Honolulu post office
gets buyer

Building renovation will be
extensive for the historic site,
which is sold for $7 million

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By Dave Segal
dsegal@starbulletin.com

A deal to buy the downtown Honolulu post office finally has been delivered.

Par Development LLC, represented by Denver-based developer Ray Suppa, has purchased the historic building for $7 million and is reselling 120,000 square feet of it as condominium office space to the state for $32.5 million.

The purchase comes two years after the U.S. Postal Service broke off four years of planning and negotiations with USPO Redevelopment Corp. to convert the space into a $54 million boutique shopping center. It was called off after numerous delays, partly because of difficulty obtaining financing.

Suppa, who closed the deal Thursday, said the 174,700-square-foot building will have two tenants once extensive renovation is completed. The state Department of Commerce & Consumer Affairs will occupy the majority of the space while the post office will remain in 37,880 square feet. Common areas make up the rest of the square footage.

Andres Albano, vice president of the development group of CB Richard Ellis Hawaii, the broker for the deal, said preliminary analysis determined that it will take $11.6 million -- or more than Suppa's purchase price -- to bring the long-vacant building up to standards. The building, on 2.6 acres of land, takes up an entire block bordered by Queen, Richards, Merchant and Mililani streets. The front portion of the post office was constructed in 1921-22 in the Spanish colonial revival style. The back portion, on Queen Street, was built in 1930.

Suppa, who did real estate development in Hawaii in the 1980s, said he was attracted by the building's architecture.

"I'm interested in historic preservation and the renovation of a beautiful building," Suppa said. "It just needs to be freshened up a bit."

That might be an understatement, since Suppa said he will basically have to gut the interior of the building.

"We'll be clearing out the entire interior to put in plumbing, electrical, communications and air conditioning," he said. "The building hasn't been occupied for several years, and when it was occupied it really didn't have the latest in equipment."

Suppa said he plans no changes to the exterior of the building other than restoration.

The state will move into the building once renovation is complete, while the post office will continue to occupy its space while work is being done.

"We'll do the post office's space in phases, and when renovation is complete we'll sell the portion occupied by the post office back to them for $1."

Suppa, who arranged financing through First Hawaiian Bank and Bank One in Denver, said he already has notified Hawaiian Dredging and Construction Co. Inc. to proceed with the work.

Suppa, who formed Par Development as a single-purpose entity in June for the acquisition of the building, develops property in Colorado under the company name of RSD Corp.

"We have a project we're finishing up now in Denver that's a $50 million residential mixed-use," Suppa said. "We specialize in historic renovation as well as ground-up construction in historic districts."

Although he has no specific timeline, Suppa said he envisions a second project in Hawaii that will be a mixed-used loft-style condominium complex. The style is characterized by high ceilings and open space.

Albano, who said CB Richard Ellis became involved two years ago in selling the property, said the real estate company presented different options in marketing the property. CB Richard Ellis and Suppa eventually arrived at the concept of a condominium property, in which the property was divided into two condominium units, with the post office occupying one of the units and the state occupying the other.

"We tried to structure the asset in a way that would make it attractive for a developer or investor to buy the building," Albano said. "Once we delineated some of the opportunities and put it on the marketplace, we had quite a few serious bidders.

"The key for any redevelopment project if you're a developer is what happens down the line, if there are tenants who will lease the space or buy the space after the developer is done. Fortunately, we were able to put the state and Ray Suppa together. We laid it out so it would be an asset that would satisfy the post office's need, the developer's need and the tenant's need."