Tuesday, April 7, 2015

Bill Proposes to Purchase Alii Place Office Building for Cost-Savings

Under a proposed draft of HB1366, the state would be allowed to enter into an agreement to purchase Alii Place, a 25-story “Class A” office building located at the intersections of Alakea, Richards and Hotel streets in downtown Honolulu.

The state is currently in discussion with its owners, Bristol Alii Holdings LLC of San Francisco, to buy Alii Place for about $90 million compared to paying $270 million to plan and construct a state office building in the Liliha Civic Center area. Alii Place is one of the highest quality Class A office buildings in the downtown area and is conveniently located adjacent to the State Capital complex. It is LEED Gold certified and its operating expenses are among the lowest of any Class A downtown Honolulu building.

“We believe this is a good deal for the state in the long run. The purchase price being discussed with the current owner is about one-third the cost of building a new comparable building,” said Rep. Mark Hashem, who introduced the bill along with Rep. Sylvia Luke (Makiki, Punchbowl, Nuuanu, Dowsett Highlands, Pacific Heights, Pauoa) and Rep. Kyle Yamashita (Spreckelsville, Pukalani, Makawao, Kula, Keokea, Ulupalakua, Kahului).

“In addition, the state would have the added benefit of being able to occupy a large portion of the building immediately versus the years that it would take to plan and construct a new building,” Hashem added. “This would be a turnkey project, without the threat of cost overrun issues, in a convenient location with significant parking for the public and employees.

“The state has been in ongoing discussions with Bristol for some time now, but only recently did talks take a serious turn toward an actual offer.”

He noted that last year the Legislature allocated $15 million for the design and planning of the Liliha Civic Center (the old Oahu railway station in Iwilei) under the House’s budget bill.

The idea is to consolidate all of the state Department of Accounting and General Service’s offices under one roof, increasing departmental efficiency and collaboration, while decreasing general fund expenditures for private lease expenses. But the total cost to actually build Liliha Civic Center is estimated to be about $270 million.

The purchase of Alii Place would initially reduce the state’s downtown rental cost by about 60 percent with the remaining 40 percent eliminated by 2021, according to Hashem.

Currently, the state rents approximately 420,888 square feet of office space in the downtown area, and spends about $10.15 million in rental costs, which includes common area maintenance and GET expenses. DAGS occupies most of that rental space followed by the departments of Human Services and Budget and Finance.

The state’s total rental cost does not include an additional 108,000 square feet of office space for DAGS in the Army & Air Force Exchange Service (AAFES) building on Ala Moana Boulevard that the state does not pay rent on.

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