Office

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

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

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

Honolulu office landlord names new CEO

Pacific Office Properties Trust Inc. (NYSE AMEX: PCE), Honolulu’s largest office landlord, has named co-founder James R. Ingebritsen president and CEO.

Ingebritsen, who also was appointed to the board, is a major shareholder as a partner of The Shidler Group and owner and director of the company’s external adviser, Pacific Office Management Inc.

He is credited with having a major role in the creation of the company through a reverse merger in 2008. He later served as executive vice president of capital markets/operations, responsible for maintaining debt and equity relationships and overseeing the company’s western region.

“As a major shareholder and co-founder of the company, Jim’s interests are uniquely well-aligned with those of our shareholders,” board Chairman Jay Shidler said in a prepared statement Monday.

Shidler has been interim president and CEO while a search was under way for a permanent replacement for former President and CEO Dallas Lucas, who left the company at the end of his employment term, which expired on Aug. 31, 2009.

Ingebritsen joined The Shidler Group in 1987 and was assigned to its San Diego office where he became vice president and later chief financial officer. During that period, he led the southwest region’s asset management division, overseeing acquisitions, property management, leasing and the financial reporting staff.

He was named a partner of The Shidler Group in 1996, leading the acquisition, financing and disposition of more than $4 billion of commercial real estate. The REIT, which was formed in March 2008, derived most of its $72.6 million in revenue last year from its seven properties in Honolulu, one of the healthiest office markets in the United States.

Source: PBN

Downtown Honolulu office market stays flat

Demand for office space in downtown Honolulu is expected to remain flat or negative this year, with business possibly picking up in 2011.

The weak demand for space will be magnified by several large blocks of office space that will become vacant, according to the Honolulu office market report for the fourth quarter of 2009 by Hawaii Commercial Real Estate.

The vacancy rate for Class A downtown space was 11.5 percent at the end of the year. When sublease space is factored in, the rate was 12 percent, the report said.

The report noted that the relocation of one large tenant, [CompanyWatch allows you to receive email alerts with stories related to your companies of interest. <p>You can watch up to ten companies at a time.</p>] Morgan Stanley, to Pacific Guardian Center will create a domino effect. AECOM will move to Bishop Square to fill Morgan Stanley’s former office space, leaving 32,000 square feet vacant in Davies Pacific Center.

The report also noted that several other businesses will close their downtown offices, including Metlife Home Loans, which has a 12,000-square-foot space at Alii Place, and Pacific Health Research Institute, which has 11,500 square feet at Topa Financial Center.

Most demand for office space from new tenants is associated with Honolulu’s rail project and with the federal government, whose spending ranges from military work in Hawaii and Guam to relocating agencies during a renovation of the federal courthouse building and general federal services, the report said. Demand from businesses associated with tourism and real estate remains weak, the report said.

Pacific Office posts $1.2M Q3 loss

Pacific Office Properties Trust, the largest office landlord in Honolulu, reported a net loss of $1.2 million in the third quarter, the company reported Monday.

The loss is slightly worse than a year ago, when the Santa Monica, Calif.-based REIT posted a loss of $1.1 million. The company, which was formed in March 2008, has a portfolio that consists primarily of office buildings in Hawaii and the western U.S. that it acquired from the Shidler Group of Honolulu.

Honolulu businessman Jay Shidler is chairman of Pacific Office Properties and the company is managed by an affiliate of The Shidler Group.

The company reported $17.7 million in revenue for the quarter ending Sept. 30, compared to revenue of $18.5 million in the same period last year.

Rent revenue for the third quarter of 2009 included $10.4 million in rent paid by tenants of its 40 office buildings. Rent revenue is down slightly from $10.8 million last year.

Operating expenses were $24 million for an operating loss of about $6.1 million, compared to $6.2 million a year ago.

The company said its properties were 85.5 percent leased in the third quarter, an improvement over the same period last year when the lease rate was 84.3 percent.

