(BIVN) – HPM Building Supply will get an additional 30 years on each of its three state land leases in Hilo.
HPM – or the Hawaii Planing Mill, Ltd., in business for nearly one hundred years – got the necessary approval from the Hawaiʻi Board of Land and Natural Resources this past Friday.
HPM’s current lease was set to expire on January 15, 2026, at the conclusion of a previously-granted ten year extension. The company made use of Act 149, enacted two years ago, which allows lease extensions of up to 40 years beyond the original term for leases located in the Hilo Community Economic District, or HCED, based on “substantial improvements” to the lease premises.
The signing of Act 149 was celebrated outside the HPM store in Hilo in July 2018.
It took another two years for HPM to end up before the BLNR. On Friday, HPM CEO Jason Fujimoto joined the State land board – along with his father and executive chairman, Michael Fujimoto – for the online meeting via Zoom.
“From our 10-year extension approved back in 2014, to today, you know it has been a long journey,” Fujimoto said. “HPM, as an original lessee, is thankful to finally have some certainty into the future and we really do look forward to moving with our substantial improvements and continued service to our Hilo community. For those of you who don’t know we do turn 99 years old this August, and again, we’re excited to do our part in revitalizing our business for future generations.”
A DLNR submittal for the agenda item details how the lease extension was worked out:
The subject leases are located within the HCED as defined in Act 149. Lessee’s proposed improvements include the replacement of the roofs on two structures on the property along with replacement and renovations to the premises’ HVAC, lighting, flooring, exterior facade and bathrooms at a cost in excess of $2,207,927 (Exhibit C). An appraisal evaluation performed by a certified appraiser has determined that the economic life of the proposed improvements will exceed the thirty-year period necessary to amortize the refurbishments. The appraiser, contracted by the Lessee, determined the market value of the current improvements to be $6,680,000. Lessee’s proposed expenditure of $2,207,000 represents 33.0% of the value of the existing improvements, and Lessee is only seeking a 30-year extension of the lease. Accordingly, Lessee’s proposed expenditure appears to justify the requested 30-year extension under Act 149.
The subject parcels are located in an area served by aging and/or substandard infrastructure. The area also includes numerous other DLNR parcels currently encumbered by long-term leases that have been extended and are scheduled to expire within the next ten years. Most of the DLNR leases in this area were established pursuant to Act 4, First Special Session of 1960 and Act 32, Sessions Laws of Hawaii 1962 resulting from the destruction of the Hilo bay front caused by the 1960 tsunami. Businesses that were severely impacted by the tsunami were given the opportunity to relocate to the newly created industrial area of Kanoelehua. These acts provided the lessees with an option to purchase the land within two years. Several businesses exercised this option creating an industrial area of mixed DLNR leases and fee simple properties.
Act 149 also stipulates that prior to entering into a development agreement, the lessee shall submit to the Board the plans and specifications for the total development being proposed. The Board shall review the plans and specifications and determine: 1) Whether the development proposed is of sufficient worth and value to justify the extension; 2) The estimated time to complete the improvements and expected date of completion; 3) The minimum revised annual rent based on the fair market value of the lands to be developed, as determined by an appraiser for the Board, and the percentage rent where gross receipts exceed a specified amount.
The Lessee has submitted plans and specifications for the total development and a proposed development agreement outlining the terms and conditions required in compliance with Act 149 and Section 171-192(a), HRS, as amended, and the Lessee has accepted the minimum revised annual rent based on the fair market value of the lands as determined by the Board’s appraiser.
Upon the Board’s approval of the terms and conditions of the development agreement as set forth above, staff is recommending that the Chairperson be authorized to approve and execute the development agreement once it is finalized and thereafter to execute the lease extension documents.
by Big Island Video News
HILO, Hawaiʻi - The Hawaiʻi Board of Land and Natural Resources on Friday voted to approve additional 30-year extensions, as requested, for each of three HPM leases.