Honolulu Airport
looks at rent relief

A proposal is for stores to
pay a percentage of sales

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By Tim Ruel
truel@starbulletin.com

The state Department of Transportation is seeking rent relief for at least some retail tenants of Honolulu Airport, a proposal that could cost the state several million dollars but help the retailers through a tough time.

The offer, which has the support of Gov. Ben Cayetano, calls for eliminating the guaranteed minimum base rent paid by airport tenants that have been hit by the drop in tourism. Under the proposal, the retailers would only have to pay rent as a percentage of their gross sales, without a minimum base. If their sales fall, so would their payment. San Francisco Airport adopted a similar rent-reduction plan Monday.

Without the rent relief, the retailers could have to cut staff, Transportation Director Brian Minaai said yesterday. Cayetano is concerned about the impact on employees and their families, Minaai said.

The minimum rent waiver would be temporary, based on monthly reviews of the financial status of each individual concessionaire.

One of the firms that could benefit from the offer is DFS Hawaii, which has a five-year exclusive contract to run duty-free business at all of Hawaii's airports.

The firm's airport sales are down 50 percent to 60 percent compared with last year, according to Sharon Weiner, group vice president of administration at DFS Hawaii. The company's duty-free sales depend heavily on spending by Japanese tourists, whose arrivals have dropped 40 percent to 60 percent in the wake of the Sept. 11 attacks.

DFS Hawaii's contract with the state currently calls for an annual minimum base rent of $60 million for its duty-free shops. Under the proposal, the minimum would be waived, and the firm's rent would be based solely on 22.5 percent of its gross duty-free sales at the airports and 30 percent of its sales at off-airport locations, including the flagship DFS Galleria in Waikiki. DFS Hawaii is a wholly owned subsidiary of Paris luxury goods giant LVMH Moet Hennessy Louis Vuitton SA.

It was not clear how much the proposal could cost the state. Earlier this year, when DFS had its minimum annual rent reduced to $60 million from $105 million, the state airport had to revisit its finances.

Other tenants at Honolulu Airport include car rental companies Hertz, Avis, Dollar, National and Budget, as well as the Pacific Aerospace Museum and the airport barber. It was not clear if the proposal would cover tenants at other airports than Honolulu.

The offer requires the approval of the state Legislature, which has tentatively scheduled a special session for the week of Oct. 22. The House Transportation Committee plans to discuss the proposal at an informal meeting today at the state Capitol, said state Rep. Joe Souki, the committee's chairman.

Souki (D, Wailuku) noted that the Legislature has a lot of proposals to sift through, including the waiver of airport landing fees and Cayetano's $1 billion construction spending package.

"Let's take a look at it and hear it and see where we go," Souki said.