Posted on: Saturday, November 23, 2002

Developer to restore post office

By Andrew Gomes
Advertiser Staff Writer

The downtown post office building at Merchant and Richards streets will be restored by a Denver-based developer and resold to the state and U.S. Postal Service. Cory Lum • The Honolulu Advertiser

The U.S. Postal Service has selected a Colorado developer's proposal to buy and restore the historic downtown post office and federal building in a deal that will provide renovated space for state offices and expanded postal services.

Par Development LLC, an affiliate of Denver-based RSD Corp., will buy the 80-year-old building makai of 'Iolani Palace for $7 million.

As part of the deal, Par will restore the building and bring the interior up to modern standards, then resell 120,000 square feet of the 160,000-square-foot property to the state for $32.5 million. The Postal Service will buy back the rest of the improved space for $1.

The state plans to relocate its Department of Commerce and Consumer Affairs, while the Postal Service will continue mail operations with one-third more space.

Restoration work should gear up Monday and last a year, said Ray Suppa, Par manager and president of RSD, a small firm that specializes in renovating historic property and building in historic districts.

If all goes as planned, the project will cap seven years of trying to restore the building that once served as a courthouse and customs house on the block made up of Merchant, Richards, Mililani and Queen streets.

In 1996, the Postal Service agreed to sell the property to developers who planned a $54 million boutique shopping center. After years of delays, the government terminated the project in 2000 after financing fell through.

The Office of Hawaiian Affairs briefly considered buying the building to use as a new headquarters for itself and a range of private groups that assist Hawaiians, or for the seat of a restored Hawaiian nation. But no offer was ever made.

Last year, the Postal Service solicited bids and received four serious proposals, said Andres Albano, a broker representing the government through local real estate firm CB Richard Ellis Hawai'i Inc.

Albano said one proposal involved turning the building into loft-type residential condominiums, while others proposed office use.

Two bidders had made arrangements with the state to be a tenant, and the Postal Service selected Par.

David Eales, Postal Service realty asset manager in Virginia, said Suppa presented the best package for restoring and reusing the building, including development team partners and plan details.

Eales also credited the state for its willingness to acquire what the Postal Service would not use. "I think the state is showing great vision," Eales said. "That was what (the building) was meant to be for — civil services."

Par is working with Hawaiian Dredging Construction Co. and local architect Pravin Desai, a principal of CDS International and designer of living space at the governor's residence. First Hawaiian Bank and Chicago-based Bank One are financing the project.

Suppa declined to give an estimate of renovation costs.

"Like all renovation projects, you don't know how much it's going to cost until it's done," he said.

The six-story complex was constructed between 1917 and 1922, with a second wing added in the 1930s. The structure, which has a courtyard bounded by distinctive arched walkways, is on the state and national registers of historic places.

The exterior will be restored. The inside has no air conditioning, inadequate communications infrastructure, offices that are too small and plumbing and electrical systems that need replacing, Suppa said. "It needs to be totally modernized."

A year-old architectural study estimated it would cost $13 million to bring the interior up to standards. The state set aside its estimated $33 million to cover the renovation work plus the fee value of its portion of the building.

Ivan Nishiki, head of the leasing branch of the state Department of Accounting and General Services, said the state Department of Commerce and Consumer Affairs would use space in the old federal building because its home in the Kamamalu Building at Merchant and King streets needs major renovations.

He said the state had requested money to make the repairs, and would like to fill the agency's space there with other state tenants that currently pay rent in private buildings.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.