Market Reports

Tag Archives: Hawaii

Investors to look at secondary commercial real estate markets in 2011- Including Hawaii

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A recent investment survey by Korpacz suggests that 2010 was a great year for “core” markets and 24-hour major cities around the globe for commercial real estate investment. We have seen a notable increase in demand for class A properties here in Hawaii but sluggish demand for class B and C properties. With loan rates still low and investors having a strong appetite for “bricks and mortar,” over other types of investments many investors are now heading into secondary or smaller markets. In 2011 investors will start to look at Class B properties and we predict those prices will begin to lift too.

Hawaii has seen a decent market in 2010 for commercial real estate sales and is expected to benefit greatly with more money and more investors, again, looking at the Hawaiian islands for commercial real estate investments.

Hawaii’s Top 3 Investment Properties – 4th Quarter 2010

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Mark’s Top 3 Picks for 4th Quarter 2010:

Off Market Deal:

Approximately 50,000 SF shopping center on Maui

  • Recently changed ownership
  • Some vacancy
  • Very well located, very difficult to reproduce

Note on a larger apartment project

  • Lender preparing to foreclose
  • Looking for someone to buy a note
  • well located project
  • recently rehabilitated
  • Strong net income in place

Aloha Tower Marketplace

  • Waterfront project
  • 2 Levels, currently operating as a festival marketplace
  • Gross Leasable Area: 168,895 SF

Please contact us for more information.

Safeway and the drug stores continue aggressive purchase of property

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walgreens

Last week, Walgreens closed on the purchase of the existing Safeway store in the heart of Honolulu.  This is subsequent to Safeway purchasing a larger site two blocks away within the past 60 days.  Walgreens elected to partner with Etco[?] on the site and will sublease part of the site to them.
As outlined at the beginning of the year, the top half dozen retailers in the state of Hawaii are becoming the biggest buyers of real estate and the most active developers of sites within the state.  With a success record and sales topping their list of stores throughout the country, Hawaii is a very attractive market to these retailers.

Last week, Walgreens closed on the purchase of the existing Safeway store in the heart of Honolulu.  This is subsequent to Safeway purchasing a larger site two blocks away within the past 60 days.  Walgreens elected to partner with Petco on the site and will sublease part of the site to them.

As outlined at the beginning of the year, the top half dozen retailers in the state of Hawaii are becoming the biggest buyers of real estate and the most active developers of sites within the state.

With a success record and sales topping their list of stores throughout the country, Hawaii is a very attractive market to these retailers.

Click on the link below to view the original article in the Star Advertiser:

Walgreen buys Safeway land

Apartment Buildings in Hawaii 2010

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The apartment building market is very slowly picking up momentum.  Halfway through the year, there were three properties on Oahu that sold.  This is about double the pace of last year.  These mixed-unit projects from 8-16 units have been selling in a range from $156,000/unit up to $194,000/unit, depending on location, current rents, and amenities.

Activity is being driven by investor confidence that rents have leveled off and will not be dropping in the future.

Currently, there are 24 apartment buildings available for sale on Oahu.  Of these 24 properties, 14 of them have been on the market for over 1 year.

Billion-dollar investor says mortgages will be negotiated before foreclosed or sold off

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Billion-dollar investor says mortgages will be negotiated before foreclosed or sold off.
A client of ours has recently bought large portfolios of loans from failed banks.  Including some of the well-publicized FDIC auctions of leftover commercial real estate loans from now-closed banks.  In talking to this client last week, he believes we are seeing a divide in commercial real estate financing markets on existing debts.
The first pool of loans are the ones similar to the FDIC sales, which come from private banks, which are generally smaller in nature on local commercial real estate projects and properties.  Clearly, banks that failed have a change in ownership and are forced to make some changes to their loan portfolios, but the few we’ve seen that the FDIC has actually sold off so far are the exception.  Most banks today have been able to hold their loans and have their former mortgage originators now monitor those loans on a monthly basis to assess their cash flow potential.  With this knowledge of the up-to-date operations of each individual property, these private banks are often expending loans and softening terms.  Foreclosure is an expensive legal process and takes the loan into a different category with bank regulators.
The second type of loans are the commercial mortgage backed security loans, which as we had discussed before are pooled together and sold off as bonds in many pieces.  Our client has been active in buying a few of these pieces that on the surface seem to be riskier portions of the loan, but in all instances so far, the loan terms have been renegotiated and/or extended as opposed to foreclosed upon, even for these high-regulated CMBS loans.
Many in the industry today call it “Extend and Pretend.”  If the underlying economics are on the upswing or do continue to improve, then operating results, including the payment of pricinpal and interest, will be able to increase on these loans.  The lenders today obviously feel it is more productive for them to continue to work with the existing in-place borrower than to draw a line in the sand, pick up the company to foreclosure process, let it essentially disintegrate in condition, and thirdly command a significantly lower value at a distressed sale.
Mark D. Bratton
Vice President
Colliers International
220 S. King Street 18th Floor
Honolulu HI 96813
Tel 808.523.9708
email mark@colliershawaii.com
www.markbratton.com
www.colliershawaii.com

A client of ours has recently purchased large portfolios of loans from failed banks.  Including some of the well-publicized FDIC auctions of leftover commercial real estate loans from now-closed banks.  In talking to this client last week, he believes we are seeing a divide in commercial real estate financing markets on existing debts.

The first pool of loans are the ones similar to the FDIC sales, which come from private banks, which are generally smaller in nature on local commercial real estate projects and properties.  Clearly, banks that failed have a new ownership and are forced to make some changes to their loan portfolios, but the few we’ve seen that the FDIC has actually sold off so far are the exception.  Most banks today have been able to hold their loans and have their former mortgage originators now monitoring those loans on a monthly basis to assess their cash flow potential.  With this knowledge of the up-to-date operations of each individual property, these private banks are often extending Tenant loans and softening terms.  Foreclosure is an expensive legal process and takes the loan into a different category with bank regulators.

The second type of loans are the commercial mortgage backed security loans, which as we had discussed before are pooled together and sold off as bonds in many pieces.  Our client has been active in buying a few of these pieces that on the surface seem to be riskier portions of the loan, but in all instances so far, the loan terms have been renegotiated and/or extended as opposed to foreclosed upon.

Many in the industry today call it “Extend and Pretend.”  If the underlying economics are on the upswing or do continue to improve, then operating results, including the payment of pricinpal and interest, will be able to increase on these loans.  The lenders today obviously feel it is more productive for them to continue to work with the existing in-place borrower than to draw a line in the sand, and force the company to go through the foreclosure process, let the property essentially disintegrate in condition, and command a significantly lower value at a distressed sale.

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

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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.

A new way to buy Commercial Real Estate in Hawaii

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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.

Great Small Office Building for Sale in Hawaii

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If you would like further information, click here and feel free to give me a call to discuss further.

A small office building recently came on the market that I really like.  This property, at approximately 10,000-sq. ft., is located one block from Ala Moana Shopping Center, has great parking, and will offer the buyer a great term of ownership.  This property is listed by another firm, but I believe it’s a great buy and it will sell in the near future. I thought it would be worth sharing with you to keep up on good buys in the marketplace.

If you would like more information, click here and feel free to give me a call at 808-523-9708 to discuss further.

Hawaii Shopping Center sells for near 10% return

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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.

Real Estate Investment Funds – Must Spend it Now or Lose it

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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.

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