Appraisal Report of the Benchmark Fair Market Rental Values for the State of City and County of Airports

As of July 1, 2016

City and County of Honolulu Airports APPRAISAL REPORT

TABLE OF CONTENTS Page TRANSMITTAL LETTER

I. CERTIFICATION 4

II. LIMITING CONDITIONS AND ASSUMPTIONS 6

III. ASSIGNMENT AND SUMMARY 8 Purpose of Appraisal 9 Function of Report 9 Interest Appraised 10 Intended Use and User of the Report 10 Scope of Work 10 Definitions 11 Airport Rental Categories 13 Rental Conclusions 13

IV. ECONOMIC ANALYSIS (State and City & County of Honolulu) 20

V. BENCHMARK PROPERTY TYPES FOR ALL HAWAII STATE AIRPORTS 23 A. Spaces and Areas in Buildings 23 B. Industrial Lands 24 C. Parking Stalls 24 D. Aircraft Storage (Tie Downs) 25

VI. ASSUMPTIONS FOR ALL HAWAII STATE AIRPORTS 26 A. Utilities 26 B. Special Conditions - Buildings 26 C. Special Conditions - Lands 26

VII. VALUATION METHODOLOGY FOR ALL HAWAII STATE AIRPORTS 28

A. Building Spaces and Areas within the Airport or Adjacent to the Airport 30 1. Retail Rental Market Considerations 31 2. Office Rental Market Considerations 31 3. Industrial Rental Market Considerations 32 4. Calculation of Benchmark Rental Values for Retail, Office, and Industrial Spaces at Small Airports 32 5. Calculation of Rental Values for T-Hangars 33

B. Undeveloped Lands 33 1. General 33

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(a) Valuation of Improved Unpaved Industrial Land 34 (b) Calculation of Paving Cost Recovery 35 (c) Valuation of Unimproved Industrial Land 36 2. Estimating Fee Simple Land Value 36 3. Prevailing Rates of Return on Land 37 4. Final Value Adjustments by Use 38 5. Concluded Land Values for Secondary and Tertiary Airports 38

VIII. MARKET ANALYSIS – Island of 39

IX. MARKET RENTS – Honolulu County Automobile Parking & Tie Downs 42 A. Rental Rates for Automobile Parking Stalls 42 B. Rental Rates for Aircraft Storage (Tie-Downs) 46

X. MARKET RENTS – Honolulu International Airport 49 A. Airport Description 49 B. Environs 49 C. Rental Analysis 52 Retail Space Rents 52 Office Space Rents 53 Industrial Space Rents 54 Conclusion of Rents within Terminal Building 55 Conclusion of Rents within Air Taxi Building 57 Industrial Land Rents 57 Ramp Area Rents 62 Rental Rates for T-Hangars 62 Rental Rates for Automobile Parking 63 Rental Rates for Aircraft Storage (Tie-Down) Areas 64 Conclusions 64 Subject Photos 69

XI. MARKET RENTS – Kalaeloa International Airport 87 A. Airport Description 87 B. Environs 87 C. Rental Analysis 87 Space Rents 87 Industrial Land Rents 91 Rental Rates for T-Hangars 94 Rental Rates for Automobile Parking 95 Rental Rates for Aircraft Storage (Tie-Down) Areas 95 Conclusions 96 Subject Photos 98

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XII. MARKET RENTS – Kawaihapai Airfield 102 A. Airport Description 102 B. Environs 102 C. Rental Analysis 102 Industrial Land Rents 105 Rental Rates for T-Hangars 105 Rental Rates for Automobile Parking 106 Rental Rates for Aircraft Storage (Tie-Down) Areas 106 Conclusions 107 Subject Photos 109

Professional Qualifications

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I. CERTIFICATION

The undersigned hereby certify that, to the best of the appraisers’ knowledge and belief:

-- The statements of fact contained in this report are true and correct.

-- The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are the appraisers’ personal, impartial and unbiased professional analyses, opinions, and conclusions.

-- The appraisers have no present or prospective interest in the properties that are the subject of this report, and have no personal interest with respect to the parties involved.

-- The appraisers have no bias with respect to the properties that are the subject of this report or to the parties involved with this assignment.

-- The appraisers have not performed services, as appraisers or in any other capacity, regarding the properties that are the subject of this report within the three-year period immediately preceding acceptance of this assignment.

-- Engagement in this assignment was not contingent upon developing or reporting predetermined results.

-- Compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

-- The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

-- Alan J. Conboy, MAI, SRA and Andrew B. Conboy have made an inspection of the properties that are the subject of this report.

-- Nobody provided real property appraisal assistance to the persons signing this certification.

-- As of the date of this report Alan J. Conboy, MAI, SRA has completed the continuing education program for Designated Members of the Appraisal Institute.

-- As of the date of this report, Andrew B. Conboy has completed the Standards and Ethics Education Requirement of the Appraisal Institute for Associate Members.

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II. LIMITING CONDITIONS AND ASSUMPTIONS

The conduct of any appraisal is necessarily guided by, and its results influenced by, the terms of the assignment and the assumptions which form the basis of the study. The following conditions and assumptions embodied in this report constitute the framework of the appraisers’ analysis and conclusions.

Special limiting Conditions and Assumptions

-- In accordance with an agreement between the appraisers and the client prior to the preparation of this appraisal, we have prepared an Appraisal Report. This Appraisal Report is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice (USPAP) for an Appraisal Report. As such, it presents a discussion of the data, reasoning, and analyses that were used in the appraisal process to develop the appraisers’ opinions of value. The depth of discussion contained in this report is specific to the needs of the client and for the intended use as stated herein. The appraisers are not responsible for unauthorized use of this report.

-- The valuation is based on assumptions that have been formulated based on information and descriptions provided by the Department of Transportation, Airport Division. These assumptions are significant to the valuation or are key factors upon which the valuation depends.

-- The analysis presumes the properties will continue to be professionally and prudently managed and maintained. It is assumed that current market and economic conditions will remain relatively stable or improve over the ensuing long-term period following the date of appraisal.

-- The legality of the traditional gathering rights of native Hawaiians that could be exercised on the properties, or other native Hawaiian rights that could impact the properties, was not considered in this report. This report assumes that the “traditional gathering rights” or any other rights of “native Hawaiians” would not be exercised on the property or properties that are the subject of this report and on any comparable properties that are included in this report. If native Hawaiian rights exist on the property and not the comparable properties, it could have a negative effect on the value of the property.

General Limiting Conditions and Assumptions

-- This appraisal is based upon the present condition of the national economy and the present purchasing power of the dollar. Fuel and energy available are assumed to remain at the levels of July 2016.

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-- This report expresses the opinion of the signers on July 1, 2016, as to an effective date of value of July 1, 2016; in no way has it been contingent upon the reporting of specified values or findings.

-- The appraisers have extensive experience in the valuation of vacant and improved income-generating properties and consider themselves competent to estimate the value of the specified real property interest in the subject properties.

-- It is assumed that the subject properties are free and clear of any and all encumbrances other than those referred to herein, and no responsibility is assumed for matters of a legal nature. This report is not to be construed as rendering any opinion of title, which is assumed good and marketable. Responsible ownership and competent management of the subject properties are assumed, unless otherwise stated within the report.

-- Any maps or plot plans reproduced and included in this report are intended only for the purpose of showing spatial relationships. These maps do not necessarily represent measured surveys or measured maps, and the appraisers are not responsible for the possible existence of any topographic or surveying errors within such maps. No engineering tests were furnished, and therefore no liability is assumed for the soil conditions, bearing capacity of the subsoil or building engineering matters relating to the subject properties.

-- Information provided by informed local sources such as governmental agencies, financial institutions, realtors, buyers, sellers and others, was interpreted in the manner in which it was supplied and, whenever possible or practical, was checked and verified by secondary means. However, no responsibility is assumed for any possible misinformation contained in these sources of information.

-- The presence of hazardous wastes or toxic materials such as asbestos, urea- formaldehyde foam insulation or other potentially harmful substances may have an adverse affect on the value of a given property. The value estimates as reported herein are predicated on the assumption that there is no such hazardous material on or in the subject properties that would result in this type of loss in value. No responsibility is assumed for any potentially adverse environmental conditions or for the lack of any expertise or engineering knowledge required to discover such conditions.

-- The appraisers are not required to give testimony or appear in court because of having made this appraisal unless arrangements for the appearance and the fee for such appearance have been agreed upon by the person or corporation requiring such testimony.

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-- The Americans with Disabilities Act (ADA) became effective January 26, 1992. The appraisers have not completed a compliance survey or analysis of the subject properties to determine the properties’ conformity with the various ADA requirements. It is possible that a compliance survey of the properties, combined with a detailed analysis of the requirements of the ADA, may reveal the properties are not in compliance with one or more of the requirements of the Act. If the properties are not in compliance, there could be a negative impact on value. Since the appraisers have not received specific information with respect to this issue, they did not consider possible non-compliance with the requirements of ADA in estimating the values of the properties.

-- The appraisers will not disclose the contents of the appraisal report except as provided for in the Uniform Standards of Professional Appraisal Practice.

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III. ASSIGNMENT AND SUMMARY

The appraisers have completed an appraisal report estimating the benchmark fair market rental values for the City and County of Honolulu airport facilities.

Purpose of Appraisal

The purpose of this appraisal is to set forth the appraisers’ opinion of the fair market rental value of various areas of classification in the City and County of Honolulu airports, managed by the State of Hawaii Airports Division, located on the island of Oahu.

This report updates the rates included within the Airports Division “Schedule of Rates and Charges” Procedure No. 4.5, effective January 23, 2014.

Function of Report

The State of Hawaii, Department of Transportation, Airports Division, oversees the operations at 15 airports and other properties in the State of Hawaii. The 15 airports include: Airport Tax Map Plat City and County of Honolulu Honolulu International Airport (1) 1-1-02, 03, 72, 76 Kalaeloa Airport (1) 9-1-13 Kawaihapai Airfield (1) 6-8-14

County of (2) 3-8-01 (2) 5-2-04 (2) 4-9-02 (2) 4-3-01 (2) 6-1-01 (2) 1-3-03

County of Hawaii Kona International Airport at Keahole (3) 7-3-43 Hilo International Airport (3) 2-1-12 Waimea-Kohala Airport (3) 6-7-01 Upolu Airport (3) 5-5-06

County of (4) 3-5-01 Port Allen Airfield (4) 1-8-08

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The function of this report is to assist the State of Hawaii, Airports Division, in establishing reasonable rates and charges for the use of facilities and services at the three City and County of Honolulu airports.

The report will first address the various property types and assumptions common to all State of Hawaii airport facilities followed by an analysis on the fair market rent analysis for the three airports located within the City and County of Honolulu. The concluded rates will be included within the State of Hawaii, Airports Division updated “Rates and Charges”.

Interest Appraised

Fee Simple Interest

Intended Use and User of the Report

The sole use of this appraisal is as an asset management tool for the State of Hawaii, Airports Division’s use in their determination of land and space rental rates in the three City and County of Honolulu airports.

Scope of Work

For purposes of this assignment, the appraisers developed their opinions of value based on a complete appraisal of the identified subject real property interest and have communicated the results of this complete appraisal within an Appraisal Report. To the best of the appraisers’ knowledge and ability, this appraisal has been prepared in conformance with the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute.

By prior agreement with the client; this is an Appraisal Report intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of the Uniform Standards of Professional Appraisal Practice for an Appraisal Report. As such, it presents a discussion of the data, reasoning, and analyses that were considered in the appraisal process to develop the appraisers’ opinion of value. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated above. The appraisers are not responsible for unauthorized use of this report.

In the course of this assignment, the appraisers have undertaken a series of independent investigations and analyses in addition to relying upon selected information and data from existing office files that are updated on a recurring basis. A summary of the investigations conducted, the primary data sources utilized and the basic methodology employed in this analysis is presented in the following paragraphs.

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The description of the subject properties was based upon a physical inspection of the properties conducted as follows:

Date of Airports Division Inspection Airport or Area Representative 06/09/16 Honolulu International Airport Mr. Mike Auerbach Ms. Abby Lareau

06/06/16 Kawaihapai Airfield Mr. Mike Auerbach Ms. Dawn Tsue

06/06/16 Kalaeloa Airport Mr. Mike Auerbach Mr. Michael Navares Ms. Dawn Tsue

The appraisers analyzed all of the background information on each property and its environs as revealed by their research and investigation. The appraisers also conducted an analysis of local real estate market conditions affecting the subject properties, based upon interviews with local real estate professionals and information contained within journals published by the local board of realtors.

Definitions

Fair Market Rental Value

The term fair market rental value, as used in this report, is synonymous with market rent, defined in The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute as:

“the most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby:

1. lessee and lessor are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their best interests; 3. a reasonable time is allowed for exposure in the open market; 4. the rent payment is made in terms of cash in United States dollars, and is expressed as an amount per time period consistent with the payment schedule of the lease contract; and

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5. the rental amount represents the normal consideration for the property leased unaffected by special fees or concessions granted by anyone associated with the transaction.

