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.
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.
In January, I presented a 2009 summary and 2010 forecast presentation on the Hawaii Retail Market for CCIM. This video is the second of three parts of the presentation (the powerpoint slides used in the presentation are available or download here).
This video focuses on Shopping center vacancy, new tenants and sales ideas. Outlined below are the main points of the video:
Recent Vacancies: For Circuit City, most of their vacated space has not been released. About two-thirds of their stores are still vacant, which means there are 45,000 SF concrete boxes that are sitting vacant.
For Hawaii, we’re keeping our eye on Blockbuster, as they occupy approximately 120,000 SF here. Should they decide to pull out of the market, we’d be losing 20+ stores at about 5,000 SF a piece, many located in shopping centers.
Expanding Retailers: Slides 11 and 12 list Tenants who have opened in 2009, spent money, made the investment, and took the risk. These are very few and far between.
Ideas for Landlords: The key is to create momentum, and increase advertising. Hire merchandising consultants because most Tenants are not capable of producing great storefronts. They could gain a lot from a professional consultant. Twitter campaigns are working for impulse daily specials, such as a restaurant tweeting a daily special.
