DENNIS ODA / DODA@STARBULLETIN.COM Ernest Lau of the state Department of Accounting and General Services walks through a hallway on the top floor of the building, which was damaged by water leaking through the roof. The ceiling and walls were peeling and flaking.

State ponders plan for building

Not enough money set aside to rehab the vacant Kamamalu Building

The state-owned Kamamalu Building will likely sit vacant for several more years because of delays and rising renovation costs, officials acknowledge.

The state vacated the 50-year-old building at Richards and South King streets four years ago for renovations, but the work has yet to start. Now state officials are saying the Kamamalu Building will not be ready until 2010 or later.

Repair costs once estimated at $12 million are now expected to be $27 million or more.

As the state tries to figure out what to do with the nine-story building, it has been mentioned as a parking facility for a nearby bank building, as a place to put all the state agencies that pay for private rental space, or even as a temporary home for Health Department employees while their building is razed to make way for a new structure.

Meanwhile, a real-estate expert says the downtown property is valuable and might be attractive to an investor.

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DENNIS ODA / DODA@STARBULLETIN.COM The Kamamalu Building is a nine-story state office building on the corner of King and Richards streets that has been vacant since 2003.

The state's nine-story Kamamalu Building, which sits on a prime piece of downtown real estate, has been vacant since November 2003 because of delays and increased reconstruction costs and is not expected to be ready for use until 2010 or later.

Since the 350 employees with the state Department of Commerce and Consumer Affairs moved out, the 50-year-old building has stood empty.

The state issued a call last week for bids to remove the asbestos and demolish the interior of the building at Richards and South King streets.

A series of delays and increased costs have repeatedly pushed back plans for the building's reconstruction.

"Right now we are looking at the different options," says Russ Saito, state comptroller. "We have the $12.6 million (appropriated by the Legislature), but what can we do with $12.6 million?

"We can't build anything for that. We might be able to completely ream out the building and possibly do most of the asbestos abatement, but there is no way we would have anything useable," Saito admits.

Repair costs originally estimated at $12 million have soared to more than $27 million or more.

State officials are unsure what they will do with the building, which was originally purchased by the state in 1968 for $2.5 million.

Earlier this year the state planned to relocate the Health Department employees to the Kamamalu Building while the Health Department building was torn down and a new structure built.

In September 2006, Saito and Health Director Chiyome Fukino signed a memorandum of understanding that the Department of Health would move to the Kamamalu Building "contingent upon additional funding by the 2007 Legislature."

The two noted in their agreement that they wanted to demolish Kinau Hale, the Health Department building, "as it is non-historic, functionally obsolete and contains hazardous material." They added that the move would "enable the construction of a new state office building and parking structure."

The Kamamalu building is valued at $8.5 million by the city, and the land is appraised at $2.9 million. When it was built in 1957 as the Hawaiian Trust Building, it was ranked as the tallest commercial building in downtown Honolulu.

Mike Hamasu, director of consulting and research for Collier Monroe Friedlander Inc., says the building is valuable and could be an attractive property for a buyer or investor.

"With a 6.5 percent vacancy rate downtown, it might be an attractive purchase opportunity, either to flip it or lease it, and it might be cheaper than building a new building," he said.

"I would say it does look like an opportunity for an astute developer. ... Rents are going up, vacancies are going down and you would have tenants if the rents were appropriate," Hamasu added.

Honolulu retail analyst Marty Plotnick cautions that the building has no parking, and that would be a problem. He noted that if the state keeps the building and the Health Department eventually moves in, it will be difficult for clients seeking services such as marriage licenses and birth certificates.

"It is a real issue, especially for a public-service building, not to have any parking," Plotnick said. But, he added, "there is always someone around to buy a building."

Saito acknowledged that the state might consider working out some deal. The building abuts the Central Pacific Bank building, and in July, Clint Arnoldus, CPB president, wrote Saito to explore the issue of parking in the Kamamalu Building.

The state made a quick study of various ways to use portions of the building for parking, but Saito said they did not discover anything conclusive.

"We have had some preliminary discussions with CPB," Saito said.

The state also did a study to see the economic effect of moving state employees from various leased buildings downtown into the Kamamalu Building.

A June 2006 report estimates that if the Kamamalu Building held 300 employees who were in leased offices, it would reduce the state's payments for private space by $771,000 a year.

"Based on a lease rent savings of $771,000 and assuming a total project cost of $19 million, the estimated payback time would be 24.5 years," the report read. Since then the total project cost has risen to nearly $30 million, meaning the payback time would be even longer.

Saito acknowledged that it will take several years to get the state moving on the project because more money will have to be appropriated. "Right now we just know we got a building there, we moved the DCCA out of it and it is vacant, so we are trying to get some use out of it," Saito said.