Fee Simple Interests

Fee simple estate is defined as an absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

Airport-Airline Lease

Lease means a lease executed by an operator of aircraft and the state Department of Transportation under which the aircraft operator is obligated to pay airport use charges.

Large aircraft (Air Carrier)

Means aircraft: (a) larger than aircraft in the large general aviation aircraft group category; and (b) aircraft operated by commercial passenger or cargo transport air carriers holding a certificate of public convenience and necessity.

Large aircraft (General Aviation)

Means an aircraft of more than 12,500 pounds maximum certificated landing weight with a fixed wing span greater than 42 feet but less than 60 feet, or rotor wing aircraft with a rotor blade diameter of 37 feet or larger but less than 49 feet. Any larger aircraft, even if operated under FAR Part 91 or Part 135 or following Part 119, shall fall into the air carrier category.

Small aircraft (General Aviation)

Means an aircraft of 12,500 pounds or less maximum certificated landing weight with a fixed span of 42 feet or less or rotor wing aircraft with a rotor blade diameter of less than 37 feet.

Aircraft parking and storage areas

Shall mean and include any portion of a public airport, designated temporarily or permanently by the state Director of Transportation, that may be used for the parking and storing of aircraft for the servicing of aircraft with fuel, lubricants and other supplies, and for the making of minor or emergency repairs to aircraft.

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Airport Rental Categories

State of Hawaii airport rental categories are summarized in Table HN-1, following.

Table HN-1

CATEGORY DESCRIPTION Terminal Floor Space Open finished floor space within the terminal.

Service Counter Finished counter space or passenger, tour, greeting, etc.

Concession - Retail Sales Areas utilized by retail vendors including Duty Free, newsstand, packaged foods, etc.

Concession - Food & Areas utilized for food concessions including restaurants, cocktail lounges, Beverage snacks, etc.

Office Office space, which include floor covering, painting or wall covering, ceiling, lighting, etc. Used for administrative purposes, ticketing, reservations, crew lounge, ramp services, etc.

VIP Lounge Lounge space similar to office finished spaces used by airlines.

Ramp Office Office space, which normally includes concrete flooring, lighting, electrical outlets and painted concrete or hollow tile walls.

Warehouse and Storage Unfinished rooms and/or remnant space used for storage.

Industrial/Agricultural Land Tenant of the property operates a business related to airport use. Land may have direct access or some aircraft access to ramp and service road.

Improved Land Graded with utilities and paved road within a reasonable distance of the property line.

Unimproved Land Not graded and lacks utilities and paved road access.

Aircraft Parking Fees Rates should vary with size, i.e. small (up to 42'); large (43' to 60'); and where noncommercial or commercial.

Rental Conclusions

Table HN-2 following, summarizes the benchmark fair market rental conclusions for all the City and County of Honolulu airport facilities, which includes the Honolulu International Airport, Kalaeloa Airport and Kawaihapai Airfield.

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Table HN-2 RENTAL CONCLUSIONS HONOLULU INTERNATIONAL AIRPORT Honolulu, Oahu, Hawaii Current (Per Sqft) Proposed (Per Sqft) Category Per Annum Per Month Per Annum Per Month Overseas Terminal, Administration Building and International Arrivals Building Terminal Floor Space (non-air carrier) $84.00 $7.00 $114.00 $9.50 Service Counters (non-air carrier) $84.00 $7.00 $114.00 $9.50 Concessionaire-Sales-Retail (F) $84.00 $7.00 $114.00 $9.50 Concessionaire-Food & Beverage (F) $75.60 $6.30 $102.60 $8.55 VIP Lounge (F) $27.00 $2.25 $30.00 $2.50 Office (F) (non-air carrier) $21.60 $1.80 $24.00 $2.00 Ramp Office (F) (non-air carrier) $21.60 $1.80 $24.00 $2.00 Storage $15.60 $1.30 Remnant Storage (non-air carrier) $6.60 $0.55 $7.80 $0.65 Inter Island Terminal (Building 310) Terminal Floor Space (non-air carrier) $84.00 $7.00 $114.00 $9.50 Concessionaire-Sales-Retail (F) $84.00 $7.00 $114.00 $9.50 Concessionaire-Food & Beverage (F) $75.60 $6.30 $102.60 $8.55 VIP Lounge (F) $27.00 $2.25 $30.00 $2.50 Office (F) (non-air carrier) $21.60 $1.80 $24.00 $2.00 Ramp Office (F) (non-air carrier) $21.60 $1.80 $24.00 $2.00 Storage $15.60 $1.30 Remnant Storage (non-air carrier) $6.60 $0.55 $7.80 $0.65 Commuter Terminal (Buildings 304 and 306) Terminal Floor Space (non-air carrier) $75.60 $6.30 $102.60 $8.55 Concessionaire-Food & Beverage (F) $37.80 $3.15 $51.30 $4.28 VIP Lounge (F) $24.25 $2.02 $27.00 $2.25 Office (F) (non-air carrier) $19.40 $1.62 $21.60 $1.80 Rental of Buildings other than Passenger Terminal Trailers $17.30 $1.44 $19.20 $1.60 Lei Stands (Average Area 353 sf) N/A N/A $12.00 $1.00 Versus 10% Rental of Industrial Lands Improved Land-Unpaved $5.00 $0.42 $5.67 $0.47 Improved Land-Paved $5.43 $0.45 $6.20 $0.52 Unimproved Land-Unpaved $3.75 $0.31 $4.25 $0.35 Ramp Area Covered Equipment Parking-Paved (non-air carrier) $8.15 $0.68 $10.00 $0.83 Covered Equipment Parking-Unpaved (non-air carrier) $7.50 $0.63 $9.21 $0.77 Open Equipment Parking-Paved $5.43 $0.45 $6.67 $0.56 Open Equipment Parking-Unpaved $5.00 $0.42 $6.14 $0.51 Open Equipment Maintenance-Paved $5.43 $0.45 $6.67 $0.56

T-Hangars (Bldgs. 420/421/422) Per Month Per Month Per Sqft/Mo Bldg. 420, 421 & 422-105; T-Hangar, Large (1,462 sf) N/A $1,140.00 $0.78 Bldg 420-106 to 130 T Hangar, Small (1,247 sf) $674.00 $973.00 $0.78 Bldg 421-106 to 140 T Hangar, Small (1,247 sf) $674.00 $973.00 $0.78 Bldg 422-106 to 122 & 422-124 T Hangar, Small (1,247 sf) $674.00 $973.00 $0.78 Bldg 420-132, Large End Room (437 sf) $233.00 $341.00 $0.78 Bldg 421-142, Large End Room (437 sf) $233.00 $341.00 $0.78 Bldg 420-131, Small End Room (207 sf) $107.00 $161.00 $0.78 Bldg 421-141, Small End Room (207 sf) $107.00 $161.00 $0.78 Bldg 422-123, Small End Room (207 sf) $107.00 $161.00 $0.78 T-Hangar Used as Commercial Space -- -- $1.30

Automobile Parking Stalls Covered-Paved Parking Per Month $150.00 Per Month $170.00 Uncovered-Paved Parking Per Month $98.00 Per Month $110.00 Uncovered-Unpaved Parking Per Month $88.00 Per Month $99.00

Aircraft Storage Charges Small general aviation aircraft (46' x 32' or smaller) Per Day $10.00 Per Day $10.00 Per Month $96.00 Per Month $144.00

Large general aviation aircraft (47' x 33' or larger) Per Day $20.00 Per Day $20.00 Per Month $136.00 Per Month $208.00

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Table HN-2 Honolulu International Airport Special Properties Honolulu, Oahu, Hawaii

Concluded Rent Remaining Map Bldg. Tenant Area Use Condition Sqft/Mo. Sqft/Year Book Value Economic Life C1 345 Old Commuter Terminal 9,620 Office Poor $0.90 $10.80 N/A D1 150 IICC Flight Kitchen Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A Single Rate 25,741 Office/Warehouse Good $1.25 $15.00 N/A D1 151 United Airlines Office Good $1.30 $15.60 $4,500,000 20 Years Warehouse Good $1.20 $14.40 N/A Single Rate 90,653 Office/Warehouse Good $1.15 $13.80 N/A D1 152 Cargo Building 47,189 Office Good $1.30 $15.60 N/A Warehouse Good $1.20 $14.40 N/A Parking (Rooftop) Good $0.50 $5.43 N/A AOA9 137 Delta Cargo 19,905 Office Good $1.30 $15.60 N/A Warehouse Good $1.20 $14.40 N/A Reefer Good $1.50 $18.00 N/A AOA12 132 Old Northwest Cargo 29,600 Warehouse Good $1.30 $15.60 N/A SO2 206 General Aviation 1 39,289 Hangar Bay Good $1.30 $15.60 N/A Office Poor $0.50 $6.00 N/A SO2 213 General Aviation 2 16,777 Hangar Bay Good $1.30 $15.60 N/A Office Good $1.40 $16.80 SO2 210 City &County 12,323 Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A SO2 212 Galiher 6,636 Hangar Bay Good $1.30 $15.60 $200,000 15 years SO4 253 3,737 Office Good $1.40 $16.80 N/A Hangar Good $1.30 $15.60 AOA11 265 Dollar 2,217 Office/Storage Good $1.40 $16.80 N/A AOA11 269 Budget 6,758 Office/Storage Good $1.40 $16.80 N/A AOA11 007-110A VIP Trans 1,113 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-110B VIP Trans 1,113 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-110C VIP Trans 750 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-110D VIP Trans 156 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-110E VIP Trans 313 Office/Storage Poor $0.70 $8.40 N/A AOA11 264 VIP Trans 675 Office Good $1.40 $16.80 N/A AOA11 274 VIP Trans 764 Office Good $1.40 $16.80 N/A AOA11 275 VIP Trans 192 Office/Storage Poor $0.70 $8.40 N/A AOA11 276 VIP Trans 313 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-113/114 Budget Office Good $1.40 $16.80 N/A AOA14 266 Hertz 3,338 Office Good $1.40 $16.80 N/A AOA14 267 Avis 5,400 Office Good $1.40 $16.80 N/A AOA14 007-121A Hertz 1,781 Office Good $1.40 $16.80 N/A I-1 184 Honolulu Freight Service 49,793 Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A Land (Paved) $0.52 $6.20 N/A I-1 185 Honolulu Freight Service 7,133 Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A Land (Paved) $0.52 $6.20 N/A I-1 186 Honolulu Freight Service 6,874 Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A Land (Paved) $0.52 $6.20 N/A

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Table HN-2 Honolulu International Airport Ualena Street Properties Honolulu, Oahu, Hawaii

Concluded Rent Address Sqft/Mo. Sqft/Year Land Only Ualena Street 3239, 3159, 3039, 2979, 2969, 2959, 2949, 2939, 2865, 2855 Improved-Unpaved $0.47 $5.67 Improved-Paved $0.52 $6.20

Land Only Ualena Street (Restricted) 2805 and 2815 Improved-Unpaved $0.24 $2.84 Improved-Paved $0.26 $3.10

Floor Concluded Rent Address Bldg. Level Area Construction Use Condition Sqft/Mo. Sqft/Year Improved Properties 3239 Ualena St 184 1st 2,160 Masonry Office Good $1.50 $18.00 184 1st 13,000 Masonry Warehouse Good $1.30 $15.60 184 2nd 9,960 Masonry Office Good $1.30 $15.60 184 3rd 15,120 Masonry Office Good $1.10 $13.20 Total 40,240 185 1st 8,000 Masonry Warehouse Good $1.30 $15.60 185 1st 1,152 Masonry Office Good $1.50 $18.00 185 2nd 1,152 Masonry Office Good $1.30 $15.60 Total 10,304

3219 Ualena St 186 1st 13,269 Masonry Warehouse Good $1.30 $15.60

3209 Ualena St 186 1st 13,269 Masonry Warehouse Good $1.30 $15.60

3169 Ualena St 187 1st 25,000 Steel Warehouse Good $1.30 $15.60 187 1st 1,620 Steel Enclosed Office Good $1.50 $18.00 Total 26,620 3077 Ualena St 191 1st 18,993 Masonry Warehouse Good $1.30 $15.60 191 1st 2,665 Masonry Office Good $1.50 $18.00 191 1st 1,062 Masonry Parts Dept. Good $1.30 $15.60 Total 22,720

3069 Ualena St 183 1st 15,979 Steel Warehouse Poor $1.00 $12.00 183 1st 572 Steel Enclosed Office Poor $0.90 $10.80 Total 16,551

3059 Ualena St 181 1st 10,135 Steel Warehouse Poor $1.00 $12.00 182 1st 3,105 Steel Office Poor $0.90 $10.80 Total 13,240 3017 Ualena St 192 1st 19,200 Steel Warehouse Good $1.30 $15.60 193 1st 738 Steel Shed - - - Total 19,938 3005 Ualena St 194 1st 3,500 Masonry/Steel Warehouse Good $1.30 $15.60 194 1st 1,624 Masonry/Steel Office Good $1.50 $18.00 194 2nd 1,624 Masonry/Steel Office Good $1.50 $18.00 195 1st 5,600 Steel Warehouse Good $1.30 $15.60 Total 12,348

