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Shidler's company to sell six major Honolulu office buildings

By Andrew Gomes

POSTED:
LAST UPDATED: 01:03 p.m. HST, Mar 28, 2011


The largest owner of office buildings in Honolulu is considering selling its portfolio of six properties.

San Diego-based Pacific Office Properties Trust Inc. announced today that it has retained a broker to explore selling the six buildings or finding a partner to invest in the portfolio. The properties up for sale are Waterfront Plaza (which includes Restaurant Row), Davies Pacific Center, Pan Am Building, First Insurance Center, Pacific Business News Building and Clifford Center.

Pacific Office retained Wells Fargo & Co. subsidiary Eastdil Secured LLC to sell the properties.

The effort may not result in a transaction, but if successful it could dramatically reshape the geography of Pacific Office's holdings.

Collectively the six properties comprise almost 1.5 million square feet of leasable space, or close to 10 percent of Honolulu's office market.

The buildings also represent the bulk of Pacific Office's assets and were the core pieces of real estate used by local commercial property investor and University of Hawaii graduate Jay Shidler to establish the company in 2008.

Besides the six Honolulu buildings, Pacific Office wholly owns one building in San Diego and one in Phoenix.

Shidler initially used nine office buildings — six in Honolulu and three on the mainland — that he owned through The Shidler Group to establish Pacific Office as a publicly traded real estate investment trust with stock traded on the American Stock Exchange.

Since then, Pacific Office, with Shidler as chairman of the board, has grown its portfolio primarily through joint ventures, acquiring partial ownership between 5 percent and 32 percent in 16 office properties, including one in Honolulu, Bank of Hawaii Waikiki Center.

But the company also has struggled financially.

Pacific Office reported a net loss of $17.5 million for the nine months ended Sept. 30. The company has yet to report full-year results for 2010.

Among financial drags are two mortgage defaults, including a loan on the Pacific Business News Building that matured in April 2010 and has cost Pacific Office $800,000 in default interest and penalties through September. Negotiations to extend the loan are continuing.

In September, Pacific Office announced an agreement to buy 12 office properties in California for about $306 million subject to selling additional stock to finance the transaction. Completion of that acquisition has been delayed.

In January, Pacific Office announced plans to sell about $430 million in stock in a new effort to recapitalize the company.

Last month, the chief financial officer of Pacific Office, James Wolford, resigned and was replaced by Michael Burer, who was executive vice president of operations for Pacific Office and a former senior vice president of finance for The Shidler Group.

The sale offering of the six Honolulu office properties is an effort to help recapitalize the portfolio and the company. James Ingebritsen, Pacific Office's chief executive officer, said in a written statement that the properties are ideal for a new buyer to obtain a dominant position in the Honolulu office market.

Ingebritsen could not immediately be reached for additional comment.






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