Donald G. Horner, vice chairman of First Hawaiian Bank, spoke yesterday at a meeting of the Certified Commercial Investment Member, Hawaii chapter.

Horner upbeat about commercial property

Modest vacancy rates and attractive
lending terms could mean an exciting
time in business real estate

By Dave Segal

It's hard to find a lot of bullishness these days given the state of the national economy.

But Don Horner, vice chairman of First Hawaiian Bank, said low interest rates and a pickup in consumer confidence are among the factors creating the best commercial real estate environment he's seen in Hawaii for the last five years.

Horner, who spoke yesterday at the Hawaii Certified Commercial Investment Member luncheon in Honolulu, said vacancy percentages have stabilized and investors have replaced speculators in purchasing Hawaii properties.

"I think the fact that a company like Federated invested (in Liberty House) here and is getting good returns on their investment is critical for Hawaii," Horner said.

"The fact that General Growth put a quarter billion dollars into buying (Victoria) Ward, that's good for Hawaii. That means people outside of this state have a lot of confidence in this economy and its people and its future."

Horner, who has been endorsed by Chairman and Chief Executive Officer Walter Dods to be his successor at First Hawaiian, said there's plenty of reasons to feel good about commercial real estate in Hawaii.

"There's a lot of cash (out there)," he said. "It's not highly leveraged, which in the long run from a banking perspective gives you a lot of confidence. If things get tough, they don't have to sell because they're not sitting on a lot of debt."

Also, Horner cited the 10 percent to 15 percent vacancy rate in Hawaii commercial real estate, adding it is improving compared to the mainland.

He also said the First Hawaiian tower is 90 percent occupied. "Our rent isn't cheap so we're encouraged by the trend there," Horner said.

In the 1980s, Japanese investors rushed into Hawaii real estate to create a speculative bubble that later burst with devastating consequences. Today, Horner sees a different type of mentality.

"Investing now is smart money," Horner said. "There's a difference between investor money and speculative money.

"Investor money is if you put it into something, you want to improve the cash flow. If you've got a building, you've got to put management in there and you've got to put in blood, sweat and tears. As opposed to buying a bunch of houses in Kahala and letting them sit there and hoping for a greater fool to come along and pay you more for them."

Horner said he doesn't see Japan flocking back to Hawaii anytime soon.

"It's still going to be mainland money (investing in Hawaii)," he said. "I don't see Japan getting out of their challenges anytime soon. There's still a lot of money in Japan. There's still a love affair between Hawaii and Japan. Japan is still critically important to Hawaii, but I don't see that (previous Japan investment level) being supplanted by any other Asian country in the near term or any other foreign country."

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