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Table HN-2 Honolulu International Airport Ualena Street Properties Honolulu, Oahu, Hawaii

Floor Concluded Rent Address Bldg. Level Area Construction Use Condition Sqft/Mo. Sqft/Year

2999 Ualena St 196 1st 1,040 Steel/Masonry Enclosed Office Good $1.50 $18.00 196 1st 12,712 Steel/Masonry Warehouse Good $1.30 $15.60 Total 13,752

2989 Ualena St 197 1st 11,160 Masonry Warehouse Poor $1.00 $12.00 197 1st 1,471 Masonry Office Poor $0.90 $10.80 Total 12,631 2909 Ualena St 198 1st 10,004 Steel/Masonry Warehouse Good $1.30 $15.60 198 1st 2,476 Steel/Masonry Office Good $1.50 $18.00 198 2nd 1,092 Steel/Masonry Office Good $1.30 $15.60 Total 13,572

2895 Ualena St 199 1st 10,920 Steel/Masonry Warehouse Good $1.30 $15.60 199 1st 1,638 Steel/Masonry Office Good $1.50 $18.00 199 2nd 1,638 Steel/Masonry Office Good $1.30 $15.60 141 1st 312 Steel Shed - - - Total 14,508

2885 Ualena St 142 1st 9,000 Steel/Masonry Warehouse Good $1.30 $15.60 142 1st 1,240 Steel/Masonry Office Good $1.50 $18.00 142 2nd 1,240 Steel/Masonry Office Good $1.30 $15.60 143 1st 2,895 Steel Shed - - - Total 14,375

2875 Ualena St 144 1st 6,920 Steel/Masonry Warehouse Good $1.30 $15.60 144 1st 820 Steel/Masonry Office Good $1.50 $18.00 144 2nd 640 Steel/Masonry Office Good $1.30 $15.60 145 1st 1,400 Steel Shed - - - 282 1st 1,573 Steel Shed - - - Total 11,353 2845 Ualena St 147 1st 3,280 Masonry/Steel Warehouse Good $1.30 $15.60 147 1st 3,120 Masonry/Steel Office Good $1.50 $18.00 147 2nd 3,240 Masonry/Steel Office Good $1.30 $15.60 284 1st 3,000 Steel Shed - - - Total 12,640

2835 Ualena St 148 1st/2nd 21,860 Steel/Masonry Warehouse Good $1.10 $13.20

2825 Ualena St 149 1st/2nd 17,769 Steel/Masonry Warehouse Good $1.10 $13.20

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Table HN-2 RENTAL CONCLUSIONS KALAELOA AIRPORT Kapolei, Oahu, Hawaii

Current (Per Sqft) Proposed (Per Sqft) Category Per Annum Per Month Per Annum Per Month Building 104 (Tower Building) Office Per SqFt $12.60 $1.05 $15.60 $1.30

Building 400 (Hangar 110) Workshop Per SqFt $12.60 $1.05 $15.60 $1.30 Office Per SqFt $12.60 $1.05 $15.60 $1.30 Hangar floor area (subdivided) Per SqFt $10.80 $0.90 $14.40 $1.20 Single Rate (Hangar/Office/Workshop Combined) Per SqFt -- -- $13.20 $1.10 Remnant Storage Per SqFt -- -- $7.20 $0.60

Trailers Per SqFt $10.20 $0.85 $12.50 $1.04

T-Hangars Per Month Per Sqft/Mo Per Month Bldg. 409-101 to104, T-Hangar (1,750 sf) $784.00 $0.66 $1,155.00 Bldg. 410-101 to 106, T-Hangar (1,750 sf) $783.00 $0.66 $1,155.00 T-hangar Used as Commercial Space $1.10 --

Rental of Industrial Lands Improved Land-Unpaved Per SqFt $2.16 $0.18 $2.69 $0.22 Improved Land-Paved Per SqFt $2.59 $0.22 $3.22 $0.27 Unimproved Land-Unpaved Per SqFt N/A N/A $2.01 $0.17 Unimproved Land-Paved Per SqFt N/A N/A $2.54 $0.21

Automobile Parking Uncovered Paved Parking Per Month $39.00 Per Month $66.00

Aircraft Storage Charges (Tie-Downs) Small general aviation aircraft (46' x 32' or smaller) Per Day $5.00 Per Day $5.00 Per Month $24.00 Per Month $54.00

Large general aviation aircraft (47' x 33' or larger) Per Day $10.00 Per Day $10.00 Per Month $34.00 Per Month $78.00

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Table HN-2 RENTAL CONCLUSIONS KAWAIHAPAI AIRFIELD Mokuleia, Oahu, Hawaii

Current (Per Sqft) Proposed (Per Sqft) Category Per Annum Per Month Per Annum Per Month

Rental of Buildings other than Passenger Terminal Trailers Per Sq.Ft. $5.00 $0.42 $6.25 $0.52

Rental of Industrial Lands Improved Land-Unpaved Per Sq.Ft. $1.08 $0.09 $1.35 $0.11 Improved Land-Paved Per Sq.Ft. $1.33 $0.11 $1.61 $0.13 Unimproved Land-Unpaved Per Sq.Ft. $0.54 $0.05 $1.00 $0.08

Concrete Revetments Spaces 630-102, 103-Unpaved Per Sq.Ft. $1.08 $0.09 $1.35 $0.11 Spaces 630-102, 103-Paved Per Sq.Ft. $1.33 $0.11 $1.61 $0.13

Sail Plane Hangars Per Month Per Sqft/Mo Per Month Building 403 (1,877 sf) $657.00 $0.36 $676.00

T-Hangars Per Month Per Sqft/Mo Per Month Bldg. 401 & 402 T Hangar w/o door (1,107 sf) $343.00 $0.45 $498.00 Bldg. 401 & 402 T Hangar w/ door (1,107 sf) $376.00 $0.50 $551.00 T-Hangar Used as Commercial Space Without Doors -- $0.75 -- T-Hangar Used as Commercial Space With Doors -- $0.83 --

Automobile Parking Uncovered-Paved Parking Per Month $39.00 Per Month $66.00

Aircraft Storage Charges Small general aviation aircraft (46' x 32' or smaller) Per Day $5.00 Per Day $5.00 Per Month $24.00 Per Month $54.00

Large general aviation aircraft (47' x 33' or larger) Per Day $10.00 Per Day $10.00 Per Month $34.00 Per Month $78.00

Table HN-2 Kwaihapai Airfield Special Properties Mokuleia, Oahu, Hawaii

Concluded Rent Bldg. Tenant Area Use Condition Sqft/Mo Sqft/Year 201 Glider Plane Booths (RM 101 & 103) 86 sqft each Retail Good $0.55 $6.60 91A Fighter Town 7,500 Hangar Good 0.55 6.60 301 Control Tower 797 Office Poor 0.35 4.20

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IV. ECONOMIC ANALYSIS – STATE AND CITY & COUNTY OF HONOLULU

This section summarizes the macro-economic trends and forces affecting the State of Hawaii and the City & County of County of Honolulu. Data was provided by the State of Hawaii Department of Business, Economic Development and Tourism (DBEDT), Hawaii Tourism Authority (HTA), Hospitality Advisors LLC and the Economic Research Organization at the University of Hawaii (UHERO). It addresses historical and projected trends in population, employment, and unemployment. Additionally, it describes historical trends of the state’s personal income, construction, tourism and its economic outlook. The following paragraphs briefly summarize the historical and projected trends.

Population -- According to the Economic Research Organization at the University of Hawaii (UHERO), the resident population of the State of Hawaii was 1,431,600 in 2015 and 1,420,300 in 2014. The City and County of Honolulu resident population was 998,800 in 2015 and 992,000 in 2014. The State of Hawaii Department of Business, Economic Development and Tourism (DBEDT) is forecasting the resident population for the entire State to grow to 1,455,000 by 2017, 1,468,000 by 2018 and 1,481,000 by 2019.

Income -- The real personal income of the State for 2015 was $54,231,000,000 and $52,346,000,000 for 2014, an increase of 3.6 percent. Real personal income data reported for the City and County of Honolulu for 2014 was $49,313,300,000. Real personal income growth for the State of Hawaii is projected to increase $55,857,000,000 in 2016, $57,610,000,000 in 2017, $59,367,000,000 and $61,124,000,000 in 2018.

Employment -- The civilian labor force for the State for 2015 was 676,300 and 470,900 for the City and County of Honolulu. The entire state in 2015 had an unemployment rate of 3.7 percent, which is down from the rate of 4.4 percent compared to 2014. The City and County of Honolulu in 2015 had an unemployment rate of 3.5 percent, which is down from the rate of 4.1 percent compared to 2014. The lower unemployment rates for both the State and the City and County of Honolulu are primarily due to the increase in the tourism and construction industries. The unemployment rate for both the State and the City and County of Honolulu, as of February 2016, was 3.1 and 2.8 (not seasonally adjusted) percent, respectively. These unemployment rates only count jobless individuals actively searching for work so it may overstate the actual health of the labor market.

Construction -- The construction industry for the entire state is greatly affected by the current global, national and local economic situation. The number of construction jobs, permits and value of permits has all declined since 2006 when the entire state in general and most of the counties including the City and County of Honolulu had the highest number of permits issued. Most of the increases were due in part to the robust residential market. When the economy began to weaken, potential projects from private developers and individuals were put on hiatus.

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The State and all of the counties have recovered from a weak housing market which has weighed heavy on new home construction. The value of statewide private building permits increased 19.6 percent and increased 67.5 percent for residential building permits in 2015 over permits issued in 2014. UHERO’s most recent forecast for construction is projecting the construction sector to continue to improve for 2016 due to an improvement in the Oahu home resale market, low mortgage interest rates and limited supply of housing units. A weakening in government and military contracts and work will be offset by the proposed rail project which will add to the potential ramp up the sector. Recent announcements of high-rise condominiums in the Honolulu & Kakaako areas, increased movement in shopping center development in West Oahu and resort-related development statewide will help to increase real non-residential building permits through 2016 and for the next several years.

Tourism -- Tourism is the primary industry for the entire State of Hawaii, and the driving force for economic stability. The success of tourism stimulates the progress of all markets in all of the counties. Total visitor arrivals, hotel occupancy rates and average daily room rates (ADR) had all been on the decline for the most part since the latter part of 2006 for both the State and the City and County of Honolulu. The industry stabilized in 2009 and started to improve in 2010. UHERO is now reporting that the industry is posting impressive rates of growth in total visitor arrivals, visitor days, visitor expenditures and visitor accommodations.

The Hawaii Tourism Authority (HTA) is reporting that tourism achieved its fourth consecutive year of record for both visitor arrivals and expenditures in 2015. There were 8,649,357 visitors to the State in 2015 or 4.1 percent more than the 8,300,000 in 2014. Visitors spent a record $15.2 billion in 2015 which was an increase of 2.3 percent from $14.8 billion in 2014. Arrivals from the U.S. West increased 7.1 percent (3,518,472 visitors) from 2014 while U.S. East arrivals increased by 3.1 percent to 1,788,573 visitors from 2014. Japanese arrivals decreased 0.8 percent to 1,499,167 visitors in 2014. Canadian arrivals totaled 517,238 visitors, a decrease of 1.4 percent from 2014. In contrast, the HTA is reporting strong growth in arrivals from other small visitor markets including Australia and New Zealand (397,704 or + 7.2 percent), Korea and China (378,444 or +2.7 percent), Europe (143,435 or +3.0 percent). Latin America declined (27,806 or -7.6 percent). 2016 is starting off strong and the State of Hawaii DBEDT is projecting visitor arrivals to increase 1.7 percent in 2017 and 2018 and visitor expenditures to increase 4.1 percent for both 2017 and 2018.

The Hawaii Hotel Flash Report for Year-End 2015 indicated that the average room revenue (REVPAR) for the State increased to $192.22, or by 6.3 percent, in 2015 in comparison with $180.83 in 2014. The average daily room rate (ADR) in 2015 was $243.93 for the State, a 3.9 percent increase from $234.85 in 2014. The average room revenue (REVPAR) for Oahu increased to $187.26, or by 4.1% in 2015 in comparison with $179.96 in 2014. The average daily room rate (ADR) in 2015 for Oahu was $219.53, a 3.0% increase from $213.22 in 2014. The average room revenue (REVPAR)

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for the State increased to $218.33, or by 3.6 percent, in February 2016 in comparison with $210.70 in February 2015. The average room revenue (REVPAR) for Oahu increased to $193.74, or by 4.0 percent, in February 2016 in comparison with $186.25 in February 2015. The average daily room rate (ADR) in February 2016 was $261.16 for the State and $223.20 for Oahu, an increase of 2.9 and 3.5 percent, respectively, over February 2015. The 2015 occupancy for the State increased to 78.8 percent from 77.0 percent in 2014. The 2015 occupancy for Oahu increased to 85.3 percent from 84.4 percent. The monthly occupancy in February 2016 was 83.6 percent for the State and 83.0 percent for Oahu, an increase of 0.7 and 0.5 percent, respectively, over February 2015.

