

Bishop Square up for sale

Bishop Square, one of downtown Honolulu’s largest office building complexes, is for sale.

The two towers that together measure 920,000 square feet are being marketed 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 last month in an open-bid process.

Based on the typical $225 per square foot price for downtown office buildings, the value of the property could top $200 million.

Industry insiders expect Hawaii office giants The Shidler Group and Douglas Emmett Inc., the largest office building owners in Honolulu, to be the primary bidders for the property.

The property 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. Calls to The Shidler Group and Douglas Emmett weren’t returned.

The property at 1003 Bishop St. has approximately 200 tenants.

Source: PBN

Lawmakers target real estate taxes

The Hawaii State Legislature has turned to the real estate industry in its search for additional revenue, proposing to levy a special 1 percent general excise tax on businesses that sell real property.

The proposed tax, which would take effect July 1 and sunset after five years, would be on the gross proceeds of a sale, minus a real estate salesperson’s commission and conveyance tax, and would apply to both commercial and residential properties.

The money generated by the proposed tax would be used to pay for infrastructure projects needed for land development.

It’s one of several tax-increase proposals lawmakers have floated this session to try to close a $1.2 billion shortfall in the state’s budget, including a 1-percentage-point across-the-board increase in the G.E.T. Both G.E.T. increases were sponsored by House Speaker Calvin Say, D-St. Louis Heights-Wihelmina Rise.

Real estate transactions currently are taxed by the state through the conveyance tax, which already has been used as a source of extra revenue.

Lawmakers last year took a three-tiered tax on real estate conveyances that stopped at 30 cents per $100 for purchases of $1 million or more and created a seven-tiered system that tops out at $1 for every $100 of purchases of $10 million and above for commercial properties.

Another bill this year, sponsored by Rep. Rida Cabanilla, D-Waipahu-Ewa, would boost the conveyance tax on the sale of “luxury homes over $700,000” by 10 percent to create a special fund for purchasing and maintaining state parks for the homeless on Oahu.

House Bill 2488 would add another tier to the conveyance tax rates that would tax homes selling for between $700,000 and $1 million at a rate of 22 cents per $100, instead of 20 cents per $100.

Under the conveyance tax increase that took effect July 1, 2009, Alexander & Baldwin had to pay $500,000 on the recent $50 million sale of the Mililani Shopping Center, instead of the $165,000 it would have paid under the old tax rate.

The proposed 1 percent G.E.T. on the A&B transaction, minus the conveyance tax and sales commissions, would add at least an additional $490,000 to the landowner’s closing costs.

The proposed measure, House Bill 1953, cleared the water, land and ocean resources committee last week unamended and is awaiting a hearing in the House finance committee. The overall G.E.T. increase, House Bill 2876, also is awaiting a hearing by the finance committee.

The real estate G.E.T. bill appears to have little, if any, support.

State tax director Kurt Kawafuchi, who testified against the measure, said it would bring in only about $16.5 million in estimated revenue and would drive up the cost of property.

“In a state with some of the highest real property prices, the [tax department] cannot support a measure that only makes taxes higher,” Kawafuchi wrote.

The Tax Foundation of Hawaii also made that point, adding that any costs added to a transaction will no doubt be passed along to buyers in what is already a stagnant market.

“Inasmuch as this bill probably is aimed at large landowners/developers, the cost of the tax will exacerbate what is already a very expensive market for real estate,” the foundation said in testimony.

The Tax Foundation also noted that the amount generated by the tax would fluctuate depending on sales and property values, which would make it an unreliable source of revenue.

“In addition, if this measure is adopted, it may open the door for other general excise tax impositions and additional rates which may result in a convoluted general excise tax system,” the foundation testified.

The Hawaii Association of Realtors’ Craig Hirai pointed out that the new tax, when added to the conveyance tax, amounts to a 626 percent increase in the tax on a $300,000 condominium, or an additional $2,816.

That money would get passed on to the home buyer, including first-time home buyers, who would need to come up with the additional amount in cash at closing.

The 1 percent G.E.T. would end up increasing the cost of affordable housing by taxing the sale of the land, and then the sale of the housing — costs that would be passed along to buyers, said Dave Arakawa, executive director of the Land Use Research Foundation of Hawaii, whose members include landowners and developers.

Arakawa testified against the proposed G.E.T. and was preparing to testify against the 10 percent increase in the conveyance tax, which was being heard by the House committees on housing and water, land and ocean resources on Wednesday.

“They’re not going to eat that tax, they’re going to pass it on,” Arakawa said of the sellers. “So, the cost of the house gets passed on. It’s counterproductive.”

