Hawaii Real Estate

Wednesday, April 10, 2013

Buying a home that is not for sale

In the current market, inventory is tight and many Buyers are getting shut out from properties that suit them because of stiff competition.  At Benn Pacific Group we often utilize methods for tracking potential sales (lis pendens filings, foreclosures, lease/fee conversions).  We also focus on neighborhoods that our clients want and solicit potential sellers via direct mailings.  These letters often describe the client’s needs and their financial abilities and highlight their attributes.  This is happening across the US and CNBC just wrote about it today in an online article.
See here:  CNBC article

Tuesday, March 05, 2013

Howard Hughes Corporation Letter to Shareholders

The following is an excerpt taken from a letter to Howard Hughes Corporation Shareholders from the CEO, David R. Weinreb on March 5, 2013 which speaks to their holdings in Kakaako (former Victoria Ward holdings):

In Honolulu, we are preparing to break ground this summer on ONE Ala Moana (http://www.onealamoana.com), a 206-unit luxury condo tower that is being developedin partnership with Honolulu-based developers Kobayashi Group and TheMacNaughton Group. These talented and highly respected local developers ledthe acceleration of this development which sold out in two days during themonth of December. Units at ONE Ala Moana sold for an average price of $1.6 million, or approximately $1,170 per square foot. At an assumed cost ofapproximately $900 per square foot, including the value of our air rights, theproject is anticipated to generate approximately $66 million in total profit. At the closing of the construction loan, The Howard Hughes Corporation will receive $47.5 million of proceeds for its air rights. In addition, at project completion, we expect that the company will have received approximately $73million of total proceeds. This asset has a book value of $22.8 million.

The strong response at ONE Ala Moana is good news for Ward Village, one of the company’s key value creation opportunities. In its current state, Ward Village generates approximately $23 million of annual net operating income. However, Ward has an approved master plan that allows for up to 9.3 million total square feet of mixed-use development, including more than 4,000 residential units and approximately 1.5 million square feet of retail and other commercial space. Ward Village has development rights for 22 high-rise towers in an urban master planned community setting. Over the next decade, Ward Centers will transform into Ward Village, a vibrant neighborhood complete with unique retail experiences and exceptional residences set among dynamic public open spaces and pedestrian-friendly streets. In October 2012, we announced plans tomove forward with the first phase of Ward Village, which will consist ofapproximately 500 market rate condominium units and at least 125 workforcehousing units. We also commenced the redevelopment of the historic IBM Building into a contemporary information and sales center, which will showcase the unparalleled neighborhood we are creating at Ward Village.

While we have not yet determined pricing for our first phase towers, market data suggest that comparable existing “front row” product with unobstructed ocean views re-sold in 2012 at an average price of approximately $1,400 persquare foot. Hokua, which is a condominium tower adjacent to Ward, resells atthe highest average price per foot of any condominium tower in Honolulu,approximately $1,400 per square foot. Hawaii’s residential market ischallenged by supply. Economic forecasts indicate approximately 20,000 housingunits must be delivered to meet demand by 2020. This has led economists toproject home prices will increase as much as 40% in the next few years. Themarket will be extremely challenged to deliver this supply given the hurdlesthat must be overcome to achieve development entitlements, which gives WardVillage new product a significant competitive advantage.

In the same way that buyers pay substantial premiums to live in Summerlin or The Woodlands, by delivering a comprehensive master planned communityenvironment that no other competitor can deliver, we expect Ward Village to capture similar premiums and generate substantial value over the life of the project not only for our shareholders, but also for the new residents. I encourage each of you to follow our progress by visiting our website http://www.avisionforward.com.

Hawaii’s largest indusrial landowner charged with mismanagement

As a stakeholder and an outside observer, the recent moves by the Commonwealth Fund (CWH) are disturbing and disappointing.  This entity was the buyer of the former Damon Estate lands (Mapunapuna) and the former Campbell Estate industrial lands.  These acquisitions make them the largest industrial landowners in Hawaii.  Over the past years they have been mired in mismanagement including:

1) Creating a separate company to handle the property management which is owned by the Chairman of the Board of CWH.
2) Splitting the REIT into three entities and divesting the properties into these Trusts but NOT giving shareholders proportionate shares in the offshoot entities.
3) Altering the Trust’s Bylaws to ensure that shareholder rights are suppressed.
4) Diluting the shares of the Company to fight off shareholder advocates.
5) Ignoring a tender offer that is 25% higher than their IPO pricing they are undertaking currently.

