First rail land trial ends in condemnation

Bryan Hoernig often logs 12-hour days crafting high-end furniture, flooring and other woodcraft at his aging warehouse on Kona Street, part of Kakaako’s shrinking industrial enclave near bustling Ala Moana Center and luxury condo high-rises.

“I enjoy it. I hate to be a cliche, but when you love your work, you don’t work a day,” Hoernig, a third-generation woodworker from Chicago, said in court testimony last week. “If it’s made out of wood, we should be able to manufacture it.”

However, Hoernig — similar to other owners whose land lies in the path of Honolulu’s planned elevated transit line — has spent much of the past three years jostling with the city over the fair price to take his property, which is needed for rail. Earlier this month, he became the first such owner to take that fight all the way to a jury trial in state civil court.

Then, on Tuesday, the warehouse that he’s owned since 2002 became the rail project’s first official casualty of eminent domain.

Hoernig, at considerable expense, challenged the city’s efforts to condemn his 10,000-square-foot property for $2.7 million. Based on his attempts to find a new warehouse, he said he believes the land and building where he runs his business, Honolulu Hardwoods, is worth $2 million more than what the city offered.

For nearly a week, a jury heard painstaking testimony from the two dueling appraisers hired by the city and Honolulu Hardwoods. They also heard briefly from Hoernig himself.

But before they could hear closing arguments, the two sides reached a settlement to pay Hoernig $3.15 million plus $232,000 in moving fees.

Technically, the court-backed deal was still a condemnation. It almost evenly split the difference between the city’s appraisal and the one done by Hoernig’s appraiser, who valued the property at $3.7 million. Both were prepared in October 2015.

DOUBTS OVER APPRAISALS

Hoernig, who’s done woodwork on Oahu since 1986, said he doesn’t know if it will be enough for Honolulu Hardwoods to survive. He’s now leasing a space about half the size in Kalihi near Sand Island but says he’ll need to find a better location closer to his clientele.

“I don’t know how much longer I’ll be able to run it,” Hoernig said outside the courtroom, minutes after they reached the settlement. “It really depends on what happens in this next year.”

After they were dismissed, at least three jurors expressed strong doubts about the approach used by the city’s appraiser, Jon Yamaguchi, who testified that he’s appraised 85 properties needed for the rail line in the past eight years and averaged $110,000 to $150,000 annually in business for the transit project.

One of those jurors, Rick Chavez, said “it appeared (Yamaguchi) took shortcuts.”

Testimony from Hoernig’s appraiser, Steven Chee, convinced them that the warehouse property was worth at least $1 million more than what Yamaguchi had found.

Yamaguchi further testified that he signed a contract with the Honolulu Authority for Rapid Transportation in April for up to $1.26 million in additional appraisal work.

HART officials say they’ll need 222 land parcels — or at least part of them — to build the entire 20-mile rail line. Not all of that land is privately owned, however.

So far, they’ve purchased part or all of 60 private properties, and they’ve gained the access they need to six others, according to the agency’s most recent tally.

For the final 4-mile rail corridor that includes Honolulu Hardwoods and ends at Ala Moana Center, they’ll need 77 total parcels. They report having access to 24 of those as of June.

Until Hoernig’s eminent-domain trial, the agency reported successfully avoiding using condemnation — although it’s come close. An 11th-hour settlement staved off condemnation at the Stuart Plaza property in Pearl City.

OWNERS IN TOUGH SPOT

The HART board has also approved in recent years about 45 resolutions to start eminent domain proceedings, even as it continued to negotiate with those same property owners.

As of July, seven of those cases had been filed in state Circuit Court, according to a recent HART report. That included Hoernig’s case as well as a high-profile dispute with the Blood Bank of Hawaii.

Rail leaders say they need the eminent-domain resolutions to keep the project on schedule in case talks break down. But Blood Bank President and CEO Kim-Anh Nguyen once likened the move to “living under (a) gun” during negotiations.

Meanwhile, other owners along the rail line who have felt the city is lowballing them have said they are put in a tough position because it may not be worth the hassle and expensive attorney fees to pursue a better price.

Hoernig said that going to court made sense for him because of the $2 million or so difference in price. Still, the legal battle has consumed about 80 percent of his time and cost roughly $500,000 in lost business, he said. He declined to publicly disclose how much he’ll pay in legal fees.

During the trial, Hoernig and his attorneys were repeatedly blocked by Circuit Judge Dean Ochiai from telling the jury details they believed were relevant.

For instance, Hoernig could tell the jury that he believed his warehouse was worth $4.5 million, but he couldn’t tell them how he arrived at that dollar figure. (After the trial, he said that he had looked at more than 35 similar properties from Kakaako to Kalihi.)

At court, Ochiai said he aimed to keep the testimony as “expert” as possible. “We don’t know the circumstances of the sale of the next-door neighbor or the lot across the street,” Ochiai said while the jury was outside the courtroom.

Yamaguchi, the city’s appraiser, originally valued Hoernig’s lot at $2.2 million in August 2014 before upping his appraisal to $2.7 million in October 2015.

Hoernig’s lawyer, Dennis King, wanted to show the jury that his client’s property had been appraised at $2.2 million in 2008 — the same value that Yamaguchi would give it six years later. However, Ochiai ruled that the 2008 appraisal was “stale” and “too far removed” to be shown to the jury.

“We got blocked on everything,” Hoernig said of the trial after the parties settled. “I’ve lost a million and a half dollars in equity in my building,” he added before leaving the courtroom.

$3M SAVED ON LAND BUYS

HART leaders, meanwhile, say their offers aim to fairly compensate owners while also protecting the taxpayers’ interests, and that they can’t give special treatment to certain owners. They’re required by federal law to get an independent appraisal of the property’s fair-market value.

Those appraised at more than $500,000 are reviewed by a second appraiser and agreed to by rail’s partners at the Federal Transit Administration, according to HART spokesman Bill Brennan.

The rail agency can agree to a purchase at a price that’s higher than the appraised value if “special circumstances warrant an adjustment in compensation,” according to an emailed statement from Brennan. That’s already happened in 42 rail acquisitions, he added.

Nonetheless, most of the 66 private parcels and easements that HART has acquired were purchased for less than what the agency had budgeted, rail documents show. Overall, the agency saved nearly $3 million total on those purchases compared to their original budget.

Moiliili resident Garret Chang, who served on the jury with Chavez, maintains the city “shortchanged” Hoernig. “I felt he deserved much more” than $2.7 million, Chang said. He favored offering Hoernig more than even Chee’s $3.7 million appraisal.

Chee “was the stronger witness,” added Chavez. “He did his homework. He covered all the bases.”

“I do think the city — they got a guy who gave them a low appraisal,” Chavez said.

With the trial over, Hoernig started shifting his focus to moving his remaining heavy equipment out of Kakaako. The Kona Street warehouse had been a lumberyard for about 50 years, even before Hoernig bought it, he said.

“Now, hell really starts,” Hoernig said.

Private Property Acquisition Summary by Honolulu Star-Advertiser on Scribd