Archive for the ‘Investments’ Category

Where are we in the Hawaii Commercial Real Estate investment cycle?

August 17th, 2010 No Comments
Many seasoned investors know that the commercial real estate market is difficult.  We did almost forget that over the last extended period of prosperity.  If you think of the cycle as either a side wave with crests and valleys or as a clock, peaking at noon and hitting the bottom at 6 p.m., you are likely to do well with your investments in commercial real estate.  Key to making money over the past five cycles has been to predict the upswing.  It doesn’t need to be an exact science.  One of our clients says that anywhere in the bottom third of the cycle is a good time to invest.  That same client also stops investing when they believe we are in the top third of the cycle.  Many clients today feel that some of the best buys that we’ve seen in the bottom of the cycle may be defined as a period during 2009.  If you remember back to the uncertainty in the market and how people were holding onto cash, you will note that the few that spent equity dollars actually received very strong returns.  I believe we are still in the bottom third of the cycle, but probably on the way up.
If you are looking to invest in Hawaii commercial real estate, pick the time when you believe we are 12 to 24 months from a strong market, meaning increase in occupancies and strong capital availability, and invest at that point in time on the upswing.

Many seasoned investors know that the commercial real estate market is cyclical.  Although, we almost forgot this fact over the last extended period of prosperity.

If you think of the real estate cycle as either a side wave with crests and valleys, or as a clock, peaking at noon and hitting the bottom at 6 p.m., you are likely to do well with your investments in commercial real estate.

They key to making money over the past five cycles has been to predict the upswing.  It doesn’t need to be an exact science.  One of our clients says that anywhere in the bottom third of the cycle is a good time to invest.  That same client also stops investing when they believe we are in the top third of the cycle.

Many clients today feel that some of the best buys that we’ve seen in the bottom of the cycle may be defined as a period during 2009.  If you remember back to the uncertainty in the market, and how people were holding onto cash, you will note that the few that spent equity dollars actually received very strong returns.  I believe we are still in the bottom third of the cycle, but probably on the way up.

If you are looking to invest in Hawaii commercial real estate, pick the time when you believe we are 12 to 24 months from a strong market, meaning increase in occupancies and strong capital availability, and invest at that point in time on the upswing.

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Posted in Articles, Hawaii Economy, Investments, hawaii commercial real estate Tags: , ,

A new way to buy Commercial Real Estate in Hawaii

August 10th, 2010 No Comments

There is a new way to buy commercial real estate in Hawaii. One of the major trends we’re seeing here in Hawaii, and in investment real estate, is off-market transactions. It is important to watch the market carefully, look for signs of various types of properties that may be for sale in your neighborhood and look for motivated sellers. We’ve recently seen two major transactions occur on properties that had been lingering on the market for years. They were taken off the market about 18 months ago, and the buyers of these properties contacted the sellers and were able to make the right deal at the right time, paying cash for these properties.

Our advice is to watch the market carefully, hunt after the properties that you’re really interested in, and make offers aggressively when you see something you want that you can close quickly and efficiently.

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Posted in Articles, Investments, Off Market Properties Tags: , , , ,

Office Buildings in Hawaii – market is starting to rebound

August 3rd, 2010 No Comments
With the closing today of the sale for Bishop Square (usually described as the best office complex in Honolulu), it can be said that the market for the purchase of office buildings in Hawaii is strong again.  There was strong bidding for this asset which was openly marketed.  There were several established bidders and a couple of major national office building owners looking to enter the Hawaii market who were competing for this asset.
The purchase of this property at roughly 50% of replacement costs will be a good buy for this buyer and allows them to control a major portion of the market place in downtown Honolulu for office buildings.  This buyer was well positioned and had put their ducks in line for a purchase like this in 2009.  By first addressing any existing building and issues as the recession came on, and then building liquid capital and credit lines to make strategic and opportunistic buys while the market was in the lower range of it’s natural variations.
We expect to see continued strong interest for quality office buildings in Honolulu that do come to market.  There are two other office complexes under contract at this time on Oahu that will be major indicators of current value in the marketplace.
Mark D. Bratton
Vice President
Colliers Monroe Friedlander
220 S. King Street 18th Floor
Honolulu HI 96813
Tel 808.523.9708
email mark@colliershawaii.com
www.markbratton.com
www.colliershawaii.com

bishopsquare

With the closing of the sale for Bishop Square (usually described as the best office complex in Honolulu), it can be said that the market for the purchase of office buildings in Hawaii is strong again.  There was strong bidding for this asset which was openly marketed.  There were several established bidders and a couple of major national office building owners looking to enter the Hawaii market who were competing for this asset.

