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NEWS RELEASE
Honolulu, Hawaii
June 30, 2010
STATE APPEALS COURT RULING ON CONSTITUTIONALITY OF ACT 189
The State is appealing a federal court decision that struck down a law advocated by local small businesses seeking open and fair ground lease rates.
The Hawaii Attorney General’s office filed a motion today in the Ninth U.S. Circuit Court of Appeals to overturn Judge Susan Oki Mollway’s recent ruling that struck down Act 189 as unconstitutional.
Act 189 was passed by the State Legislature in 2009, to redress grievances of local businesses facing rental demands from a mainland landowner that would double or triple the existing rates. The businesses formed a coalition, Citizens for Fair Valuation, to respond to the demands of the landowner, HRPT and its subsidiaries.
Michael Steiner, executive director of Citizens for Fair Valuation, says Act 189 merely clarifies that when a long-term ground lease calls for “fair and reasonable” rents, those rents be fair and reasonable to both the lessor and the lessee. The Act requires appraisers, when acting as arbitrators, to take into account all relevant attendant circumstances of the lease including the uses and intensity of uses, surface and subsurface characteristics of the land, and the surrounding neighborhood.
Judge Mollway ruled that Act 189 substantially impaired the existing lease contracts.
The Attorney General’s office and Citizens for Fair Valuation, strongly disagree with the Court’s findings.
Steiner added, “The Act serves to remind HRPT, and its seven subsidiaries, that fair and reasonable rent is just that, not double that amount, which is what HRPT is demanding from lessees. Act 189, which had bi-partisan support in the legislature, calls for rents that are neither unfair nor unreasonable to either party.”
“Due to HRPT’s focus on profits, arbitrations are at an historic high with more than 20 properties contesting HRPT’s demands. The system is not working because HRPT is unwilling to accept the market for what it is,” Steiner said. “We applaud the State’s decision to appeal the Court’s ruling and look forward to 9th Circuit Court to deem Act 189 as constitutional.”
Citizens for Fair Valuation is a non-profit coalition of businesses that hold long-term ground leases from the seven (7) subsidiaries that comprise HRPT Properties Trust which purchased over 200 acres of near-town commercial land from the Damon Estate in 2003 making the parent company the largest owner of industrial land in Hawaii.
# # # #
Michael A. Steiner
Executive Director
Citizens for Fair Valuation
841 Bishop Street, Suite 1500
Honolulu, HI 96813
Email: MSteiner@SteinerAssoc.com
Web: www.FairValuation.org
Honolulu, Hawaii
June 30, 2010
STATE APPEALS COURT RULING ON CONSTITUTIONALITY OF ACT 189
The State is appealing a federal court decision that struck down a law advocated by local small businesses seeking open and fair ground lease rates.
The Hawaii Attorney General’s office filed a motion today in the Ninth U.S. Circuit Court of Appeals to overturn Judge Susan Oki Mollway’s recent ruling that struck down Act 189 as unconstitutional.
Act 189 was passed by the State Legislature in 2009, to redress grievances of local businesses facing rental demands from a mainland landowner that would double or triple the existing rates. The businesses formed a coalition, Citizens for Fair Valuation, to respond to the demands of the landowner, HRPT and its subsidiaries.
Michael Steiner, executive director of Citizens for Fair Valuation, says Act 189 merely clarifies that when a long-term ground lease calls for “fair and reasonable” rents, those rents be fair and reasonable to both the lessor and the lessee. The Act requires appraisers, when acting as arbitrators, to take into account all relevant attendant circumstances of the lease including the uses and intensity of uses, surface and subsurface characteristics of the land, and the surrounding neighborhood.
Judge Mollway ruled that Act 189 substantially impaired the existing lease contracts.
The Attorney General’s office and Citizens for Fair Valuation, strongly disagree with the Court’s findings.
Steiner added, “The Act serves to remind HRPT, and its seven subsidiaries, that fair and reasonable rent is just that, not double that amount, which is what HRPT is demanding from lessees. Act 189, which had bi-partisan support in the legislature, calls for rents that are neither unfair nor unreasonable to either party.”
“Due to HRPT’s focus on profits, arbitrations are at an historic high with more than 20 properties contesting HRPT’s demands. The system is not working because HRPT is unwilling to accept the market for what it is,” Steiner said. “We applaud the State’s decision to appeal the Court’s ruling and look forward to 9th Circuit Court to deem Act 189 as constitutional.”
Citizens for Fair Valuation is a non-profit coalition of businesses that hold long-term ground leases from the seven (7) subsidiaries that comprise HRPT Properties Trust which purchased over 200 acres of near-town commercial land from the Damon Estate in 2003 making the parent company the largest owner of industrial land in Hawaii.
# # # #
Michael A. Steiner
Executive Director
Citizens for Fair Valuation
841 Bishop Street, Suite 1500
Honolulu, HI 96813
Email: MSteiner@SteinerAssoc.com
Web: www.FairValuation.org
Servco Arbitration Award Made Public
Honolulu, December 1, 2009: UPDATE - An arbitration panel recently determined that $5.26/SF with no step ups is "fair and reasonable annual rent" for the 10-year period beginning February 1, 2009 for Servco's 9.6 acre dealership and headquarters site at 2810 Pukoloa Street.
This compares to HRPT's offer to Servco of $7/SF for the first year of the 10-year period with 4% annual increases thereafter. Because the notice initiating the Servco arbitration was issued in February 2009, well before the July 1, 2009 effective date of Act 189, both HRPT and Servco agreed that Act 189 did not appear to apply to the Servco arbitration.
CFV has been saying for the past two years that HRPT's approach to setting fair and reasonable annual rent is unrealistic. Although CFV believes that an even lower award would have been appropriate in light of the poor economy, the unanimous award of the three-member arbitration panel, including HRPT's appointee, is a clear rejection of HRPT's approach to setting rents.
Since the panel consisted of three distinguished Hawaii appraisers, including the President of the local chapter of the Appraisal Institute serving as chairman, CFV hopes that HRPT will take the award to heart and adopt a more realistic approach going forward.
CFV strongly recommends that lessees discuss this with their attorneys or negotiating professionals before settling rent renegotiation issues with HRPT as the details of the Servco award may have an impact on those issues. For additional information as to the renegotiation process or to attorneys and other professionals who might advise and assist you in the process, please contact Michael Steine, Executive Director of CFV.
HRPT again rejects CFV`s attempts to work together
• See letter of 11/10/2009 from HRPT CEO John Mannix. Another regrettable decision by HRPT.