Source: PBN

Stoneridge Capital Partners buys Mililani Shopping Center

A&B Properties, the real estate subsidiary of Honolulu-based Alexander & Baldwin, said Monday it completed the sale of the Mililani Shopping Center.

The sale of the 180,300 square-foot retail center, located in Central Oahu, was for $50.3 million in cash. The asking price was $55 million.

The transaction marks the entry into the Hawaii market for the buyer, Newport Beach, Calif.-based Stoneridge Capital Partners.

“Due to supply constraints within the local market, this shopping center benefits from both high occupancy levels and historically high rental rate growth, making it an ideal fit for our real estate investment strategy,” said CEO Greg Merage. “We will continue to leverage our strong cash position to seek out these types of investment opportunities and further expand our portfolio of commercial and multifamily assets.”

In a separate transaction, A&B Properties acquired the Meadows on the Parkway Shopping Center, a 216,400 square-foot retail center in Boulder, Colo., for $30.8 million.

“During our eight-year ownership of Mililani, we focused on marketing programs to increase customer traffic and invested in facilities upgrades to improve the property’s value,” said Norbert M. Buelsing, president of A&B Properties. “These initiatives resulted in a 39 percent increase in net rent and a 66 percent increase in average tenant sales, while maintaining a 98 percent average occupancy at the center.”

Mililani Shopping Center was built in 1976 and is anchored by Foodland Supermarket, Ross Dress for Less, 24-Hour Fitness, and food, retail and professional services outlets.

Alexander & Baldwin (NYSE: ALEX) is involved in ocean transportation and logistics services through subsidiaries, Matson Navigation Company, Matson Integrated Logistics, and Matson Global Distribution Services; in real estate through A&B Properties; and in agribusiness through Hawaiian Commercial & Sugar Company and Kauai Coffee Company.

Sale of commercial real estate as investments could rise this year.

The transaction volume for commercial real estate totalled $600 million in 2009, Mike Hamasu, consulting and research director for Colliers Monroe Friedlander, told a gathering of some 800 professionals from the real estate industry who met at the Hawaii Convention Center. Hamasu predicted that volume could grow to $810 million by the end of the year, which would be a third more than in 2009.

The annual real estate forecast is sponsored by the Hawaii chapters of CCIM, the Building Owners and Managers Association and the Institute of Real Estate Management.

Representatives from CB Richard Ellis, Colliers Monroe Friedlander and Ambard & Co. gave their predictions for the office, retail and industrial markets.

The bottom line for all three categories: Vacancy rates are forecast to remain fairly flat this year, and landlords should work to keep tenants where they are or risk having empty spaces for up to a year or more.

Source: PBN

Condo tower gets new name, new money

The San Diego development company that bought the unfinished Moana Vista condominium tower plans to spend $110 million to restart and upgrade the project, now known as Pacifica.

Pacifica will create work for dozens of local companies and generate 400 construction jobs over the next two years, its new owner says.

OliverMcMillan is redesigning the 46-story building’s exterior, unit mix, layout and ground-floor retail space to give it a higher-end feel, and adding 4,000 square feet of amenities on a fifth-floor recreation deck.

The firm is working on obtaining approvals for the changes from the Hawaii Community Development Authority and expects to restart work on the project in March.

The project represents a foothold in Hawaii for OliverMcMillan, a 31-year-old development firm that specializes in urban mixed-use communities.

The firm, which has formed a Hawaii-based subsidiary, OliverMcMillan Pacific, has already been talking to large local landowners Kamehameha Schools and Queen Emma Land Co. about mixed-use projects in Kakaako and Waikiki.

Read More At PBN

West Oahu building sells for $19M

A local family has purchased a 189,000-square-foot cold/freezer food distribution building in West Oahu’s Campbell Industrial Park.

The building at 91-315 Hanua St., which is occupied by a single tenant, C&S Wholesale Grocers, was purchased by KDI Investments Inc. for $19 million, according to Colliers Monroe Friedlander, which handled the sale along with the Los Angeles office of Colliers International. KDI Investments is owned by siblings Malcom Tom, Kenton Tom and Joanna Leong, who also own the Wailana Coffee House in Waikiki.

The seller was Tower Plaza Associates LP, which bought the building in 2006 for $18.75 million from Pacific Warehouse Inc., a related company of Foodland Super Market Ltd.

“The buyer stepped up and purchased the property at this opportune time because of the high rates of return with an in-place credit tenant,” said Mark Bratton, the senior vice president at Colliers Monroe Friedlander who represented the seller along with Executive Vice President Scott Mitchell. “Considering the eventual upswing in the market cycle, investors will not see this type of return three to five years from now. This is impeccable timing.”

