PacificBusinessNews-article

May 15, 2015

Alexander & Baldwin's Kailua Town portfolio attracts interest from tenants

By Duane Shimogawa

Alexander & Baldwin Inc.’s Kailua Town commercial real estate portfolio, which it acquired from Kaneohe Ranch and the Harold K.L. Castle Foundation in 2013, has been attracting interest from tenants wanting to lease space in the Windward Oahu town.

Jon Moyer, A&B's director of asset management in Kailua, sat down with PBN at the firm’s office on Hekili Street above Boots and Kimo’s Homestyle Kitchen to talk about the town's commercial core.

“Demand for space is high,” he said. “We aren’t focused on financial returns on the short term. We are here for the long term.”

Occupancy in the approximately 180-tenant portfolio is in the mid to high 90 percent range and is consistent with other parts of Oahu, Moyer said, noting that the occupancy level has been about the same since it acquired the portfolio less than two years ago.

“We are focused on local tenants, but it’s really about enhancing the shoppers’ experience in Kailua,” he said. “That’s what people come to Kailua for — the unique and amazing things you can’t find anywhere else.”

He pointed out that the national tenants, such as California Pizza Kitchen and Whole Foods Market, do play a role in the portfolio, and that there could be more national tenants, although last year its new leases were only with local tenants, including Grylt, Paniolos Hawaii, Twin Islands and Aloha Sunday Supply.

“Preserving the character of the town is important,” Moyer said. “That’s why tenant mix is important. The unique local tenants are very important.”

As tenant occupancy rises, so do rents.

“The great thing about tenants in Kailua is that they do good,” Moyer said. “[Market] rents have gone up on Oahu across the board and that’s consistent with Kailua. Couple that with demand for space and you do have an environment where market rents have increased for vacancies and available space.”

Moyer said A&B selects tenants on a case-by-case basis.

“We consider where they’ll go and how they will be complementary to tenants and enhance the shopping experience,” he said. “We do consider the tenants’ ability to do well and thrive in Kailua town.”

A&B paid $373 million for the Kaneohe Ranch/Harold K.L. Castle Foundation portfolio. It included 386,000 square feet of grocery- and drug store-anchored shopping centers, retail strip centers, light industrial properties, and more than 50 acres of retail and other commercial centers that are ground-leased to third parties located primarily in Kailua and other parts of Windward Oahu and in Honolulu.

“It was a great move for A&B,” said Moyer, who was part of the transaction side of the deal and now has transitioned to the asset management side. “We are a 140-year-old company. We are here for the long term. We are going to take our time.”