Downtown office tower
goes on market

The owners of 1132 Bishop Street have put the downtown office tower up for sale, according to the property's brokers, Secured Capital Corp. and Hawaii Commercial Real Estate LLC.

The building, near the Fort Street Mall, has nearly 450,000 square feet of office and retail space and is 80 percent occupied, according to Jamie Brown, president of Hawaii Commercial Real Estate. No asking price was listed.

"There's been a lot of interest since the property was listed," Brown said. "It's one of the largest high-quality office buildings in the downtown area."

The building's tenants include U.S. Bankruptcy Court, Actus Lend Lease, McDonald's Corp. and Territorial Savings & Loan.

The 25-story tower was built in 1992 by California developer Irwin Daniels during a downtown building spree that dumped 1.5 million square feet of office space onto the market in the early to mid-1990s.

From 1992 to 1996, Honolulu's office market gained Alii Place, 1100 Alakea, Harbor Court, 1132 Bishop Street and First Hawaiian Center.

In the early '90s, Japan-based lending giants Fuji Bank Ltd. and Sumitomo Trust & Banking filed suit against the building's owners, Bishop Street Associates, seeking more than $110 million owed on a loan. Bishop Street Associates subsequently filed for bankruptcy.

The building, which was appraised for $85 million at the time, was purchased out of bankruptcy for $50 million by BSOT Holdings LLC.

California-based VEF Advisors LLC, which bought the building in 1998 for $73.1 million, is the latest investor attempting to capitalize on perceptions of Honolulu as an attractive commercial property market.

"Honolulu's office market is in the process of being reinvigorated," Brown said. "There have been large changes of ownership in recent times."

When 1132 Bishop sells it will become the sixth of 13 "Class A," or high-quality, office buildings to change hands since 2001, Brown said.

The Davies Pacific Center, the Waterfront Plaza, Harbor Court, the Topa Financial Center and Pioneer Plaza have all gained new owners, who were able to purchase the properties at a fraction of the replacement costs, he said.

Since office rents are still too low to justify new office construction, the result of these sales will likely be increased rents, Brown said.

"That's what the investors are counting on," he said.