Residential Real Estate -- The Honolulu Board of Realtors reported the median sales prices of single-family units on Oahu for February 2016 was $700,000 compared to $648,000 for the same time period in 2015. The median sales prices of condominium units on Oahu increased to $378,444 from $326,000 one year earlier. Single-family sales increased 19.4 percent from 201 units to 240 units and condominium sales were up by 11.7 percent from 290 units to 324 units. Locations LLC is forecasting a 5.0 percent increase in both the number of sales and the median price for the overall Oahu residential market fueled primarily by demand and low inventory. The median days on market for both single-family homes and condominiums was 23 days in February 2016.

Summary – UHERO latest State forecast (February 26, 2016) is reporting that the economic outlook for the State is positive especially in regards to tourism and construction. The current expansion remains strong as indicated by the strong labor market and increases in personal income. 2015 performed better than anticipated and the momentum will continue into 2016. Growth in tourism set records in 2015, even with a weak Japanese visitor market, with record occupancy rates on Oahu and above 70.0% on the neighbor islands (per Hospitality Advisors LLC). UHERO is projecting visitor arrivals to ease up a little in 2016 to a 1.5% growth following the 4.0% growth exhibited in 2015. The labor market is much healthier than it was a couple of years ago and is projected to grow approximately 1.5% per annum for the next couple of years and dropping to approximately 1.0% for the latter part of the decade. Construction activity is strong on all islands and is projected to expand for several more years with minimal growth in the latter part of the decade. Inflation remains low primarily due to declining oil prices however is projected to increase to 3% in 2017 as rising housing costs and wages begin to affect local prices.

External global challenges including, but not limited to, a surging dollar, China’s slowing economy, the effects of el nino on agriculture, the refugee crisis, terror attacks in the West and abroad and the Fed’s recent shift to higher interest rates are potential risks to both the national and State economies. These adverse developments have the potential to cause a sustained decline in consumer confidence erasing all of the growth experienced so far since 2012 and projected for the next several years.

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V. BENCHMARK PROPERTY TYPES FOR ALL HAWAII STATE AIRPORTS

The benchmark property types within the Hawaii State Airport facilities are categorized into four groups:

Spaces and Areas in Buildings Main Terminal Buildings Commuter Terminal Buildings Air Taxi Buildings Hangars Cargo

Lands within the Airport or Adjacent to the Airport Industrial Uses (Improved, Unimproved, Paved and Unpaved) Agricultural Uses

Parking (Open/Covered)

Aircraft Storage (Tie Downs)

General characteristics of the spaces and areas in each category are outlined under the following subheadings.

A. Spaces and Areas in Buildings

The buildings spaces and areas within the Hawaii State Airport facilities cover a wide range of uses that directly or indirectly support airport operations. They include:

Non-Air Carrier

Terminal Floor Space Service Counters VIP Lounge Office Storage

Air Carrier

Rates for rental of Terminal Space for Air Carriers are established according to the January 1, 2008 First Amendment Lease Extension to the “Airport-Airline Lease”.

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Other Spaces

Concession - Retail Sales Concession – Food and Beverage Sales Warehouse - Cargo (Open/Covered) Warehouse - Industrial Warehouse - Office Shed Reefer (Cold Storage) Revetment /Bunker Baseyard - Office, Service Bay, Maintenance Shop Hangar Shed Office Trailer Aviation Hangars T-Hangars

B. Industrial Lands

The majority of the undeveloped lands that are a part of the Hawaii State Airport Facilities are comprised of “improved” land for the following uses:

Industrial Agricultural (Where Applicable)

Undeveloped improved lands have direct access to the airport ramp. Improved lands are graded with utilities and paved road access within a reasonable distance of the property line. The undeveloped lands for each use type are differentiated based on whether they are paved or unpaved.

Some airports also have “unimproved” industrial land, which is land that is not graded and that lacks utilities and paved road access.

C. Parking Stalls

All airports, with the exception of the Upolu on the island of Hawaii and Port Allen Airfield on the island of Kauai, include parking stalls that are available for rent on a monthly basis. The parking stalls include:

Covered Uncovered, both paved and unpaved

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D. Aircraft Storage (Tie Downs)

General aviation aircraft storage includes uncovered tie-down areas for small and large aircraft. The small aircraft tie-down storage areas can accommodate aircraft with a wing-span up to 42 feet. By contrast, the large aircraft tie-down storage areas can accommodate aircraft with a wing-span from 43 feet to 60 feet.

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VI. ASSUMPTIONS COMMON TO ALL HAWAII STATE AIRPORT RENTS

The following conditions are deemed by the Department of Transportation, Airports Division to be common to all airports.

A. Utilities

Rents within all terminal buildings for all airports excluding Kalaeloa, Upolu and Port Allen are subject to the following:

(1) Janitorial services are not included in stated rental rates.

(2) Water for ordinary use is furnished.

(3) Electricity and air-conditioning services are extra.

B. Special Conditions - Buildings

Rents within all buildings other than terminal buildings for all airports excluding Kapalua, Hana, Upolu and Port Allen are subject to the following:

(1) Minimum rental shall be twenty-five dollars ($25.00) per month regardless of use, size or location of space rented.

(2) Special charges shall be assessed for special equipment or machinery in any building structure.

(3) Tenants shall pay for all utilities, utility services and other services which they may require, unless otherwise provided.

(4) Janitorial services are not included in rental rates. (Applicable to Honolulu International only)

C. Special Conditions - Lands

The following conditions are common to rentals on industrial lands.

(1) Minimal rental shall be $15.00 per month regardless of the use, size, or location of the area rented. (Rate for Honolulu International is $25.00)

(2) Improved land is graded and utilities and paved access road are within a reasonable distance from property line.

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(3) Unimproved land is not graded and lacks utilities and paved access road. For unimproved land at all airports, discount improved, unpaved rates by 25 to 50 percent depending on distance to utilities and paved access road.

(4) Utility connections and charges at tenant’s sole cost and expense.

(5) Adjustments for location, size and poor shape must be considered for specific sites at all airports.

(6) Size discounts for the rental of a contiguous parcel of industrial land included under a single contract upon its commencement may be applied towards the appropriate land rate in accordance with the schedule shown below. Leased premises that have been enlarged in land area due to subsequent amendments to the contract do not qualify the lessee for such discounts to be applied to the entire leased premises.

Size of Parcel Discount 2 to 2.999 acres 4.0% 3 to 3.999 acres 8.0 4 or more acres 12.0

(7) Size discounts for the rental of a contiguous parcel of agricultural land included under a single contract upon its commencement may be applied towards the appropriate land rate in accordance with the schedule shown below. Leased premises that have been enlarged in land area due to subsequent amendments to the contract do not qualify the lessee for such discounts to be applied to the entire leased premises.

Size of Parcel Discount 5 to 9.999 acres 2.0% 10 to 19.999 acres 4.0 20 or more acres 8.0

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VII. VALUATION METHODOLOGY FOR ALL HAWAII STATE AIRPORTS

This report addresses the fair market rental value of various classifications of space within City and County of Honolulu airport facilities. The analysis is similar to the methodology utilized for all State of Hawaii airport facilities. The methodology utilized herein incorporates the Direct Comparison Approach.

Given the many differences when comparing one airport to another, the appraisers have concentrated their investigation into current Hawaii rental rates of “off airport” office, retail and industrial space within close proximity to the subject City and County of Honolulu airports. This information was used to estimate rental rates for the various space classifications of the subject airports. Studies were made utilizing rental surveys of similar uses, i.e., retail, office and industrial, off the airport but within close proximity. While a comparison of this type provides support, its use as a primary method for a special purpose property might result in rental rates toward the low end of the property’s potential rent. It is difficult to quantify the adjustment between on and off airport property. The motivations of lessees and the characteristics of the properties are vastly different. Special purpose properties similar to the subject airports typically reflect a much higher overall construction cost. As such, using rental information reflected solely by off airport properties would probably result in a low side rental rate.

The following paragraphs represent a summary of the various valuation methods and terminology which is common to the State of Hawaii airports. The City and County of Honolulu airports will be analyzed in more detail later in Chapters IX (Honolulu International), X (Kalaeloa) and XI (Kawaihapai), covering each airport.

Valuation Method

The fair market rental rates for the benchmark spaces and areas within the various Hawaii State airport facilities are estimated using recognized appraisal principles and based on analyses of the local “off airport” rental market for each airport.

The fair market rental value for each benchmark space is estimated using the direct market comparison approach. The market comparison approach assumes that the rent within an airport property relates directly to the rents of comparable, competitive “off airport” properties. The approach assumes that the rent of a property tends to be set by the rent that would be paid to acquire a substitute property of equal utility and desirability.

The benchmark property types within the Hawaii State airport facilities are categorized into four groups:

 Spaces and areas in buildings within the Airport or adjacent to the Airport  Lands within the Airport or adjacent to the Airport

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 Parking stalls  Aircraft Storage

Additionally, for valuation purposes, the Hawaii State airport facilities were further categorized into three classifications as follows:

Primary Airports Honolulu International Airport Kahului Airport Kona International Airport at Keahole Hilo International Airport Lihue Airport

Secondary Airports Kapalua Molokai Lanai

Tertiary Airports Kalaeloa Airport Kawaihapai Airfield Kalaupapa Airport Hana Airport Waimea-Kohala Airport Upolu Airport Port Allen Airfield

The estimated values in the primary airport areas generally increase with airport activity. For example, the Honolulu International Airport has the highest level of passenger enplanements and cargo of the airports in the State. As expected, the respective values are also the highest. The relationship between passenger activity and cargo at the primary, secondary, and tertiary airport areas is shown in the following tabulation:

Activity Levels (2015) (1) Cargo Airport Passengers (U.S. Tons) Primary Honolulu 19,869,707 413,401 Kahului 6,678,772 31,217 Kona 3,070,772 19,564 Lihue 2,820,998 18,194 Hilo 1,324,596 20,222

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Secondary Molokai 242,157 1,055 Lanai 78,638 885 Kapalua 62,228 1,293

Tertiary Hana 3,826 0 Kalaupapa 12,297 111 Waimea-Kohala 10,255 0 Kawaihapai 0 0 Upolu 0 0 Port Allen 0 0 _____ (1) Department of Transportation - Airports Division Calendar Year January – December 2015.

The valuation methodology for each of the property types is further described in the following subsections.

A. Building Spaces and Areas within the Airport or Adjacent to the Airport

The benchmark building spaces and areas within the Hawaii State airport facilities can be categorized by the manner in which they are used.

The first category is comprised of those areas and spaces that are used by airport travelers. The second category includes those support areas which facilitate efficient airport operations that are used by airport personnel; this category includes both office and non-office uses. A third category includes warehouse and storage spaces.

Based on the similarities in use, the benchmark building spaces and areas are grouped according to the relevant “off airport” markets that provide the basis for establishing the fair rental values.

Retail Office Warehouse Rental Market Rental Market Rental Market Terminal floor space VIP Lounge Warehouse Area Concession space Office space Storage Hangars Cargo area Reefer, Shed

The fair market rental rates for the benchmark building spaces and areas within the airport facilities are estimated based on:

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 Recent rents for retail, office, and industrial spaces and other functionally similar uses within relevant “off airport” market areas around each airport.  Discussions with leasing agents.

1. Retail Rental Market Considerations

The rental rates for the typical benchmark finished retail-related spaces at the five major airports (Honolulu, Kahului, Hilo, Kona and Lihue) within the State are based on the current rent levels for retail space in the respective competitive “off airport” market areas throughout the State.

Additionally, retail-related spaces in the following areas are judged to be inferior in physical condition or accessibility to the typical retail-related spaces at the respective airports:

 Honolulu - Commuter Terminal  Kahului - Commuter Terminal  Hilo - Air Taxi Building  Kona - Air Taxi Building  Lihue - Commuter Terminal

2. Office Rental Market Considerations

The rental rates for the typical benchmark finished office spaces at the five major airports (Honolulu, Kahului, Hilo, Kona and Lihue) within the State are based on the current rent levels for the office space in the respective competitive “off airport” market areas throughout the State.

Additionally, office spaces in the following areas are inferior in physical condition or accessibility to the typical office spaces at the respective airports:

 Honolulu - Commuter Terminal  Kahului - Commuter Terminal  Hilo - Air Taxi Building  Kona - Air Taxi Building  Lihue - Commuter Terminal

Trailer rents in all airports are based on the indicated general office base rate discounted by 20 percent.

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3. Industrial Rental Market Considerations

The fair market rental rates for the typical benchmark warehouse and storage spaces at the five major airports (Honolulu, Kahului, Hilo, Kona and Lihue) and Kalaeloa are based on the current rent levels for industrial warehouse and storage space in the respective competitive “off airport” market areas in close proximity to the airports.

Rents for areas in sheds, quonsets, bunkers and remnant storage are generally estimated to be 50 percent of the associated warehouse rent in each airport area.

4. Calculation of Benchmark Rental Values For Retail, Office and Industrial Spaces at Secondary and Tertiary Airports

Sufficient market data is not available to accurately estimate the rents in the vicinity of the smaller airports by direct comparison. As a result, the benchmark rents for the retail, office and industrial type spaces at these airports are estimated by comparison to rates established for the five major primary airports.

