investors

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

investors

Developer owes money to Hawaii hotel’s high bidder

The connection between Unity House and developer Brian Anderson goes deeper than its high bid this week of $8.5 million at a foreclosure auction for The Lotus at Diamond Head hotel.

Anderson owes the nonprofit organization several million dollars from a 5-year-old loan, and Unity House was in talks earlier this year to buy the former W Honolulu hotel from Anderson as a means to settle the debt.

“We initially got onto this because Brian owed us money,” said Unity House Chairman Jim Boersema. “We considered a number of options and one of them was the W hotel.”

The money owed is more than $4.5 million, according to documents from a lawsuit Unity House filed in June 2008 that is still pending in 1st Circuit Court.

Unity House was unable to work out a final agreement between Anderson and First Hawaiian Bank and Central Pacific Bank, which held mortgages on the property totaling more than $10 million.

After the first foreclosure auction, scheduled for June, was delayed, Unity House took another look at attempting to acquire the hotel.

“We basically decided a few weeks ago,” Boersema said. “We’ve liked the property; we think in the long run it’s going to be a good investment.”

Anderson’s company, Anekona W, purchased the hotel, which sits on leased and fee-simple land on Kalakaua Avenue’s Gold Coast, from Colony CSR Investors LP on Aug. 17, 2004, nearly five years to the day before Tuesday’s auction.

First Hawaiian Bank filed for foreclosure on the property in October, saying it was owed more than $4.9 million in principal, fees and interest from a $5 million loan. Central Pacific Bank also is owed about $5 million on a second mortgage. The sale to Unity House must be confirmed at a hearing in about 30 days, at which time other parties could still outbid the nonprofit.

The hotel was worth between $10.2 million, according to an appraisal ordered by Central Pacific Bank, and $16 million, the figure in an appraisal ordered by Unity House, which assumed the conversion of the 51 rooms into condominium hotel units.

Unity House had loaned Anderson $2.5 million in 2004, with an interest rate of 30 percent, due in March 2006, according to court documents.

In March 2008, the two sides had reached a settlement agreement, but the lawsuit said that Anderson, identified in the original complaint as John Doe, and his wife, Joan, had “failed and refused to pay the principal and all the accumulated interest” to Unity House.

In November 2008, the two sides reached a settlement compromise in which Anderson would turn over six condominium units on the 25th floor of the Ilikai by March 31 in lieu of paying back the loan. If the condos were not conveyed by that date, then Unity House would seek a judgement against the Andersons for $4.5 million plus 10 percent interest, according to court documents.

But the Ilikai itself was in foreclosure, and in May, New York lender iStar Financial took back the 203 residential units and the 16 commercial units after bidding $51 million at a confirmation hearing for the foreclosure auction. Anderson also lost the Kauai Beach Resort to iStar Financial through foreclosure a couple of weeks later.

Unity House did not receive title to the Ilikai units, and in June, the Andersons were named in the lawsuit, replacing the unnamed John Does.

Last week, the Andersons were named in an unrelated lawsuit filed by Pacific Rim Bank alleging they, one of their sons and a company called Lanihau Properties LLC owe nearly $1.6 million in principal, interest and fees from a $2 million line of credit opened on Aug. 25, 2006.

Anderson said Tuesday he had not seen the lawsuit and could not comment on it. He did not immediately return a call Wednesday seeking comment on the Unity House bid and lawsuit.

Anderson’s company, Anekona W, filed for Chapter 11 bankruptcy in June in an effort to prevent the Waikiki hotel from being sold at a foreclosure auction that same month. In July, he retained a broker to market the property for $14 million, but the Chapter 11 case was dismissed a week and a half later after the U.S. Trustee argued that the two mortgages on the property would leave little for other creditors.

Earlier this month, Anderson hired a new bankruptcy attorney and, less than two hours before the auction’s scheduled time on Tuesday, attempted to have the Chapter 11 case reinstated and the auction halted, claiming there was a buyer interested in purchasing the notes from the two banks

After a brief deliberation, U.S. Bankruptcy Judge Robert Faris declined to grant Anderson’s motions, saying that the time between the foreclosure auction and the confirmation hearing would give an interested buyer plenty of time to step in and purchase the hotel.

