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The Honolulu Advertiser
Posted on: Friday, June 14, 2002

Property sales resilient

By Andrew Gomes
Advertiser Staff Writer

Investors who bought commercial real estate in Hawai'i last year spent $1.4 billion, paying roughly half of that to Japanese companies that continued to liquidate investments mostly at a loss, according to a recent industry analysis of the Island market.

The analysis also shows that the state's commercial property market remained resilient after Sept. 11, as several of the largest transactions were completed in the last three months of the year.

Colliers Monroe Friedlander, a local commercial real estate firm that tracked commercial property sales of more than $1 million — excluding deals between affiliated buyers and sellers — said there were 72 such transactions for a combined $1.4 billion last year.

Japanese investors sold $678 million of the total, often for less than 70 cents on the dollar, which translated into a net equity loss of $250 million, the report said.

The activity pales in comparison to the real estate buying boom in the late '80s and early '90s when Japanese investors poured an estimated $6 billion to $14 billion into Hawai'i real estate. But the sales show that even after several years of divesting and property value declines, the market remains in transition.

Dana Peiterson, senior vice president at commercial real estate firm CB Richard Ellis Hawaii Inc., estimated that last year's sale activity was up from about 50 annual transactions in the late '90s.

"It's not a real superheated market like you're seeing on the residential side, but it's moving in the right direction," he said.

Mike Hamasu, research director for Colliers Monroe Friedlander, said some in the industry believe that the commercial market recovery will be slow with near-term property values remaining flat, while others believe a recovery and rise in property values will happen sooner.

This year, experts forecast commercial property sales will come close to last year's volume, but with a different mix of property.

Already, last month's $250 million sale of Victoria Ward Ltd.'s retail/mixed-use property equaled last year's biggest transaction, the $250 million sale of the Kea Lani Hotel on Maui.

Other property types making up the bulk of sales this year will likely be office, industrial and more retail/mixed-use real estate. Only three small hotels and three golf courses are listed among $684 million of commercial real estate currently on the market, according to Colliers.

Last year, the biggest sales involved hotels. A dozen were sold for a combined $897 million. Of that, $500 million was divested by Japanese companies, including Kokusai Jidosha, which sold the Hyatt Regency Maui for $200 million, and Nissho Iwai Corp., which sold the Ritz-Carlton Kapalua for $143 million.

Among other commercial property sale highlights last year:

• Seven office buildings sold for a combined $188 million, including the $95 million sale of Amfac Center.

• There were 13 retail/mixed-use properties sold for $137 million, including the Nicos Building, a Waikiki retail/office complex, for $80 million.

• Investors also bought 22 land parcels for $108 million; 11 multi-family complexes for $75 million; and seven industrial properties for $33 million.

• More than $350 million in sales involving nine properties closed in the last three months of the year, after terrorist attacks on the Mainland triggered widespread economic damage and uncertainty.

• Among the buyers were major hotel corporations, local and Mainland real estate investment companies and homebuilders.

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