Category Archives: Business

“Insolvency” and “bankruptcy” are behind the sale of the Black Press chain of newspapers

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The news of the insolvency and bankruptcy court filing on behalf Black Press Ltd. hit this week. It hit hard.

It leaves many of us wondering if Honolulu, Hilo, Kona, and Kauai will continue to have daily newspapers or, if they do continue under the proposed new ownership of Carpenter Media Group, what they will look like.

In a news release, Black Press tried to play down concerns, never mentioning “bankruptcy” or “insolvency.”

But quite clearly, that’s what is going on. Civil Beat’s Stewart Yerton provided the most complete story so far on what’s happening (“Mississippi Publisher Looks To Buy Struggling Star-Advertiser And Other Hawaii Papers“) based on digging into the court filings. It’s worth reading if you’re concerned about the future of news.

Black Press, based in British Columbia, is the owner of Oahu Publications, which in turn owns the Honolulu Star-Advertiser and several other papers across the state. Black Press which also owns a cross-border stable of newspapers in Canada and the U.S., first obtained an order from a Canadian court staving off creditors, and then filed in the Bankruptcy Court in Delaware to have the original order honored in the U.S.

Yerton traces the company’s woes specifically to the ill-advised purchase of the Akron Beacon-Journal in 20016 for a reported $165 million. After ten years of losses at the newspaper, Black sold it for 10¢ on the dollar. It’s the kind of hit that’s difficult to recover from.

Black Press has a deal to receive short term financing while the company readies a public solicitation of bids for the whole caboodle. If no other bidders appear, the financing group will take ownership.

Simultaneously, Black Press owner David Black announced his retirement, apparently effective immediately.

There was a bit of deja vu in this situation. On September 15, 1999, news spread that the Honolulu Star-Bulletin, the city’s evening newspaper, was to be closed. I had joined the S-B staff as an investigative reporter in 1993.

I started posting news and digital photos online. It predated general use of the term, “blog.”

Here’s what I wrote at the time.

The news that the Star-Bulletin would close leaked out on Wednesday afternoon, September 15, 1999, after our publisher and managing editor emerged from a management meeting with somber expressions, word of a major announcement scheduled the next morning, and “no comment” beyond that. Word quickly spread to other media, and news of the Star-Bulletin’s demise led the television news that night. A number of reporters had left for the day before the rumors emerged, and heard about the closure for the first time while watching news on the tube.

The official word came the following day. We were given a 60-day notice of the newspaper closing.

I started writing about the experience from inside the newsroom. I had just purchased an early consumer digital camera, a little Ricoh RDC-2, which I happened to have with me on September 15. If you’re interested, you can follow along the not-quite-daily posts.

In the end, the newspaper didn’t close, for a variety of reasons, including a federal lawsuit, and eventually David Black made a stealth bid for the newspaper after secretly negotiating to purchase MidWeek, which had its own printing press.

Black’s purchase of the Star-Bulletin closed in March 2001. The newspaper survived a close call. My job didn’t. I received one of those unpleasant “we will not longer require your services” letters, and my short but successful newspapering career ended.

Luckily, I didn’t stop writing. And, even luckier, I was married to a professor with tenure, which took the financial edge off the loss of my only full-time paid gig as a reporter.

You can be sure that everyone at the Star-Advertiser is quietly assessing their options, whether to sit tight and see how things develop, or jump ship now ahead of the pack. As I recall that last time 20+ years ago, it was very, very difficult for all involved.

More Turo parking woes

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Problems with Turo peer-to-peer car rental hosts using public streets to park their cars between rentals has been mentioned here before.

Now another complaint is bouncing around, this time about a Turo “host” who apparently manages more than 50 vehicles.

Copies of several emails about the situation have been circulating, and I had a chance to read one of those.

According to the complaint, a Turo host parks as many as 20 cars on a residential street in Manoa, initially in the 2300 and 2400 blocks of Oahu Avenue, later forther down on the 2200 block, near the UH president’s home and the Honolulu Christian Church.

This particular host started a car rental company in mid-2021, state business registration records show. Two others were added as company officers in November 2022.

In 2022, the host—who is listed as the car rental company’s president—purchased a home on East Manoa Road home for about $1.5 million. The deed for that home identified him as a resident of Irvine, California.

The house, which sits on a lot of about 5,000 square feet, has no room for parking of the fleet of rental cars, and city rules allow only two rental vehicles to be parked as part of a legal “home business.”

According to a June 9 email, complaints about this particular host have been on record with Honolulu’s Department of Planning and Permitting since August 2021, and was also reported to the city’s Customer Service Branch.

The complainant did not know whether the host has faced fines from the city.

Turo claims to have an internal system for resolving complaints about parking, but had failed to resolve this complaint after earlier complaints.

Add it to the list of issues to keep track of.

Are you aware of Turo hosts with large rental fleets in your neighborhood?

Hawaii condo law does provide for “termination” of a condominium

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I did a little more research this morning, and found Hawaii’s condominium law (Chapter 514B HRS) does include a provision for terminating a condominium, found in Section 514B-47.

The process is spelled out in the statute, and there are several ways for a condominium as a legal entity can be dissolved.

Based on a quick reading, here’s how it seems the process would work. With the obvious caveat that I’m not an attorney and am just trying to summarize what I’m reading.