Unity House, which was founded in 1951 by Arthur Rutledge, has approximately 10,000 beneficiaries, mostly members and retirees of the UNITE H.E.R.E. Local 5 hotel and restaurant workers union and the Hawaii Teamsters, Local 996.

The Lotus at Diamond Head, which is managed by Castle Resorts & Hotels, is a non-union operation.

Boersema said the hotel likely would continue to be managed by Castle, but it’s unclear whether the hotel’s employees would become organized under Local 5 if Unity House prevails at the confirmation hearing.

“We have to actually obtain title to it and then look at all the various options for that property,” he said.

Source: PBN

investors

Bay View Golf Park Facing Foreclosure

Central Pacific Bank is pursuing foreclosure against a local partnership that bought Bay View Golf Park three years ago, though the owners of the Kane’ohe golf course hope they can resolve the loan default and retain the property.

The financial trouble has hurt plans by owner KBay LLC to redevelop half of the 18-hole course with a mix of 300 affordable and market-priced homes, a bowling alley, batting range, lodge and community center. But the golf course, driving range, restaurant and miniature golf facilities remain open.

Greg Hong, one of KBay’s principals, said he couldn’t comment about the mortgage troubles or development plan because the owners are trying to work with Central Pacific to avoid foreclosure.

The bank filed its foreclosure suit last month against KBay and its principals Hong, Michael Nekoba and Thomas Enomoto.

According to the suit, KBay borrowed nearly $6.9 million in March 2006 that helped the group buy the property for $11 million. The loan, Central Pacific said, matured on March 15 and wasn’t paid off by KBay, which owes nearly $7.1 million, including unpaid interest.

The suit is part of a wave of foreclosure cases imperiling commercial property owners who couldn’t refinance their debt in the past year or so because of the financial crisis constraining global credit markets.

KBay’s purchase came near the height of Hawai’i's last real estate investment boom, and three years after another hui of local investors — The Shidler Group, J.D. Watumull and Joe Leoni — bought the distressed golf course for $3.4 million and restarted play there after paying a $1 million property tax delinquency.

KBay’s plan was to spruce up facilities and increase kama’aina play. But the initiative faltered as a series of upgrades, including opening a new restaurant, failed to reverse financial losses and resulted in temporary closures and layoffs.

In a move to salvage the investment, KBay late last year unveiled a proposal to redevelop nine holes for other uses.

The plan, which the developer said had some community support but drew none at a November Kane’ohe Neighborhood Board meeting, involved developing 150 affordable multi-family rental homes for seniors earning between 80 percent and 140 percent of O’ahu’s median income, and 149 market-priced homes.

Though Bay View land is primarily zoned for preservation, the developer sought to use a state law that allows exceptions to zoning controls for housing projects where at least half the units are affordable to moderate-income buyers.

Other parts of the development plan include a 40-lane bowling alley replacing Bay View’s miniature golf course, a multipurpose senior community center, walking trails and a 60-unit lodge for sports teams. Part of Bay View’s two-story driving range was slated for conversion to a baseball batting range.

A wedding chapel and pet mausoleum also were elements in the draft plan that KBay said was subject to change based on public input.

KBay previously said one major benefit to developing half the golf course would be creating a safe public access to an adjacent city sewage treatment plant being taken out of use, allowing the city to convert the property to a dog park or other recreational use.

Another benefit would be expanded access to Waikalua Loko Fishpond, which KBay owns and seeks to sell to the nonprofit Waikalua Loko Fishpond Preservation Society that manages the pond.

KBay had planned to publish an environmental impact statement to address traffic issues, water use, storm water runoff and flooding, but the mortgage troubles have hung up the project.

