Only five Hilo leases have been extended in exchange for renovating their properties under a program intended to revitalize Banyan Drive and the Kanoelehua Industrial Area.
A bill signed by Gov. David Ige in 2018 established a Hilo Community Economic District encompassing the Kanoelehua Industrial Area as far south as Makaala Street, as well as Banyan Drive, the Waiakea Peninsula, Wailoa River State Recreation Area, the Bayfront ball fields and along Kalanianaole Avenue.
Within that district, the bill initiated a 10-year pilot program wherein business owners could extend their leases through the state Department of Land and Natural Resources if they reinvested a certain amount of money into renovating their properties.
Many leases on the state lands within the district were awarded 60 years ago or more and are reaching the end of their terms. However, before 2018, there was no mechanism in place to extend those leases, so business owners were unwilling to continue to invest in their properties, leading to general decrepitude throughout the area.
So far, only five leases have been extended in this way, three of which appear to belong to the same company: Hawaii Planing Mill Ltd. in June 2020 secured 30-year lease extensions for three properties all around the HPM Building Supply store on Kanoelehua Avenue.
The fourth and fifth leases were approved in April 2020 for JH Moku Ola LLC, which leases warehouse space off Kanoelehua Avenue.
The state Board of Land and Natural Resources authorized the negotiation of agreements for another 30-year lease extension for one other property — Hilo Fish Co. on Holomua Street — but that has not yet been finalized, according to a legislative report on the district released in December.
Three other applications are pending, according to the report.
State Rep. Chris Todd of Hilo, who has advocated for the economic district for years, said the general sentiment among the Hilo business community remains positive toward the program, but many are still taking a wait-and-see approach.
“I think the majority of the lessees will be supportive of it, but they want to see other businesses go through the process first,” Todd said. “It’s not cheap to go through, after all.”
In order to be granted a lease extension, business owners are required to make improvements to the property that cost at least 30% of the property’s market value, which Todd said is a tall order after the economic strain of 2020.
The impact of the COVID-19 pandemic also has led business owners to question the current value of some of the properties.
“There’s a feeling right now that the valuations of their properties are not reflecting the current reality,” Todd said, explaining that any appraisal of a property’s value from before 2020 will not accurately reflect the effects of the pandemic.
According to the report, some business owners also were critical of the application process for the lease extensions, which required two separate board actions before a lease could be approved. That process was subsequently simplified last year.
While he said he understands business owners’ hesitation, Todd hopes as many businesses as possible will apply by the time the program ends in 2028.
“The reality is, a lot of these businesses have three choices: They go through with this and make the renovations, they relocate — probably to Shipman (Business Park), because there isn’t a lot of commercial space in Hilo — or they just shut down,” Todd said. “We want to avoid those last two options. … A lot of these businesses have been here for decades, and we don’t want them to go.”
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.