Expiring Leases Prompt Condo Fire Sale
State leases for the land under several of the buildings on Hilo’s Banyan Drive are set to expire in about three years, setting off a real-estate version of a closeout sale.
Over the past year, according to the Hawaii Multiple Listing Service, four condominium units in the Country Club have sold for between $3,000 and $8,000. Real estate agents said the same properties in good condition and carrying a lease of at least 20 years would sell for up to $50,000.
It is unclear what will happen to the properties after the leases expire in March, 2015, except that on that date the buildings themselves will become the property of the state. The leases were originally issued in 1949 and extended in 1962 to the current date following a devastating tsunami.
The looming expiration dates have prompted state lawmakers to look for ways to extend the leases. The most successful effort involved the former Hawaii Naniloa Resort, located several doors down from the Country Club.
In 2005 the Legislature cancelled an existing lease for the Naniloa ten years early. The cancellation was done with the blessing of the leaseholder, The Nakano Company, Ltd. of Japan, which was having difficulties finding financing for improvements with so little time left on the lease.
As a result, a new 65-year lease was put out to auction. The winning bid was made by Hawaii Outdoor Tours and its president, Ken Fujiyama, who paid the former leaseholder $6.1 million for the existing improvements, which include a nine-hole golf course located across the street. Fujiyama’s winning bid for the property he renamed the Naniloa Volcanoes Resort also called for a yearly base lease of $500,000 – the previous owner was paying $73,000 annually – and at least $5 million in improvements to the property over the next five years.
State Rep. Jerry Chang, who tried unsuccessfully to establish a community development district to create public-private partnerships to improve the state-owned Banyan Drive properties (see related article: Banyan Drive Improvement Bill Dead for Session), said Monday he will next introduce a resolution urging the state to seek improvements.
“We’ve got to figure out what to do with those buildings,” Chang said.