KAPOLEI, HAWAII — Alexander & Baldwin has purchased the ground lease interest in Kapolei Business Park West Lot 31 in Kapolei for $41 million in an off-market transaction. The property is commonly known as the Honolulu Authority of Rapid Transportation (HART) precast yard. The 36.4-acre parcel of I-2 (industrial-zoned) land is licensed to the City and County of Honolulu through 2025. The property is a fabrication facility and storage yard for the precast concrete components of the guideways for the HART rail project. Additional terms of the sale were not released.
WAILEA, HAWAII — Ike Place Hotels and R.D. Olson Construction have started the ground-up construction of AC Hotel Wailea, a four-story estate hotel located at the corner of Wailea Ike Place and Wailea Ike Drive in Wailea. Situated on three acres, the 70,000-square-foot property will feature 110 guestrooms including one-bedroom suites and studio options, a business center, fitness area and infinity-edge pool with a poolside tiki bar and cabanas. The property will features a Polynesian design with modern flare and offer guests ocean-view and mountain-view room options with private lanais. Additionally, the property will feature indoor/outdoor lounge spaces and an 85-car parking lot. The project team includes R.D. Olson Development, Architects Hawaii Limited and SAND Design. Completion is slated for fall 2020.
KAILUA-KONA, HAWAII — Pacific Hotels has completed the sale of Courtyard by Marriott King Kamehameha’s Kona Beach Hotel, a full-service beachfront hotel located at 75-5660 Palani Road in Kailua-Kona on Hawaii’s Big Island. Situated on 13 beachfront acres, the 452-room hotel comprises two connected six-story towers that feature more than 20,000 square feet of flexible indoor and outdoor meeting space; more than 18,000 square feet of retail space, including a full-service spa; a fitness center; yoga studio; 24-hour business center; outdoor pool and patio; tennis courts; and five food and beverage outlets, including Honu’s on the Beach Restaurant, Billfish Poolside Bar & Grill and The Island Breeze Hawaiian Lu’au. The hotel was renovated and converted into the Marriott Courtyard in 2011. Scott Hall, Tony Malk, Tracey Goo, Aaron Lapping and Blake Malecha of HFF represented the seller in the deal. The name of the buyer and acquisition price were not released.
WAIKOLOA, HAWAII — Hilton Grand Vacations has opened Ocean Tower by Hilton Grand Vacations Club, the company’s fourth property in Waikoloa and its first on Hawaii Island with direct oceanfront views. Once complete, the multi-phase project will feature 350 units in a mix of studio, one-, two- and three-bedroom suites, including upgraded penthouse residences. The project’s initial phases, which are now complete, features 72 units consisting of 18 studios, 24 one-bedroom suites, 24 two-bedroom suites and six three-bedroom suites. All completed suites offer resort or ocean views, full kitchens, private balconies, walk-in showers with soaking tubs and spacious living and dining areas. At complete built out, on-site amenities will include a check-in and departure lounge and fitness center. Additionally, owners and guests will have access to the amenities of the Hilton Waikoloa Village, including three pools, a salt water lagoon, Dolphin Quest, tennis courts, a tram and boat system, resort shops, restaurants and the Kohala Spa.
HONOLULU — Bethesda, Md.-based Phillips Realty Capital has secured $63 million in financing on behalf of Lucky Hotels USA. Benefit Street Partners provided fixed-rate, permanent financing secured by the OHANA Waikiki Malia Hotel in Honolulu. John Sieber Jr. of Phillips Realty Capital structured the financing, while Aaron Derby at Benefit Street Partners represented the lender. Situated at 2211 Kuhio Ave. within the Waikiki Resort District, the hotel features two towers built in 1960 and 1980 and underwent a $6.2 million renovation in 2010 to update the rooms, lobby and common areas. Outrigger Hotels and Resorts manages the 327-room hotel.
