Tuesday, August 31, 2004

Harbor Court sold

One of the largest property owners in Los Angeles has bought the leasehold interest in the Harbor Court commercial tower for $27 million in partnership with local real estate developer Richard Gushman.

The property, which has about 200,000 square feet of office, retail and restaurant space, was purchased by DEG LLC, a joint venture between Gushman's DGM Group and Los Angeles-based real estate investment and management firm Douglas Emmett.

Gushman, the co-developer of the Waikele shopping complex and a trustee of the Campbell Estate, would not divulge any details of the partnership's structure except to say his involvement was "passive" and aimed primarily at helping to facilitate Douglas Emmett's acquisition.

Douglas Emmett has a Southern California portfolio valued at more than $3 billion, according to the company. It includes 13 million square feet of office space and around 2,000 residential apartment units.

Harbor Court's seller was Phoenix-based PRA/Harbor Partners LLC.

The deal marks the first local property investment for Douglas Emmett, which is the latest in a slew of mainland commercial property investors eager to grab a piece of Hawaii's commercial real estate pie.

Gushman said Douglas Emmett was enticed by the state's brightening economic picture and expectations that a tightening office market would generate increasing income.

"It's another good sign of confidence in Hawaii's market that outside investors are really looking at investing here," Gushman said.

Executives at Douglas Emmett declined comment.

PRA/Harbor Partners barely recouped their investment on the property, having paid $26 million for it in 1999.

Steve Sofos, of commercial property firm Sofos Realty Corp., said PRA/Harbor Partners probably paid too much and was unable to get more for it because the property has a vacancy rate of roughly 30 percent. Honolulu's overall Honolulu office vacancy rate was around 11 percent at the end of June.

The land where the building rests is owned by the City and County of Honolulu and the lease extends to the year 2074, according to state records.

The city government earlier this summer sought bids on the fee interest in the property. Gushman said DEG LLC did not submit a bid, but declined to say why.

The fee interest in the adjacent Harbor Court residential tower was purchased three years ago by AHI Harbor LP, an investor group linked to Wall Street deal-maker Leon Black, but only after years of wrangling with the city government.



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