To learn more I invite you to read this blog from the Wall Street Journal:
Link to Wall Street Journal Blog

Aloha!

Wednesday, December 12, 2012

SOLD OUT!

What’s the best economic indicator of the health Hawaii’s real estate industry?  How about an error by the Star Advertiser in running an ad for the sales of the ONE Ala Moana condominium on Friday last week instead of Monday as scheduled, thus forcing the developer to go to market 3 days earlier than planned.  End result?

206 units sold out almost instantly with an average price point of approximately $1,500/sf and a maintenance fee estimated to be on the north side of $1/sf per month.  Even the Penthouse units in the $8-9 Million range…gone.  That pace of sales beats any absorption rate I have seen in years.

ONE Ala Moana promises to be one of the first in what appears to be the pending boom in condo development in the Kakaako to Waikiki area.  What makes this one so unique is its location on top of the existing parking structure of Nordstrom at Ala Moana.  This means residents will be able to go out their door to the world’s largest open air shopping center or out the back to the Keeaumoku/Kapiolani corridor.  Paired with valet parking for residents, lots of amenities (including a simulated golf driving range) and a relatively small number of units, ONE Ala Moana may just be the hottest address in town!

inventory at ONE Ala Moana

Contact us for more information on this and other condos coming soon to Kakaako!

Mahalo.

Friday, October 26, 2012

Hawaii #1 for holding real estate in an LLC

The Wall Street Journal reported that Hawaii has the highest percentage of homebuyers holding title in LLCs.  If you are looking for certain privacy and protections you might consider holding title in an LLC… of course, consult your financial and legal advisors before doing so!

Wall Street Journal Article.

Thursday, September 13, 2012

FED announcement

This morning the Federal Reserve announced its continued stimulus of the US economy by affirming a commitment to purchasing $40 Billion a month of mortgage-backed securities and re-investing the returns off of previous investments by purchasing another $45 Billion in similar securities.  This amounts to an $85 Billion-a-month pledge and it is open-ended until it’s satisfied that economic conditions have improved. 

Additionally, on the call, it announced that it plans to keep the Fed funds rate at essentially zero and intends to keep it there through at least mid-2015.

What does this mean?  Well, it is evident that the Fed believes the best impact on job growth and economic recovery is at least partially through the housing market which is continuing to recover.  In short, the more people that stay out of foreclosure… the better for the overall economy.  The more people that can refinance their existing mortgages into lower payments, the more money they have to spend elsewhere.  The lower rates also are an encouragement for consumers and businesses to lever up, borrow more and invest in growing their companies, buying assets, etc.  The 2015 forecast is a message that you will have this window of opportunity for another 3 years!

How do I profit from this? 
If you have a mortgage that would be lower at today’s rates you should consult a lender and see if that would make sense. 
If you want to up-size your home you should call us and see what your money can buy and what your current home could sell for.
Increase your leverage if you are comfortable with the payments and purchase more real estate or other assets that you think will appreciate or cash-flow at a rate higher than the cost of those funds.

Future inflation?
Many are predicting that the longer term outcome of this is much higher inflation.  I have been talking about this for a while.  If this happens, you want to own real estate.  Real estate is an inflation hedge for several reasons:
1) Your payments are fixed.  If you have a $2,000 a month 30-year fixed mortgage, that payment is unchanging for 30-years.  If inflation occurs, the dollar will weaken and the costs of goods and services will go up in price but you might not care as your income should also be rising in that environment.  However, the mortgage payment you have does not inflate with the cost of everything else.  It is fixed so you might be paying back that mortgage with “75 cent dollars” (your devalued dollars).
2) Rents are NOT fixed.  This means that while your payments are fixed for 30 years and not subject to inflation…your rents are not.  So you would be increasing your rents to your tenants on your investment properties and widening the gap between your income and your expenses…otherwise known as “profit!”

Author: 
Trevor Benn (R, GRI, ABR, ePRO, SFR)
Principal Broker - Benn Pacific Group Inc.

*DISCLAIMER

Wednesday, September 12, 2012

Trying to avoid possible tax changes?  You may need to sell now.

With the election looming and the current economic realities, most experts seem to agree that many tax rates will be increasing in 2013.

