An investment firm is in talks to buy Honolulu's Waterfront Plaza, home to Restaurant Row. The leasehold office and retail complex, developed beginning in 1988, is pictured above.
Waterfront Plaza sale near
The Shidler Group is seeking
to buy the leasehold Honolulu
complex from One Waterfront LLC
The San Diego-based Shidler Group plans to buy Waterfront Plaza, the leasehold office and retail complex that houses Restaurant Row, adding yet another Class A Honolulu property to its rapidly expanding local portfolio.
Shidler Group managing partner Larry Taff said the local real estate investment firm was in discussions to purchase the 16-year-old Kakaako property, which has had a checkered history but now boasts nearly 98 percent occupancy.
"We're talking," said Taff, who declined to offer any further details.
Officials with Colliers Monroe Friedlander, the real estate firm that manages the property, confirmed that a purchase and sale agreement for the property had been signed.
"A deal is in the works," said Mike Hamasu, Colliers' research director. A purchase price was not disclosed.
Waterfront Plaza's current owner is One Waterfront LLC, an entity controlled by Michigan-based real estate firm Kojaian Management Corp. It bought the then-struggling property just more than three years ago for about $46 million, according to property records.
The land on which it rests belongs to the Kamehameha Schools trust and would not be included in the sale. The lease ends in 2046.
The transaction marks the latest in a flurry of deals for the investment firm headed by Jay Shidler, which appears to be positioning itself for an expected rebound in Honolulu's office market.
In December, it purchased the Davies Pacific Center downtown and the Pan Am Building on Kapiolani Boulevard for $90 million total.
Around the same time, the group sold its interest in the Waikiki Galleria Tower retail complex, which houses the DFS Galleria. In that deal, local developer Bill Mills bought out the Shidler Group and a third party in a $125 million deal.
"They want to increase their share of the office market because they're banking on it going up since there's just not much space to build anything new in town," said Steve Sofos of Sofos Realty Corp.
"(Waterfront Plaza) is a good move for them. They've got a strong presence on the mainland and have been trying to increase their presence here."
Waterfront Plaza includes seven five-story buildings with a total of 425,000 square feet of office space and 89,000 square feet of retail space. It was put up for sale earlier this year.
The plaza was developed beginning in 1988 by Bruce Stark. It ran into financial difficulties in the 1990s and Stark was unable to service a $113.5 million loan from the New York-based Teachers Insurance and Annuity Association, which foreclosed on the property and bought it for $50 million in 1998.
At the time, Waterfront Plaza's occupancy rate had been languishing in the 60-70 percent level, according to Hamasu of Colliers Monroe Friedlander, which was brought in by TIAA to assume management. The plaza also had been plagued by steady turnover in its restaurant space.
Today, the property's occupancy is a robust 98 percent, Hamasu said, compared to around 85 percent for comparable space in the nearby downtown area, making it a good time for Kojaian to sell. The upside for the Shidler Group rests mainly on growth in rental rates, which have been flat since about 1996.
