Case Studies
PM Realty Group's business strategy centers around four key drivers, all of which are essential to managing the long term expansion of our portfolio: value creation, personnel development and training, quality control and benchmarking, and information technology.
677 Ala Moana Blvd. - Sale / Repositioning / Disposition
Challenge:
- Marketing a 270,000 square foot, 35% vacant office property in a functionally obsolete are for sale in 2004 during a 10-year period of economic downturn in the State.
- Upon selling the property, playing an integral role in its reimaging to distinguish the property as a competitive and desirable office space alternative.
- Ultimately, preparing the property for disposition in anticipation of the time when the State's economic doldrums lifted and the commercial real estate market gained momentum and acceleration.
Solution:
- The offering memorandum described the property as the center of the State's master plan for redevelopment of Kaka'ako, the special design district created as the next area of economic growth and vitality in Honolulu, immediately adjacent to the new University of Hawaii John A. Burns School of Medicine, and on the main thoroughfare bridging the Central Business District and the world class destination of Waikiki. Positive aspects of the property were emphasized, including the relatively new mechanical, energy management, elevator and roof systems, good parking ratio, on-site storage areas, and floor to ceiling glass windows with panoramic ocean and mountain views.
- PMRG was retained by the purchaser to coordinate a comprehensive cosmetic upgrade, and to focus on a tenant retention program and the aggressive leasing of available space. All finish materials and surfaces at the property were replaced or refinished, and a fire/life-safety system was installed. Each existing tenant was contacted in person to determine current satisfaction with the property, space requirements, and interest in remaining a part of the property's community of tenants. Brokers' open receptions were held featuring fine cuisine, the announcement of generous incentive programs, and the promise of quick responses to inquiries and offers.
- As part of the repositioning, transaction parameters were implemented to maximize the property's revenue, and vacant spaces were improved to a new uniform buildingstandard “vanilla shell” condition, comparable to the caliber of improvements found in downtown office space.
Result:
- A purchaser was identified within two months of the initial sale effort in 2004.
- In a 3-yr holding period, notwithstanding the disruptions of a complete cosmetic upgrade, fire/life-safety installation, and refurbishing of vacant spaces, a total of 143,000 square feet of renewal leases and 79,000 square feet of new leases was negotiated, representing activity on 83% of the total leasable space at the property.
- The property was put on the market in 2007 and received offers ranging from 2.5 to 3 times the 2004 purchase price.
- PMRG was retained by the new buyer to continue managing and leasing the property, working with the tenants through additional major façade upgrades and bringing the property to a net 91% leased as of June 2010.
Hilo Medical Building, Hilo, HI - Saleilo, HI
Challenge:
- Located in the weak Hilo submarket on the Big Island of Hawaii
- A 58% vacant, non-performing asset with lease-up challenges
- Although in good physical condition, built for a single-tenant medical user
- Shallow tenant market in Hilo making tenant prospects scarce
- Stabilize the building through successful lease-up, or sell the building to an owner-user
- Identify qualified and financially strong tenants with needs in the specific market
- Lease the vacant space in as short a period of time as possible
- Identified a quasigovernmental tenant to lease the entire building in 2007
- Increased value by negotiating a long-term lease benefiting both the landlord and tenant. As a result the tenant did not need to request, and potentially be denied, funds from the State of Hawaii to finance its improvements
- Identified a qualified medical office building (MOB) buyer to acquire the asset as a long-term single-tenant triple net investment, its first in Hawaii
- Significantly exceeded seller's pricing expectations upon closing in early 2008
Hale Ohana / Starwood Hotels & Resorts – Sale
Challenge:
- Dispose of an asset originally acquired to provide housing for employees of the Westin Maui Hotel, owned by Seller
- Need to sell by end of year 2009
- Low income stream due to unilateral land use restriction agreement requiring that units first be made available to hotel employees; offered to them at below-market rents
- Agreement also provided that units could be rented to the general public only if not taken by hotel employees; mitigated by covenants for marketing all units at market rents
- Resolved late revelation of title glitch related to recordation of unilateral agreement
- Lahaina submarket facing economic challenges
- Limited credit available due to economic crisis
- Emphasized to potential buyers that unilateral agreement did not hinder the property's ability to achieve market rents
- Targeted several qualified buyers that already owned apartment buildings on Maui in particular and in Hawaii in general
- Received nine offers from qualified buyers by the submittal deadline
- Narrowed offers down to several all cash offers with short due diligence and closing periods
- Closed in 2009 at a sales price acceptable to Seller