After the deal closes, the store will remain leased to Liberty House Inc. and continue to be operated as a Liberty House.
Lexington Corporate Properties Inc. said Liberty House's lease runs through September 2009 and the retailer has options to renew for another 26 years after that.
"This is our first foray into the Hawaiian islands. All we buy are these single-tenant, long- term lease properties," said T. Wilson Eglin, president and chief operating officer of the New York Stock Exchange-listed investment trust. "Because it's a long-term lease it's pretty inexpensive rent and there are lots of renewal options," said. That gives the buyer long-term stability and a revenue stream for the future, Eglin said.
The purchase, expected to close in 60 days, is not for cash. Instead Lexington takes on existing debt of some $8 million on the property.
The sellers, a private partnership known as Fort Street Partners, are no strangers to Lexington. Robert Roskind, Lexington's chairman also serves as Fort Street chairman and Lexington Vice Chairman Richard Rouse also is vice chairman of Fort Street.
In the deal, Fort Street, which acquired the fee interest to the downtown building in May 1981 for $6.6 million, will get Lexington real estate investment trust partnership units, Eglin said. The units are exchangeable for Lexington stock after Jan. 15, 2006.
Eglin said the property generates annual rent of $963,000, which will rise to about $990,000 in 2005.
Lexington owns and manages 4.6 million square feet of properties, most of them in commercial and industrial use buildings but some in retail use, Eglin said.
The Liberty House building is on leasehold land that has a lease through April 2036.