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County cites rent savings in possible building purchase

Maui News parcel would provide office space as well as equity for county

Keani Rawlins-Fernandez Introduced bills for purchase

Saying Maui County could save rent money, county Finance Director Scott Teruya made a case Wednesday afternoon for the county to acquire a 6.3-acre Wailuku parcel that includes The Maui News offices.

The Maui News has a letter of intent from the county to purchase the land and three office buildings on the newspaper’s property at 100 Mahalani St. If approved, the purchase would not be allowed to exceed $9.8 million.

Teruya, during Maui County Council’s Budget, Finance and Economic Development Committee’s meeting, said the debt service in acquiring the building would be about $600,000 per year or about $50,000 per month. 

The saving of rent leases by purchasing the parcel and moving county staff out of existing leases would generally be about $50,000 to $60,000 per month, he added.

The county pays $3.6 million annually for office space rent, which includes space on Lanai and Molokai, according to Teruya. Currently, 93,000 square feet in office space is being rented under contract.

“The overall plan is to try to get out of renting properties for somebody else’s mortgage,” Teruya told the committee. “When I look at the numbers, as general as they are, it is almost the same amount of debt service that we are realizing in savings from rent.”

“For those reasons . . . I would say it makes sense financially for us to go out of the lease business and into owning our own equity,” he added.

No action on bills to acquire the parcel was scheduled for Wednesday and all matters were deferred.

An appraisal report dated Oct. 29 by Fukuda Valuation & Consulting LLC said that the market value of the fee simple estate of The Maui News property is $10.2 million.

Appraiser Shane Fukuda during the meeting said it’s “pretty atypical” to find vacant land zoned B-2 Community Business District in general, let alone the sale of that type B-2 zoned land.

The report said the buildings have a remaining economic life of 30 or more years. Buildings include the 14,978-square-foot Maui Publishing Building built in 1987; 25,697-square-foot Maui News Print Room built in 1994; and the 3,454-square-foot Vitec building built in 1969. Also, the property has 175 marked parking stalls.

If the sale goes through, The Maui News will lease 23,151 square feet in the rear building from the county and continue operating at its current location. 

Teruya said the county negotiated a lower sales price provided there’s no rent owed for the first two years. If The Maui News were to stay, the monthly rent would be $10,000 from months 25 to 36.

Budget Committee Chairwoman Keani Rawlins-Fernandez had introduced the three proposed bills to acquire the property. Also on Wednesday, the committee considered language that would give council staff first dibs at occupying the parcel.

Rawlins-Fernandez said the possible acquisition is a good deal and one she wouldn’t want to pass up.

“I understand the argument of the optics — not looking so good for the county purchasing a building during this pandemic,” she said. “But the direction that the mayor and our finance director is taking us ultimately saves our county more money. And I support that.”

Council Chairwoman Alice Lee said the council has not expanded its space in 47 years, despite having Office of Council Services and Office of County Clerk staff. Meanwhile, the 9th floor, which once held the Department of the Corporation Counsel, Office of Economic Development and Community Development Block Grant Program Office, is now occupied solely by the Mayor’s Office, she said.

“The building we are in, the space we occupy, is totally inadequate,” Lee said. “Ask Yuki (Council member Yuki Lei Sugimura); it was leaking in her office. The 8th floor leaks.”

Still, council members during the meeting said they want more time to mull the potential acquisition and take it to public hearing.

“If we didn’t have COVID, in my opinion, this would be a slam dunk,” said member Mike Molina. “It’s an opportunity, and a good one. Unfortunately, it comes at a time when we are looking at some major, major cutbacks with departments’ services to the public.”

Molina added that he was on the council when One Main Plaza in Wailuku was up for possible acquisition. 

“I think today if we had bought that building we would’ve owned that building by now and saved a hell of a lot of rent money,” he said. 

Council members said they wanted to do a site visit and take more time to assess the purchase. Member Gabe Johnson said he would like to see if office space is available in other locations and “shop around.”

Teruya said the county was approached by the listing agent before it was listed publicly. 

Initially, the administration had thought of moving staff out of One Main Plaza and into The Maui News location, but the mayor asked that the council be given the opportunity to purchase it and use it for its purposes. If it declined, then the administration would go ahead with the plan to purchase and move in departments, possibly beginning with the ones with the highest rents, Teruya added.

“COVID time or not, we are still going to have to lease the space for the departments,” he said. “We’re just trying to take that money and put it into a building and an asset that we can retain.”

* Kehaulani Cerizo can be reached at kcerizo@mauinews.com.

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