The secondary and tertiary airports should have a defined correlation with the primary airports in order to have a consistent rental structure now and in future years. There is insufficient or inconclusive market data available in similar “off-airport” markets of secondary airports to establish rents for the office and retail-related spaces, or to estimate the market rates for the benchmark improved, unpaved industrial lands. Therefore, there should be consistent, established relationship between the primary airports and the smaller airports.

The following rate structure utilized in the analysis for the secondary and tertiary airports is based upon the rates and charges determined for the primary airports:

Primary Airports Base Secondary Airports 60% of Base Tertiary Airports 25% of Base

The intent of this rate structure is to address the following:

Secondary Airports - Services the outlying areas of the community or island and is an integral mode of transportation. It is used by both residents and visitors and is the principal means of travel between islands; however, airport

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infrastructure and population characteristics of the community or island present an obstacle to aircraft service.

Tertiary Airports - Services the outlying areas of the community or island and is not widely used due to limited facilities or service. The tertiary classification reflects (1) limited or non-existent terminal facilities; (2) limited or non-existent hangar facilities; (3) limited or non-existent terminal floor space for concessions/passenger service areas; (4) limited or non-existent infrastructure support facilities; and (5) limited use and demand.

5. Calculation of Rental Rates For T-Hangars

Hangar spaces (T-Hangars and End Rooms) are available for rent at the following airports:

 Honolulu International Airport  Kalaeloa Airport  Kawaihapai Airfield  Kahului Airport  Kona International Airport  Hilo International Airport  Lihue Airport

Historically, the rental rates for hangar space are estimated to be equivalent to the rental rates for warehouse space, with a downward adjustment associated with the characteristics and limited use of the space.

B. Undeveloped Lands

1. General

The majority of the undeveloped lands that are a part of the Hawaii State Airport facilities are comprised of “improved” land for industrial uses. These lands have direct access to the airport ramp.

These “improved” industrial lands are graded with utilities and paved road access within a reasonable distance of the property line. The lands are further differentiated based on whether they are paved or unpaved.

Some airports also have “unimproved” industrial land, which is not graded and lacks utilities and paved road access. Kalaeloa Airport and Kawaihapai Airfield on the island of Oahu and Kona International Airport on the island of Hawaii are the only airports with unimproved land for industrial use. Kahului

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Airport on the island of Maui is the only airport that has improved and unimproved land for Agricultural use.

(a) Valuation of Improved-Unpaved Industrial Land

The fair market rental rates for the industrial improved-unpaved lands are based on one of two methods (1) the product of the underlying fee simple land value and the prevailing land rate of return or (2) the direct comparison of market land rental rates. In the first method, the fee simple land value within each primary airport complex is estimated by comparison to sales of industrial sites in nearby “off airport” competitive neighborhoods. The land rate of return is estimated based on a review of rates of return from leases of industrial lands and interviews with major land owners. In the second method, actual industrial land rents based on the agreements of land owner and lessee are utilized.

Sufficient “off airport” market data exists to accurately establish the market rents of the fee simple interest of the industrial improved- unpaved lands in the following primary airport areas:

Primary Airport Areas:  Honolulu  Kahului  Kona  Hilo  Lihue

By contrast, there is limited or insufficient market data to accurately estimate the market rates for the benchmark improved-unpaved industrial/commercial lands in the secondary airports in the following areas:

Secondary Airport Areas  Kapalua  Molokai  Lanai

Tertiary Airports  Kalaeloa  Kawaihapi  Kalaupapa  Hana  Waimea-Kohala  Upolu

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 Port Allen

The approach to estimate the market rates for the benchmark improved, unpaved industrial lands at the primary airports is outlined as follows:

1. Research general neighborhoods of the benchmark properties for sales or leases of comparable “off airport” industrial properties.

2. Select the most comparable property transactions and confirm the transactions through interviews and recorded documents.

3. Estimate the most appropriate units of comparison after reviewing the various price indicators from the comparable transactions.

4. Analyze the comparable unit price indicators and adjust the unit price indicators to the selected benchmark properties for factors influencing land value.

5. Weight the adjusted unit price indicators based on their reliability.

6. Reconcile the weighted unit price indicators and estimate the land value or land rent of the selected benchmark industrial improved- unpaved lands at the primary airports.

The selected “off airport” transactions that have occurred recently on the various islands are considered similar in physical characteristics and share similar highest and best uses to the benchmark airport designated industrial/commercial properties. As a result, the transactions provide a reliable basis for estimating the market rents for the subject airport industrial classified properties.

The estimated land rents for the benchmark properties in the secondary and tertiary airport areas is based on the 60 percent and 25 percent relationship discussed earlier for retail, office, and industrial space rents.

(b) Calculation of Paving Cost Recovery

The fair market rent for the benchmark industrial improved-unpaved properties are estimated as the product of the fee simple land value and the current prevailing land rate of return or actual market rents per square foot data.

The fair market rents for the benchmark industrial improved-paved properties are based on the market rents for the improved-unpaved

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properties with an adjustment for the amortized cost of the paving over their remaining useful lives. Estimated costs for the paving typically found on the paved industrial properties vary by island location.

The base course is estimated to have an indefinite life. By contrast, the useful life of the asphalt-concrete paving is about 10 years. For the purposes of this analysis, the asphalt-concrete paving is estimated to have an effective age of 10.0 years.

Using a discount rate of 5.00 percent, about 150 basis points above the prime lending rate, the annual amount to amortize the paving cost over the remaining useful life is shown in HN-3 following.

Table HN-3 Paving Costs Useful Life (Yrs) Annual Recovery Paving Base Base Discount County 2" Asph 4" Base Total Paving Course Rate Paving Base Total Honolulu $3.22 $1.65 $4.87 10 30 5.00% $0.42 $0.11 $0.53 Maui $3.53 $1.81 $5.34 10 30 5.00% $0.46 $0.12 $0.58 Hawaii $3.76 $1.93 $5.69 10 30 5.00% $0.49 $0.13 $0.62 Kauai $4.15 $2.13 $6.28 10 30 5.00% $0.54 $0.14 $0.68

(c) Valuation of Unimproved Industrial Land

All airports also have “unimproved” industrial land, which is land that is not graded and that lacks utilities and paved road access. Rates for unimproved lands are discounted from improved, unpaved rates by 25 percent to 50 percent, depending on the distance to paved access and utilities.

2. Estimating Fee Simple Land Values

The same methodology is utilized in the analysis of each primary airport property within each county.

The sales comparison approach is the most common technique for valuing land and is the preferred method when comparable land transactions are available. It is generally considered to be the most reliable approach and was considered the primary method to value the airport lands. Based on the principle of substitution, this method estimates the land rent or value of the land according to prices generally obtained for “off airport” properties with similar locational characteristics and zoning classifications in the surrounding or neighboring areas

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The unit land value or unit land rent indications of selected “off airport” transactions is adjusted relative to the subject airport property to compensate for various comparative factors including, terms of sale, market conditions, location, access, physical characteristics and size in order to yield a fee simple unit land value indication or land rent for the subject airport sites.

Common to all land adjustments is the following exception.

(a) Size Adjustment -- A size adjustment is usually considered to compensate for the fact that larger parcels usually tend to reflect lower unit prices while smaller parcels usually reflect higher unit prices. A size curve was not used due to the undetermined size of the subject airport sites.

3. Prevailing Rates of Return on Land

The fair market rental rates of return for the industrial lands surrounding the various airports are based on the product of the underlying fee simple industrial land value and the prevailing land rate of return for “off airport” industrial land.

A survey undertaken of major land owners in Hawaii as well as property managers of major trusts, disclosed that renegotiated ground lease rents have typically been based on fee simple land values consistent with the underlying zoning and highest and best use of the site multiplied by the prevailing market rate of return or contract rate. Rates generally range between 1.0 to 2.0 percent per annum for agricultural uses and up to 4.0 percent for residential uses. Rates for industrial and commercial properties generally range between 6.0 to 8.0 percent per annum. The rates at the lower end of the range typically reflect contract rates contained in older leases. The majority of newer lease rents for industrial and commercial properties are based on a rate of return of 8.0 percent per annum.

Based on the available information, the prospective annual fair market rent for the primary airports, except Hilo, is calculated by applying an 8.0 percent rate of return to the estimated value indication.

Based on the results of research and interviews, it is the appraisers’ opinion that an appropriate annual market rate of return on land for Hilo properties is 6.0 percent of the unencumbered fee simple land value.

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4. Final Value Adjustments by Use

Rates for unimproved lands within the primary airport areas are discounted from improved, unpaved rates by 25 percent to 50 percent, depending on the distance to paved access and utilities.

5. Concluded Land Values for Secondary and Tertiary Airports

Rental for lands within secondary and tertiary airports was based on the 60 percent and 25 percent relationship of the airport to the primary base airport with the exception of the Kawaihapai Airfield which is 50 percent of Kalaeloa Airport. The relationship of the secondary and tertiary land values to their respective base land value is as follows.

Kalaeloa (Base) Kawaihapai (50%)

Kahului (Base) Molokai (60%) Lanai (60%) Kapalua (60%) Hana (25%)

Kona (Base) Waimea-Kohala (25%) Upolu (25%)

Lihue (Base) Port Allen (25%)

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VIII. MARKET ANALYSIS-ISLAND OF OAHU

This section of the report presents a brief overview of the industrial, office and retail markets for the island of Oahu. The primary intent of this market analysis is to provide a general assessment of prevailing rental rates, operating expenses and vacancy levels within the local marketplace.

Retail Market

The First Quarter 2016 retail report prepared by Colliers Consulting summarizes the Oahu retail market.

COLLIERS OAHU RETAIL REPORT Low High Avg. Net Avg. Net Avg. Net Bldg. Available YTD Vacancy Asking Asking Operating 1st Quarter 2016 Area Space Absorpt. Rate Rent Rent (1) Expenses Oahu Submarkets Central Oahu 889,235 21,415 31,382 2.41% $3.25 $4.71 $0.98 East Oahu 1,511,774 45,780 (10,193) 3.03 4.85 5.9 1.55 Honolulu 4,833,231 300,022 108,349 6.21 3.21 3.97 1.43 Leeward Oahu 4,407,948 111,376 1,383 2.53 3.47 3.92 1.18 North Shore 198,125 6,407 (3,000) 3.23 3.19 3.81 1.39 Waianae 342,060 59,917 0 17.52 1.58 2.33 0.95 Waikiki 1,471,046 128,289 6,059 8.72 8.87 18.84 1.98 West Oahu 1,140,957 17,441 5,437 1.53 3.99 4.58 1.22 Windward Oahu 1,621,750 66,207 (12,140) 4.08 3.48 4.67 1.32 Oahu Totals 16,416,126 756,854 127,277 4.61% $3.53 $4.32 $1.30 Retial - By Building Class Commuty Power Center 3,381,852 88204 34,661 2.61% $4.19 $4.92 $1.44 Neighborhood 4,725,648 157530 -3,409 3.33% $3.51 $4.23 $1.25 Regional 5,183,388 261560 99,464 5.05% $3.37 $5.90 $2.43 Resort/Specility 1,560,350 134,588 8,258 8.63 8.43 17.73 1.98 Strip 1,564,888 114,972 -11,797 7.35 3.43 4.20 1.2 Total 16,416,126 756,854 127,177 4.61% $3.53 $4.32 $1.30

As demonstrated in this schedule, there is 16,416,126 square feet of retail space on the Island of Oahu. The Waikiki area considered comparable to the subject property contains 1,471,046 square feet of retail space, which equates to 9.0 percent of the total retail space. The average low and high asking rental rates for Oahu’s retail market was $3.53 and $4.32 per square foot per month, respectively. The Waikiki area demonstrated average asking retail rents ranging from $8.87 to $18.84 per square foot per month. The average recoverable operating expenses (CAM) for the entire island for retail space is $1.30 per square foot per month while recoverable CAM expenses for the Waikiki area averages

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$1.98 per square foot per month.

Office Market

The First Quarter 2016 office report prepared by Colliers Consulting summarizing the Oahu market is included in the following tabulations.

