Hawaiian Electric looks to unplug from longtime operating base

Hawaiian Electric Co. is offering up one of its biggest real estate assets for sale in an effort to consolidate operations, and the opportunity could result in more condominium towers in Kakaako.

The utility plans to seek proposals from private developers to make new use of its main operations base across from Neal S. Blaisdell Center.

HECO will consider selling nearly all of the site, about 8 acres of the 10.7-acre property, which would be enough room for at least two high-rises in an area where several condo projects have been built in recent decades.

Proceeds from the sale would be used to consolidate HECO operations from the Kakaako site and seven other largely office facilities around downtown Honolulu into one or two locations, and ideally result in more efficient operations that reduce costs and benefit rate-paying customers.

“What we’re hoping to get out of this is an investment that, through efficiency and cost savings, gets passed on to the customer,” said HECO spokesman Jim Kelly.

HECO said efficiency and cost savings are the primary goal of the move and that the site is cramped while traffic that has increased in the area over decades has made it more difficult for the company to quickly respond to utility repair jobs and other work.

Furthermore, demand for new homes and activity by developers in the area, along with an effort by the city to redevelop much of its Blaisdell site, has made the HECO property more desirable and valuable for redevelopment.

For property tax purposes, the city values the 10.7 acres at $161 million, excluding $19 million for buildings. That land valuation is up from $100 million in 2013.

Kelly said HECO hasn’t calculated what it might get for the property or what it could cost to consolidate facilities that employ 1,400 people.

Any plan would be subject to approval by the state Public Utilities Commission with input from the state Consumer Advocate.

To solicit interest, HECO has retained commercial real estate firm Colliers International to issue a request for proposals later this month. Developers are being asked to submit plans for the property and consolidating HECO operations from the site and seven others in town into one or two suitable facilities.

A Colliers representative declined to comment about what kind of interest the company expects to receive.

The HECO site is bordered by three condo towers — Royal Court, built in 1970; One Archer Lane, built in 1998; and Symphony Honolulu, built in 2016 — as well as a cemetery, a Mercedes-Benz dealership and a midrise condo called Vanguard Lofts.

HECO acquired most of the property in 1944 when the area was more industrial in character, and in 1947 put up an office building that was expanded in 1970.

About 3 acres not being offered for redevelopment are occupied by an electrical substation, which connects main transmission lines to smaller lines branching out in the area and will not be moved.

The office building is where the utility mainly controls its power systems. Other operations on the site include planning, engineering, fleet operations and warehousing. About 700 employees work at the site, including more than 400 field workers who service electrical lines, read meters and handle construction.

Kelly said facilities at the site are overcrowded. “We’re really cramped for space,” he said. “You have guys basically sitting on top of each other. It was not built for the high-tech world that we live in.”

Another 700 employees work out of seven separate facilities including leased space in downtown office towers and a historic four-story HECO building at 900 Richards St. that has been the company’s headquarters since 1927 but is owned by Kamehameha Schools under a lease that expires in 2021.

HECO said employees traveling between the different properties consume time and money that could be saved by consolidating work sites.

“We have a lot of people all over the place,” Kelly said. “It’s really hard to build a collaborative workforce where we have a lot of projects going on that touch on a lot of things. We have engineers and planners, finance people and regulatory — and when none of them are together, it’s kind of hard to have that sort of critical mass of creativity and innovation that we’re trying to foster.”

HECO anticipates making a decision and filing a plan with the PUC by the end of this year if a desirable offer is received. However, moving most of the company’s workers from the Kakaako site isn’t expected to happen before mid-2023 given expectations for building new or acquiring existing facilities for a move.