Victoria Ward sale deal near

By Andrew Gomes
Advertiser Staff Writer

Victoria Ward Ltd.'s 65 acres in Kaka'ako includes the Ward Village shops. The land has a potential for high-rise residences in a neighborhood of theaters, restaurants and stores. Deborah Booker • The Honolulu Advertiser

Alexander & Baldwin Inc., which in February said it had expressed interest in acquiring Victoria Ward, has been the front-runner in negotiations to buy the company, according to people familiar with the situation.

No deal had been signed as of yesterday afternoon and talks were continuing in the evening, according to two people with knowledge of the talks who asked not to be named because of the sensitivity of negotiations.

At least one other company, a Mainland real estate investment trust, is known to have expressed an interest in buying Victoria Ward.

Mitch D'Olier, Victoria Ward's president and chief executive officer, declined comment Wednesday and could not be reached yesterday.

An Alexander & Baldwin spokeswoman yesterday said company officials could not comment.

Steven Wolf, a director of the New York investment banking firm Credit Suisse First Boston, which Victoria Ward had engaged to help broker a transaction, also declined comment yesterday.

Talks could still run into trouble, but if a sale agreement is reached, it would be one of the largest of a local company or Hawai'i real estate in the past few years, including last year's $200 million purchase of Liberty House by Federated Department Stores Inc.

"On a Hawai'i scale, this is a huge purchase," said Stephany L. Sofos, a local real estate and retail consultant.

"It's a significant situation that someone is coming in and purchasing 65 acres right in the heart of the urban core of Honolulu. It could be instrumental."

A sale would end more than 130 years of the property's ownership by descendants of Victoria Robinson and Curtis Ward, who once lived on an estate, Old Plantation, where Blaisdell Center is today.

But the financial strength and borrowing ability of a new owner could make it easier to realize Victoria Ward's vision of future development that includes several residential high-rise condominiums and a $150 million to $200 million Nordstrom-anchored retail center to replace Ward Warehouse.

An ownership change could also bring changes to Victoria Ward's master plan. The Ward estate today is a mix of income-producing retail, industrial and office property, including several parcels identified for redevelopment.

The neighborhood-like complex of 600,000 square feet of retail space is O'ahu's third-largest after Ala Moana and Pearlridge centers. It includes a 16-screen theater and 140 retailers and restaurants at Ward Entertainment Centre, Ward Centre, Ward Warehouse and smaller sites.

The value of Victoria Ward holdings was estimated at $300 million several years ago, but analysts familiar with the property, and with the income it generates, estimate a purchase price today in the range of $200 million to $250 million.

D'Olier has said Victoria Ward has invested $86 million in its property in the past eight years. Annual retail sales for the company have grown from $65 million in 1993 to more than $155 million at the end of 2000, according to D'Olier.

Stewart Scharf, a stock analyst who covers Alexander & Baldwin for Standard & Poor's in New York, said that buying Victoria Ward would make sense for the company.

"They're focusing on their transportation (Matson Navigation Co.) and real estate businesses — and especially with the transportation business not being at full strength, they probably feel that a good real estate acquisition could generate growth."

Scharf added that Alexander & Baldwin executives mentioned to analysts earlier this year they were pursuing a large real estate acquisition but did not disclose the specific property.

Several large Mainland real estate companies and shopping center owners, including Ala Moana Center owner General Growth Properties Inc., have been mentioned by analysts as possible contenders for Victoria Ward.

Still, most analysts and observers say they believe that A&B is better suited for such a purchase, given its familiarity with Hawai'i real estate, interest in buying local shopping centers and financial ability to make such an acquisition.

A&B owns Matson, Kauai Coffee Co. and Hawaiian Commercial & Sugar Co. But Hawai'i real estate has been where A&B has most aggressively focused lately.

In 1999, A&B made a bid of roughly $800 million in an unsuccessful attempt to buy Ala Moana Center in partnership with Simon Property Group, the nation's largest shopping mall operator.

In the past two years, A&B has spent about $200 million buying and developing mostly Hawai'i property, including Kaneohe Bay Shopping Center.

Other real estate assets owned by the company include Maui Mall, Kahului Shopping Center and several office and industrial properties. A&B is also active in residential real estate development, which is envisioned as a key growth area for the Ward estate.

Selling Victoria Ward would provide a sizable return to about 35 shareholders, including members of the local Hustace family related to the Wards. Some observers say several shareholders are aging and are interested in cashing out after years of modest earnings.

The Wards incorporated their holdings in 1930 as a closely held private company. Over the decades, the company has transformed its property from mostly industrial use to mostly entertainment and retail.

The retail vision crystallized in the early 1990s with additions such as Pier 1 Imports, Ross, Office Depot, Sports Authority and Nordstrom Rack.

In 1997, Victoria Ward announced plans to develop an 800,000-square-foot retail center in partnership with Indianapolis-based Simon Property. But difficulties, including Saks Fifth Avenue backing out in 1999, killed the proposal.

A year ago, the 156,000-square-foot Ward Entertainment Centre opened with a 16-screen theater, Dave & Buster's and several new restaurants and retail shops.

Late last year, Victoria Ward announced a plan to replace Ward Warehouse with a 550,000-square-foot center that would include a 150,000-square-foot Nordstrom department store projected to open in late 2005.

Ward's master plan also includes residential high-rises, a supermarket, more parking and street realignment.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.