March 24, 2016 The REIT Way Hawaii Newsletter

REIT-Owned International Market Place in Waikiki to Open on August 25, 2016 

The historically significant International Market Place in Waikiki is transforming into a premier shopping and dining destination slated to open on Aug. 25, 2016.

Developed by Taubman Centers, a Real Estate Investment Trust (REIT), and CoastWood Capital Group in conjunction with Queen Emma Land Company, the Center will offer Hawaii’s first Saks Fifth Avenue, an unparalleled lineup of retail and 10 world-class, chef-driven restaurants, including unique-to-market concepts by award-winning Chefs Michael Mina and Roy Yamaguchi.

James Beard award winning chef Roy Yamaguchi will open Eating House 1849 at the Center’s grand lanai. The restaurant will pay homage to Hawaii’s vibrant culinary heritage and restauranteurs like Peter Fernandez who opened one of the first restaurants in Hawaii in the mid-1800s.

“There is nothing in Waikiki like Eating House 1849 where Hawaii’s history and plantation past are reflected in the dishes I’ve created,” said Chef Yamaguchi. “International Market Place is the perfect location for this concept, which pays homage to Hawaii’s multi-ethnic island culture.”

The new International Market Place has also just appointed Oahu-native Thai Phan as its facilities director. With more than 15 years of experience in facilities service and management, Phan will be responsible for all building systems and interior and exterior maintenance.

Through the involvement of The Queen Emma Land Company, the Center supports The Queen’s Medical Center, the largest private hospital in Hawaii with the mission to provide quality health care services to the people of Hawaii.

REITs also impact and benefit other industries in the state through job creation. The Center has provided many construction jobs to local residents and, once open, will provide employment opportunities at its numerous shops and restaurants.

Waikiki Property Gets Upgrades

As Waikiki continues to be a major tourist destination in the Hawaiian Islands, many of the long-standing properties are renovating and expanding. Owned by RJL Lodging Trust, a Real Estate Investment Trust, the Courtyard Waikiki Beach Marriott has completed a $20 million renovation of its 403 rooms and suites.

“The renovation took about eight months,” said Charles Young, general manager of Courtyard by Marriott Waikiki Beach. “The owners wanted to reinvest back into the asset and provide a fresh new look that is up to date and more with the times.”

The property recently completed its renovations of more than 400 rooms and suites without resort or amenity fees. Work on the lobby and lobby bar continue and are projected to be completed by March.

As visitor arrivals continue to reach record highs, it is important to provide a quality visitor experience and quality accommodations are an important part of that.

With nearly 10 REIT-owned hotel and resort properties and 10 REIT-owned shopping and retail centers, REITs support Hawaii’s visitor industry through the offerings of accommodations for visitors, as well as providing greater options for shopping.

February 16, 2016 The REIT Way Hawaii Newsletter

(As Published in The Honolulu Star-Advertiser on Feb. 14, 2016)

[caption id="attachment_961" align="alignleft" width="250"] Jay H. Shidler, founder and managing partner, The Shidler Group[/caption] [caption id="attachment_960" align="alignright" width="250"] Lawrence J. Taff, managing partner, The Shidler Group[/caption]

Bills are pending in the legislature which aim to discriminate against REITs (real estate investment trusts) investing in Hawaii. This is surprising to us because REITs were created by the U.S Congress shortly after Hawaii became a state to ensure that all citizens have the opportunity to pool resources to own and benefit from real estate in their communities and around the nation.

The pending legislation would eliminate the dividends paid deduction for REITs owning and operating real estate in Hawaii.  For decades, Hawaii has respected the policy set by the U.S. and every state in the union except for New Hampshire, by permitting REITs to deduct dividends paid to shareholders whether in Hawaii or elsewhere from the corporate income tax, but requiring shareholders to pay the tax on dividends received. Since REITs must pay out all their taxable income to shareholders each and every year to be treated similarly to a partnership for income tax purposes, they are a great way for small investors to own a part of large properties in Hawaii and around the nation.

Supporters of the legislation claim that Hawaii is losing income tax revenue on the dividends paid to non-resident shareholders. If you believe the supporters’ estimates, the lost tax revenue is roughly equal to 100% of all corporate tax revenue to the state for 2015.  We believe this figure is grossly overstated and the interim study completed by the state Department of Business, Economic Development and Tourism (DBEDT) supports our conclusion.

The truth is the proposed legislation will only increase tax revenue for the state in the long run if REITs continue to own and operate real estate in a manner that will result in them paying higher taxes than competing property owners, or they are replaced by owners that are subject to Hawaii income tax.  REITs could be replaced by foundations or pension funds that are passive owners, pay no income taxes, and don’t redevelop properties or build new buildings.  We could easily lose millions of investment dollars and operational expertise and gain no income tax revenue at all.

The additional general excise and real property tax revenue generated by redeveloping Ala Moana Shopping Center, International Market Place, constructing public storage facilities, and medical office buildings exceeds any lost income tax revenue many, many times over.  REIT investments have created significant predictable tax revenue sources and thousands of permanent jobs.  REIT employees are productive members of our community. Our focus should be on attracting REIT capital investment rather than supposed lost income tax revenue.  Municipalities across the country have been willing to offer private companies significant tax incentives in return for capital investment in their regions.  We should be celebrating that Hawaii is receiving a disproportionate share of the capital invested by REITs, but instead we are contemplating changing state law to discourage future REIT investment.

We believe that enactment of this legislation would not only cost Hawaii precious investment and thousands of good jobs, it would actually result in a significant loss of tax revenue long term and cripple the primary way average individuals invest in real estate.  That is why we oppose these pending bills. If this legislation is passed, there are only losers.

February 4, 2016 The REIT Way Hawaii Newsletter

What are REITs?

Real Estate Investment Trusts (REITs) give everyday citizens the ability to own commercial real estate.  Established by the U.S. Congress in 1960, REITs are modeled after mutual funds.