Alakea high-rise bought by A&B
By Andrew Gomes
Advertiser Staff Writer
Alexander & Baldwin Inc. has bought the mostly vacant downtown Honolulu commercial high-rise 1100 Alakea and plans to resell fee-simple office space to businesses tired of paying rent.
The Honolulu-based company, through subsidiary A&B Properties Inc., yesterday acquired the 32-story tower from Toa Kogyo Co. Ltd., a Tokyo company that developed the high-rise in 1993.
A purchase price was not disclosed, but is estimated to be between $20 million and $30 million — far below the building's $80 million to $100 million development cost roughly a decade ago.
The sale is the first downtown commercial high-rise to change hands in more than a year — since sales of Amfac Center and Pioneer Plaza in 2001.
The deal also ends a troubling investment for Toa, and is a unique purchase for A&B, which has never converted an rental office building to fee-simple units for sale.
"To us it's a very unusual acquisition," said Allen Doane, Alexander & Baldwin president and chief executive officer.
A&B plans to improve common areas of the building that will be attractive to commercial condo buyers, such as adding conference space, and said the property has been well maintained.
The 170,000-square-foot building, on the 'ewa-mauka corner of Hotel and Alakea streets, is 32 percent occupied. Tenants, including AOL-Time Warner, Prudential Insurance and T-Mobile, will have an opportunity to purchase their office space or continue leasing under current terms.
Mike Wright, A&B Properties vice president, said there has already been strong interest to buy spaces in the Stringer Tusher Architects-designed building that features exterior glass elevators and a granite-and-glass exterior.
"Our market research indicates that the building's design, plentiful on-site parking, excellent security, ocean views and high-quality construction — coupled with the lowest interest rate environment in 40 years — will make this a very attractive investment for both investors and owner-user businesses," he said.
For Toa, 1100 Alakea started off in a poor financial position in 1989 when company chief executive Harumichi Ohtani paid Honolulu auto dealer James Pflueger's Pflueger Partners $33 million for the project site.
The 0.6-acre piece of land — valued around $7 million in the late 1980s and today — became a record sale for Honolulu real estate at $1,250 a square foot, setting the extreme example of Japanese speculative real estate acquisitions.
Leasing trouble has nagged the building since. The property first faced construction delays that cost the developer a six-floor primary banking tenant, followed by an office space glut in the early 1990s, then a soft economy and the recent fallout among high-tech companies that were attracted to 1100 Alakea's infrastructure and 5,000-square-foot floors.
Larger tenants, however, found taking multiple floors a hassle, and that the above-market rents hurt leasing efforts, according to local real estate brokers.
Doane said the building is an opportunity and an excellent addition to A&B's real estate portfolio.
"We have demonstrated confidence in our state's future by investing," he said. "It is the strongest statement we can make about our belief in Hawai'i."
A&B investments have grown on O'ahu, where four years ago the company owned only its corporate headquarters, the Alexander & Baldwin Building. Today, the company owns 10 O'ahu properties, including downtown buildings Ocean View Center, Haseko Center and the Judd Building.
A&B's core real estate holdings remain on Maui and Kaua'i. The company also owns 19 Mainland properties.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or at 525-8065.
