Firm to invest $500M in isles
A $2 billion Portland, Ore.-based real estate private equity firm that is making its first Hawaii purchase has plans to invest up to $500 million in the islands.
ScanlanKemperBard Cos. is buying the Pacific Park Plaza, a 16-story glass office tower and adjacent low-rise Kaiser Permanente building, on the corner of Kapiolani Boulevard and Cooke Street, for $75 million, or $300 per square foot, according to sources familiar with the deal who asked not to be identified.
The company, also known as SKB, is following a growing trend of mainland investors competing to acquire properties in Hawaii. The state has become an increasingly attractive market, particularly for office buildings, because of supply constraints that are driving up office rents.
After years of eyeing the local market, SKB is ready to build a portfolio here because of its proximity to Asia and its strong tourism-based economy, said Todd Gooding, company president. The company is seeking to scoop up office, retail and industrial space on Oahu, but is considering retail investments on the neighbor islands as well.
"We just feel that the economy is strong enough and, with the constraints on new supply for office space, that we're going to see a significant runup in rental rates," Gooding said. "We want to be a part of that."
The firm, which invests on behalf of high-net-worth individuals, trusts, institutions and its principals, expects to close this month on the Park Plaza deal, which includes the 213,000-square-foot office tower, 40,000-square-foot Kaiser building and 0.8-acres of land beneath a five-story, 550-stall parking garage at 711 Kapiolani Blvd. The buildings are being sold by California-based TMS-Curci LLC.
"Even though this is our first investment in Hawaii, we probably looked at four or five of the last office opportunities in Honolulu," he said.
Most recently, the company tried to acquire the Arroyo Realty Partners Hawaii portfolio, which included the Hawaii Agricultural Research Center, the Airport Center, the Ocean View Center and Haseko Center in downtown Honolulu. Those properties were sold last month to Morgan Stanley for $98 million.
Gooding said the company has access to about $100 million in equity, which equates to between $400 and $500 million in buying capacity in the islands, where the company is focusing on transactions in excess of $20 million.
The market has seen significant interest in office properties over the past five years, said Mike Hamasu, director of consulting and research at Colliers Monroe Friedlander Inc.
The cost of land and rising price of construction discourage the development of new office buildings here, he said, while job growth has resulted in businesses requiring more office space, driving up rents on existing properties.