Outrigger club rent could rocket to $1M under judge's ruling
Landlord Elks club awarded legal fees
The Outrigger Canoe Club could face a rent increase from $30,000 to more than $1 million a year on the oceanfront Waikiki land it has occupied for the last 50 years as a result of a judge's ruling yesterday.
The canoe club's attempt to convince the court that appraisers should consider the property as a "club site" in determining its market value was denied yesterday.
Circuit Judge Randal K. Lee said the court found it inappropriate to impose a definition of a "club site," and that the amount of rent should be left up to appraisers.
He dismissed the canoe club's lawsuit over the lease rent, filed in July, and ordered the club to pay attorneys' fees for the Benevolent and Protective Order of Elks of the United States of America, better known as the Elks club.
The Outrigger Canoe Club has a 99-year land lease on 73,804 square feet of land from Honolulu Lodge No. 616 of the Elks club. Under that lease, signed in 1956, the current rent of $30,000 per year will expire on Nov. 15.
The lease provides that if the parties cannot reach an agreement, the rent is to be determined by "three impartial appraisers" who would determine the market value of the land.
Rent would be set at 5 percent of the market value of the land, exclusive of all improvements, as a club site. County tax records assess the value of the property at $20.3 million, which would translate into rent of more than $1 million per year.
At the heart of the dispute is whether a property being used as a "club site" should be appraised differently than a hotel, office or luxury condominium.
Kenneth Kupchak, the attorney for the Outrigger Canoe Club, argued in court filings that the Elks specifically recruited Outrigger to be its neighbor by offering a discounted rent. If the Elks club had consented to a practical commercial use, then an entirely new rent formula would be crafted.
"All of those arguments are still valid," said Kupchak. "He (the judge) just said, take them to the appraisers."
Kupchak said neither side was suggesting the property be appraised at fair market value at this time.
"The issue is what the club site means," he said, "and that's what we were trying to ask the judge to determine. He said that's something you still have the opportunity to ask the appraisers."
The Elks' attorney, Rosemary Fazio, said that the club should follow the terms of the lease.
Under those terms, the canoe club appoints an appraiser, the Elks club a second one, and the two then appoint the third.
Fazio said an arbitration hearing should occur in the next two to three months, and that she hoped a decision could be made before the end of the year.
Because the stretch of oceanfront land on the Diamond Head end of Kalakaua Avenue is limited, it is considered luxury property. Condominiums in the area are selling for a minimum of $1 million.
Real estate analyst Ricky Cassiday, who is a member of the Outrigger Canoe Club and has applied for membership at the Elks, estimates the parcel could be worth up to $40 million.
"It's got that sunset view that's so killer," said Cassiday. "All the great sunset views translate into a high residential price."
He said the parcel, zoned for residential use, potentially could be an oceanfront home.
The Elks club, founded in 1911, has about 2,600 members and is part of a national organization. The club bought the property in 1920 at about $1 per square foot from the widow of James Castle.
Outrigger Canoe Club, established in 1908, has more than 2,000 members.