I just got off a national real investment call where several interesting properties were being pitched. We also analyzed our 30 most recent sales. Initial rates of return varied by property and region but I did notice three interesting trends: 1) Properties in secondary markets with some credit tenants are returning 7.5% the first year. 2) Properties in stronger markets with less availabilities are averaging about 6.5%. 3) Foreign capital is definitely becoming an important buyer in the west coast markets and specifically for multi family assets.

Waikiki is showing signs of  life for investment. While hotels are having increasing occupancy another timeshare project comes on line. See the attached article for more details.

http://www.staradvertiser.com/businesspremium/20110926__Royal_Garden_now_a_140unit_timeshare_site.html

The inventory of time-share properties in Waikiki got bigger last week after the world’s largest time-share developer completed a 4-year-old plan to convert the former Royal Garden at Waikiki hotel for use by its customers.

Wyndham Vacation Ownership opened the 140-unit property at 440 Olohana St., between Kuhio Avenue and the Ala Wai Canal, to its time-share customers last week, and plans to begin sales of time-share interests at the Royal Garden within the next month.

The conversion resumes a trend of time-share market expansion in Oahu’s urban resort area after the recession. Previous development included the 331-unit Hilton Grand Waikikian, which opened in late 2008, and 195 units at Wyndham’s Waikiki Beach Walk property that opened in 2006.

Major additions are planned by Hilton, which proposes to build two more towers with about 500 time-share units on its Waikiki property. Hilton also bought the shuttered Ohana Islander Waikiki Hotel earlier this year and plans to convert the tower’s 143 one-bedroom suites to time shares by 2013.

Florida-based Wyndham bought the Royal Garden in late 2007 and was set to begin extensive renovations that entailed gutting all rooms and combining some of them into one- and two-bedroom suites.

The recession led to some reassessment of the plan, though Wyndham remained committed to the conversion and kept the property open for hotel rentals during the longer-than-anticipated renovation period.

Now that renovations are complete, Wyndham opened the Royal Waikiki to existing time-share customers. "There’s a high level of expectations from our time-share owner base as far as the quality they expect," said Dusty Tonkin, executive vice president for the Western/Pacific region of Wyndham’s time-share division. "They’re going to have the best. Walking into a unit, it’s going to feel brand-new."

The addition gives Wyndham about 1,500 time-share units at 15 properties in Hawaii. Globally the company has developed 20,500 units for roughly 800,000 owners.

Tonkin declined to disclose prices and annual fees for time-share interests at the Royal Garden. Tonkin also declined to disclose how much renovations cost.

Wyndham spent $54 million converting the 195-unit Ohana Reef Towers hotel at Waikiki Beach Walk into time shares. That project is nearly sold out.

According to property records, Wyndham paid $43 million to acquire the Royal Garden from private investment firm Jupiter Holdings Group.

The 25-story tower was once known as the Pleasant Hawaiian Hotel and had 220 rooms, though a prior owner sold about 80 rooms to individual buyers as resort condominiums, reducing the number of units acquired by Jupiter and Wyndham.

Another sign of continued demand for our Hotels in Hawaii. See the attached link for more detailed information.

http://www.bizjournals.com/pacific/news/2011/09/23/hawaii-hotel-rates-rise-by-7.html?ana=e_vert

Hawaii hotel occupancy rose by more than 3 percent last week while average room rates went up by 7 percent, according to a report by Hospitality Advisors LLC and Smith Travel Research  .. .

Statewide, hotels in Hawaii were 75.8 percent occupied during from Sept. 11-17, a rate that was 3.3 percent higher than the same week in 2010, the report said.

The average daily room rate statewide was $175.33, which was a 7 percent boost over the same week last year.

In our last two properties offered for sale here in Hawaii we have experienced great interest from buyers from Korea. While many of the buyers want to spend more time in the islands there is another twist to this buyer group. The Koreans are interested in major construction projects here in Hawaii. In the first half of this year we met with many groups doing "due diligence" on coming to Hawaii to build large scale resort projects. Specifically they are interested in Hotels in Hawaii and golf courses in Hawaii. These groups are looking at long term development and holding periods and starting with a minimum of 100 Million dollars investment in commercial real estate in Hawaii.

In Hawaii there have been 75 investment property sales over 1 million
dollars in the period from January thru June. Sales volume was 438
million for Hawaii commercial property sales. This is a very similar
number of sales to 2010.

Sales volumes are definitely up over the past six months across the US.
Surprisingly,
17 percent of all the sales across the country are characterized as
distressed
sales. In Hawaii the percentage of distressed sales is much… much
lower. There were approximately 5 transactions or 6 percent of our sales
are characterized as distressed sales.
Colliers was the 5th busiest investment sales brokerage company across
the
U.S.