The owner of Ala Moana Center and Ward Centers exits bankruptcy as two companies
POSTED: 1:30 a.m. HST, Oct 22, 2010
LAST UPDATED: 2:22 a.m. HST, Oct 22, 2010
An envisioned high-rise condominium on top of the Nordstrom parking garage at Ala Moana Center will be one project taken over by a major new player in Honolulu's condominium development scene, as part of the bankruptcy reorganization of mall owner General Growth Properties.
The Howard Hughes Corp. is poised to assume ownership of four Hawaii real estate assets under a bankruptcy exit plan a New York judge approved yesterday.
The arrangement will give Hughes Corp. the rights to develop a condo tower next to the Nordstrom store, and 60 acres comprising Ward Centers in Kakaako slated for residential and retail redevelopment including 20 condo towers. The projects would make the company a top Hawaii developer.
Two vacant 10-acre parcels on Maui are also part of the transfer, which is expected to be done Nov. 8 when General Growth exits Chapter 11 as two companies.
General Growth will continue to own Ala Moana Center, Prince Kuhio Plaza on the Big Island and a half-interest in Whalers Village on Maui.
As part of the plan, Hughes Corp. was set up to own a collection of assets mostly unrelated to General Growth's main focus on shopping centers.
PROPERTY TO CHANGE HANDSThe space above the Nordstrom parking garage at Ala Moana Center (shown in orange) is being transferred by General Growth Properties to a new company as part of a bankruptcy exit plan and is slated for development of a single 18-story tower.
Many of Hughes' assets have been a financial drag on General Growth, which had to halt much of its development work while in bankruptcy. Collectively, Hughes' assets accounted for a $703.6 million net loss to General Growth last year.
According to General Growth, the most valuable assets being transferred to Hughes are four master-planned communities on the mainland with a combined net book value of about $1.8 billion.
Among other assets, Ward Centers is the most valuable at $319 million.
The development plan known as Ward Neighborhood envisions as many as 4,300 residential units spread among 20 buildings, with some as high as 400 feet and five positioned along Ala Moana Boulevard opposite the Kewalo Basin commercial boat harbor.
Retail would continue to be a major presence with space for about 400 retail tenants, up from about 300 today. The project also includes three landscaped pedestrian plazas covering about five acres, 9,600 parking spaces, 700,000 square feet of industrial space and a connection to a mass-transit station planned by the city in the vicinity.
The project would over time replace all existing structures in the area bound by Ala Moana Boulevard, Queen Street, a cluster of blocks just Ewa of Ward Avenue and the IBM Building. Everything in the area -- including Ward Warehouse, Ward Centre and Ward Entertainment Center -- would be redeveloped except for a new 850-stall parking garage and retail space previously slated for a Whole Foods Market.
WARD DEVELOPMENTProperty slated for condominium tower development (shown in orange) is being transferred by General Growth Properties to a new company as part of a bankruptcy exit plan. It includes 60 acres comprising Ward Centers in Kakaako slated for residential and retail redevelopment including 20 condo towers.
A representative of Hughes Corp. said earlier this month there is no timetable for moving forward with Ward Neighborhood.
The other prime Hawaii asset Hughes is acquiring is the right to build a residential high-rise atop the Nordstrom parking garage at Ala Moana Center.
General Growth built the six-story garage to support a tower up to 18 stories for 210 luxury condo units but never pursued the plan.
Hughes values the development rights for the tower at $22.8 million.
The Maui land comprises two unconnected vacant parcels near the Kula Forest Preserve. The land, which has no legal access by ground, was once part of the estate of Victoria Ward, whose family was connected to Hawaiian royalty. The Wards also maintained a roughly 100-acre residence in Honolulu called Old Plantation, part of which became Ward Centers.
Local real estate industry observers suspect that the Honolulu condo development projects might progress differently under Hughes, given that the new company will have objectives different from General Growth's.
Christine Camp, president of local development firm Avalon Development, said Ward Centers will no longer have to compete with Ala Moana Center for capital from General Growth.
Also, one company will no longer control the two largest retail centers in Honolulu's urban core.
"It's good news for Hawaii, good news for retailers," Camp said. "When you have a new owner, it's a fresh outlook."
A Hughes representative could not be reached for comment yesterday. The company said in a stock registration statement that it will assess the opportunities to maximize the long-term value potential for the properties.
Hughes Corp. will be a publicly traded company spun off from General Growth. Shareholders of General Growth will receive shares in Hughes.
The two companies, however, will have separate management. Leading Hughes as chairman is William A. Ackman, chief executive of investment firm Pershing Square Capital Management.
Pershing Square is one of several firms that helped recapitalize General Growth and with financing difficulties that forced it into bankruptcy in April 2009.
A chief executive for Hughes is expected to be named after the spinoff is completed.
The company, which was temporarily dubbed Spinco Inc. by General Growth earlier, takes its name from the late billionaire and aviator Howard Hughes, who became active in developing a vast area of Las Vegas in the 1960s.
The 22,500-acre master-planned Hughes community known as Summerlin was acquired by real estate development firm Rouse Co. in 1996. General Growth bought Rouse in 2004 for about $11 billion in a deal that created much of the debt that led General Growth into bankruptcy.