Bids sought for old Honolulu post office

By Andrew Gomes
Advertiser Staff Writer

A broker handling the sale of the downtown Honolulu post office building for the federal government put out a request for bids yesterday in an attempt to find a buyer for the historic property after a 5-year-old sales contract with a retail developer fell through.

The 79-year-old United States Post Office, Customs and Court House in downtown Honolulu is on the national and states registers of historic places. CB Richard Ellis photo

The study, conducted by Honolulu-based CDS International, says it would cost a buyer $13 million to bring the building's interior space up to current standards. To gut the space would cost $11.6 million. Tenant improvements would cost more.

"That is going to be the question that any developer is going to ask: 'How much is it going to cost to get up to speed,' " said Andres Albano, vice president of development consulting for CB Richard Ellis.

To build a similar building would cost $43.5 million today, according to the analysis, though the 79-year-old building — known as the federal building because it housed the post office, customs and court house — cannot be replaced because it is on the state and national registers of historic places.

A number of interested entities have suggested a variety of possible uses for the 175,000-square-foot, six-story complex bordered by Queen, Merchant, Richards and Mililani streets.

Albano said the federal court expressed interest in being a tenant in the building but not to buy it. That could help attract developers of office space, which is the obvious use for the property.

One developer informally suggested the building would make interesting loft-style multifamily residences, though a zoning change would be required, Albano said.

In November, while it was being guided by interim trustees, the Office of Hawaiian Affairs, expressed an interest in acquiring the building for its headquarters. But the agency's new board, which recently signed a lease to use office space at its current location through 2003, has not reiterated any interest in the federal building.

Retail remains an option, despite the failure of one development company to finance a $54 million boutique shopping center after leasing what it claimed was 85 percent of the project.

USPO Redevelopment Corp., headed by Russell Allen and Harold Spector, planned a two-phase Galleria Shopping Center. They had a contract to purchase the property for $11.5 million and completely renovate it. But the deal, struck in 1996 and extended into last year, was called off in September by the Postal Service after the developers failed to close financing.

That put the Postal Service back at square one in trying to redevelop the property. It also resulted in several prospective tenants saying that developers owed them at least $200,000 in deposits and lost expenses. At least three sued USPO to recover money.

Neither USPO officials nor their attorney could be reached for comment yesterday.

Bill Meyer, an attorney representing prospective restaurant operator and Galleria tenant Bill Wyland, said USPO has not responded to court orders in Wyland's case. Meyer said he plans to file a motion for default judgment today.

As the suits continue, the Postal Service hopes to move on, and possibly free up some needed extra space for carrier delivery operations downtown. "The carrier operation is crowded," said Felice Broglio, a Postal Service spokeswoman.

One of the conditions to a purchase is providing the post office with additional space. Albano said a buyer has a variety of options, including redesigning the Postal Service's current 38,000-square-foot space to be more efficient, providing more space, selling a portion of the building back to the Postal Service and providing an off-site location.

CDS also did a conceptual analysis of how to create additional parking for the property, including asking the city to close off the end of Merchant Street to increase metered stalls from 40 to 70, as well as adding 154 stalls underground.