Distressed Property

General Growth rejects Simon’s $10B offer

General Growth Properties Inc., owner of Honolulu’s Ala Moana Center, has rejected a $10 billion offer to sell to rival Simon Property Group.

But the nation’s second-largest mall owner did not reject outright Simon’s overtures and indicated it would consider being acquired as part of its efforts to emerge from Chapter 11 bankruptcy protection. Indianapolis-based Simon is the nation’s largest mall owner.

General Growth CEO Adam Metz, in a letter to rival Simon CEO David Simon, said the company remains committed to restructuring its debt but will not allow Simon to derail that process.

Metz said Simon’s offer “is not sufficient to preempt the process we are undertaking to explore all avenues to emerge from Chapter 11 and maximize value for all the company’s stakeholders.”

Chicago-based General Growth made the letter public in a press release issued Tuesday evening in response to Simon’s decision to publicize its acquisition offer. General Growth filed for bankruptcy protection in April 2009.

Simon, which owns the Waikele Premium Outlets on Oahu, said Tuesday it has offered to acquire General Growth for $10 billion, including $9 billion in cash. The offer would give General Growth creditors $7 billion in consideration.

Shareholders would get more than $9 a share, including $6 a share in cash.

General Growth owns or manages more than 200 regional shopping malls in 43 states, including Ala Moana Center, Ward Centre, Ward Entertainment Center and Ward Gateway Village in Honolulu and Prince Kuhio Plaza in Hilo. The company also manages Windward Mall 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.

Source: PBN

FOR SALE: Makena resort

The Maui beach and golf property has recovered from a near shutdown last year

The Makena Beach and Golf Resort will be up for sale as early as April after recovering from a near shutdown last year.

Maui Circuit Court Judge Shackley Raffetto entered an order of foreclosure yesterday for the property, and has appointed a commissioner to sell the resort to satisfy the unpaid mortgage of about $192 million.

Formerly the Maui Prince Hotel, the resort received a reprieve from a shutdown in September after it went into receivership and had a new management company in place.

Since then the resort’s performance has improved “substantially,” said Kelly Lewis, general manager. “We are excited about the improvements we have been able to offer in guest experience and look forward to announcing our new restaurant and lounge offerings next month. Our goal is for this transition on the ownership side to be completely seamless for our guests.”

There are no expected changes for employees or visitors. The property has been managed by Benchmark Hospital International since September, with attorney Miles Furutani overseeing the receivership.

The turnaround can be attributed to more aggressive and effective marketing, said William Kennison, director of International Longshore and Warehouse Union Local 142 on Maui.

“We’ve been very happy with Benchmark,” he said. “They have a good marketing arm, and they’re able to attract more tourists. I think the employees can see it, too.”

Kennison said the union’s more than 250 employees at the property have been on pins and needles waiting to see what the outcome would be.

“We’re hopeful that they will maintain the hotel as well as keep Benchmark as the management team,” Kennison said.

Raffetto appointed Honolulu-based real estate developer Chris Lau as commissioner for the foreclosure sale. Lau, vice chairman of Towne Development of Hawaii, must now take an inventory of all property.

Lau is required to advertise the auction once a week for three weeks, the last publication being no less than 14 days before the sale. The auction is tentatively scheduled to take place sometime in April on the steps of Maui Circuit Court.

“In order to qualify for the bid, they would need to have 10 percent of the bid amount on hand at the time of the auction,” Lau said. “I believe we can have an auction by April.”

Wells Fargo, the trustee of the mortgage lender for the resort, petitioned for receivership and new management to keep the asset open, after owners Everett Dowling Co. and a Morgan Stanley real estate fund walked away from their investment. An additional $227 million of debt has not been secured by the mortgage.

“We have complete confidence in Mr. Lau and look forward to concluding this process over the coming months,” said Barry Sullivan, attorney for Wells Fargo Bank. “Thanks to the work of Benchmark and the receiver appointed last September, resort performance has not only stabilized, but we see very positive momentum, and we look forward to that continuing.”

After the auction is held, the court will select the winning bidder. Closing on an asset of this size typically takes another three to four months.