COLLIERS OAHU OFFICE REPORT Low High Avg. Net Avg. Net Avg. Net No. of Bldg. Available YTD Vacancy Asking Asking Operating 1st Quarter 2016 Bldgs. Area Space Absorpt. Rate Rent Rent (1) Expenses Oahu Submarkets Airport/Mapunapuna 4 679,916 62,798 2,392 9.24% $1.61 $1.66 $1.08 Central Business District 54 7,153,292 1,020,813 (32,680) 14.66 1.28 1.49 1.30 East Oahu 15 468,032 22,440 (5,556) 4.79 2.19 2.39 1.36 Kakaako/Kapiolani/King 45 3,760,820 488,494 21,658 12.99 1.53 1.62 1.43 Kalihi/Iwilei/Kapalama 13 937,923 56,039 66,050 5.97 1.32 1.50 1.09 Leeward Oahu 13 667,006 56,815 3,924 8.52 2.14 2.30 1.29 Waikiki 12 812,027 55,193 7,233 6.80 2.01 2.24 1.63 Windward Oahu 8 284,401 31,387 300 11.04 1.87 1.94 1.49 Oahu Totals 164 14,763,417 1,793,979 63,321 12.15% $1.60 $1.74 $1.35 Office - By Building Class Class A 20 4,966,720 720610 -39,392 14.51% $1.40 $1.67 $1.42 Class B 84 6,826,941 795,475 88,827 11.65 1.85 1.96 1.42 Class C 32 2,969,756 277,894 13,886 9.36 1.38 1.53 1.27 Total 136 14,763,417 1,793,979 63,321 12.15% $1.60 $1.74 $1.35

As demonstrated in this schedule, there is a total inventory of 14,763,417 square feet of office space on the Island of Oahu. The Central Business District (CBD) submarket contains 7,153,292 square feet or 48.5 percent of the total office space. The average asking net rent for office space in this submarket ranges from $1.28 to $1.49 per square foot per month with common area maintenance (CAM) expenses at $1.30 per square foot per month.

The Airport/Mapunapuna submarket contains 679,916 square feet or 4.6 percent of the total office space. The average asking net rent for office space in this submarket ranges from $1.61 to $1.66 per square foot per month with common area maintenance (CAM) expenses at $1.08 per square foot per month.

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Industrial Market

The First Quarter 2016 industrial report prepared by Colliers Consulting is detailed in the following tabulation.

COLLIERS OAHU INDUSTRIAL REPORT Weighted Weighted Avg. Net Avg. Net No. of Bldg. Available YTD Vacancy Asking Operating Year End 2015 Bldgs. Area Space Absorpt. Rate Rent Expenses Honolulu Submarket Iwilei 97 2,355,935 80,722 (24,922) 3.43% $1.09 $0.42 Kalihi 695 9,358,530 169,521 15,890 1.81 1.22 0.36 Sand Island 72 564,353 14,443 (4,500) 2.56 0.82 0.30 Mapunapuna 105 4,193,541 27,800 15,124 0.66 1.22 0.43 Airport 127 4,662,873 5,300 29,527 0.11 1.20 0.30 Total 1,096 21,135,232 297,786 31,119 1.41% $1.17 $0.38 Central Oahu Bougainville 20 806,460 0 0 0.00 1.25 0.38 Halawa 84 2,594,562 17,784 20,896 0.69 1.25 0.25 Pearl City/Aiea 32 1,660,582 36,264 -8,264 2.18 1.76 0.45 Pearl City Ind Park 45 762,292 2,380 12,033 0.31 1.20 0.37 Gentry Business Park 66 1,778,759 29,353 -4,585 1.65 1.25 0.38 Milltown 36 432,280 10,900 0 2.52 1.30 0.37 Waipahu 128 2,716,063 46,825 6,815 1.72 0.59 0.14 Total 411 10,750,998 143,506 26,895 1.33% $1.15 $0.30 West Oahu Campbell Industrial Park 121 4,960,296 34,633 -8,050 0.70 1.18 0.23 Kapolei Business Park 51 1,432,383 98,121 2,427 6.85 1.21 0.34 Malakole Industrial Park 3 197,000 0 0 0.00 1.18 0.23 Kenai Industrial Park 12 90,680 0 0 0.00 1.18 0.23 Kalaeloa Industrial Park 5 47,137 0 0 0.00 0.00 0.12 Total 192 6,727,496 132,754 (5,623) 1.97% $1.20 $0.31 Windward Oahu Kapaa Industrial (2) 59 551,704 7,800 5,329 1.41 1.98 0.31 Kaneohe 41 602,851 7,589 9,962 1.26 0.51 0.66 Total 100 1,154,555 15,389 15,291 1.33% $1.25 $0.48 Oahu Totals 1,799 39,768,281 589,435 67,682 1.48% 1.17 $0.35

As demonstrated in the First Quarter 2016 schedule, there is approximately 37,768,281 square feet of industrial space on the Island of Oahu. The subject’s Airport/Mapunapuna submarket contains 8,856,414 square feet of rentable area, which represents approximately 23.5 percent of the total industrial space for the Island of Oahu. The average asking net rent for industrial space in this submarket ranges from $1.20 to $1.22 per square foot per month

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with common area maintenance (CAM) expenses ranging from $0.30 to $0.43 per square foot per month. IX. MARKET RENTS – City & County of Honolulu Automobile Parking & Tie Downs

The following provides an analysis of the City and County of Honolulu Automobile parking rates and aircraft storage (Tie-Down) rates

A. Rental Rates for Automobile Parking Stalls

All of the Hawaii airports, with the exception of the Upolu Airport and Port Allen Airfield, include parking stalls that are available for rent on a monthly basis. The parking stalls include:

 Covered  Uncovered, both paved and unpaved

Monthly rates for parking stalls vary by demand. The demand for monthly parking within the Hawaii State Airport facilities is estimated to be higher at those airports with higher levels of activity and lower at those airports with lower levels of activity.

The Honolulu International Airport is considered a high level activity airport. Other airports with mid-levels of activity (medium demand areas) measured in terms of passenger enplanements and cargo levels, include:

 Kahului Airport  Hilo International Airport  Kona International Airport  Lihue Airport

The level of activity at these airports is judged to support a similar level of demand for monthly parking as that found in high demand areas but at a reduced rate.

By contrast, low activity levels are judged to result in low demand areas for monthly parking at the following airports:

 Kalaeloa Airport  Kawaihapai Aifield  Kapalua Airport  Hana Airport  Molokai Airport  Lanai Airport  Waimea-Kohala Airport

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Current monthly parking rates in competitive “off airport” market areas in the City and County of Honolulu, County of Maui and County of Hawaii are included in Table HN-4.

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Table HN-4 COMPARABLE PARKING RENT SURVEY Oahu and Neighbor Islands

Monthly Rate Building Location/Address Unreserved Reserved City and County of Honolulu Covered Parking Downtown Central Business District Bishop Square 1003 Bishop Street $260.00 $415.00 Pacific Guardian Center 733/737 Bishop Street 227.00 457.00 City Financial Tower 201 Merchant Street 235.00 345.00 TOPA Financial Center 700 Bishop Street 210.00 320.00 Executive Center 1088 Bishop Street 240.00 360.00 Bishop Place 1132 Bishop Street 230.00 395.00 Harbor Square 700 Richards Street 250.00 425.00

Outside Fringe Area 215 N. King Street 215 N. King Street 110.00 155.00 Dole Office Building 680 Iwilei Road 150.00 -- former Gentry Pacific Center 560 N. Nimitz Highway 100.00 -- Liliha Professional Building 1520 Liliha Street 120.00 225.00 Airport Trade Center 550 Paiea Street 105.00 --

Uncovered Paved Parking Open Lot 181 Aloha Tower Drive 125.00 175.00 Open Lot 600 Queen Street 170.00 -- Open Lot 888 Nuuanu Avenue 220.00 340.00 County of Maui Covered Parking One Main Plaza 2200 Main Street 70.00 Maui Realty Suites 1885 Main Street 50.00

Uncovered Paved Parking Wells Professional Center 2127 Wells Street 50.00 Diamond Parking - Kihei 2575 S. Kihei Road 50.00 Diamond Parking - Paia 120 Hana Highway 100.00 Diamond Parking - Lahaina Various 50.00 to 80.00 County of Hawaii KONA Uncovered Paved Parking Diamond Parking 75-148 Alii Drive 85.00 Diamond Parking 75-5719 Alii Drive 65.00 Diamond Parking 75-5770 Alii Drive 100.00 Diamond Parking 75-5669 Alii Drive 65.00

HILO Uncovered Paved Parking Open Lot Aupuni Street 51.04 New Kaikoo Building 100 Pauahi Street 25.00 Open Lot Waianuenue Avenue 25.00

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The current rental structure within the State of Hawaii airport facilities are summarized in Table HN-5.

Table HN-5 CURRENT 2014 AIRPORT PARKING RENTAL RATES State of Hawaii Airports

Monthly Parking Rate Type of Uncovered Demand Covered Paved Unpaved City & County of Honolulu Honolulu International Airport High $150.00 $98.00 $88.00 Kalaeloa Airport Low $39.00 Kawaihapai Airfield Low $39.00

County of Maui Kahului Airport Medium $80.00 $52.00 Kapalua Airport Low $39.00 $35.00 Lanai Airport Low $39.00 $35.00 Molokai Airport Low $39.00 $35.00 Hana Airport Low $39.00 County of Hawaii Hilo International Airport Medium $80.00 $52.00 Kona International Airport Medium $80.00 $52.00 Waimea-Kohala Airport Low $39.00 Upolu Airport N/A County of Kauai Lihue Airport Medium $80.00 $52.00 Port Allen Airfield N/A

(1) Benchmark Rental Rates for Automobile Parking Stalls in the State of Hawaii Airports

Monthly rates for unreserved covered parking stalls in downtown Honolulu cluster between $210.00 and $260.00. Parking rates outside the fringe area, which is on the periphery of downtown Honolulu, range from $105.00 to $120.00 per month.

The Honolulu International Airport is considered to be a high-demand area for parking. However, the demand level is judged to be lower than found in downtown Honolulu. As a result, the parking rate is considered to be at the lower end of the observed rental range.

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Based on the comparable data, the monthly rental rate for a paved, covered parking stall at the Honolulu International Airport, a high-demand area, is estimated at about $170.00.

Current 2014 parking rates for uncovered parking stalls at the Honolulu International Airport are 35 percent lower than the rate for covered stalls. Utilizing the current differential results in a monthly rental rate for a paved uncovered parking stall about $110.00.

Rental Rate for Paved-Uncovered Parking Stalls Paved-Covered Stall $170.00 Adjustment to Uncovered x .65 Paved-Uncovered Stall $110.00

Rental rates for unpaved-uncovered parking facilities were not available. To the parking stall user, the disutility associated with a parking stall in an unpaved lot is judged to be relatively low compared to the same stall in a paved lot. For this analysis, the adjustment from a paved parking rate to an unpaved parking rate is estimated at -10 percent. As a result, the monthly rental rate for an unpaved-uncovered parking stall is estimated to be about $99.00.

Rental Rate for Unpaved-Uncovered Parking Stalls Paved-Uncovered Stall $110.00 Adjustment to Unpaved -10 % Unpaved-Uncovered Stall $99.00

Rental rates for uncovered parking stalls in low demand areas on Oahu are estimated at a reduced rate of 40 percent from the medium demand areas.

Rental Rate for Paved-Uncovered Parking Stalls Paved-Uncovered Stall $110.00 Adjustment to Unpaved -40 % Unpaved-Uncovered Stall $66.00

(2) Rental Rates for Parking Stalls on the Neighbor Islands

Medium Demand Airports

As seen in Table HN-4, the monthly covered parking rates in medium-demand areas on the neighbor islands range from about $50.00 to $100.00 per stall. Based on the comparable data, the monthly rental rate for a covered parking stall in medium-demand areas within the Hawaii State Airport facilities on the

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neighbor islands is estimated at about $85.00. From the market data, uncovered paved parking is estimated at $55.00.

Low Demand Airports

Rental rates for covered parking stalls in low demand areas were estimated at a reduced rate of 25 percent from the medium demand areas.

Rental Rate for Paved-Uncovered Parking Stalls

Paved-Uncovered Stall (Medium Demand) $55.00 Adjustment to Low Demand -25 % Paved-Uncovered Stall (Low Demand) $41.00

The adjustment from a paved-uncovered parking rate to an unpaved- uncovered parking rate is estimated at -10 percent. As a result, the monthly rental rate for an unpaved-uncovered parking stall is estimated to be about $37.00.

Rental Rate for Unpaved-Uncovered Parking Stalls Paved-Uncovered Stall $41.00 Adjustment to Unpaved -10 % Unpaved-Uncovered Stall $37.00

(3) Concluded Automobile Parking Rates (City and County of Honolulu)

Based on the preceding analysis, the estimated fair market rental rates for the benchmark parking stalls within the City and County of Honolulu airport facilities as of July 1, 2016 are presented in Table HN-6.

Table HN-6 PROPOSED AIRPORT PARKING RENTAL RATES City and County of Honolulu Airports

Monthly Parking Rate Type of Uncovered Demand Covered Paved Unpaved

Honolulu International Airport High $170.00 $110.00 $99.00 Kalaeloa Airport Low $66.00 Kawaihapai Airfield Low $66.00

B. Estimated Rental Rates for Aircraft Storage (Tie-Down)

Rental rates for aircraft storage areas (Tie Down) are estimated separately from the individual Hawaii airports analysis since the basic market data is extracted from areas

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outside of the State of Hawaii. It is felt that the data is basically common to all Hawaii airports and not related to the specific airports environs.

General aviation aircraft storage includes uncovered tie-down areas for small (single & twin engine) and large aircraft. The small aircraft tie-down storage areas can accommodate aircraft with a wing-span of up to 42 feet. By contrast, the large aircraft tie-down storage areas can accommodate aircraft with a wing-span from 43 feet to 60 feet.