When we last reported on the health of Oahu’s industrial market in December 2017, we offered rationale for a then 1.88 percent industrial vacancy rate. This was fueled by demand from contractors building large residential condo developments, the construction of a nearly $10 billion light rail system (voter approved at less than $5 billion), booming tourism and military sectors and large public infrastructure improvements. Oahu’s small 40.4-million-square-foot industrial market was under further compression as industrial product was being taken by the state to support rail construction, or lost due to high rise residential construction and the expansion of our main Honolulu harbor. A prohibitive industrial construction cost scale, which generally exceeds $125 per square foot for metal skin shell warehouse, had also slowed spec and build-to-suit construction. Fast forward to late 2018, and our statistics reflect an industrial vacancy rate bouncing off the bottom at just 2.02 percent. The monthly industrial base rent average is $1.20 per square foot and monthly operating expenses are $0.40 per square foot. This vacancy rate average reflects a small increase over the previous quarter as tenants scrape the bottom of the inventory barrel looking for suitable space. LoopNet cites six industrial availabilities of more …
OAHU, HAWAII — Industrial Logistics Properties Trust (NASDAQ: ILPT) has secured a $650 million mortgage loan secured by an industrial portfolio in Oahu. The portfolio includes 186 properties, which total approximately 9.6 million square feet. The 10-year loan applies to approximately 57 percent of ILPT’s total owned square footage in Hawaii. As of Dec. 31, 2018, the average remaining lease term for these properties was more than 14 years and the occupancy was nearly 100 percent. “We are pleased to term out our floating rate debt with attractive, long-term, fixed-rate debt and to demonstrate the tremendous value of these unique Hawaiian assets,” says John Murray, CEO of Industrial Logistics Properties Trust. “While the underlying assets had a net book value of less than $500 million at year end 2018, this loan provides us with $650 million of capital to fund value-enhancing external growth opportunities.” Terms of the non-amortizing financing included a fixed interest rate of 4.3 percent. Morgan Stanley, Citi, UBS and J.P. Morgan provided the capital. Sullivan & Worcester LLP provided legal counsel to Industrial Logistics Properties Trust in the transaction. ILPT stock closed at $20.79 per share on Tuesday, Jan. 29, down from $22.47 one year ago. — David …
Hawaii’s multifamily market continues to achieve record pricing driven by strong local investor demand and notable institutional investors of larger mega deals at $100 million or above. This market is defined by limited inventory and prohibitively expensive new construction that leaves Hawaii with stable annual vacancy rates of about 96 percent. Hawaii has seen only modest increases in annual rental rates of less than 1 percent and relatively low rents for apartments in our market that pencil out to $1.75 per square foot to $2.25 per square foot. Despite these relatively anemic financial returns, enthusiasm remains for this sector. In fact, multifamily continues to reign as the most desired asset class for local investors with monthly transaction counts in the five to seven range and the most aggressive cap rates currently averaging 3.86 percent. The pricing results for multifamily have been stunning with per-unit sales prices ranging from $250,000 to $380,000, depending on the type of construction. The multifamily market demand drivers are not anticipated to change in the near term. While the island of Oahu reports average annual new housing demand of 3,500 units, only 1,500 housing units at most are approved annually. Paul Brewbaker, former chief economist for …
The Hawaii investment sale market was active in 2018 with an abundance of capital seeking investment opportunities throughout the state and across all product types. Mortgage availability from local banks and non-local financiers remained strong, and there was a steady flow of new interest from debt and equity sources looking for first opportunities in Hawaii. Last year’s transaction volume (including entity level) was up 33 percent from 2017 to $5.5 billion. Institutional and cross-border investment volumes were up from 2017 and performing well above the 10-year average. It was a slower year for private investors and REITs, though institutional capital from Singapore, Zurich, Kuwait, Germany and Japan were the foreign standouts in 2018. Entity-level activity boosted Hawaii’s transaction volume significantly in 2018. We anticipate this story to continue to spill over into Hawaii through 2019 as institutions deploy large amounts of capital to build scale. Brookfield’s acquisition of GGP was the largest entity-level transaction, which included the 2.5 million-square-foot Ala Moana Center with its two office buildings consisting of about 400,000 square feet, the Whalers Village in Maui and the Prince Kuhio Plaza in Hilo. The hospitality sector led the charge for the third year in a row with $2.45 …
Honolulu’s office market has been stagnant for nearly 20 years with negative supply growth, limited demand, constant reductions in square feet per person and a very tight labor market. However, conversions from office to residential and/or hotel use and a major tenant move could change the market starting in 2019. Multi-tenant inventory has decreased by about 500,000 square feet since 1996 with the conversion of an office building to a hotel in 2015 through 2017; another taken off the market in 2016 for a hotel or residential conversion; and yet another converted to office condominiums in 2004. The market currently has about 11 million square feet in 73 Class A and B multi-tenant buildings. Half the inventory and 65 percent of the vacancy (940,000 square feet) is in the Central Business District (CBD), which is Hawaii’s financial center and sits adjacent to federal, state and municipal centers. New inventory has been limited to owner-users, medical office buildings and small mixed-use buildings. These include Hale Pawaa, a 135,000-square-foot medical office building, the 160,000-square-foot FBI building, the 240,000-square-foot NOAA Regional Center, the 75,000-square-foot Princess Kamamalu State office building and the 26,000-square-foot former Honolulu Advertiser Building for Hawaiian Dredging. Office users are generally …