The purchase of this property at roughly 50% of replacement costs will be a good purchase for this buyer and allows them to control a major portion of the marketplace in downtown Honolulu for office buildings.  This buyer was well positioned and had put their “ducks in line” for a purchase like this in 2009.  By first addressing existing building issues as the recession came on, they built liquid capital and credit lines to make strategic and opportunistic buys while the market was in the lower range of its natural variations.

We expect to see continued strong interest for quality office buildings in Honolulu that do come to market.  There are two other office complexes under contract at this time on Oahu that will be major indicators of current value in the marketplace.

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Posted in Articles, Hawaii Economy, Hawaii Office Properties, Investments, Recent Investment Sales Tags: , , ,

Commercial real estate financing in Hawaii – take a look at your property

June 23rd, 2010 No Comments

Recently, we’ve been assisting clients with refinancing their Hawaii investment properties.  As lenders are getting tougher on their underwriting criteria, they’re also getting tougher on property conditions.  If you are contemplating refinancing or selling your property, you should take a good, hard look at and around the property, just as a buyer, appraiser or an inspector would do.

Recently, we had a situation where a lender sent a team out from the mainland.  After offering a term sheet on the property, the lender rescinded the offer to loan because of deferred maintenance on the property.

The elements are very tough on our properties here.  We need to constantly maintain them, but probably take an even tougher look at the properties and their conditions at sale or financing times, so they can present in the best possible light.

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Posted in Articles, Investments Tags: , , ,

Under the Radar of Hawaii Commercial Real Estate

June 21st, 2010 No Comments

We are starting to notice more and more activity in the marketplace today here in Hawaii.  A number of those deals are happening offline, off market, and before the general public has a chance to see them.

In recent conversations with my clients, we have discovered a ground lease that says ‘Sold’ and also an office complex on the west side, which will be closing in the next few days.  Both of these are market rate caps or investment returns for the owners, and will provide substantially higher returns today than what was provided for buyers 24 months ago.

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Posted in Articles, Hawaii Office Properties, Investments, Recent Investment Sales Tags: , , ,

Hawaii Shopping Center sells for near 10% return

May 17th, 2010 No Comments
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.
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Posted in Articles, Hawaii Economy, Hawaii Shopping Centers, Investments, Recent Investment Sales Tags: , , , , , , ,

Pearlridge Shopping Center in Hawaii is up for sale

May 14th, 2010 No Comments
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.

With the lack of capital in the marketplace we expect that the buyer will demand a high rate of return and feel that at this low point in the market it will be rewarded handsomely.
For more information, please see the article from Pacific Business News:
Pearlridge Center up for Sale
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Posted in Articles, Hawaii Shopping Centers, Investments Tags: , , ,

Commercial Real Estate Loans in Hawaii with 75% to 80% loan to values

May 12th, 2010 No Comments

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.

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Posted in Articles, Hawaii Economy, Investments Tags: , ,

Distressed Property in Hawaii sells just before confimration sale

May 4th, 2010 No Comments

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.

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Posted in Articles, Distressed Properties, Foreclosures, Hawaii Industrial Properties, Investments, Recent Investment Sales Tags: , , , ,

Macadamia orchard sold on the Big Island

December 3rd, 2009 No Comments

A 736-acre macadamia nut orchard in Keaau on the Big Island has been sold to Geyser Keaau Hawaii LLC, a unit of California-based Geyser Holdings, for undisclosed terms.

Geyser is not getting into farming per se, said Mark Bratton, a vice president at Colliers Monroe Friedlander.

“With an in-place farming and nut purchase contract, this is a great asset requiring minimal site management by the new owner,” he said in a statement.

Mauna Loa Macadamia Nut Co., a subsidiary of the Hershey Co., will buy the orchard’s output.

It is a “net lease deal” in which the property is leased by an operator and Geyser will be collecting rent, which “goes up a bit” every two years, Bratton said.

The orchard was sold by Keaau Macadamia Land LP and Roland and Eleanor Herberg of San Diego for estate planning reasons, Bratton said.

The purchase expands Geyser’s portfolio of commercial real estate, primarily in resort retail and hospitality, to more than $400 million.

Its Hawaii holdings include Poipu Shopping Village on Kauai and an interest in King Kamehameha’s Kona Beach Hotel on the Big Island.

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Posted in Hawaii Industrial Properties, Investments, News Tags: , ,
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