The new “Medicare” excise tax on high income earners is already set to take effect on January 1, 2013.  In brief, this is an additional tax of 3.8% for individuals with an AGI (Adjusted Gross Income) over $200,000 or couples filing jointly with an AGI in excess of $250,000.  This tax is applied to the income in excess of these income limits… but investment and passive income is also counted in that!  So, the sale of your home (in excess of the exemptions) might be added to that.

The National Association of Realtors® has some scenarios that might help in understanding this tax (click on the link below):
NAR 3.8% Tax Scenerios

Additionally, many think that 2013 will bring even more changes to the higher tax brackets and capital gains rates.  We are recommending our clients review their real estate holdings with us and their estate planning consultants now.  If liquidating any of these assets makes sense for your estate plan, the time to list these properties to close by the end of 2012 is NOW!*

* DISCLAIMER:  Benn Pacific Group Inc. and its agents and affiliates are NOT experts on tax and estate planning matters.  You should consult your CPA and/or tax/estate planning attorney for advice prior to making an investment decision.

Monday, July 16, 2012

Housing Passes a Milestone

Housing Passes a Milestone
By DAVID WESSEL

The housing market has turned—at last.

The U.S. finally has moved beyond attention-grabbing predictions from housing “experts” that housing is bottoming. The numbers are now convincing.

Nearly seven years after the housing bubble burst, most indexes of house prices are bending up. “We finally saw some rising home prices,” S&P’s David Blitzer said a few weeks ago as he reported the first monthly increase in the slow-moving S&P/Case-Shiller house-price data after seven months of declines.

The U.S. finally has moved beyond attention-grabbing predictions from housing “experts” that housing is bottoming. The numbers are now convincing, according to David Wessel on The News Hub.

Nearly 10% more existing homes were sold in May than in the same month a year earlier, many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point. In something of a surprise, the inventory of existing homes for sale has fallen close to the normal level of six months’ worth despite all the foreclosed homes that lenders own. The fraction of homes that are vacant is at its lowest level since 2006.

The reduced inventory of unsold homes is key, says Mark Fleming, chief economist at CoreLogic, a housing data-analysis firm. For the past couple of years, house prices have risen in the spring and then slumped; the declining supply of houses for sale is reason to believe that won’t happen again this year, he says.

Builders began work on 26% more single-family homes in May 2012 than the depressed levels of May 2011. The stock of unsold newly built homes is back to 2005 levels. In each of the past four quarters, housing construction has added to economic growth. In the first quarter, it accounted for 0.4 percentage points of the meager 1.9% growth rate.

“Even with the overall economy slowing,” Wells Fargo Securities economists said, cautiously, in a note to clients, “the budding recovery in the housing market appears to be gradually gaining momentum.”

Economists aren’t always right, but on this at least they agree: A new Wall Street Journal survey of forecasters found 44 believe the housing market has reached its bottom; only three don’t.

Housing is still far from healthy despite the Federal Reserve’s efforts to resuscitate it by helping to push mortgage rates to extraordinary lows: 3.62% for a 30-year loan, according to Freddie Mac’s latest survey. Single-family housing starts, though up, remain 60% below the 2002 pre-bubble pace. Americans’ equity in homes is $2 trillion, or 25%, less than it was in 2002 and half what it was at the peak. More than one in every four mortgage borrowers still has a loan bigger than the value of the house, though rising home prices are reducing that fraction slowly.

Still, the upturn in housing is a milestone, a particularly welcome one amid a distressing dearth of jobs. For some time, housing has been one of the biggest causes of economic weakness. It has now—barely—moved to the plus side. “A little tail wind is a lot better than a headwind,” says economist Chip Case, the “Case” in Case-Shiller.

From here on, housing is unlikely to drag the U.S. economy down further. It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses. “Manufacturing had led growth and construction had lagged,” JPMorgan Chase economists said last week.“Now the roles are reversed: Manufacturing growth has slowed as private construction comes to life.”

Plenty could go wrong. The biggest threat is a large shadow inventory of unsold homes, homes which owners won’t put on the market because they are underwater, homes that will be foreclosed eventually and homes owned by lenders. They have been trickling onto the market, slowed in part by government efforts to delay foreclosures; a flood could reverse the recent rise in prices. Or the still-dysfunctional mortgage market could get worse. Or overly zealous regulators or a post-election change in government policy could unsettle mortgage lenders or home buyers.

But the housing bust is over.

Write to David Wessel at .(JavaScript must be enabled to view this email address)

A version of this article appeared July 12, 2012, on page A2 in the U.S. edition of The Wall Street Journal, with the headline: Housing Passes a Milestone.