As seen in Table HN-7 monthly rates for small aircraft storage at eleven general aviation smaller “secondary” airports on the mainland United States ranged from $50 to $140 and averaged about $90. Similarly, monthly rates for large aircraft at some of these airports ranged from $108 to $225. Excluding the extremes, the comparable mainland data supports a monthly rent for small aircraft of about $90.00 and for large aircraft storage of about $130.00.

Table HN-7 COMPARABLE AIRCRAFT (TIE DOWN) STORAGE RATES Various Mainland Airports

Small Aircraft Large Aircraft Airport (Daily) Monthly (Daily) Monthly California Airports Santa Monica Municipal, Santa Monica $16.68 $113.41 $33.36 $170.12 Redding Municipal, Redding 71.00 112.00 Santa Barbara Airport 116.00 Lompoc Airfield, Lompoc 85.00 Hayward Executive, East Bay-SFO 8.00 75.00 12-22 108-216 John Wayne Airport, Irvine 140.00 169.00 Napa County Airport, Napa 15.00 100.00 15.00+ 225.00+ Torrance Airport, Torrance 15.00 105.44 Washington Airports Harvey Field, Snohomish 5.00 60.00 Olympia Airport, Olympia 10.00 85.70 Bellingham Airport, Bellingham 50.00 100.00

Based on the observed data, the monthly rental rates for small and large aircraft storage at the smaller secondary Hawaii airports (Kapalua, Molokai, Lanai) are estimated to be $90.00 and $130.00, respectively.

Considering the current relationship, the monthly rental rates at the Hawaii major airports are estimated to be 60 percent higher than those rates at the smaller secondary

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airports. As a result, monthly rental rates for small and large aircraft storage at the Hawaii major airports are estimated to be $144.00 and $208.00, respectively.

Similarly, the current relationship of monthly rental rates at the Hawaii tertiary airports are estimated to be 40 percent higher than those rates at the smaller secondary airports. As a result, monthly rental rates for small and large aircraft storage at the Hawaii tertiary airports are estimated to be $54.00 and $78.00, respectively.

The transient overnight daily rental rates at the selected mainland general aviation airports ranged between $5.00 and $15.00 for small aircraft and $10.00 to $20.00 for large aircraft. The transient overnight daily rates for Hawaii airports are forecast at $10.00 and $20.00 for small and large aircraft, respectively, at the major airports. The transient overnight daily rates for Hawaii airports are forecast at $5.00 and $10.00 for small and large aircraft, respectively, at the secondary and tertiary airports.

Based on these considerations, the current and proposed fair market rental rates for the aircraft storage areas within the City and County of Honolulu airport facilities are shown in Table HN-8.

Table HN-8 PROPOSED AIRCRAFT STORAGE RATES City and County of Honolulu CURRENT 2014 AIRCRAFT STORAGE RATES Small Aircraft Storage Large Aircraft Storage Airport Daily Monthly Daily Monthly Honolulu International Airport $10.00 $96.00 $20.00 $136.00 Kawaihapai Airfield $5.00 $24.00 $10.00 $34.00 Kalaeloa Airport $5.00 $24.00 $10.00 $34.00 PROPOSED 2016 AIRCRAFT STORAGE RATES Small Aircraft Storage Large Aircraft Storage Airport Daily Monthly Daily Monthly Honolulu International Airport $10.00 $144.00 $20.00 $208.00 Kawaihapai Airfield $5.00 $54.00 $10.00 $78.00 Kalaeloa Airport $5.00 $54.00 $10.00 $78.00

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X. HONOLULU INTERNATIONAL AIRPORT (HNL)

A. Airport Description

Honolulu International Airport is the major aviation gateway for the State of Hawaii. It is the primary hub for domestic overseas and interisland flights and is currently one of three State airports accommodating international flights. Honolulu International also functions as a joint military-civilian airport sharing airfield facilities with Joint Base Pearl Harbor Hickam (JBPHH).

The Airport occupies 2,216 acres of land and 2,210 acres of water about three miles west of Downtown Honolulu, and seven miles from Waikiki. The airfield consists of two parallel east-west runways, two parallel crosswind runways, associated taxiways and navigational aids. Facilities include a complex of general aviation, air cargo, and airport support facilities at the south Ramp near Ke’ehi Lagoon and the passenger terminal complex at the North Ramp. A complex of maintenance and air cargo facilities, principally for the interisland airlines, is located west of the terminal complex.

The Honolulu International Airport is the major airport of entry and departure for the Hawaiian Islands.

B. Environs

The subject property is in the Airport Industrial Park. Only three miles from downtown Honolulu, the subject area has good access to urban Honolulu and the remainder of the island due to its proximity to Nimitz Highway, a major arterial located along the mauka side of the subject property extending from Waikiki via Ala Moana Boulevard to Pearl Harbor. Access to the H-1 Freeway is available within a short distance from the subject property as is downtown Honolulu (Diamond Head).

Within a two to three-mile radius are several industrial areas and parks including the Iwilei and Kapalama industrial areas, Mapunapuna, Moanalua, Shafter Flats and Lagoon industrial parks. Fee simple ownership is available primarily in the Kalihi-Kai area and portions of the Sand Island Industrial Subdivision while the remaining parks are leasehold developments. The major land owners of industrial property in these areas are the HRPT Properties Trust, Kamehameha Schools and the State of Hawaii.

The immediate neighborhood of the subject is typically characterized by industrial buildings and uses including light manufacturing, wholesaling, warehousing, repairing, and related activities and some retail commercial uses along Nimitz Highway.

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C. Rental Analysis

(1) Space Rents

The fair market rental rates for the typical benchmark warehouse, finished office and retail related spaces at the Honolulu International Airport are based on the current “off airport” rent levels for retail, office and warehouse space in the Honolulu competitive market area.

(a) Retail Space Rents

Waikiki’s retail space shares the most similarities with the retail concession spaces at the Honolulu International Airport. Waikiki continues to experience significant retail growth unlike that observed in other parts of Oahu’s retail market. The high demand for well-located retail space is being fueled by an increase in visitor arrivals. Two trends characterize the Waikiki retail market. In terms of retail market mix, Waikiki continues the renovation towards the high-end luxury goods and lifestyles market catering to the east bound traveler to Hawaii.

The results of our market rent survey for “off airport” retail rents are presented within Table HN-9.

Table HN-9 COMPARABLE RETAIL SPACE RENT SURVEY Honolulu International Airport Honolulu, Oahu, Hawaii

Area in Monthly Rent Per SqFt Lease Term Location Sq. Ft. Net CAM Gross Date (Years) Waikiki Waikiki Marketplace 350 $8.50 - - Jan-14 5 2310 Kuhio Avenue 700 $10.00 - - Asking 5 2583 Kuhio Avenue 5,000 $5.00 $1.18 $6.18 Jun-15 20 BOH Marketplace 20,438 $7.40 $1.59 $8.99 Sep-15 10+ 333 Seaside Ave 1,187 - - $9.83 Aug-15 5 864 - - $9.55 Aug-15 5 2,057 - - $10.30 Mar-15 5 2155 Kuhio Avenue 6,971 $18.00 $2.28 $20.28 Asking - Kapiolani Pacific Guardian Center 2,485 $7.00 $0.96 $7.96 Sep-14 5 1440 Kapiolani Boulevard 1,470 $7.25 $0.96 $8.21 Jun-15 5 1160 Kapiolani Boulevard 1,760 $4.00 $1.10 $5.10 Asking 3-5 1409 Kapiolani Boulevard 2,310 $4.00 $2.00 $6.00 Asking - 1356 Kapiolani Boulevard 1,277 $4.00 $1.20 $5.20 Asking 3

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As demonstrated in this schedule, current actual monthly rents for ground floor commercial retail spaces were found to range from $5.00 to $8.50 per square foot on a net basis, with actual gross rents ranging from $6.18 to $10.30 per square foot. Net asking rents ranged from $4.00 to $18.00 per square foot, with gross asking rents ranging from $5.10 to $20.28 per square foot. Rents vary depending on the particular location of the space, exposure characteristics, size and terms of lease.

In addition to the minimum rents, retail leases typically provide for the payment of percentage rents. Percentage rents for most retailers in Waikiki and elsewhere in Honolulu generally range between 8.0 percent and 12.0 percent of annual sales. Percentage rents for restaurants generally range between about 7.0 percent and 8.0 percent.

Currently monthly common area maintenance (CAM) expenses on a square foot basis are charged at rates depending on the expense items paid individually by each tenant. Current CAM charges range from $1.10 to $2.28 per square foot per month. In most cases the upper end rents represent spaces with excellent street frontage exposure and smaller space. Leasing concessions were found to be negotiable depending on the strength and desirability of the tenant and term of the negotiated lease.

Based on the market data, the appraisers estimate benchmark retail market rent for “off airport” retail type space ranging from $8.00 to $10.00 per square foot per month.

(b) Office Space Rents

The results of our market rent survey for “off airport” office rents are presented within Table HN-10.

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Table HN-10 COMPARABLE OFFICE SPACE RENT SURVEY Honolulu International Airport Honolulu, Oahu, Hawaii Area in Monthly Rent Per SqFt Lease Term Location Sq. Ft. Net CAM Gross Date (Years) Pioneer Plaza 836-6,771 $1.25-$1.39 $1.35 $2.60-$2.74 3-5 Asking Bishop Square 544-6,914 $1.30-$1.40 $1.38 $2.68-$2.78 3-5 Asking 720-4,537 $1.25-$1.40 $1.38 $2.63-$2.78 3-5 Asking Pacific Guardian Center 912-5,283 $1.55-$1.65 $1.38 $2.93-$3.03 - Asking City Financial Tower 1,385-5,681 $1.40 $1.47 $2.87 3-5 Asking Alii Place 1,979-2,571 $1.55-$1.85 N/A 3-5 Asking Pacific Park Plaza 8,200 $1.40 $1.49 $2.89 May-16 3 American Savings Bank 1,162 $1.48 $1.21 $2.69 Jan-16 5 Bishop Place 476 $1.40 $1.42 $2.82 Dec-15 -

As demonstrated in this schedule, actual office net space rents range from $1.40 to $1.48 per square foot per month with gross rents ranging from $2.69 to $2.89 per square foot per month. Asking net rents range from $1.25 to $1.85 per square foot. Gross asking rents range from $2.60 to $3.03 per square foot. Based on conversations with various brokers and leasing agents, base rents can vary depending on the size of space, quality and location. Currently monthly common area maintenance (CAM) expenses on a square foot basis generally range from $1.21 to $1.49 depending on the expense items paid individually by each tenant. There does not seem to be much of a difference for upper floor rents as compared to ground floor rents. Leasing concessions were found to be negotiable depending on the strength and desirability of the tenant and term of the negotiated lease.

Based on the market data, the appraisers estimate benchmark office market rent for “off airport” office type space ranging from $1.40 to $2.60 per square foot per month.

(c) Industrial Space Rents

Table HN-11 presents a summary of the results of the “off airport” industrial market rent survey of the Central Park, Bougainville and Mapunapuna Industrial areas.

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Table HN-11 INDUSTRIAL SPACE RENT SURVEY Honolulu International Airport Honolulu, Oahu, Hawaii

Area in Monthly Rent Per SqFt Lease Term Address Sq. Ft. Net CAM Gross Date (Years) Central Park 99-994 Iwaena St. 5,039 $1.25 $0.45 $1.70 Oct-14 3 99-807 Iwaena St. 4,436-17,784 $1.25 $0.30 $1.55 Asking 3

99-1093 Iwaena St. 9,940 $1.17 $0.32 $1.49 Mar-14 5 Bougainville Industrial Park 4429 Malaai St. 3,552 $1.20 $0.40 $1.60 Jul-14 3 2,471 $1.25 $0.40 $1.65 May-14 3 2,554 $1.23 $0.40 $1.63 Apr-15 3

4369 Lawehana St. 5,428 $1.30 $0.36 $1.66 Asking - 3,070 $1.30 $0.36 $1.66 Asking - Mapunapuna Industrial Park 1038 Kikowaena St. 8,960 $1.10 $0.19 $1.29 Jan-15 3 666 Mapunapuna Street 6,250 $1.30 $0.32 $1.62 Sep-15 7 2,160 $1.40 $0.32 $1.72 Sep-15 3

Most of the competitive industrial warehouse buildings include net rents and common area maintenance fees (CAM). Actual net rents vary from $1.10 to $1.40 per square foot per month, with qross rents ranging from $1.29 to $1.72 per square foot per month. Asking net rents range from $1.25 to $1.30 per square foot, with gross asking rents ranging from $1.55 to $1.66 per square foot per month. Common area maintenance fees ranged from $0.19 to $0.45 per square foot per month. In many instances, small offices were included as part of the warehouse space. Included within the gross space rents is common area maintenance or CAM recovery charges. Most CAM charges reported typically include all operating expenses with the exception of electricity charges which are typically individually metered and paid for directly by the tenants.

Based on the market data, the appraisers estimate “off airport” benchmark industrial space at $1.25 to $1.50 per square foot per month.

