SKB bought the two office buildings subject to a long-term ground lease and acquired the parking garage on a fee-simple basis. The complex, which was developed in the 1980s, was 95% leased at the time of the sale.

SKB says that the high level of leasing reflects the fundamentals of the Kapiolani Corridor submarket, near the central business district of Honolulu, where the tenant roster includes a mix of finance, insurance, healthcare, engineering firms and government entities. More than 50% of the rentable space is leased by investment grade tenants, including Geico, ADP, Progressive Insurance, ING North America and Kaiser Foundation Health.

Rents have been rising in the submarket because of its low vacancy, but the rates are generally not enough to justify new construction, says SKB Chairman Bob Scanlan. This means "it's unlikely that an abundance of new office product will come online during the holding period," Scanlan says.

SKB President Todd Gooding adds that, with employment growth expected to continue and half of the Pacific Park Plaza's square footage rolling in the next four years, there is ample opportunity to capitalize on market rent growth.

The equity necessary for the acquisition was provided by SKB Real Estate Investors LP and a co-investment vehicle managed by SKB. The business plan involves approximately $1.5 million in both capital and tenant improvements and a six-year holding period.