A state agency decided Wednesday to make costly repairs to the historic but vacant Royal Brewery building in Kakaako and use it as a headquarters, after a lengthy and vigorous debate over whether the move makes good financial sense.
Board members of the Hawaii Community Development Authority voted 6-2 to spend up to $6.1 million on the work, including the replacement of beams and flooring that were installed in a 1996 renovation that cost the state $2.5 million but generated noxious fumes rendering the five-story brick building uninhabitable. Repair work is expected to begin later this year and be finished by December 2014.
The decision was made after the board twice deferred action at meetings in February and March.
"This is a tough decision," said board Chairman Brian Lee. "I respect everyone’s views on this."
Anthony Ching, the agency’s executive director, recommended doing the repair work, which a contractor agreed to do for $4.9 million in a competitive bid. Another $1.2 million is budgeted as a contingency expense.
Ching said the agency, which administers development rules primarily in Kakaako and Kalaeloa, would save $173,000 annually that it pays to rent office space in a privately owned building while making use of an unused state-owned property. The agency also would provide one floor in the brewery building for community use.
Even though it would take 28 years to break even with the investment based on the rent savings, Ching said the state would have a more valuable property compared with a virtually worthless building that it can’t sell, given restrictions in state law. Demolishing the property also would be problematic, given historic preservation issues.
But board member Miles Kamimura, who deals in commercial real estate as president of Pacific Property Group, argued that it would be "terribly irresponsible" to fix the building.
"From a real estate standpoint, you’re going into a bad investment," he said. "I think we’re throwing good money after bad."
Kamimura suggested that the agency look for a better property to buy and occupy.
Kamaki Kanahele agreed with Kamimura and joined in voting no on the plan.
"I don’t think it’s a very good expenditure of state money," he said.
Dean Seki, a board member and comptroller of the state Department of Accounting and General Services, said his agency’s view is that it’s better for state agencies to occupy state property than to rent private office space — a view that held sway with some other board members.
Mary Alice Evans, deputy director of the state Department of Business, Economic Development and Tourism, said that for her as a board member it was a question of stewardship of a historic property owned by the state.
The brewery building, which is also known as the American Brewery building or the Honolulu Brewing and Malting Co. building, was built in 1900 and is listed on the state and federal historic registers.
The building on Queen Street between South and Punchbowl streets produced beer including Primo and Royal brands, but brewery operations ceased in 1960, according to the Historic Hawaii Foundation.
In the early 1990s, American Brewing Co. Ltd. sold the building, which had been vacant for more than 30 years, and an adjoining lot to HCDA so the agency could develop a complex of rental apartments for seniors and affordable condominium studios on the lot pressing up against the brewery building.
After the 1996 renovation, Catholic Charities Elderly Services used three floors in the renovated building for a community center for seniors, but fumes drove them out and the building has been vacant for the past 14 years.
HCDA recovered about $1 million in a 2011 legal settlement over the defect, which stems from a termite treatment, and determined that there were no viable options to correct the problem without replacing the beams and flooring.
