The Shidler Group said yesterday it has bought Waterfront Plaza, the Honolulu office and retail complex that houses Restaurant Row, and plans an extreme makeover of the property's uninviting glass-and-concrete look aimed at luring more customers to its retail businesses.
The real estate investment firm bought the leasehold complex for an undisclosed price from Michigan-based Kojaian Management Corp. and the Witkoff Group of New York, adding yet another Oahu property to its rapidly expanding local portfolio.
The Shidler Group has been on an investment binge in Honolulu's office market, having bought the Davies Pacific Center and The PanAm Building for $90 million last December.
The acquisition of Waterfront Plaza and its 515,000 square feet of office, retail and restaurant space means the Shidler Group now owns about 10 percent of Honolulu's office space, Managing Partner Larry Taff said.
"We are very bullish on the Honolulu office market," Taff said.
He said the group plans to spend $7 million to $8 million in the next year to turn the property into a "class A garden office complex that will include far less concrete and a lot more green, people-friendly space."
This will entail tearing out portions of the concrete plaza that snakes between the complex's seven five-story buildings and replacing it with plants and other landscaping.
Signage will be improved, some areas will be repainted and garden settings on the complex's large rooftop expanses also will be repaired and renovated. Taff said the upgrades should benefit tenants by enticing more customers.
"We're excited about the potential of the property and see many opportunities to turn a good property into a great one," Taff said.
That'll be music to the ears of Waterfront Plaza's retail tenants.
"That's what we've been praying for," said Kelly Nou, manager of the Chez Sovan Express Cambodian restaurant.
The 16-year-old Kakaako property was a hot nightspot in its early years but has had a checkered history since, marked by heavy turnover in its ground-floor retail businesses, primarily restaurants.
Nou blames this on the inability of previous owners to lure outside visitors such as tourists, forcing tenants to rely too much on business from the office workers upstairs.
Despite the past retail woes, property analysts see a bright future for the complex.
Kojaian bought the property just more than three years ago for about $46 million, when occupancy rates languished around 60-70 percent.
But the complex has benefited from an overall strengthening of the Honolulu office market since then. Taff said it now boasts an occupancy rate over 90 percent.
"It had its troubles in the past but that cycle has turned. This looks like a very opportune purchase," said Doug Smoyer, chairman of consulting firm Retail Strategies.
Taff said leasing and management of Waterfront Plaza would be performed by Shidler Hawaii Investment Partners "effectively immediately," ending the tenure of property manager Colliers Monroe Friedlander.
The land where the complex rests belongs to the Kamehameha Schools trust and is not included in the sale. The lease ends in 2046.
The plaza was developed beginning in 1988 by Bruce Stark. It ran into financial difficulties in the 1990s and Stark could not 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 and later sold to Kojaian.