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HONOLULU-The leasehold interest to 515,250-sf Waterfront Plaza office and retail complex here changed hands for $70.9 million. The 97% leased development contains 415,250 sf of office space and 90,000-sf of shop and restaurant space in seven five-story structures at 500 Ala Moana Blvd. The new owner is the Shidler Group of San Diego.

The seller was One Waterfront, LLC, a partnership between Michigan-based Kojaian Management Corp. and its New York City-based partners Witkoff Group and Lehman Bros. The partnership, led by Grubb & Ellis chairman C. Michael Kojaian, bought Waterfront Plaza less than four years ago for $47 million and spent $1.7 million upgrading and leasing the property.

Shidler Group partner Matt Root says the appreciation in Honolulu commercial properties over the past few years demonstrates the strength of the market and the dramatic return to health of the Hawaiian economy after a several-year recession. “Hawaii is now one of the hottest markets in the nation for commercial property,” he says. Crediting defense-related spending for the strong showing, he says “we are cautiously optimistic that it will translate into greater values down the road. We see Honolulu as a recovering market.”

Root tells GlobeSt.com that the deal closed with $5 million of 1031 Exchange funds and a five-year loan at a 6% fixed-rate interest from RBS Greenwich Capital Markets Inc. of Greenwich, CT. Negotiations began in April, with Shidler positioned as the frontrunner with a 20% ownership stake in Honolulu’s CBD office market and 10% of the region’s market.

Constructed in 1983 on 8.7 acres, Waterfront Plaza sits on leased land owned by Kamehameha Schools Trust. The lease runs into 2046. The Shidler Group will spend about $7 million to renovate common areas and retail along with landscaping and lighting upgrades. Current tenants include AT&T, AIG Hawaii Insurance Consultants, Aloha Airlines headquarters, Wachovia Securities and McCorriston Miller Mukai MacKinnon LLP. The retail portion of the project includes a Wallace Theatres and a Restaurant Row that houses Ruth’s Chris Steak House, Sansei Seafood Restaurant & Sushi Bar, Sunset Grill and Ocean Club.

Both sides in the transaction were represented by Stephen Silk, Jay Borzi and Stephen Van Dusen of Secured Capital Corp. of Los Angeles. Jamie Brown of Hawaii Commercial Real Estate served as the local broker contact in Honolulu.

An owner of some eight million sf in Texas, Arizona, Hawaii and Southern California, the Shidler Group early last year paid CalSTRS $90 million for 22-story Davies Pacific Center and the 17-story Pan Am Building, two Honolulu CBD office buildings that house a combined 550,000 sf of leasable space. CalSTRS acquired the two properties in 1989 for $145 million. In August 2003, Shidler acquired Bay View Golf Park and the Shops at 2150 Kalakaua and two years earlier the 16-story Waikiki Galleria Tower retail and office building, which it sold last year for $125 million.

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