Source: SB

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

General Growth files reorganization plan

General Growth Properties said on Wednesday that it has filed its plan of reorganization with the bankruptcy court in the Southern District of New York for the 92 regional shopping centers, office properties, community centers and related subsidiaries associated with approximately $9.7 billion of secured mortgage loans.

That’s more than the previously announced agreements in principal to restructure $8.9 billion of mortgage loans. The company said that is because it has reached additional agreements in principal with certain secured mortgage lenders since the prior announcement on Nov. 19.

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.

The reorganization plan provides that all undisputed claims against the emerging debtors for pre-petition goods and services be paid in full.

“We are extremely pleased to take this important step of filing the plan of reorganization for these debtors,” said Thomas H. Nolan, Jr., president and COO of GGP, in a news release. “Our successful completion of agreements in principal with additional mortgage lenders shows our continued progress. We will continue to work with our other secured mortgage lenders and are hopeful that we will reach additional consensual agreements quickly.”

Confirmation of the reorganization plan is set for Dec. 15.

Source: PBN

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

Maui Land & Pine to cease pineapple operations

Maui Land & Pineapple is quitting the pineapple business after 97 years and will lay off up to 285 employees.

The Kahului-based company (NYSE: MLP) announced Tuesday a restructuring plan between its two operating companies, Maui Pineapple Co. and Kapalua Land Co. The new direction will focus on Kapalua Resort.

Maui Land & Pineapple said it will immediately stop planting pineapple and will cease pineapple operations by the end of the year. That will put Maui out of the pineapple business and leave only a small pineapple operation run by Dole Food Co. on Oahu growing one of Hawaii’s signature crops.

The announcement comes just days after the company reported a $25.5 million loss for the third quarter.

“Unfortunately, despite our exhaustive efforts to revitalize the pineapple business over the last few years and efforts to keep agriculture jobs on Maui, market conditions have not improved and pineapple operations at MPC are not financially sustainable,” said Warren Haruki, chairman and interim CEO of ML&P, in a statement.

Haruki said MPC has lost $115 million in the agriculture business since 2002.

“Realizing that these losses could no longer continue, we spent the last year exploring options to keep pineapple operations going on Maui,” Haruki said. “Despite our efforts, it became clear that there were no other financially viable options. The painful decision to close pineapple operations at MPC after 97 years was incredibly difficult to make, but absolutely necessary. We realize this ends a significant chapter in Maui’s history — an important part of many lives, over many generations.”

The company has issued a notice of termination to employees at the affected Kapalua Land Co. divisions and at MPC under the federal Worker Adjustment and Retraining Notification (WARN) Act and the Hawaii Dislocated Workers Act. The company said it expects up to 133 employees will be offered employment at partner companies, while up to 285 employees will be laid off, primarily at MPC.

Maui Land & Pineapple currently employs 624 people.

Kapalua Land Co. will make changes to its business model and will streamline operations to focus on the resort. The company will find operators to manage select assets of the resort, including a hotel/condominium management company to manage the Kapalua Villas; leasing equipment and licensing operations of Kapalua Adventures to a zipline activity company; choosing an operator to provide shuttle service and resort security services; and seeking a new operator at Kapalua Farms to continue organic farming and to lease its equipment and operations.

Earlier this year the company eliminated 100 jobs at its Kapalua Resort and corporate offices in an effort to cut costs.

In July 2008, the company cut 274 jobs — 204 of which were at Maui Pineapple Co. — as a result of the economy.

Maui Pineapple Co. closed its cannery in June 2007 and has since struggled with fuel costs and other operating expenses.

ML&P was founded in 1909 as the Keahua Ranch Co., which became the Haleakala Pineapple Co. in 1929 before becoming the Maui Pineapple Co. in 1932. The company introduced its extra-sweet Maui Gold pineapple in 2005, and a year later opened a $24 million multipurpose processing facility adjacent to the now-closed cannery in Kahului.

At its peak in 1962, the company processed 250,000 tons of pineapple annually. Last year, Maui Pineapple Co. harvested 92,000 tons of the fruit and today has just 2,000 acres under cultivation.

Shares of ML&P stock closed up 4.3 percent to $6.52.

Kaka’ako condominium tower sold

The partially built Moana Vista condominium tower in Kakaako, makai of McKinley High School, has been renamed Pacifica by a development firm that completed its purchase of the stalled project yesterday.

