STAR-BULLETIN FILE An investment fund has bought the Pearl Highlands Center on Oahu at a premium to the price the center fetched when it was last sold in 2000.

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Pearl shopping center
sells at markup

An investment fund managed by New York-based Morgan Stanley has purchased the Pearl Highlands Center, Oahu's seventh-largest shopping center, in a deal worth $113.5 million.

PEARL HIGHLANDS DEAL Sale price: $113.5 million Buyer: Morgan Stanley Real Estate's Prime Property Fund, which manages nearly $28.7 billion in real estate assets Size: 410,325 square feet Location: 1000 Kamehameha Highway, Pearl City Major tenants: Sam's Club, Regal Cinema, Pier 1 Imports Opened: 1993

Morgan Stanley Real Estate's Prime Property Fund, which manages close to $28.7 billion in real estate assets worldwide, said it bought the Kamehameha Highway property in a fee-simple transaction.

Pearl Highlands, which was built in 1993, is anchored by a Sam's Club and home to a Regal Cinema, Pier 1 Imports and Ross Dress for Less. The center is 98.7 percent leased with the majority of the leases extending through 2013 and beyond.

The center's purchase price, about $267 per square foot, is 82 percent higher than what LaSalle Investment Management's Income and Growth Fund II LP paid to acquire the 410,325-square-foot property in 2000.

"The price represents a continuation of the value in Hawaii and is relative to the center's location," said Andrew Friedlander, chief executive and principal broker of Colliers Monroe Friedlander Inc., which handled the center's retail leasing and property management and assisted in marketing the property.

"The center is already anchored by Sam's Club and is near Home Depot and the new Wal-Mart," Friedlander said. "It's an incredible asset."

West Oahu's rapid residential growth and strong retail market also augmented the property's value, he said.

Pearl Highlands Center Associates bought the 14-acre property for $26.5 million in 1990. The mall, developed for an undisclosed price by Japan-based Takenaka International Ltd., opened in 1993.

Pearl Highlands struggled in the mid-1990s during a slow state economy, but began doing much better when it opened its theater in May 1997, retail and real estate consultant Stephany Sofos said.

"The center is now a major part of a stabilized market and with the purchase Morgan Stanley will become a major player in Honolulu," Sofos said.

Morgan Stanley is likely to revamp the center's appearance and to play with the tenant mix, she said.

The transaction, the fund's first acquisition in Honolulu, was motivated in part by the city's recent ranking as the eighth-strongest real estate investment market in the United States, said Joe Thomas, managing director of Morgan Stanley and president of Prime Property Fund.

"With the Hawaii economy strengthening in recent years and the increasing level of new household formation in the central and west Oahu markets, we believe it is the right time to invest," Thomas said.

A lack of investment opportunities in the mainland and a resurgence in the state's economy have fueled interest in Hawaii's commercial real estate, said Mike Hamasu, director of consulting research for Colliers Monroe Friedlander.

He estimated 2004's investment volume will increase about 50 percent to 60 percent, to between $3 billion and $3.5 billion.