Thursday, May 3, 2001

City & County of Honolulu

Council panel
rejects office
building takeover

The city offered the choice
of a downtown shift
to Queen's Court

By Gordon Y.K. Pang

City employees may not be moving into the empty Queen's Court office building anytime soon.

The City Council's Policy Committee voted 5-1 to reject ownership of the six-story Nimitz Highway building as partial settlement for money the city is owed on the fee interests of 84 units at the nearby Harbor Court complex.

Members raised questions about the financial viability and attractiveness of the plan.

The Council is to vote on the proposal, but the outcome is likely to be the same because the Policy Committee is made up of all nine Council members.

Those voting to reject the plan were Duke Bainum, Romy Cachola, John Henry Felix, Andy Mirikitani and Gary Okino. Steve Holmes was the only member on hand not to vote for rejection. John DeSoto, Rene Mansho and Jon Yoshimura were not present.

AHI Limited Partnership owes the city between $12 million and $14 million for the fee rights plus accrued interest. The Harbor Court project was built atop city-owned land. The original developer later agreed to purchase the fee on the units, but slow sales forced the project into bankruptcy. That left AHI, lenders to the original developer, owing the city for the fee on the remaining 84 units.

Rejection of the Queen's Court plan would require the city to negotiate with AHI to pay $7 million cash up front and $5 million over five years, with interest.

AHI attorney Bill McCorriston and city Managing Director Ben Lee both said they would go for either transfer of Queen's Court or the payment to settle the outstanding debt.

Lee told Council members the administration wanted to offer them an option to do something different. He acknowledged, however, that taking over Queen's Court gives the city the opportunity to relocate more than 200 employees into the building, thereby eliminating the need to rent some $700,000 in space at privately owned downtown office buildings.

A report issued by the administration of Mayor Jeremy Harris this week showed the city generating $139,801 in "net rent savings" if it were to relocate employees to Queen's Court. It put the actual cost, however, of strictly taking over the building at $558,586 annually based on lost lease rent income and property tax revenues and the cost of debt service associated with $3.5 million in improvements needed to put the building online.

Felix said the Council's own analysis shows the city would actually lose more than $10 million in lost revenues and necessary expenditures if it took over Queen's Court, a building that has never been occupied since it was completed in 1994.

City & County of Honolulu

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