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The Honolulu Advertiser
Posted on: Tuesday, August 13, 2002

New $75M telecom hub already for sale at $18M

By John Duchemin
Advertiser Staff Writer

A state-of-the-art center recently built in Maili by telecommunications company Tyco sits unused and empty.

Eugene Tanner • The Honolulu Advertiser

After spending $75 million to build a massive state-of-the-art center in Wai'anae intended as the hub of a globe-circling network of undersea fiber cables, troubled telecommunications company Tyco International is trying to sell the building for a fraction of its cost.

Tyco is asking $18 million for the 38,000-square-foot building, which now sits fully equipped but unused in Maili, surrounded by homes, dry brushland and the Maili Elementary School.

Tyco representatives say the building is a casualty of the financial troubles that plague the telecommunications industry. Many of its potential customers — particularly Internet and phone companies — face billions of dollars in losses, thanks to overoptimistic spending that saddled them with billions of dollars of debt and costs that far exceed sales.

Tyco itself faces questions over its accounting practices, and its telecommunications arm is at the heart of the company's financial troubles.

"A year ago, the sky was the limit in this industry, but now all the business has just disappeared," said David McDermott, cable depot manager for Tyco's operations in Hawai'i and Guam. "I don't think expanding is in anyone's books right now."

The company earlier this year scrapped its plans to lay the trans-Pacific cable that would have hooked the Maili hub to the United States and Asia. The cable, which would carry massive amounts of Internet and phone data along the ocean floor, would have cost more than $1 billion to complete.

Ironically enough, McDermott said, the bad news came down from headquarters the day local Tyco employees completed the final steps of construction and permitting. All that was missing was the cable itself, he said.

"One day we had 60 or 70 people out here working. The next day they said, 'Oops, we're not going to need that anymore,'" McDermott said. "Just wham — and that was it."

Despite the steeply discounted price, Tyco is unlikely to find a buyer for the Maili building unless the price drops even further, several observers said.

Local companies will be scared off, while big telecom companies are unlikely to invest in a building until their own financial condition improves, said Burt Lum, president of Honolulu network services company NetEnterprise.

"We received a prospectus," lum said. "They asked us if we wanted to buy it, but there's no way we can unless the price drops several orders of magnitude."

Tyco's local broker, Andrew Conboy of commercial real estate firm Grubb & Ellis, acknowledged that interest had been scarce, even though the building comes with millions of dollars in top-line Tyco equipment, including air conditioners, diesel back-up generators, power plants, switchboards and fiber hookups.

"The people I've shown it to have been overwhelmed," Conboy said. "There's nothing wrong with the property. It has more to do with the industry."

Tyco may lose money on the sale, but McDermott said the company needs cash where it can get it.

"It sounds like a waste to sell this place, but in the big scheme of things, we're just doing what we can to not go under," he said. "We've got to get some money to help stay alive, even if later we'll just have to build another one."

The news surprised Albert H. Silva, chairman of the Wai'anae Coast Neighborhood Board, who said the community was not aware the building was empty and that Tyco had halted its plans.

"To go through all that trouble, all that planning, a whole bunch of public meetings, and then — poof. That's shocking," Silva said.

Reach Advertiser staff writer John Duchemin at 525-8062 or jduchemin@honoluluadvertiser.com.