Douglas Emmett Acquires 468-Unit M-F Property in Honolulu

By Scott Baltic, Contributing Editor

Douglas Emmett Inc., a Santa Monica, Calif.–based REIT, has purchased a 468-unit multi-family property in central Honolulu for $146 million, or about $312,000 per unit, Douglas Emmett announced Tuesday.

The 12-acre, 24-building Waena Apartments complex is at 1320 Aala St., just north of downtown Honolulu and less than a mile west of the famous “Punchbowl,” site of the National Memorial Cemetery of the Pacific.

As of press time, the seller had not been disclosed and Douglas Emmett could not be reached for comment.

The property recently underwent a $22 million capital improvement program, including upgraded interiors, a new community center and a solar electrical system. The buyer stated that it closed the purchase using its credit line, but intends to obtain permanent financing “in the near future.”

“With the sale of Waena Apartments, the Honolulu apartment market is on track to surpass $300 million in total sales for 2014,” Jared Ikeda, president of Apartment Advisors L.L.C., Honolulu, told Commercial Property Executive. “Overall, the apartment market remains at an all-time historic high in terms of pricing. The average price per unit for the third quarter of 2014 was $261,000, compared to the previous peak of $182,000 back in 2006.”

“There are only a handful of institutional-grade multi-family assets in Hawaii, so it’s not surprising Waena Apartments sold for over $300,000 per unit, given the recent $22 million enhancement to the property and its strategic location in the Honolulu corridor,” Ikeda added.

“The key for Douglas Emmett is to continue occupancy stability while increasing rents,” he added. That’s because there likely will be competition for residential tenants as several new projects are completed over the next two or three years in Kaka‘ako, a former industrial area just south of downtown Honolulu.

Multiple residential projects, both luxury for sale and affordable rentals and fee simple properties, are being developed in Kaka‘ako, along Ala Moana Boulevard between South and Cooke streets.

Hawaii’s apartment real estate market generated almost $500 million in total sales in 2014.

Several institutional acquisitions including Waena Apartments, Kalaeloa Rental Homes and Hibiscus Hill accounted for more than half of the total sales volume for the year, according to a new report.

There were a total of 73 transactions with 1,777 units sold last year, according to the quarterly market report by Apartment Advisors, a Hawaii real estate brokerage and property management firm.

Inventory levels remained stable throughout the year with an average of 35 to 45 active listings on the market at any given time. Properties were on the market an average of 74 days.

Prices for multifamily properties have seen a dramatic increase over the past few years — 2014 marked the fifth consecutive year of growth in price per unit and the first year with double-digit growth since 2010, the report said.

The volume of apartment sales in 2014 was up in every quarter compared to 2013. During the fourth quarter of 2014, more than 75 percent of all transactions had sales prices above $1.5 million, compared to 53 percent a year earlier.

The market continues to be driven on a local level by non-institutional investors that have demonstrated confidence despite escalating prices, said Jared Ikeda, president and principal broker of Apartment Advisors.

He noted that favorable financing terms and low interest rates continue to play a key role in the ongoing demand for apartment assets along with signs of a strengthening rental market as landlords begin to raise asking rents.

“The apartment market has entered into a new era of pricing expectation,” he said in a statement.

“The aggressive growth has been partly attributed to a new demographic of investors entering into the market and driving up prices.”

Hawaii’s multi-family real estate market finished up 2014 with nearly $500 million in total sales, mainly due in large part to several institutional sales including Waena Apartments, Kalaeloa Rental Homes and Hibiscus Hill, which accounted for more than half of the total sales volume for the year, according to a new report.

There were a total of 73 transactions with 1,777 units sold, while average days on the market for the year saw a decrease to 74 days, the Apartment Advisors quarterly market report said.

Inventory levels have remained stable throughout the year with an estimated 35-45 active listings on average.

Overall, prices for multi-family properties have seen a dramatic increase during the last few years with average pricing per unit ending the year just above $221,000, marking the fifth straight year of annual growth in price per unit and the first year with double-digit growth since 2010, the report said.

Additionally, the apartment sales volume in 2014 saw an overall increase in every quarter compared to a year ago. During the fourth quarter of 2014, more than 75 percent of all transactions had sale prices above $1.5 million, compared to a year ago when only 53 percent of transactions had sale prices above that same amount.

The overall market continues to be driven on a local level by non-institutional investors who have demonstrated confidence in the market despite escalating prices, Jared Ikeda, president and principal broker of Apartment Advisors said, noting that in essence, favorable financing terms and low interest rates continue to play a key role in the ongoing demand for apartment assets along with signs of a strengthening rental market as landlords begin to push asking rents up.

“The apartment market has entered into a new era of pricing expectation,” he said in a statement. “The aggressive growth has been partly attributed to a new demographic of investors entering into the market and driving up prices.”