By Ken Sakamoto, Star-Bulletin
This courtyard parking lot at the downtown post office
will be turned into a mall full of stores and restaurants. The
historic facade of the post office will remain, as will
the post office itself.
Deal set for retail
complex downtown
The historic post office building
By Jerry Tune
will be developed into a retail galleria
featuring three restaurants
Star-BulletinThe U.S. Postal Service has signed a contract to sell most of the historic downtown post office building for $14.2 million to make way for a retail and restaurant development.
The Postal Service said it is selling the building, not including the post office area in front, to USPO Redevelopment Corp., headed by local developer Russell Allen, for $11.5 million plus $2.7 million to upgrade the postal operations area.
The company plans to build a $57.5 million galleria in two phases that will be anchored by three restaurants.
The galleria will occupy 300,000 square feet and the Postal Service 55,000 square feet, both owning their space under a condominium-like arrangement.
During construction, mail-handling operations at the post office will move to Kakaako until early in 2000. But no postal operations will be permanently displaced by the development.
"It's just good business to maximize an underutilized building," said Phil Wilson, contracting officer for the Postal Service utilities management office in Arlington, Va. "Three-quarters of the building was excess space."
Wilson said similar developments have been done at Rincon Center in San Francisco and Postal Square in Washington D.C.
The sale is expected to close in July with construction to begin in August.
The developers said Phase 1 of the galleria is scheduled to open by December 1998 and phase 2 by December 1999.
The developers originally planned to rebuild part of the historic building, on the Queen Street side, but the revised plan calls for no demolition.
"We're only using the interior space," Allen said. "We will come in from Richards Street (where the postal service trucks operate) and dig down to create the 350 parking spaces underneath the courtyard and building (Queen Street side)."
Allen said the deal enables the Postal Service to avoid spending $12 million to $15 million in rehabilitation work for the historic building completed in 1930.
Besides the restaurants, the galleria also will include a wedding chapel open seven days a week; a bistro for those attending the weddings; and a visitor center. The developers said the three-story project will include 100 or more high-end boutique shops for tourists and local shoppers.
The first phase will include duty free shops, the Postal Service renovation, and a Bishop Museum historical display and shop. The duty free operations will be operated by a corporation headed by local businessman Guiseppe Carlo.
The second phase will include the Stars Restaurant, Living Seas Cafe, Wall Street Cafe, an international food court and the new parking garage.
Steve Sofos, president of Sofos Real Estate, said he is "cautious" about the galleria's prospects for success.
"Hawaii was under-retailed but now it's getting over-retailed," Sofos said. "Like other new projects, they are all chasing the same tenants."
Sofos said the post office is "a central site and an attractive complex" but other projects, like nearby Aloha Tower Marketplace and Dole Cannery, have struggled to get tourists to visit them.
Allen said the first phase is leased out and the total project is more than 85 percent leased out. Arrangements are being made to use parking at four nearby downtown buildings in the evenings, he added.
"We are also making arrangements for tourist trolleys and buses to bring Asian tourists to the Galleria from opening day," Allen said.
The project originally was announced as a leasehold office project three years ago. But Harold Spector, one of the partners in USPO Redevelopment, said the decision was made to switch to a retail project and purchase the fee-simple land. Since that change in 1996, USPO Redevelopment has been negotiating with the Postal Service and working on financing.
The project is moving ahead after the deal signed with the Postal Service and the addition last week of a $9 million equity partner, Chevron TCI Inc. of San Francisco, a subsidiary of Chevron Oil.
The next step it to make final arrangements for $48 million in financing from two institutional lenders in Los Angeles and New York. Insignia Capital Advisors Inc. of New York is helping with the financial arrangements.
Allen said he has been briefing city officials and hopes to get a building permit to start work by August.
He said the $45 million in construction work should provide 200 construction jobs. Phase 1 will add up to 150 new retail jobs and phase 2 will create 350 new retail positions, Allen said.
The National Park Service is working on a detailed agreement on what historical features to save in the reuse of the post office.
Contractor for the galleria is Obayashi Hawaii and the architect is R.G. Wood & Associates.
Wood said the exterior features, and most of the interior features, will be retained. "The building will be historically correct," he said.
Those features not retained will be documented and put in an archive, following federal and state historical guidelines, Wood said.
The front portion of the U.S. Post Office was constructed in 1921-22 in the Spanish colonial revival style.
The back portion, on Queen Street, was constructed in 1930.
Allen and Spector other projects in Hawaii included the One Kalakaua Seniors project, which they started before selling to another developer who completed the project.
Three theme restaurants will anchor the post office building galleria, according to the developers. They are: The restaurants three
Stars Restaurant of San Francisco and Singapore has signed a lease to take about 12,000 square feet using three levels, including the rooftop, at the corner of Queen Street and the Mililani Mall. Construction cost is $3 million. Chef Jeremiah Tower and Golden Harvest Films, a Chinese motion picture company that includes actor Jackie Chan, are partners in the restaurant.