Funds from operations for the third quarter were $862,000, or 5 cents per share, compared to $493,000, or 3 cents per share, during the same quarter last year.

Pacific Office Properties said 60 percent of its holdings are in Honolulu — one of the healthiest office markets in the U.S., which accounted for 73 percent of its operating income in the quarter.

Source: PBN

A&B sells Pacific Guardian Tower for $38M

“The sale of Pacific Guardian Tower is another clear signal of the continued demand for quality, stable income properties in Hawaii. Further, the favorable pricing we realized is a reflection of our efforts over the past several years to transform PGT into one of urban Honolulu’s premier office buildings,” said Norbert M. Buelsing, president of A&B Properties, in a statement.

Pacific Guardian Tower is at the corner of Kapiolani Boulevard and Keeaumoku Street, across from the primary entrance to Ala Moana Center. The 18-story building was built in 1989 and bought by A&B in 2001.

A&B Properties’ commercial property/investment portfolio now consists of 8.4 million square feet of retail, office and industrial space in Hawaii and eight U.S. Mainland states.

Pacific Office Properties sees $1.1M loss in Q2

Pacific Office Properties Trust, the largest office landlord in Honolulu, reported a net loss of $1.1 million in the second quarter, the company reported Wednesday.

It’s a slight improvement over last year, when the Los Angeles-based REIT posted a loss of $1.3 million. The company, which was formed in March 2008, has a portfolio that consists primarily of office buildings in Hawaii and the western U.S. that it acquired from The [CompanyWatch allows you to receive email alerts with stories related to your companies of interest. <p>You can watch up to ten companies at a time.</p>] Shidler Group of Honolulu.

Honolulu businessman Jay Shidler is chairman of Pacific Office Properties and the company is managed by an affiliate of The Shidler Group.

The company reported $18 million in revenue for the quarter ending June 30, compared to revenue of $18.2 million in the same period last year.

Rent revenue for the second quarter of 2009 included $10.6 million in rent paid by tenants of its 40 office buildings. Rent revenue is down from $11 million last year.

Operating expenses were $23.9 million for an operating loss of about $5.8 million, compared to $7.1 million a year ago.

Funds from operations for the second quartter were $1.8 million, or 10 cents per share, compared to $183,000, or 1 cent per share, during the same quarter last year.

Pacific Office Properties (Amex: PCE) said 60 percent of its holdings are in Honolulu — one of the healthiest office markets in the U.S., which accounted for 75 percent of its revenue in the quarter.

Source: PBN

Pacific Office Properties sees $1.1M loss

Pacific Office Properties Trust, the largest office landlord in Honolulu, lost $1.16 million in the fourth quarter, the company reported Friday.

The Los Angeles-based REIT was formed last March and it has now completed three quarters as a publicly traded company. The company’s portfolio consists primarily of office buildings in Hawaii and the western U.S. that it acquired from The Shidler Group of Honolulu.

Honolulu businessman Jay Shidler is chairman of Pacific Office Properties and the company is managed by an affiliate of The Shidler Group.

The company reported $20 million in revenue for the quarter ending Dec. 31, 2008, including $11 million in rent from tenants of its 40 office buildings. Operating expenses were $26 million for an operating loss of about $6 million.

The loss was narrowed to $1.16 million by investments by “minority interests in our operating partnership,” the company said.

Pacific Office Properties (NYSE Alternext: PCE) said 60 percent of its holdings are in Honolulu, which accounted for 70 percent of its revenue in the quarter. It said its leasing activity had increased from the previous quarter from 84 percent leased to 85.2 percent leased.

The company listed $530 million in assets at the end of 2008 and $453 million in liabilities. It said it had no debts maturing in 2009 and $66 million in 2010.

The company recently said it planned to issue up to $350 million in stock to help finance the acquisition of office buildings in Hawaii and on the Mainland.

Source: PBN