Isle investors buy
downtown real estateDuane Kurisu and Mike
Fergus acquire four offices
Local investors Duane Kurisu and Mike Fergus have bought four downtown Honolulu office properties for $21 million, half the previous purchase price.
Downtown deal
Local investors Duane Kurisu and Mike Fergus have purchased four downtown office properties.
Buildings: The C. Brewer Building, University Center, 125 Merchant St. and 126 Queen St.
Price: $21 million
Occupancy: 90 percent
Parking: 270 spaces
Source: American Land Co.
The four properties -- the historic Star-Bulletin Building at 125 Merchant St., 126 Queen St., the historic C. Brewer Building and University Center -- were sold by Aall Hawaii Holdings Inc., which acquired them for $42 million in the 1980s, according to tax records.
The purchase includes approximately 65,000 square feet of land improved with 100,000 rentable square feet of office and commercial space and 270 parking spaces.
Three of the properties are located in the block bounded by Bishop, Queen and Merchant streets and Fort Street Mall. The fourth property, University Center (formerly known as the James Campbell Building), is across from Fort Street Mall, between Merchant and Queen streets.
With the purchase, Kurisu and Fergus, owners of KF Downtown LLC, have joined a growing number of investors who are buying Honolulu office space at ground-level prices hoping to get high returns when the market improves.
Oahu's office market has been stagnant for years, but an improving economy combined with low interest rates has generated a flurry of activity, said Mike Hamasu, directing of consulting research for Colliers Monroe Friedlander.
"Market conditions have made it a very interesting time to be in commercial real estate," Hamasu said. "It's a great opportunity for sellers to get a good price and for investment buyers to anticipate higher returns."
With the economy in strong recovery, the demand for office space has strengthened the Honolulu office market, according to CB Richard Ellis, a national commercial real estate firm.
The metropolitan Honolulu gross average asking rental rate has climbed to $2.22 per square foot a month, the highest it has been since 1999, said Jeffrey Hall, senior director of research at CBRE.
With no new construction and or delivery of office space expected in the next five years, vacancy rates will continue to decline, likely causing asking gross rental rates to increase by 10 percent to 20 percent in the next 12 to 24 months, he said.
The prospect of rising rents, coupled with low interest rates and a greater expectation for returns, have spurred an investment cycle in the office market, Hamasu said.
With the strong economy and the possibility of collecting higher rents, sellers are making more office space available to buyers. The trend is evidenced by the number of properties that have had recent activity, including Harbor Court, the Davies Pacific Building, the Pan Am Building, the Pacific Business News Building, 677 Ala Moana and Waterfront Plaza, Hamasu said.
"I believe this transaction reflects increasing investor confidence in Honolulu's commercial real estate market, resulting from an improved economic outlook for the island of Oahu," said John Lyles, president of American Land Co. The firm is managing and leasing agent for the properties and will continue to manage the buildings, which are 90 percent leased.
