REMEMBER the "Japanese Bubble" that brought $15 billion in Japanese investment to Hawaii in 1985-90? Get ready, says developer Bill Mills, for a comparable inflow of mostly U.S. mainland big money to Hawaii.
Developer says hes
bullish on Hawaii
Former Japanese properties will be picked up, often at a discount, by well-heeled U.S. investors. In five years Japanese money will be mostly out of Hawaii and replaced by owners able to upgrade the former Japanese properties, market them, draw more visitors and create more employment.
"For the first time in years, I'm bullish on Hawaii," Mills says. He sees the investment wave already hitting Maui, where the Grand Wailea Resort was acquired for $350 million, about half its original cost.
He expects the sale of Ala Moana Center soon by Japan's Daiei Co. It has to work down $23 billion in debt back home. Mills thinks Daiei has a good chance to recover its $800 million investment in Ala Moana, yet the price still will be a bargain to the buyer.
Ten years ago Japan was flying high -- its stock market strong, its economy purring. Spare cash poured out to the U.S., some $80 billion in all, $15 billion of it to Hawaii.
Now the tables have turned. The eastward flow of cash out of Japan is being replaced with a westward flood of U.S. dollars into Japan. The old resentments have reversed, too. Now it is the Japanese who are fearful of outside capital taking over.
The U.S. investment shoppers include Goldman Sachs, Bankers Trust, Cargill, Morgan Stanley, and more. While Japan is their big bargain-hunting target, Mills says, they also will recognize, as he does, that Hawaii is one of the safest, most attractive places in all the world, and also available at bargain prices.
Mills thinks it will be great for Hawaii --economic stimulation, more jobs, more taxes, more money to buy new cars and homes. In the near term, he expects Maui to be the No. 1 investment target, followed by Kona on the Big Island.
Waikiki will lag, he fears, because leasehold land complications and government regulations still stand in the way.
Certainty is what investors like best, Mills says. It still is elusive in Waikiki. Beyond Waikiki, he says, all undeveloped lands are clouded by uncertainty over what a developer can do with them. The state Supreme Court holds they are subject to traditional Hawaiian access rights that are still undefined.
A legislative proposal to require buyers to keep all employees of the previous owner seems doomed, fortunately. But it shows another way government and unions can spur investor uncertainty.
A positive fringe development, says Mills, is the movement of very rich people into Kona to own third and fourth homes. He saw 27 corporate jets parked at Kona airport during the Christmas season.
Bill Mills Development Co. specializes in explaining the intricacies of Hawaii investment to outsiders. His travels span the U.S. and the Pacific as an intermediary for deals here. Sometimes his firm participates itself in development.
MILLS says today's investment opportunities in Hawaii are much like those that brought the late Harry Weinberg here to create an estate of almost $1 billion that he then left to charity.
When Mills first came here with Castle and Cooke in 1985, some 25 investor-developers were active in Hawaii -- Chinn Ho, Chris Hemmeter, Bruce Stark, Jack Myers and Mike McCormack among them. They are gone and few new names have yet replaced them, but Mills thinks more will.
A.A. Smyser is the contributing editor
and former editor of the the Star-Bulletin
His column runs Tuesday and Thursday.