Collecting on
Harbor Court could avert layoffs,
Council members say

By Gordon Y.K. Pang
Star-Bulletin

Mayor Jeremy Harris should not be laying off employees while his administration has failed to collect $12 million owed on a luxury condominium project downtown, City Council members say.

"So as you're balancing this budget and saying you need to cut all of this because we don't have any revenue coming in, there are all these revenue sources," Councilwoman Donna Mercado Kim told Budget Director Malcolm Tom during a Budget Committee meeting yesterday.

City attorneys didn't know how aggressively they should pursue collection on the Harbor Court property because Tom has been negotiating a settlement, she said.

Kim added that the Council, which approved the sale of the fee interest, should have been made aware of the problems in collection.

Councilman Duke Bainum said the $2 million on back rent from the Harbor Court project "alone would allow us to make up half the reduction in force so we could avoid most of the layoffs."

The city leased the land under the 120-unit Harbor Court and the adjoining Nuuanu Court office building to Harbor Court Developers in 1989.

Harbor Court Developers was a joint partnership of McCormack Properties and Dick Bradley. The chief lender was Mitsui Trust Banking of Japan.

In 1994 the developer sought to convert the condominium units to fee simple, arguing that lease units weren't moving in a sluggish economy.

The city agreed to a new deal allowing both the leaseholders and developer to purchase the fee interest on condominiums.

The city is owed about $10.45 million from the sale of the fee-simple interest in the property, according to Housing Department estimates obtained by Kim.

The city was to have been paid entirely on the fee-simple transactions by June 1997.

The city is also owed about $2 million in unpaid lease rents by McCormack on the commercial portions of Harbor Court and Nuuanu Court, according to documents obtained by Kim.

The documents show the city should have been collecting $150,000 a month but has not been paid since November 1996.

Trinity Investment Trust, an Illinois-based company, has taken over the mortgage on the property following a series of legal entanglements involving McCormack and lender Mitsui Trust.

Trinity, which bought the $130 million note from Mitsui, has been seeking to negotiate a settlement of the debt with Tom since at least last June, according to documents.

Attorney William McCorriston, whose law firm represents Trinity, said his client bought the mortgage from McCormack but should not be considered the lessee.

"The original lessee from the city (McCormack) is an entity that is insolvent."

McCormack, McCorriston said, "does not have the financial capability to pay lease rent and bring arrears to current."

While Trinity does not owe the city, "Trinity is attempting as the new lender of the property to try and negotiate a resolution of back rent and other issues involving the property," he said.

The city, while negotiating with Trinity, continued through yesterday to send letters to McCormack asking for payment.