I checked in on the market today, and found there are 55 shopping centers and retail properties for sale, 42 office buildings, 49 industrial properties, and 7 hotels available for sale over $1 million in the State of Hawaii.
Inventory has been climbing this entire year with a lack of sales and some financial pressure on owners.
Today it was reported that three new restaurants will go under construction and open for business in the next six months in the Honolulu area. The restaurants are as follows: Paparazzi, Ka Restaurant – Pacific Rim Cuisine, and Pablo McGinty’s, a Mexican/Irish restaurant and bar. All three restaurant locations have been closed by other operators within the past year. Located at General Growth Properties Ward Centre, the restaurants are all large space, second floor locations. It’s great to see activity where there were recently dark, papered up windows.
Our California offices also reported an uptick in restaurant operators coming to town, looking for new locations, and willing to invest new capital. This willingness to spend new capital, hopefully, will be an early sign of an uptick in activity in the commercial real estate markets in both locations.
As I was reviewing the investment property sales in Hawaii for the ending of third quarter 2009, I noticed that, year to date, three golf courses have sold. The common thread seems to be that the properties that have sold are somewhat distressed, with sellers having some motivation or reportedly having other debts to pay.
One new Golf Course has just come on the market for sale. The only other “Resort” property that has sold so far this year is a 12-unit hotel in Waikiki. There will be many more resort properties coming to market in the next year.
A San Diego-based developer has salvaged a deal to buy the partially built Moana Vista condominium tower in Kaka’ako, and expects to resume construction early next year.
The firm, OliverMcMillan, has signed a contract to buy the property from original developer KC Rainbow II LLC after paying off a $29.5 million lien filed against the property by general contractor Hawaiian Dredging Construction Co.
The deal calls off a foreclosure sale that had been initiated by Hawaiian Dredging and postponed until Friday.
OliverMcMillan said it expects to receive title to the property at 1009 Kapi’olani Blvd., makai of McKinley High School, by Nov. 2, and resume marketing and sales after making some changes to the 46-story tower designed for 492 units.
“We believe in Hawai’i, and see this project as a great opportunity, which is why we are investing substantial capital in the state,” company CEO Morgan Dene Oliver said in a statement.
OliverMcMillan is a 30-year-old private 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 pipeline, 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.
The firm didn’t disclose the total acquisition price for Moana Vista, which it values at $300 million.
If completed as expected, the acquisition would result in a relatively quick revival of a project that had a strong start three years ago but was derailed by unexpected downturns in the global financial market and the local housing market.
Moana Vista was begun by high-tech entrepreneur and University of Hawai’i graduate Fred Chan, who led KC Rainbow and successfully developed the nearby twin-tower condo Moana Pacific.
In May 2006, 466 people entered a lottery to buy 192 Moana Vista units reserved for owner-occupants. Investors reserved nearly all remaining units available for purchase, and construction funded by Chan began several months later.
But after the local real estate market and economy deteriorated sharply last fall, close to two-thirds of buyers canceled their nonbinding reservations. That prevented KC Rainbow from drawing on a $100 million construction loan late last year after roughly $65 million had been invested in the project, mostly by Chan.
Hawaiian Dredging halted work in November, and filed a foreclosure lawsuit in April after applying a $29.5 million lien to the property.
OliverMcMillan in July had a tentative deal to buy the project, but a sale fell through and a foreclosure auction was scheduled for Sept. 25. More negotiations between OliverMcMillan and KC Rainbow led to the auction being rescheduled for Oct. 2.
OliverMcMillan said it plans to rename the project and make some upgrades where it can. The tower is about 40 percent complete, with the structure rising up to the 26th floor.
KC Rainbow canceled about 175 remaining reservations and refunded deposits. OliverMcMillan plans to resume sales and marketing in early November, and will be contacting people who previously reserved units in the building.
As part of an affordable housing agreement with the state, 124 units are reserved for residents earning no more than 140 percent of Honolulu’s median income.
As the real estate debt market comes to a grinding halt, it is now apparent that many loans that were made should not have been made and were made for amounts greater than the value of the properties that secure them. In the coming years, these owners will need to de-leverage and pay down debt. Specifically, in the commercial mortgage backed securities (CMBS) market, between the years 2010-2012, there is $10 billion dollars of properties in the United States that will need to be refinanced. Hawaii has its fair share of those great non-recourse loans. We are currently talking with clients about strategies to pay off, pay down, or refinance these debt levels. The clients who are best off are in the second wave of financing pools, which are due between 2015 through 2017. These add up to another $375 billion dollars in properties across the country that will need to be refinanced. Many owners have not faced reality yet about the declining values of their properties, and they need to plan ahead to start paying off this debt before it comes due.