First, there are options for buildings on land owned in fee simple.

The first option provides that the condominium can be terminated if approved by owners holding a total of “at least eighty percent of the common interests…and the holders of all liens affecting any of such units consent thereto….”

The second option is available if there has been “subtantial damage” to the common elements that has not been repaired “within a reasonable time….”

Here’s the language of that provision.

The common elements suffer substantial damage or destruction and the damage or destruction has not been rebuilt, repaired, or restored within a reasonable time after the occurrence thereof, or the unit owners have earlier determined as provided in the declaration that the damage or destruction shall not be rebuilt, repaired, or restored….

If either of these conditions are met, then any owner or lien holder can go to court seeking an order for a partition sale. If approved, the property would be sold, with the proceeds being split among owner based on their share of the common interest, after any outstanding liens on a particular unit are paid out of the owner’s share.

There’s another option in the next section of the law. It is applicable if:

(b) All of the unit owners may remove a property, or a part of a property, from this chapter by an instrument to that effect, duly recorded, if the holders of all liens affecting any of the units consent thereto, by duly recorded instruments. Upon this removal from this chapter, the property, or the part of the property designated in the instrument, shall cease to be the subject of a condominium property regime or subject to this chapter, and shall be deemed to be owned in common by the unit owners in proportion to their respective common interests.

None of this would be easy to accomplish, as anyone who has tried to wrangle votes of two-thirds of owners to pass a by-laws change would know. The 80% target seems like an extremely high bar to get over.

But there is a statute.

Comments?

What’s the life span of a high rise condo in Hawaii?

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Here’s a new point worth considering as many of Oahu’s condominium buildings reach 40 years or older: What happens when a condo becomes economically untenable in the face of falling property values caused by mounting maintenance fees that can’t keep up with the cost of needed repairs and maintenance? We need a discussion of procedures appropriate for condominium that reach the end of their useful life.

John from Toronto raised the issue in a comment, which I’m elevating into its own post.

There is a very quickly evolving condo industry and related regulations where I am a condo manager, here in Toronto, Canada.

One looming issue is: most large , tower style condos built in the 60’s to 80’s are beginning to decay rapidly. There is no easy way to terminate a Condominium Corporation here, and this will become a huge issue in the future as repair costs make owning a condo untenable. Rising insurance premiums, inflation rate, and costs of labor and materials has all created a perfect storm for higher condo fees. There needs to be improved procedures and processes made for owners who want to dissolve the corporation so a new development can be built in its place.

During the Honolulu City Council’s debate over mandatory retrofitting old buildings with fire sprinklers a few years ago, the Honolulu Fire Department identified about 360 buildings built before 1975, when a law requiring sprinklers in new high rise buildings was passed. Projects that were on the books but had not yet started construction were grandfathered in, and were not required to add sprinklers.

Hawaii condominiums on leasehold land already face an end-of-life point at the expiration of their leases, when the land reverts back to the landowner. The lease of the Kahala Beach Apartments expires in July 2027, and landowner Kamehameha Schools has shown no interest in extending the lease for another term. Apartment values in the Admiral Thomnas, a high rise condominium near Thomas Square, with a lease that expires in less than 30 years, have been falling since the remaining term fell below the 30year mark.

But in fee simple buildings, it’s a different story. Do condo declarations typically contain provisions streamlining the eventual need to sell not just a single unit, but an entire condominium project? Perhaps someone else can answer that question.

The website Quora laid out one scenario for the fate of older buildings.

What often happens is that people first stop paying their condo fees. Then they move out and stop paying their mortgages. The building deteriorates and the condo association doesn’t have enough income to keep going. The association would go bankrupt and the lenders would foreclose on the individual units. At some point, possibly, a developer would enter the picture, buy the foreclosed units cheaply, and put something else up, if the area is economically viable. If not, it just sits there. (Detroit’s been going through some of that.) The city might actually buy up foreclosures and bulldoze them, simply to get rid of the urban blight and to absorb some of the surplus housing units.

That’s pretty harsh. Is it possible here? Again, I don’t know.

This brings up another issue. Hawaii’s condominium law requires boards to have a plan to fund repair and replacement costs over a couple of decades into the future. These “reserve” studies list each major project, when it needs to take place, and the estimated cost, and then requires to board to have a plan to cover those costs, either with savings built up in advance, or via cash flow. So, if this law were effective, the horror stories of soaring monthly fees and special assessments to meet unexpected to cover costs should be a thing of the past.

But it looks like there are consultants who are willing to produce “make it come out right” reserve studies, extending the estimated service life of existing systems, turning a blind eye to known issues, or underestimating replacement or repair costs, all with the goal of keeping current maintenance fees lower than they would be otherwise. Sometimes the board itself will tinker with the line items, adding a few years here, cutting cost estimates there, with the same goal of keeping current costs low.

I sat on a condo board some years back that commissioned a reserve study from a reputable company. When the draft was received, the board majority was unhappy with the bottom line. The majority’s answer was not to develop a financial plan, but to go shopping for another consultant willing to produce a study that minimized the estimated future expenses. Our property manager at the time took the unusual step of telling the board he was keepign a copy of the original reserve study to defend himself if any litigation was triggered by the board’s questionable shopping around for an amenable consultant.

This just to say that an investigation of the “reserve study” industry and its members might turn up interesting findings.