Isle developer buys out
Galleria Tower partners
Local developer Bill Mills has bought out the other investors of the Waikiki Galleria Tower, the mixed office-retail building home to the DFS Galleria, in a deal worth $125 million.
The purchase closed late last month. Mills was part of a group, including San Diego real estate firm Shidler Group and New York-based investment management company Angelo Gordon & Co., that bought the Galleria Tower for $95 million in October 2001 from Japan-based credit card company Nippon Shinpan Co.
Mills formed a new company Global Pacific Fund - Waikiki Galleria LLC that bought out Shidler and Angelo Gordon. A person familiar with the deal said it was worth about $125 million.
ASSOCIATED PRESS FILE
The Waikiki Galleria Tower, which includes the DFS Galleria, has about 75,000 square feet of retail space.
Shidler confirmed the sales yesterday, though the company declined to comment on the price. "We felt it was a good time for us to sell," said Larry Taff, Shidler Group managing partner.
"To me, it's a friendly acquisition between partners," said Honolulu real estate broker Steve Sofos, who was not involved in the deal.
Last year, Shidler, Mills' Bill Mills Development Co. and Watumull Properties Corp. bought seven Waikiki parcels for $10.6 million.
The Waikiki Galleria Tower has about 75,000 square feet of retail space on a long-term lease to DFS Group. The building, which used to be the Bank of Hawaii tower in Waikiki, has nearly 86,000 square feet of office space.
The purchase won't affect operations of DFS Hawaii, said Sharon Weiner, the company's group vice president.
DFS caters largely to Japanese visitors, and the state Hawaii Tourism Authority has targeted 14 percent growth in Japanese visitors arrivals in 2004 from 2003, and a 16.9 percent growth in spending.
Still, the gain would follow years of declining Japanese arrivals. The target of 1.5 million total Japanese arrivals in 2004 is down from 1997's height of 2.2 million arrivals.
Taff said the Galleria Tower's office space has recovered after taking a hit from the Sept. 11 attacks, which caused a plunge in Japanese tourism in Waikiki.
"The rental rates that we were getting on the property and occupancy was picking up lately. Initially after 9/11, we had a lot of fallout from the Japanese, a number of Japanese companies that went bust and left the state. We lost a lot of tenants ... but we were able to replace all of them and actually improve the occupancy during the time that we owned the property," Taff said.
Waikiki's overall office space market is in tough straits, with average vacancy of more than 18 percent at the year's end, the highest on Oahu, according to a report from Colliers Monroe Friedlander.
Nippon Shinpan bought the Waikiki Galleria Tower in 1988, during the Japanese bubble years, for $66 million. Later, DFS spent $65 million to expand the galleria, located at the corner of Kalakaua and Royal Hawaiian avenues. The expansion was completed in early 2001.
Meanwhile, Shidler bought the Davies Pacific Center and the Pan Am Building from the California State Teachers' Retirement System for $90 million in a deal that closed Dec. 19. The office space represents nearly 5 percent of the Honolulu office market.
Shidler also had bid for the former Damon Estate commercial and industrial lands sold in December for $480 million to Newton, Mass., real estate investment trust HRPT Properties Trust.
Shidler and Angelo Gordon own several properties together in California and Texas, including the Hilton Pasadena and the Seaview Corporate Center where Shidler is based in San Diego, Taff said.
