Our team represented the buyer in the fee simple purchase of Honolulu’s Flagship Walgreens store. The purchase price was $42,250,000 which translates to a 4.73% cap rate and $1,141.89 per square foot for the 2015 built single tenant store. This is the second largest arm’s length transaction for a single tenant Walgreens according to Co-Star.
The Walgreens Flagship location in Honolulu is located at the corner of Kapiolani Boulevard and Keeaumoku Street (“Property”), across the street from the Ala Moana Center. The building is unique in its location and architectural significance. This property is located in the middle of Honolulu’s premiere shopping district. In 2016, it received the prestigious VIVA (Vision, Innovation, Value, and Achievement) award from ICSC for its unique architectural design. Wall patterns and screens interpret the symbols for water in traditional Hawaiian art, which reflects the site’s history of fishing. At 36,058 square feet, it is twice the size of a traditional Walgreens, occupies two floors and does not have a drive thru, but it is open 24 hours a day seven days a week to take advantage of the pedestrian-heavy intersection.
THE ADJOINING DEVELOPMENT
Two months after opening, the Property was purchased directly from Walgreens by Salem Partners, together with the contiguous parking structure and adjoining Heald College Building – the fee simple site that encompasses approximately 73,103 square feet of leasable space on 43,000 square feet of land. The entire site is part of City and County of Honolulu’s transit-oriented development or TOD, zoning plans that recommend a redevelopment of the Heald College Building site into a residential high rise. Salem is planning a $549M hotel condominium on the Heald College site and 68 affordable rentals atop the existing Walgreens parking structure.
We represented a Korean fund (“Client”) in the purchase of the Property. The assignment originated with the disposition of Hacienda Plaza, an approximately 135,000 square foot grocery anchored shopping center located in the city of La Puente in Eastern Los Angeles County shopping center with an estimated value of $26M. The assignment required both the disposition of Hacienda Plaza and the identification of a replacement property. The Client was enrolled in the 1031 Exchange Navigator™ , a unique program designed for investors with specific exchange requirements within an identified period. Each requirement is different and the process requires the active participation of both the client and our team.
Our 1031 Exchange Navigator is a customized program based on our client’s exchange requirements. Ideal for clients currently in an exchange or getting ready to walk through one, our team focuses a structured process built to mitigate any potential risk tolerance. Once the exchange strategy is created, our team sources opportunities while providing access to underwriting, property analysis, property positioning, acquisition strategies, and transaction recommendations. Our end goal is to make sure our client’s walk through 1031 exchanges with all the information they need to make informed decisions and reach our promise of a secured and managed close.
By the time the Property was sourced, several investors were also pursuing the opportunity and the team worked quickly to negotiate a winning bid that required the buyer to commit to a short timeframe to complete the purchase.
Once we opened Escrow, we needed to overcome several obstacles, including;
- Negotiating a new amendment to the Walgreens lease that described the parking arrangement between the parking garage owner, the new property owner and the tenant
- No record of store performance, since tenant was not required to report sales
- Transfer of density rights to the adjoining development as a condition of sale
- Record breaking price per foot on the sale and aggressive cap rate for a such a high priced single tenant Walgreens
THE REVERSE 1031 EXCHANGE
The sale of Hacienda Plaza fell out of contact while in Escrow. This came as a big surprise but the team was able to maintain the buyer focused on the purchase of the Property. The team facilitated the structure of a rare 1031 reverse exchange, which required the clients to “park” Hacienda Plaza with an Exchange Accommodator Titleholder (EAT). This process will now give our Client six months to complete the sale of Hacienda Plaza to complete their tax deferred 1031 exchange.
HOW WE DID IT:
1031 Exchange Navigator
The Deal Finder Game Plan