Makiki Manor condo conversion settled
The property was the last approved for condemnation before the law was repealed
After more than a year and half of legal battles, owners of the land beneath Makiki Manor have agreed to sell the fee to the building's lessees.
Although other lease-to-fee conversion actions remain tied up in court, the Makiki Manor agreement marks an end to the last such case the city approved for condemnation before a law allowing such suits was repealed.
Under Chapter 38, a 1991 city ordinance repealed early last year, the city could condemn lands and then turn around and sell the fees to lessees.
A group of about 20 lessees from Makiki Manor at 1130 Wilder Ave. was the last approved for condemnation by Honolulu City Council before Chapter 38 was repealed.
Last month, both parties -- the Lums, who own the land, and the City and County of Honolulu, which sued on behalf of the lessees -- agreed to settle the suit by offering the fee interest in each of the 38 units at Makiki Manor for $72,000 apiece.
Richard M.C. Lum, 81, said he and his siblings agreed to the price, which would potentially bring in a sum of $2.7 million. The target closing date for the sales is in December.
"It's fair and reasonable," Lum said. "We're waiting to have this matter completed and escrowed through Title Guaranty."
CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM
In a settlement, the fee interests in each of the 38 units at Makiki Manor are being offered for $72,000 apiece.
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Lum said it was just a matter of reaching a fair price for everyone in his case. The prices they bargained over were as low as $56,000 and as high as $90,000.
Lum, along with brothers Charles T.C. Lum of Honolulu and Frederick Y.C. Lum of Las Vegas, are beneficiaries of their mother's trust, which owns the land beneath Makiki Manor.
The total sum will also be shared with their three sisters.
David Nakashima, the attorney representing the lessees, called the settlement a victory for everyone.
"The lessees have the opportunity to buy, and the lessors receive what they consider fair value for their interest," said Nakashima. "It's one of those settlements that's good for everyone."
Other battles
While the Lums agreed to the sell their lands, other landowners are not as willing.
Most leasehold lands are owned by charitable entities such as Kamehameha Schools and the Queen Liliuokalani Trust, but smaller landowners also battle to hold properties they pass down to family, sometimes for more sentimental than commercial reasons.
Before Honolulu City Council voted to repeal Chapter 38 in January 2005, Makiki Manor had qualified for condemnation.
A group of about 30 lessees at Discovery Bay was right behind them in the application process, but before the conversion could be completed, the council decided to repeal Chapter 38.
Ralph Mitchell is one of them. He bought a two-bedroom condo at Discovery Bay seven years ago, with the understanding that he'd be able to purchase the fee one day.
He feels like the rules changed on him halfway through the game.
They've sued the City and County of Honolulu for breach of contract and violation of constitutional rights.
A group of about 30 lessees at Admiral Thomas at 1221 Victoria St. are embroiled in a condemnation lawsuit dating back three years. It will go to trial in November.
And a group of lessees at Parkside Tower never filed a condemnation application with the city, but is still hoping to negotiate the fee purchase of their units from the landowner.
Nakashima represents the lessees at Discovery Bay, Admiral Thomas and Parkside Tower.
21,000 units remain
With or without condemnation, plenty of landowners are willing to entertain fee purchase offers, according to Michael Pang of
Monarch Properties, who specializes in lease-to-fee-conversions.
The latest property undergoing the conversion: Island Colony in Waikiki.
An estimated 21,000 leasehold units remain on the island of Oahu, about 2,000 less than two years ago, according to Pang.
Regardless of mandatory conversion laws, demand for fee simple units remains consistent. For many different reasons, a landowner might agree to sell the fee to his or her property if the timing is right.
"The market goes up, and the market goes down, but fee conversions are very consistent," he said. "Everyone who owns a leasehold would like to own the fee, and eventually, most people get a chance to buy their fee."
For Lum, the change of heart came from circumstance and age.
"We feel that as the beneficiaries, we're not that young, so we might as well settle this before we go to our graves," Lum said. "We decided to let this matter be settled through peaceful arbitration."