Damon deal may dash
tenants’ hopes for titlesA Massachusetts company is
close to buying the Estate property
for nearly $500 million, sources say
A Massachusetts firm that hopes to buy some 220 acres of Oahu industrial and warehouse land from the Damon Estate for close to $500 million has no plans to sell land titles to any of the nearly 200 tenants, sources say.
While the estate of Samuel Mills Damon is remaining silent about the pending transaction, sources close to the deal said HRPT Properties Trust, a publicly traded real estate investment firm headquartered in a suburb of Boston, has signed a contract to buy the Damon properties.
They include large chunks of land in Mapunapuna and Moanalua, as well as some parcels on either side of Sand Island Access Road and the land under the Pali Safeway and Salt Lake Shopping Center.
HRPT is undergoing due diligence, the pre-purchase phase that allows it to look at all the leases and other conditions covering the properties, and if all goes well a deal could be consummated in the first week in December.
The only local entity that had been in the bidding, the Shidler Group, had said it would sell individual titles to the business tenants. Shidler made an offer, but as of yesterday had not heard back from Damon, said Larry Taff, Shidler managing partner.
Many of the tenants say they have waited for years for a chance to buy the land under their buildings because they see no economics in improving their buildings with, in many cases, only a couple of dozen years to go on the lease.
In some cases, however, Damon owns the buildings as well as the land. Also, the leases are of varying lengths, with occupants of newer buildings holding longer land leases than businesses in the older buildings, in the industrial heart of Honolulu.
"Everyone is on different terms," said Lyle Moody, president of Walker-Moody Construction Co. at 2927 Mokumoa St. in Mapunapuna. His firm has a lease on 63,000 square feet that runs until 2022. It seems to make more sense for him to go on leasing, rather than buying, when the costs of financing a purchase are weighed against lease rent, he said.
"As an owner-user it's a great place and the lease rent is not bad," he said.
Other tenants, however, have complained about operating in rundown buildings with lease lengths that don't justify improvement costs. Leases would run out before they could earn back the improvement expenses, they say.
HRPT has said it doesn't want to sell and prefers to hold the property users to their present leases and collect rents. A source close to the arrangement said HRPT could change its mind later on, after it settles in and gets more familiar with the properties and tenants.
However, rules governing publicly owned real estate trusts could make it difficult to sell to tenants, one real estate expert said.
HRPT officials did not respond to requests for comment.
The Damon Estate has been seeking a single buyer for the Oahu industrial land since early this year and by midyear had placed the collection for sale through a California real estate firm, Eastdil Realty, which introduced it to buyers.
From nearly two dozen interested parties, the list of would-be buyers was narrowed to four in recent weeks and finally to one.
Based in Newton, Mass., HRPT Properties reported property assets of just more than $3 billion as of Sept. 30. In the third quarter, HRPT had revenues of $127.5 million, almost all of it from rentals.
Any sale of the Damon package of properties would have to be approved by the Damon board of trustees, but would not need the approval of the 20 or so remaining beneficiaries of the estate, sources said.
Created in 1924, the Damon Estate is set to close and be divided up among the beneficiaries upon the death of the sole remaining grandchild of Samuel Damon, Joan Haig, who is in her 80s.
As part of its winding down, the estate in early July sold 115,000 acres of Big Island land for $22 million to the National Park Service and the Nature Conservancy for a major expansion of Volcanoes National Park.
