The Moana Vista was a partially constructed and failed condo project. This development was up to approximately the 20th Floor when constuction was halted. Reportedly, the developer had $65 Million dollars invetsed. Oliver McMillan, a high rise developer, purchased the project for $36 million and is poised to restart constcution.
Hawaii has a high percentage of multi-family properties that are eventually converted to condominiums.
Recently the Kele Center, located on the island of Maui in the city of Kahalui, sold. The Shopping center is approximately 14,820-sq. ft. and sold at a price of $4,925,000. Anchored by Denny’s Restaurants, Super Cuts, Rent-A-Center, and Edward Jones, this well-located community center was a great investment for the new owners. The property is located just outside of the airport and down the road from Borders, Sports Authority, Lowe’s, and Costco. The property sits on a land area of approximately one acre. This Hawaii commercial investment will provide a nearly 10% return to the new owners of this property.
This is another example of a substantially higher rate of return (CAP Rate) than was achievable by investors just a short 24 months ago. While it did take a large equity investment in today’s financing environment, the owners will be rewarded for making a move at this time in the marketplace.
I believe 2009 and 2010 will be looked at as low points in the Commercial Real Estate cycle for Hawaii.
The Pearlridge shopping center and mall is the second largest shopping center in the State of Hawaii. This property has a great tenant mix and is well suited for the trade area it serves. Over the years, the owners and management have done a very good job of juggling tenants and providing an environment where tenants can thrive. The sales per square foot of the center are very high for similar and comparable centers. The mall is anchored by Macy’s, Sears, and a new Bed, Bath & Beyond store (the first one in Hawaii), as well as numerous restaurants.
This shopping center will sell in today’s market. It is located on a ground lease that will deter some investors in the marketplace because of the potential uncertainties of the long-term land tenure.
The past success of the center, the current tenant mix, and the strong, stable performance will attract a new owner to this property.
It is likely that that owner will reinvest in the property, as its last major renovation was over a decade ago.
For more information, please see the article from Pacific Business News:
Pearlridge Center up for Sale
Recently, we have seen the beginning signs of a more rational market in the commercial real estate industry. In the past four weeks, we have seen loan-to-value ratios and debt coverage ratios return to a more fair and balanced level. While these loans are available for better income-producing properties, at this point in the cycle, it signals to us a return to a more level playing field and a point in the cycle which we may see increased transactions activity.
Specifically, we are seeing loans done on improved property with strong income in place with loans at value ratios of 75% and debt coverage ratios back down to 1.25% on the mainland US. With reports of these deals now starting to close and coming in for the past few weeks, we are looking for signs of similar availability with our local banks.
At this point in time, we are aware through our relationships of loans what will be offered for Hawaii properties. Last week, I even received a quote of up to 80% loan-to-value ratio. This will make a major difference in the numbers of potential buyers in the market place.
With lenders obtaining 25% equity investment before their debt investment, this seems like a safe bet for these lenders. Todays overall values are under written to tighter guidlines and will protect lenders adequately.
Wall Street Journal – Fund Returns to the Fray
The attached article is a good summary of what’s happening across the country today in commercial real estate investments in the public sector. As predicted in our annual Certified Commercial Investment Member Forum in January, these funds that have raised billions of dollars are having a hard time spending them and attracting the returns that they promised. A number of these funds were placed 2-3 years ago and will expire this year if not spent on buying commercial and investment real estate.
In Hawaii, we have had less distress than most U.S. mainland cities because there has not been overbuilding. We have not seen many of these funds looking to invest in Hawaii, as they are focused on larger markets and markets with greater distress and foreclosures. The distressed commercial real estate market across the country, although pronounced, has not hit massive numbers of properties. Greater supply was thought to continue to drive prices lower.
This article deals with the fact that some investment managers are being pushed to invest in properties at the moment that could end making marginal investments. The other alternative is to return the money to investors and not obtain the management fees as originally planned.
Attached is an article regarding Safeway’s recent purchase of a new three acre site in the heart of Honolulu’s Commercial Real Estate Market post “Great Recession”. This site formerly housed a Cadillac dealership, which has been closed for approximately the last year. Safeway has an existing store very nearby that was not able to be enlarged, but does very high gross sales. Safeway is paying a price very close to top of the market, even prices that have not been seen in two or three years. At nearly $200 per square foot for the land, this will buoy land prices in the heart of Honolulu at least for the rest of this year. Many of us had thought that land prices would start to drop, but this single transaction shows a very motivated buyer with a known history for strong sales reinvesting in the heart of Honolulu’s population.
A large parcel of industrial property sold in the first quarter of 2010 despite the uncertainty around the ownership of the property. The land area is approximately 59 acres, and the property sold for $12.5MM. The property had been in foreclosure and reportedly, the note had been sold at a small discount off the face value. An investor came in just prior to the confirmation hearing and paid the price to pay off the mortgage. The property is unimproved, and was recently rezoned for industrial use. Most likely, plans include one to ten acre industrial lots with common areas and streets being put in by the new developer.
There was a lot of interest in this property, and we can see why, with a price tag of $4.86 per square foot for the raw, unimproved industrial land, there seems to be a profit for someone. At this price, it should allow for a developer to hold the property for a couple of years, make improvements, and sell the individual lots at a retail price as the market strengthens.
