By Craig Kojima, Star-Bulletin
The Hilton Hawaiian Village is the state's
largest resort property.

---

The company said it will
pay $400 million to Prudential
for a majority share
of the resort

By Rob Perez
Star-Bulletin

Hilton Hotels Corp. today said it plans to increase its investment in the Hilton Hawaiian Village by as much as $400 million, taking a controlling interest in the state's largest resort.

By the end of this year, Hilton will have majority control of the 2,545-room property and by the end of 1999 will get almost 100 percent ownership, Hilton spokeswoman Kathy Shepard said. Hilton now owns 50 percent, with Prudential Insurance Co. owning the other half.

Shepard said the change in ownership will have no effect on the daily operation of the resort. The Hilton executives who currently manage the property will continue to do so, she said.

"(Guests) won't even know the difference," Shepard said.

After its unsuccessful bid to take over ITT Corp., Hilton disclosed last year that it was negotiating with Prudential to acquire full ownership of the Waikiki hotel. Beverly Hills, Calif.-based Hilton also noted that Hawaii's weak economy could present other buying opportunities in the state.

Besides its stake in the Hilton Hawaiian Village, the company is part owner and manager of the Hilton Waikoloa Village on the Big Island and manages the Turtle Bay Hilton Golf & Tennis Resort on Oahu.

Hilton today said it would invest the additional money in Hilton Hawaiian Village over the next six to 24 months. The company said the property, one of its top income-producing hotels, will contribute significantly to the lodging division's cash flow beginning in 1999.

"We are thrilled to be able to assume control of this landmark property in Honolulu," said Matthew J. Hart, the company's chief financial officer, in a statement.

"It fits exactly with our strategy of controlling top quality lodging assets that provide strong economics and have high barriers to entry," he said.

Newark, N.J.-based Prudential more than a year ago announced plans to liquidate much of its $6 billion portfolio of real estate and since then has made a series of high-profile sales.

Prudential said in a statement today that it is sharply reducing direct ownership in real estate in favor of real estate securities and other more flexible investments.

"While changes in our real estate investment strategy have led us to this agreement, we nevertheless have been very pleased with our partnership with Hilton over the years, and the returns have been very strong," said Prudential senior managing director David Twardock.

Once the ownership restructuring is completed, Prudential will have a tiny stake in the property and will continue receiving a share of profits, Hilton said. A Prudential spokesman said the precise stake it will have still must be determined.

In addition to the four-tower hotel, the resort includes two apartment towers with 289 units, 90,000 square feet of retail space and 110,000 square feet of meeting space.