Source: HNA

investors

Alexander & Baldwin Selling Mililani Retail Center

Alexander & Baldwin Inc. hopes to cash in on upgrades it made to Mililani Shopping Center by selling the mall seven years after acquiring the property.

A&B is asking $55 million for the mall, compared with the roughly $30 million it paid in 2002.

The 180,300-square-foot center is 99 percent occupied with about 50 tenants, according to Colliers Monroe Friedlander, which is marketing the property for A&B.

Mililani Shopping Center was the first of three shopping malls in the Central O’ahu community when it opened in 1970, and is the second-largest mall in the area today.

Honolulu-based A&B said it has made substantial improvements to the center since buying the property from Japan’s Morita Co.

“Mililani Shopping Center is a major retail center in central Oahu, and offers an excellent opportunity for investors interested in expanding or initiating a Hawai’i-based portfolio,” said Norb Buelsing, president of A&B Properties Inc.

Tenants include Ross Dress for Less, 24-Hour Fitness, Blockbuster, GameStop, Starbucks, Jack In the Box, Goodyear Tires, and NAPA Auto Parts. Established local tenants include Foodland Super Market, Bank of Hawaii, First Hawaiian Bank, American Savings Bank, Wahiawa General Hospital, Hawaii USA Federal Credit Union and The Shack Restaurant.

Alexander & Baldwin, through A&B Properties, owns 20 retail, office and industrial sites in Hawai’i and 22 in eight other states. Its Hawai’i portfolio includes the Kunia Shopping Center, Kaneohe Bay Shopping Center and Pacific Guardian Tower on O’ahu, and the Kahului Shopping Center and Maui Mall on the Valley Isle.

Source: HNA

investors

Lehman loan jams up Big Island project

A $105 million loan by Lehman Brothers to pay for development of 5,700 acres of former sugar plantation land on the Big Island is the latest financial deal ensnarled by the Lehman bankruptcy.

With the job unfinished and Lehman’s assets in limbo, the developers have asked a New York bankruptcy court to make a decision on assuming or rejecting the loan.

The borrowers are led by Massachusetts resort developer Alan Worden. If the loan is rejected, Worden wants to be able to seek alternate funding, according to a motion filed Friday in the U.S. Bankruptcy Court in New York. The court has set an April 7 hearing on the matter.

Worden’s group purchased the land in the Big Island’s Kau district in 2006 and had projected it would take three to five years to build out the infrastructure and secure approvals and permits to build a high-end residential development consisting of large homes on “farm” lots. They planned to subdivide and sell the land, which would have an average density of one home per 20 acres.

Lehman Brothers stopped funding the loan after it filed for Chapter 11 bankruptcy protection on Sept. 15, 2008, disrupting the project. Up to that point, the developers had borrowed $43 million of the $105 million, according to the motion.

The motion said that Lehman Brothers, in discussion with the Hawaii borrowers, had indicated that it would reject the loan, but has not done so. That inaction has adversely affected dozens of contractors and other employees who cannot be paid without the Lehman funding, the document said. The project owes at least $335,000 to local workers, according to a declaration filed by Worden.

“Those contractors’ work is essential to obtaining permits for the acquired land necessary to realize its full value,” the motion said. “Lehman’s failure to fund the project’s operating costs has thus severely disrupted the project’s ability to obtain necessary permits and has been so devastating that the Hawaii borrowers’ damages may exceed the amount borrowed.”

Worden is the managing member of Windwalker Hawaii, which is the managing member of WWK Hawaii Holdings, which owns all the interests in the borrowers, WWK Hawaii-Waikapuna, LLC, WWK Hawaii-Moaula, LLC, WWK Hawaii-Honuapo, LLC, WWK Hawaii-Little Honuapo, LLC, WWK Hawaii-House Parcel, LLC, WWK Hawaii-House Parcel 2, LLC, and WWK Hawaii-Naalehu Parcel 1, LLC.

Worden is also founder and CEO of Scout Real Estate Capital, which is based in New York City and Nantucket, Mass., and president of Windwalker Real Estate in Nantucket.

Source: PBN