San Diego-based OliverMcMillan said it expects to resume construction early next year and will give buyers who previously held reservations to buy units from the original developer priority to buy units in the revamped project.

OliverMcMillan has not set prices for Pacifica.

Some changes to the 46-story tower are planned besides the name, including exterior design, unit interiors and the addition of resort-level amenities. The number of units may change slightly from the 492 originally planned.

OliverMcMillan acquired the project for an undisclosed price from original developer KC Rainbow II LLC, which ran into financing trouble late last year.

That led to construction being halted in November and a foreclosure lawsuit filed by general contractor Hawaiian Dredging Construction Co.

The sale averted a foreclosure auction of the project, which is about 40 percent complete, with the tower’s structure rising up to the 26th floor.

OliverMcMillan is a 30-year-old privately held firm that has developed a variety of residential and commercial real estate projects.

The company said it has $2 billion worth of projects in its development pipe-line, including a $700 million urban redevelopment plan in Houston, residential lofts in San Diego and a mixed-use project involving a historic winery in Ontario, Calif.

Source: HNA

Lender takes Fairmont Orchid

A lender quietly acquired The Fairmont Orchid Hawaii in lieu of foreclosure earlier this year, giving the luxury hotel at Mauna Lani Resort on the Big Island its fourth different owner in seven years.

An affiliate of New York-based lender Barclays Capital in June repossessed the 540-room hotel from Westbrook Partners LLC, a Boston-based real estate investment firm that bought the 32-acre oceanfront property for $250 million in 2005, property records show.

A spokesman for Barclays Capital declined to comment. The company is expected to keep the property at least until the local hotel and real estate markets improve.

The deal hasn’t affected the operation of the hotel, which is managed under a long-term contract by Fairmont Hotels & Resorts Inc. But it adds to a growing number of Hawai’i hotels being taken over by lenders amid the economic downturn that has hurt the state’s tourism industry and investors that paid hefty prices for hotels in the past few years.

“I expect there’s going to be more of that,” said Joseph Toy, president of local tourism industry consulting firm Hospitality Advisors LLC. “Clearly the distressed hotel market is very active.”

Toy said the economic downturn was so sharp that even sophisticated hotel buyers who had significant capital reserves are having problems keeping their mortgages out of default.

Westbrook bought the Orchid in December 2005, and 18 months later had listed the property for sale through brokerage firm Eastdil Secured LLC. The offer attracted significant interest, but didn’t result in a sale.

The $250 million paid by Westbrook was a record price for the hotel, and was almost twice what the previous owner paid.

Westbrook bought the hotel from Fairmont, which had paid $140 million in 2002 to acquire the hotel from Los Angeles-based investment firm Colony Capital LLC, which in 1995 paid $75 million for the hotel then known as the Ritz-Carlton Mauna Lani.

Ritz-Carlton Hotels and a Japanese partner, ONKD Inc., spent $175 million to develop the property, which opened in 1990.

Other Hawai’i hotels that have faced mortgage trouble recently include the Ilikai in Waikiki, which was acquired by a lender through foreclosure in July, and the Maui Prince Hotel, which is under receivership after a consortium of lenders sued to foreclose on the property last month.

Source: HNA

Maui Prince Hotel to Remain Open

The Maui Prince Hotel in Hawaii will remain open with a new management company in charge, according to an attorney for the lender that foreclosed on the Makena Resort last week, according to Pacific Business News. But the threat has been averted and the hotel has hired a new management company, Barry Sullivan, the attorney for lender Wells Fargo Bank, said Wednesday.

The loan was transferred to special servicing on 12 June 2009 due to imminent default, according to the aforementioned Fitch Ratings report. The borrower expects to keep the loan current by funding any operating shortfalls. The loan was scheduled to mature on 9 July 2009; however, the borrower advised the lender that they are not in a position to continue under the current capital structure and will not be exercising an extension of the maturity as contemplated in the loan agreement. The borrower is seeking to restructure the loan and is speaking to its mezzanine lenders about a possible purchase. The debt service reserve established at issuance has been depleted. The servicer conducted a property inspection on 7 May 2009, which resulted in a good rating.

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