STAR-BULLETIN / JUNE 2001 Tenants of West Oahu industrial land that is being sold include power-plant operator AES Corp., in the left structure, and the city's HPOWER waste-to-energy plant, in the right set of buildings.

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Industrial advantage

HRPT Properties Trust buys
188 acres near Kapolei, making
it the state's largest owner
of industrial land

The Massachusetts company paying $115.5 million for the Estate of James Campbell's industrial properties near Kapolei said it's not done making deals in Hawaii.

REAL ESTATE POWER HRPT Properties Trust buys more Hawaii real estate. Base: Newton, Mass. Market capitalization: $2.3 billion Purchase: 188 acres in the James Campbell Industrial Park. Cost: $115.5 million

HRPT Properties Trust is "actively looking" for other acquisitions in Hawaii in the industrial and office sectors, said Executive Vice President Adam Portnoy.

"We would love to expand further in the Hawaii market," said Portnoy, who did not disclose any of the potential transactions. "Its economy is favorable and obviously the current industrial market is very good."

Yesterday, HRPT said that it has reached an agreement to purchase the fee interest to 188 acres at the Campbell Industrial Park.

The purchase -- combined with the company's $480 million acquisition of the Damon Estate's industrial lands on Oahu in 2003 -- will make HRPT the state's largest owner of industrial properties, owning nearly a fifth of all industrial lands on Oahu.

Portnoy said that the company is interested in acquiring additional industrial space or a fee-simple office building. But he acknowledged that very few office buildings are being offered with their fee interest.

Portnoy said that Hawaii is attractive because its population is growing and the industrial market has been active as vacancy rates have dropped below 2 percent. He added that it's difficult to develop new industrial properties in today's regulatory environment.

The deal will likely close between June and December to allow Campbell Estate time to find a replacement property.

The properties represent most of the estate's remaining holdings in the 1,300-acre Campbell Industrial Park, which was built in the 1950s. The estate said it sold off most of its land in the park during the past several years to its tenants.

Tenants include oil refiner Tesoro Corp. and AES Corp., which operates a power plant.

HRPT said that the properties generate about $8.7 million in annual income.

Portnoy said that tenants aren't likely to see much change during the first year of new ownership. He said that HRPT sees the purchase as a long-term investment and has no plans of selling off the lands as individual parcels.

Portnoy added that the company will work closely with tenants that are interested in extending the terms of their leases. The typical tenant has about 15 years remaining on their lease and their rents are set to increase every 5 to 10 years, the company said.

Mike Hamasu, research director at Colliers Monroe Friedlander Inc., said the deal comes as the average industrial rent on Oahu has risen nearly 40 percent to about 96 cents a square foot from about 69 cents a square foot in 2001.

Hamasu said yesterday's deal makes HRPT the "kingpin" of industrial property owners. He said the company will own roughly 17.9 million square feet of industrial space on Oahu, which is about 18 percent of the market.

"They're going to be the primary industrial land owner in Hawaii," Hamasu said.