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The Honolulu Advertiser

Posted on: Sunday, October 12, 2003

The rising cost of high-rise living

By Deborah Adamson
Advertiser Staff Writer

Maintenance fees at Kukui Plaza, a 908-unit condominium on Nu'uanu Avenue, increased each of the past three years after an 80 percent increase in insurance costs.

Deborah Booker • The Honolulu Advertiser

Maintenance fees at Hawai'i condominiums are on the rise, prompted by aging buildings that need repairs and rising costs affecting everything from insurance premiums to electricity and elevator upkeep.

"It's not a crisis, but the pressures are there on maintenance fees" to keep rising, said Emory Bush, president of Honolulu-based Hawaiiana Management, the state's largest property manager.

More than 75 percent of Hawaiiana's clientele of 400 condominium associations — representing 62,000 units statewide — have raised their maintenance fees at least once in the past three years, Bush said. Some had double-digit hikes.

Condo owners can expect little relief as aging buildings undergo needed repairs.

"A lot of condos are getting old," said Calvin Kimura, supervising executive officer of the state Real Estate Commission. "The first condo was built in the 1960s."

Maintenance fees in the Islands range from $150 to $2,000 a month. The fees cover upkeep of common areas, operating costs, personnel, water, sewer and trash collection. Sometimes they pay for electricity and cable television. A condo's board of directors typically oversees the complex, usually with a property manager.

To be sure, maintenance fees tend to go up with inflation, and they're not capped by the state. A 1992 state requirement that condos maintain reserves to pay for major capital expenditures also led to a spike in fees.

But as expenses have soared in recent years, boards have been under more pressure to pass along the costs to owners — and sometimes to renters.

Check out the fees

Condominium living comes with the downside of paying ever-increasing maintenance fees. But if you're looking to buy a unit, there are ways to minimize the hit these fees can have on your wallet.

Here are tips from Calvin Kimura, supervising executive officer of the state Real Estate Commission:

• If the condo complex hasn't raised fees in 10 years, there's a good possibility an increase is coming.

• Amenities such as a weight room and pool are attractive, but make sure you're willing to pay a higher maintenance fee for them.

• If it's a mixed-use complex, with small businesses and residences on the premises, fees could be higher. Businesses attract more traffic, leading to increased wear and tear.

• If the complex is in a hotel zone, fees could be higher because of the wear and tear of tourists constantly moving through.

• A building with a low percentage of owners occupying units tends to have higher fees.

• Get a copy of the building's budget and look at maintenance fee hikes to get an idea about trends.

• If the building's reserves are 100 percent funded, there could be fewer fee increases.

• Condos in flood and tsunami zones or high-theft areas may have higher maintenance fees.
In 2001, the median annual expenses at Honolulu high-rise condominiums came to $4,645 a unit, an increase of 88.5 percent from 1998, according to the latest data from the Chicago-based Institute of Real Estate Management, an association of property and asset managers.

A breakdown of costs shows the upward pressure coming mainly from operating, repair and maintenance. Administrative costs actually fell 20 percent.

Operating costs at high-rise condos rose 175 percent from 1998 to 2001. Skyrocketing electricity costs were the chief culprit: They rose 376 percent over the period. Higher oil prices and the state's fuel surcharge are to blame, Bush said.

The fuel surcharge allows an electric company to pass along any increase in fuel costs to consumers, said Alan Takumi, an account executive at Honolulu-based Certified Management, which serves more than 300 condo associations representing 50,000 units statewide.

Repair and maintenance costs also far outpaced inflation, rising 151 percent over the period. The biggest chunk went to general maintenance expenses, which rose 260 percent, and heating, air-conditioning and ventilation costs, which were up 270 percent.

Insurance costs rose by 40 percent in 2001. Since the 9-11 attacks, premiums have soared even more.

Four years ago, a 400-unit building would have paid about $65,000 a year for general insurance coverage — fire, hurricane, an umbrella policy. Today, it would have to cough up $150,000, Bush said.

At Kukui Plaza, insurance costs have risen by 80 percent in the past two years, said general manager Alden Kamaunu. He believes the fallout from the terrorist attacks and the perception that Hawai'i may be due for another hurricane resulted in soaring premiums.

Maintenance fees at the 908-unit complex have risen from $208 for a one-bedroom apartment with a parking stall in 1992 to $232 this year — an increase of 11.5 percent, or about 1 percent a year. Kukui Plaza held fees steady from 1998 to 2000, then raised them in 2001, 2002 and 2003.

"The biggest benefit for us has been our size," Kamaunu said of Kukui's relatively modest fee hikes.

In addition to standard operating, repair and personnel costs, Kukui Plaza's maintenance fees pay for 24-hour security, a waterfall, a 2.5-acre garden deck, golf cages, a swimming pool and a recreation area. It has an annual budget of $3 million.

Other buildings have raised fees more steeply. Hawaiiana Management cited a 407-unit building that hiked maintenance fees by 34 percent over a decade, to $215.30.

Corrine Goldstick, a 75-year-old condo owner at Queen Emma Gardens, said the fee hikes she has experienced "have been fair, given the expenses we've had."

Fees went up when the building caught up with deferred maintenance during its conversion from rentals. The last fee hike was more than a year ago, a $20 increase to $316 a month for her one- bedroom unit.

However, condo owners' patience may run out if fees continue to rise — and there are signs they could. Water rates are going up in July, and the impact of higher elevator labor costs is just beginning to be felt.

Earlier this year, elevator mechanics negotiated a $15-an-hour salary increase over five years, double the raise they used to get, said Dennis Fuller, general manager of Otis Elevator Co. in Hawai'i.

"In the previous five-year contract, the increase was about 4 percent. It's quite a bit more this time — 8 percent," Fuller said. "We're having to pass that on to customers."

Not only do condominiums have to deal with higher elevator maintenance costs, many are spending to modernize aging lifts. Elevators usually are not replaced but upgraded to operate more efficiently.

Fuller said business is up 20 percent to 30 percent this year, mostly from condominiums, and he predicts a similar increase in 2004. Modernizing lifts is Otis' biggest market right now.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.