DENNIS ODA / DODA@STARBULLETIN.COM
Richard Emery bought Queen's Court overlooking Honolulu Harbor and is refurbishing it into an office condominium.
New suitor spruces
up Queen’s CourtRichard Emery is turning
the space into business condos
Conversion of the Queen's Court building on the Honolulu Harbor waterfront into an office condominium has worked beautifully for the partners who bought it for $3.6 million in January, the partners say.
All 45,089 square feet of floor space in the six-story building was sold by word of mouth in three weeks, said Richard Emery, founder and president of Hawaii First Inc., who bought the building with a partner, South Carolina-based developer Richard Weiser.
Emery said they are turning the never-occupied building into a waterfront landmark, ripping out the marble finishes that he said make so many Hawaii buildings look like New York. Those hard finishes will be replaced with "woods and stones and soft Hawaii colors," Emery said.
For him, the joy is in working with an empty building that was delivered in "loft" condition -- the floors and wall and basic plumbing and wiring were in place, along with some of the black marble finishing in the lobby, but otherwise it was open for development. That created an opportunity to work with buyers to divide up the space, Emery said.
Floors will be in ipe wood (pronounced eepay), one of the hardest woods known. Emery said the lobby and the entrance to the offices on every floor will feature reproductions on canvas of paintings by artist Raymond Massey, who has recreated historically accurate scenes of sailing ships in Honolulu Harbor.
Emery wants a display case in the lobby of old waterfront memorabilia and already has located some old Honolulu Harbor maps to put up on the lobby walls.
DENNIS ODA / DODA@STARBULLETIN.COM
Queen's Court, overlooking Honolulu Harbor, was finished in 1994, but the inside was never polished off for occupation by businesses or residents."We thought it would be a wonderful way to honor Honolulu and its history," he said.
Aside from working with what he thinks is a beautiful building in a great location, Emery gets some comfort from the economics.
It helps that his partner Weiser took the top floor to turn it into his own apartment of more than 4,000 square feet and that his own business needed a new location.
Emery's business, which he started in 1997 managing about five apartment complexes, has grown to manage more than 70, most of them by working with condominium owners' associations.
The company had about 1,200 square feet in Pioneer Plaza but needed about 3,200. Its lease ran out March 31 and it has been on a month-to-month rental deal. The owners of Pioneer Plaza wanted to change the rent structure in a way that would have increased his monthly costs 30 percent to 35 percent, Emery said.
"We thought it best to see if we can buy something," Emery said. "We looked at Chinatown but there were parking issues. We looked outside the central business district. There were location issues but it was more affordable."
Meanwhile, he and his wife, Rosaline, were often driving along Ala Moana and Nimitz and she commented on the building that had been standing empty for nine years and suggested looking at it.
He did and he agreed to have his recently formed QC Partners LLC buy it from AHI Harbor LP, a partnership led by Trinity Investment Trust LLP, which had acquired the mortgage for the Harbor Court project and Queen's Court for $185 million in 1996.
Last year, AHI Harbor bought the fee-simple interest in the Harbor Court project from the city, but the city still owns the 16,513 square feet of Queen's Court land at 800 Bethel St. and leases it to QC partners for $270,000 a year.
The Harbor Court/Queen's Court development was created during the Japanese big-spending period of the late 1980s and early 1990s. Harbor Court eventually got occupied by residential and business condo- miniums, shops and restaurants but Queen's Court, finished in 1994, remained empty.
Investors looking to buy it, finish it and lease out the space found the mathematics didn't work, Emery said. There was too much vacant office space downtown and it would take so long to get it fully leased that it wasn't an economic proposition, he said.
"But Hawaii has a lot of successful small and medium businesses" and it has been very difficult for them to own places in the central business district, Emery said. "Here was an opportunity to build an office condominium, buy loft space, build it out and sell it" for an equivalent rent of $2 to $2.50 a square foot."
By that he meant that the purchase of the space, debt service, maintenance and all other costs would work out at about $2 to $2.50 a month per square foot. Current office rent, in a high-vacancy environment, is about that much, but the difference is that buyers, unlike renters, can see what their costs would be way out into the future, Emery said.
Mike Hamasu, research director at the commercial real estate firm Colliers Monroe Friedlander Inc., said the gross rent average for a Class A office building in the central business district is $2 to $2.20 a month per square foot.
Buyers could encounter a problem if they want to expand or downsize, but balancing that is the fact that their office-space cost is fixed, he said.
The ground floor was acquired by Ferahan Hawaii Inc., owners of the Indich Collection and several other business, who plan to set up a retail showroom for Indich carpets, furnishings and accessories.
The second floor was acquired by Insurance Associates Inc., a 35-year-old local insurance business. Sue Savio, president, said she initially did not want her company to take on debt.
"But I've been renting forever. The company is 35 years old and knowing that I'm going to be working for a minimum of another 25 to 30 years, I'm going to buy," Savio said. "It makes sense to buy, even though we have to go into debt."
In 10 years, she said, the debt will be paid off.
Emery said the third floor will be shared by Long and Associates, a high-end residential architecture firm, and Pacific Bridge, a mainland investment firm.
Buyers who took the fourth floor were Honolulu Builders, a local construction firm; Economic Values, a public accountancy firm; Weiser Corp., a property developer headed by his partner; and Medusky & Co., a real estate appraiser.
Emery's company, Hawaii First, took most of the fifth floor and the rest was purchased by Architectural Diagnostics Ltd., a firm that specializes in finding and fixing architectural problems in buildings.
Weiser has the top floor as a residence.
Incentives that the partners offered to buyers include a high-quality Internet system for $50 a month, a private telephone system that works out at $35 a month per business line and 5 cents a minute for long distance, and parking stalls in the Harbor Court building that work out at about $63 per reserved stall per month, well below the going rate of $250 or more in other buildings.
