A portion of the 2nd largest regional mall in Hawaii, Pearlridge Center Uptown II, was purchased on January 21, 2011 by BlackSand Capital, LLC.
We (Colliers International) represented the Seller in this transaction, which included the former J.C. Penney building, anchored by Borders and Price Busters, as well as the adjacent standalone building once occupied by INspiration Interiors.
Read the full article at Pacific Business News.
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.
Mark’s Top 3 Picks for 4th Quarter 2010:
Off Market Deal:
Approximately 50,000 SF shopping center on Maui
Note on a larger apartment project
Please contact us for more information.
Please click on the link below to view the details of a new large pool of commercial real estate loans, which our new sister company, Mariner Holdings, will be servicing for the buyer. There have been a handful of these large pool of loan sales this year by the FDIC. As you read through the details, you will see that these types of investments require some patience, but offer assistance from the FDIC through low or zero percent financing.
http://www.bloomberg.com/news/2010-09-02/mariner-holdings-buys-stake-in-760-million-of-real-estate-loans-from-fdic.html
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:
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.
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.
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.
I recently attended a dinner and was privileged to hear a CEO of a major company in Hawaii speak about current trends. This is a company that is very conservative and has thousands of employees here in Hawaii.
One of the main points I took away from his speech was that it used to be imperative that we write 5-year and 10-year plans. While we may still do these today, his comment was in regards to the speed of information. Even with an organization as large as theirs, they have to be flexible. He said they were focused on continually making decisions on current information and relaying and understanding large amounts of data. He said he will sometimes make a wrong decision, but it’s better to continue to update their plan to support and serve their customer base than to sit back and evaluate every 12-60 months.
You may ask, what does this have to do with appraisals in commercial real estate? One of the biggest issues for our team this year has been current appraisals of properties. It is clear to us that prices have risen on many assets for 2010 versus 2009. We find that appraisers are often using data that is 6-9 months old to value properties. While we have a long line of buyers willing to pay where the market is and where the market seems to be going, every once in a while the appraisers step in and suggest a much lower value.
Recently, what we have found helpful is sharing our most current information with appraisers, including bidding characteristics, depth of the market, and the motivation of equity investors. In addition, we’ve noticed that the same market conditions are happening on the mainland. Because we have been sharing this data throughout our offices, we can share the transactional information, including cap rates and depth of the market, with local appraisers so they are able to get a global perspective on what investors are looking at today.
If you conduct an appraisal for your property in today’s market, be cautious, sit down with the appraiser at the beginning of the process to understand what the expectations are, and make decisions on the most current information.
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.