Source: PBN

Macadamia orchard sold on the Big Island

A 736-acre macadamia nut orchard in Keaau on the Big Island has been sold to Geyser Keaau Hawaii LLC, a unit of California-based Geyser Holdings, for undisclosed terms.

Geyser is not getting into farming per se, said Mark Bratton, a vice president at Colliers Monroe Friedlander.

“With an in-place farming and nut purchase contract, this is a great asset requiring minimal site management by the new owner,” he said in a statement.

Mauna Loa Macadamia Nut Co., a subsidiary of the Hershey Co., will buy the orchard’s output.

It is a “net lease deal” in which the property is leased by an operator and Geyser will be collecting rent, which “goes up a bit” every two years, Bratton said.

The orchard was sold by Keaau Macadamia Land LP and Roland and Eleanor Herberg of San Diego for estate planning reasons, Bratton said.

The purchase expands Geyser’s portfolio of commercial real estate, primarily in resort retail and hospitality, to more than $400 million.

Its Hawaii holdings include Poipu Shopping Village on Kauai and an interest in King Kamehameha’s Kona Beach Hotel on the Big Island.

98 acres of Hawaii’s North Shore is headed for a sealed-bid sale

Nearly 100 acres of agricultural land next to the Turtle Bay Resort on O’ahu’s North Shore are headed for a sealed-bid sale, four years after a Florida-based investment firm bought the oceanfront property for $2 million with plans to subdivide it for potential residential use.

The property on Marconi Road includes an old home and a commercial building that once housed Hawai’i's first wireless telegraph station, established in 1901 under a contract with a company set up by the Italian inventor of the technology, Guglielmo Marconi.

More at the Honolulu Advertiser

Simon looking at General Growth assets

Simon Property Group Inc. has hired outside advisers to help it weigh its options regarding the possible acquisition of assets from fellow shopping mall owner General Growth Properties.

Chicago-based General Growth, operating under bankruptcy protection since April, owns or holds a stake in about 200 malls across the country. In addition to owning and managing the Ala Moana Center and the Ward Centers in Honolulu, General Growth also manages Windward Mall and Kapolei Commons on Oahu; King’s Shops at Waikoloa Beach Resort and Queens’ Marketplace on the Big Island; and Whaler’s Village and Queen Kaahumanu Center on Maui.

Indianapolis-based Simon Property owns nearly 400 properties, including Waikele Premium Outlets.

General Growth filed for bankruptcy protection under the weight of debt it was unable to refinance when the credit markets froze. Its financial problems stem, in part, from a local deal, when it financed its $11 billion acquisition of Columbia-based Rouse Co. largely with debt.

Simon Property spokesman Les Morris confirms the company has hired Lazard Ltd. and Wachtell, Lipton, Rosen & Katz as advisors on a possible General Growth acquisition.

General Growth reported a $117.8 million third quarter loss. Simon Property (NYSE: SPG) had third quarter net income of $105.5 million.

Simon Property and Farallon Capital Management acquired Chevy Chase-based The Mills Corp. in 2007 for $1.6 billion.

Source: PBN

CVS Purchases Two Star Markets Properties

The owner of Longs Drugs Stores said it has completed the purchases of two former Star Markets stores on O’ahu and will convert the stores in Mo’ili’ili and ‘Ewa Beach to Longs stores within the next two years.

The two Star stores were closed in recent weeks by Times Supermarkets, which bought Star’s seven stores earlier this year with the intent to rebrand five stores with the Times name and sell two to CVS Caremark, which operates Longs.

CVS yesterday confirmed it has purchased the two stores. The company also said the pharmacy business at the Star store in Kíhei, Maui, was transferred to a nearby Longs.

On O’ahu, CVS said it expects to renovate the Mo’ili’ili Star building and reopen as Longs in the next 18 to 24 months. The new store will replace an existing Longs store about two blocks away at 2220 S. King St.

A new Longs store in ‘Ewa Beach is expected to open in the second half of next year after a renovation of the former Star store at 91-919 Fort Weaver Road.

After the moves, CVS will operate 46 Longs stores in Hawai’i. The Rhode Island-based company acquired California-based Longs last year, and operates about 7,000 stores under the CVS pharmacy name outside Hawai’i.

In Hawai’i, CVS is facing heightened competition from its biggest rival, Walgreens, which opened its first store in the state two years ago and has a goal of opening 25 to 30 stores over the next several years.

Walgreens opened its fifth full-service store in Hawai’i last month. The company also operates a few smaller pharmacy-only stores, as does Longs.

Source: HNA

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