Wednesday, June 20, 2012

Pacific Business News - Island of Lanai for sale

Will Bill Gates or Larry Ellison buy Hawaiian island of Lanai?

Pacific Business News by Duane Shimogawa, Reporter
Date: Monday, June 18, 2012, 1:34pm HST - Last Modified: Tuesday, June 19, 2012, 9:56am HST

Word spread fast after PBN broke the story last Friday confirming the widely spread rumor that Los Angeles billionaire David Murdock is trying to sell the island of Lanai.

Now, Maui County Mayor Alan Arakawa is telling PBN that there’s a good chance that Lanai might be sold relatively quickly. Word of the sale could come out in about a week or so.

“At this point, there seems to be a serious inquiry, [but] the due diligence must be done — a lot of paperwork must be satisfied,” he said.

The listing price for the island is not being publicly disclosed, but one expert who sells islands for a living told PBN that its price is probably more than $500 million.

Arakawa said he had a discussion with representatives from Castle & Cooke Hawaii Inc. over the weekend and, in that discussion, “someone” was identified as being interesting in purchasing Lanai, although he declined to give any names.

Meantime, Gov. Neil Abercrombie told PBN through his spokeswoman, Donalyn Dela Cruz, that he met with Castle & Cooke representatives Thursday afternoon, and they informed him that they have started discussions with a potential buyer for Lanai.

Dela Cruz said Monday that the governor has no other information at this time.

Lanai, the sixth-largest Hawaiian island by acreage, is owned by Murdock, who in 1985 took control of it as a result of his purchase of Castle & Cooke. The state owns 2 percent of the island.

Rumors have been spreading for some time now that two prominent American businessmen, Larry Ellison, co-founder/CEO of Oracle Corp., and Bill Gates of Microsoft-fame may be likely candidates to buy Lanai.

Gates and his wife, Melinda, rented out the entire island for their marriage in 1994, and Ellison has a home on Lanai.

Calls to Oracle’s corporate offices weren’t immediately returned.

A call and email to Gates’ Bill and Melinda Gates Foundation requesting comment weren’t immediately returned.

Wednesday, June 13, 2012

Bloomberg - Hualalai Loan in trouble…

Four Seasons Hualalai Hotel Loan Sent to Special Servicer - Bloomberg

By Nadja Brandt - Jun 12, 2012 11:26 AM GMT-1000

A loan on the luxury Four Seasons Resort Hualalai, a joint venture of Rockpoint Group LLC and Michael Dell’s MSD Capital LP, was transferred to a special servicer because of maturity default, Fitch Ratings said.

The loan has a balance of $175.9 million, Fitch said today. Rockpoint and MSD, the investment firm started by the Dell Inc. (DELL) founder and his family, bought the property in June 2006 for $503.7 million, according to Scott Pritchard, a director for structured finance at Fitch.

Special servicers negotiate with landlords on behalf of investors in commercial mortgage-backed securities. The resort’s owners are in talks with lenders and seeking a later maturity. The fourth and last extension on the loan expired on June 9, according to Fitch.

The borrowers “will continue to make interest payments on the mortgage during the discussions with lenders,” Patrick Fitzgerald, chief executive officer of the resort, said in an e- mailed statement. “We are confident that the discussions will lead to a multiyear extension of the maturity date.”

A tsunami triggered by the 9.0-magnitude earthquake in eastern Japan caused more than $10 million of damage to the hotel on March 11, 2011, primarily to landscaping. Losses from tsunami disruptions probably will be covered by insurance, Fitch said in its note. The 243-room, five-star property, on Hawaii’s Big Island, has a golf course, two outdoor swimming pools and three tennis courts, according to Fitch.

The original balance of the interest-only, floating-rate loan on the resort was $354.4 million, Pritchard said.

Occupancies at U.S. luxury hotels climbed to 72 percent this year through April from 70 percent a year earlier, according to Smith Travel Research, based in Hendersonville, Tennessee. That’s the highest among the seven lodging categories the firm monitors. On Oahu, the only Hawaiian region Smith Travel tracks, occupancies were 84 percent, the best performance among the top 25 U.S. markets.

To contact the reporter on this story: Nadja Brandt in Los Angeles at .(JavaScript must be enabled to view this email address)

To contact the editor responsible for this story: Kara Wetzel at .(JavaScript must be enabled to view this email address)