commercial real estate

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

commercial real estate

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

commercial real estate

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

commercial real estate

A&B Properties Acquires Kailua-Kona Shopping Center

Acquires Favorably Priced, Well-Located Center with 1031 Proceeds

HONOLULU, Apr 12, 2010 –A&B Properties, Inc., the real estate subsidiary of Alexander & Baldwin, Inc.(NYSE:ALEX) (“Company”), announced today that it has acquired Lanihau Marketplace (“Lanihau”), an 88,300 square-foot neighborhood shopping center in Kailua-Kona, on the Big Island of Hawaii. A&B Properties previously sold the center to its current owner in 2006. The Lanihau acquisition represents the Company’s third improved property acquisition in Hawaii, and sixth overall, in the past 12 months.

“We continue to take advantage of favorable market conditions to expand our Hawaii improved property portfolio with the acquisition of Lanihau Marketplace,” said Norbert M. Buelsing, president of A&B Properties. “We sold Lanihau at a good point in the market cycle, but we’ve always liked the center. Lanihau remains a very popular shopping destination for the Kailua-Kona community – as demonstrated by its 99 percent occupancy and strong, stable long-term tenants, including Sack N Save, Longs Drugs, Bank of Hawaii and American Savings – and we are fortunate to have this opportunity to add this property back to the portfolio.” Lanihau was acquired in a 1031 exchange transaction, using proceeds from earlier dispositions.

Located along the Big Island’s west coast in the heart of Kailua-Kona’s regional retail center, Lanihau is ideally situated at the intersection of Queen Kaahumanu Highway and Palani Road, one of the busiest intersections in Kona.

With the acquisition of Lanihau, A&B Properties’ commercial property/investment portfolio consists of 8.4 million square feet of retail, office and industrial space located in Hawaii and eight U.S. mainland states. Additional information about A&B Properties, Inc. may be found at its web site: www.abprop.com.

About Alexander & Baldwin: A&B is headquartered in Honolulu, Hawaii and is engaged in ocean transportation and logistics services through its subsidiaries, Matson Navigation Company, Inc., Matson Integrated Logistics, Inc. and Matson Global Distribution Services; in real estate through A&B Properties, Inc.; and in agribusiness through Hawaiian Commercial & Sugar Company and Kauai Coffee Company, Inc. Additional information about A&B may be found at its web site: www.alexanderbaldwin.com.

Statements in this press release that are not historical facts are “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement.These forward-looking statements are not guarantees of future performance.This release should be read in conjunction with our Annual Report on Form 10-K and our other filings with the SEC through the date of this release, which identify important factors that could affect the forward-looking statements in this release.

SOURCE: A&B Properties, Inc.

commercial real estate

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

commercial real estate

Servco Pacific wins arbitration on HRPT rent

Servco Pacific recently won an arbitration over the rent it pays for its Mapunapuna auto dealership, and the decision may set a new standard favorable to tenants of Hawaii’s largest industrial landlord.

The downturn in the economy may end up helping even more of the tenants as the sluggish commercial real estate market pushes land values down.

Servco’s arbitration with Newton, Mass.-based HRPT Properties Trust for its 9.6-acre lot on Pukoloa Street in Mapunapuna was confirmed in court this month for $5.26 per square foot annual rent, or $2.2 million per year, for 10 years.

Servco, the state’s largest auto dealer, had been paying $2.95 a square foot. HRPT wanted Servco to pay $7 plus 4 percent increases each year for 10 years, putting Servco’s annual rent at $4.2 million by the end of the lease.

Citizens for Fair Valuation — a group of about 20 Mapunapuna businesses, including Servco, that formed several years ago to oppose HRPT’s effort to dramatically raise rents — sees the award as a victory, since the amount was far less than what the landlord originally sought.

But HRPT spokesman Tim Bonang noted that Servco’s new rent reflects a 78 percent increase over what it had been paying.

“I think the fact that the Servco arbitration still came out at close to an 80 percent increase is where the market is right now,” Bonang said. “At the end of the day, absent any legislative interference, our rental rates have been driven by the market. For better or worse that’s the way the agreements have been set up.”

Servco, whose executives declined an interview request from PBN, was the first tenant to complete arbitration with HRPT. The process can take as long as six months, depending on the availability of arbitrators and other experts.

At least one other company, Hawaii Select Investments, has gone through arbitration hearings and is waiting for the final ruling from a three-appraiser panel after receiving rent estimates from both sides’ appraisers.

Several other tenants, whose leases expired more than a year ago, are also seeking arbitration but their cases haven’t yet begun.

Hawaii Select, which leases about an acre and a half on Sand Island from HRPT, was initially offered rent of $7 per square foot with 3 percent annual step-ups, according to the company’s attorney, Bill Byrns.

Hawaii Select’s appraiser determined the annual rent should be $4.45 per square foot, he said.

“The offer they made to my client without step-ups was $10.25,” said Byrns, who represents three other HRPT tenants waiting to go through arbitration. “Then their appraiser comes in at $6.48, way below what their offers were.”

The market may end up pushing rents down further.

A recent ground rent renegotiation in the Bougainville area of Honolulu, which is zoned for industrial mixed-use, valued the land at $66 per square foot.

That, coupled with the award for the Servco land, which is zoned business-community — which allows for a number of different business activities — points to values for the industrial-zoned land in metro Honolulu of $45 to $50 per square foot, said Mark Ambard, president of Ambard & Co.

HRPT paid $50 per square foot for 220 acres of Damon Estate land in Mapunapuna and Sand Island in 2005. It also owns about 200 acres at Campbell Industrial Park.

Ambard expects prices for the industrial market on Oahu to drift downward over the next year and then remain flat for another three to four years.

“It’s purely a reflection of the economy,” Ambard said. “I don’t see any turnaround until 2014 at the soonest.”

More than a dozen businesses going through arbitration had rent resets due on Jan. 1, 2009, or Jan. 1, 2010. A majority of the leases in Mapunapuna come up for reset in 2012.

Source: PBN

commercial real estate

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

commercial real estate

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

commercial real estate

A&B Properties buys Waipio Shopping Center

Honolulu-based A& Properties, the real estate arm of Alexander & Baldwin (NYSE: ALEX) announced Tuesday that it bought the 113,800-square-foot neighborhood center in Central Oahu.

Financial details were not disclosed.

“The Waipio Shopping Center is the second property A&B has acquired in the past two weeks, in line with our core strategy of redeploying 1031 tax-exchange proceeds from earlier dispositions into quality, commercial properties with favorable growth prospects,” said Norbert M. Buelsing, president of A&B Properties, in a statement. “First developed in the mid-1980s and recently expanded, it is the primary retail and office center of the master-planned community of Waipio.”

The shopping center is anchored by Foodland Supermarket and includes Outback Steakhouse, Big City Diner, Taco Bell and Pizza Hut.

A&B Properties’ commercial property/investment portfolio now consists of 8.6 million square feet of retail, office and industrial space in Hawaii and eight U.S. Mainland states.

commercial real estate

A & B buys two California warehouses

Alexander & Baldwin Inc. has purchased two distribution warehouses in Fullerton, Calif., for an undisclosed price.

The company, through subsidiary A&B Properties Inc., said the buildings with a combined 119,400 square feet of leasable area in the Northpoint Commerce Center industrial park are fully occupied by a records management company and food service distributor.

The purchase is A&B’s seventh industrial real estate acquisition in the last two years, bringing the firm’s commercial property investment portfolio to 8.5 million square feet of retail, office and industrial space in Hawai’i and eight Mainland states.

Source: HNA

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