Conditional Damon Estate agreement verified
By Andrew Gomes
Advertiser Staff Writer
Newton, Mass.-based HRPT Properties Trust confirmed yesterday that it has a conditional agreement to buy the assets of major O'ahu landowner Damon Estate for $480.5 million.
If a sale is completed, which could happen as early as next month, it would be one of the highest valued property sales in Hawai'i and could result in the revitalization of large, decaying leasehold property tracts in Honolulu.
HRPT did not disclose its plans for the 224 acres of commercial real estate concentrated in Mapunapuna and Kalihi Kai.
HRPT, a publicly traded real estate investment trust, deals primarily with office property, but it said Damon's land leased to 186 mostly commercial, industrial and retail businesses would be a valuable addition to its portfolio.
"The existing (leases) and the location of the Damon Estate lands represent a rare opportunity to acquire properties which combine very little downside risk and considerable upside potential," John Popeo, HRPT chief financial officer, said in a statement.
HRPT expects the Damon assets to generate about $37.5 million in average annual rent starting next year. Damon's broker, the California-based real estate firm Eastdil, projected that the estate's revenue will rise from $34 million next year to $38 million in 2009, generating net operating income of $32 million next year and $36 million by 2009.
None of the Damon leases expire before 2009; almost half expire within 20 years.
Completion of the transaction is subject to a closer study of Damon's assets, including potential ground contamination liability.
A sale also would be subject to approval by Damon trustees and the estimated 20 beneficiaries of the trust, which earlier this year hired the Eastdil firm to solicit offers for the property.
Local real estate experts said a successful buyer could continue acting as a passive landlord like Damon. Or a buyer could sell tenants the land under their leased property, redevelop parcels as tenant leases expire, sell off portions of the portfolio, or combine some of those prospective actions.
Other bidders for the Damon portfolio include the Los Angeles firm Douglas Emmett Realty; The Shidler Group, a local investor; and the Chicago-based investment group Walton Street Capital.
HRPT said that it owned 212 office properties worth $3.1 billion at the end of last year and that it has bought 13 properties for $281 million this year through September. If the Damon deal is completed, it would be the firm's largest acquisition.
Most of Damon's property covers 150 acres in Mapunapuna and Kalihi Kai, but the estate's holdings also include the Salt Lake Shopping Center, the Safeway at the corner of Pali Highway and Vineyard Boulevard, and property in Waipahu.
Estate trustees have been exploring options to end the trust as required upon the death of Samuel Mills Damon's last living grandchild, Joan Haig, who is in her 80s.
Selling the 224 acres would largely eliminate the remaining land holdings of what was the state's fourth-largest private landowner until its July sale of 116,000 acres of Kahuku Ranch on the Big Island to The Nature Conservancy of Hawai'i and the National Park Service for $22 million.
The estate owns some Mainland property and other Hawai'i holdings, including a few thousand acres of conservation land on O'ahu not part of the 224-acre sale.
The trust was created upon the death of Samuel Mills Damon in 1924. Damon, the son of a missionary, was a partner in Bishop & Co., forerunner to First Hawaiian Bank, and was given the Moanalua ahupua'a — a land division from the uplands to the sea — by Princess Bernice Pauahi Bishop.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