(d) Conclusion of Rents within Terminal Building

Numerous projects were surveyed in order to ascertain the “off airport” market rent for areas classified under the category of retail, office and industrial space in the Honolulu area. In each case, each of the property

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types surveyed is located within close proximity to the Honolulu International Airport. The retail and office product is primarily situated within the Waikiki and Airport area. The industrial properties presented for comparison purposes are generally located in the Central Park, Bougainville and Mapunapuna areas, nearby the airport.

For the most part, the retail projects tend to support a range in retail rent from $8.00 to $10.00 per square foot per month, net, or $96.00 to $120.00 per square foot per year. Similarly, office projects tend to support a range of $1.40 to $2.60 per square foot per month or $16.80 to $31.20 per square foot per annum. One might conclude that similar space within the terminal might fall toward the upper end of the market.

A variety of industrial properties were presented for direct comparison purposes. While the overall range in rent varies, the most representative range approximates $1.25 to $1.50 per square foot per month, or $15.00 to $18.00 per square foot per year. Typically speaking, the highest rent comparisons are those buildings that are best suited for airfreight use. In the case of industrial properties, size seems to have less influence on the ultimate rental rate. Moreover, office build-out appears to have little impact on overall rent as well. Lease terms generally range from three to five years. Most agreements provide for rent adjustments during the term, either annual CPI or periodic fixed increases. Tenant improvements are marginal.

In terms of comparison, the subject’s terminal and office type space compares favorably with the Honolulu retail and office properties presented when analyzing quality and location. However, the subject’s airport location generates greater overall demand, when compared to the Honolulu retail and office submarket. Overall market softness over the years has resulted in artificially low rental rates for the Honolulu office market. Given the special purpose nature of the subject property, coupled with its inherent amenities, higher rental rates would not be judged unreasonable.

With respect to industrial space, the comparisons are judged a reasonable indication of potential rent. However, properties in and around an airport that are suitable for airfreight use typically generate slightly higher rental rates when compared to standard industrial space. As such, it is reasonable to assume that such space on the airport might generate a slight premium in comparison.

Therefore, in light of the foregoing, the appraisers estimate the following triple net rental rates for each classification within the Overseas Terminal

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and Inter Island Terminal space via direct comparison with off-airport properties of somewhat similar use characteristics.

Rent/ Rent/ Category of Space Mo./S.F. Year/S.F. Retail $9.50 $114.00 Office 2.00 24.00 Warehouse 1.30 15.60

Given the difficulty in comparing off-airport property to on-airport property, this direct comparison approach will probably reveal the low end of the potential range in rent for the subject terminal since a return on cost of construction would probably result in higher required rents. While it should be supported in the marketplace that on-airport property generates higher rents when compared to similar property off-airport, the actual adjustment is not always clear.

From the indicated “benchmark” indications for the three basic space categories additional judgmental adjustments were made to reflect airport passenger use. A downward adjustment of 10 percent was made for concessionaire – food and beverage space as compared to concessionaire – sales retail space. An upward adjustment of 25 percent was made for VIP Lounge space as compared to general office space.

(e) Conclusion of Rents within the Commuter Terminal Building

Rents within the Commuter Terminal Building are considered similar by category as the Overseas Terminal Building and Inter Island Terminal but reflecting a ten percent discount for quality of construction. Concessionaire space rents were reduced 50 percent to reflect the limited foot traffic.

(2) Industrial Land Rents

The fair market rental rates for the various industrial lands within the airport are based on off-airport land data. The analysis first estimates the land rent for a benchmark improved-unpaved land by direct comparison with the off- airport data. The fair market rents for improved-paved and unimproved are calculated as percentages of the benchmark improved-unpaved conclusion.

(a) Calculation of Industrial Improved-Unpaved Land Rent

This section of the chapter presents a brief overview of the industrial “off airport” land market which includes the Airport Industrial Park,

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Mapunapuna, Iwilei and Kalihi-Kai. The intent of this analysis is to provide a meaningful assessment of the unit land values within the Honolulu International Airport’s immediate “off airport” area. The market data was employed as a basis for estimating industrial land rents for the Honolulu International Airport.

Market Data

Of the transactions disclosed by the appraisers’ investigation, four transactions were selected for critical analysis to establish a value index for the subject airport’s improved-unpaved land. These transactions are analyzed in summary form in Table HN-12.

Table HN-12 SCHEDULE OF COMPARABLE LAND TRANSACTION ADJUSTMENTS Honolulu International Airport Honolulu, Oahu, Hawaii

Transaction Number Subject 1 2 3 4 Tax Map Key Honolulu Intl. Airport 1-2-21-17 1-1-05-99 1-2-23-23 1-5-4-30 & 32 Location Kalihi-Kai Mapunapuna Sand Island Kapalama Street Frontage Sand Island Ac. Rd. Ahua St. Mohonua Pl. Kokea St./King St.

Land Area (Acres) 1.38 0.80 1.06 1.93 Land Area (Square Feet) 60,000 35,000 46,221 84,027 Zoning I-2 I-2 I-2 I-2 BMX-3/IMX-1

Transaction Date 01-Nov-15 1-Jan-15 1-Jan-15 1-Jan-14 Instrument/Financing Lease Reneg. Lease Reneg. Lease Reneg. Lease Reneg.

Unit Rent Per Square Foot $7.05 $6.92 $6.72 $8.33 Terms of Sale 1.00 1.00 1.00 1.00 Adjusted Unit Rent $7.05 $6.92 $6.72 $8.33 Market Conditions Adjustment 1.02 1.05 1.05 1.08 Adjusted Unit Rent $7.19 $7.27 $7.06 $9.00 Adjustments (%) Location -20% -20% -20% -25% Zoning 0% 0% 0% -15% Physical Characteristics 0% 0% 0% 0% Net Adjustments (%) -20% -20% -20% -40%

Adjusted Unit Rent $5.75 $5.81 $5.64 $5.40 Size Adjustment 1.00 1.00 1.00 1.00 Size Adjusted Unit Rent $5.75 $5.81 $5.64 $5.40 Weighting Factor 0.35 0.25 0.20 0.20 Product $2.01 $1.45 $1.13 $1.08

Range of Rents $5.40 to $5.81 per sqft Mean Unit Rent $5.65 per square foot Median Unit Rent $5.70 per square foot Weighted Unit Rent $5.67 per square foot Concluded Unit Rent $5.67 per square foot

Transaction Number 1 is the November 1, 2015 ground rent renegotiation for a rectangular interior lot, with single street frontage, underlying a building located at 238 Sand Island Access Road in the Kalihi-Kai area of Honolulu. The property is identified on tax maps as TMK 1-2-21-17. The

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land, zoned I-2 Industrial, encompasses 60,000 square feet. Rent was set for 10 years at an average of $7.05 per square foot. Actual rent steps every two years. Rent was mutually agreed to by lessor and lessee.

Transaction Number 2 is the January 1, 2015 ground rent renegotiation for a rectangular interior lot, with single street frontage, underlying a building located at 719 Ahua Street in the Mapunapuna area of Honolulu. The property is identified on tax maps as TMK 1-1-05-99. The land, zoned I-2 Industrial, encompasses 35,000 square feet. Rent was set for 5-years at an average of $6.92 per square foot. Rent was mutually agreed to by lessor and lessee.

Transaction Number 3 is the January 1, 2015 ground rent renegotiation for a rectangular interior lot, with single street frontage, underlying a building located at 212 Mohonua Place in the Sand Island area of Honolulu. The property is identified on tax maps as TMK 1-2-23-23. The land, zoned I-2 Industrial, encompasses 46,221 square feet. Rent was set for 14 years at an average of $6.72 per square foot per annum. Rent was mutually agreed to by lessor and lessee.

Transaction Number 4 is the January 1, 2014 ground rent renegotiation for a rectangular shaped corner lot underlying a single-tenant building located at 925 Kokea Street in the Kapalama area of Honolulu. The property is identified on tax maps as TMK (1) 1-5-04, Parcels 30 & 32. The land, zoned IMX-1, Industrial-Commercial Mixed Use District, includes a gross area of 84,027 square feet. The new rent for the five-year period beginning January 1, 2014 was mutually agreed to by lessor and lessee at $8.33 per square foot per annum.

Adjustments

The ground rent value indications of each selected transaction were adjusted relative to the subject to compensate for various comparative factors. The factors include terms of sale, market conditions, location, zoning and physical characteristics in order to determine a lease rent indication for the subject’s industrial use lands. A final adjustment for size differential was not considered.

Terms of Sale -- Comparable “off airport” transactions were analyzed as to economic and financing conditions (terms of sale) to reflect the impact of non-institutional methods of financing or the advent of low financing costs due to favorable exchange rates and foreign financing. Down payment, interest rates and loan terms was considered in the cash

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equivalency analysis. No adjustment for terms of sale was considered necessary.

Market Conditions -- The adjustment for market conditions (appreciation or depreciation over time) considers changes in the market between the comparable transaction dates and the effective date of appraisal. For the period 2003 through 2005 the overall Oahu real estate market appeared strong reflecting the strength in the commercial, industrial and residential markets. For the period 2005 through 2006 markets exhibited a more tempered upward movement reflecting a stabilization of the commercial and industrial markets and a downturn in the residential markets. For the period 2007 through 2009 commercial markets exhibited a downward trend. From early January 2010 through December 2012, the market was considered to be in a stabilized condition. After January 1, 2013, a positive three percent annual adjustment was made to all the comparables to reflect the strengthening in the industrial/commercial markets.

Location -- The site location adjustment category takes into consideration aspects relating to each property's proximity to surrounding complementary urban areas and major transportation routes and the resulting degree to which the associated relationship between potential land users and their markets are either enhanced or diminished. All transactions represent properties, which are located in areas in closer proximity to major commercial developments and business districts and were considered superior to the subject sites in terms of location. Transaction Number 1, 2 and 3 were awarded downward adjustments of 20 percent for location. Transaction Number 4 was awarded a downward adjustment of 25 percent to also reflect its close proximity to both harbor and airport facilities.

Zoning Adjustment -- The subject property is zoned I-2, Industrial. Although there are many similarities within the permitted uses and structures and development standards between I-1, I-2 and IMX-1 zoning regulations, primary differences include permitted uses. The zoning adjustment takes into consideration the differences in the IMX-1, Industrial- Commercial Mixed Use zoning compared to I-1 and I-2 zoning. Although there are many similarities within the permitted uses and structures and development standards between I-1, I-2 and IMX-1 zoning regulations, primary differences include permitted uses such as business services, office buildings and retail establishments within the IMX-1 zoned properties.

Development standards for the IMX-1, I-2 and I-1 districts are summarized as follows:

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Development Standards I-1 I-2 IMX-1 Minimum Lot Area (Sq. Ft.) 7,500 7,500 5,000 Minimum Lot Width and Depth (Ft) 60 60 50 Yards (Ft.): Front 10 5 5 Side and Rear 0 0 0 Maximum Building Area 80% 80% 80% (Percent of Zoning Lot) Maximum Density (FAR) 1.0 2.5 1.0 - 2.5 Maximum Height (Ft.) 40 Per Zoning Map

Although it is difficult to measure any reliable differences in value indications between the zoning classifications, it is perceived that the greater flexibility in use and development potential of the IMX-1 zoned properties would naturally result in higher value indications followed by properties zoned I-2 and I-1.

Based on the zoning of the transactions that considered permitted uses and density, no adjustment was required for Transaction Numbers 1, 2 and 3 which have I-2 zoning. Transaction Number 4 was adjusted downward to reflect its superior mixed use IMX-1, commercial/industrial zoning.

Physical Characteristics -- The physical characteristics adjustment considered the shape, topography and utility factors of the comparables in terms of development potential as compared to the subject. All the comparable transactions were considered similar requiring no adjustment

Rent Conclusions Improved-Unpaved Land – The adjusted unit rents ranged from $5.40 to $5.81 per square foot with a mean unit rent of $5.65 per square foot. Weighting factors were applied to the comparable transactions based on the reliability of each transaction as an indicator of value as well as the degree of comparability of each transaction to the subject. Most weight was awarded to Transactions Number 1 and 2, resulting in a weighted unit rent of $5.67 per square foot. The appraisers conclude at an annual fair market rent of $5.67 per square foot of land area for improved-unpaved land.

(b) Calculation of Industrial Improved-Paved Land Rents

The market rents for the benchmark improved-paved land is based on the market rents for the improved-unpaved land with an adjustment for the amortized cost of the paving over their remaining useful lives.

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Adding $0.53 for the estimated annual recovery for paving estimated earlier in Table HN-3 results in an annual rent for industrial improved- paved land of $6.20 per square foot.

Annual Rent Improved-Unpaved Land $5.67 Add Annual Rent for Paving .53 Annual Rent Improved-Paved Land $6.20

(c) Calculation of Industrial Unimproved Land Rents

The Honolulu International Airport also has industrial unimproved land, which is land that is not graded and lacks utilities and paved road access. Rates for unimproved industrial lands are discounted from improved, unpaved rates by 25 percent to 50 percent, depending on the distance to paved access and utilities.

Considering the distance from utilities and paved road access and the associated cost, the fair market rental rate for the industrial unimproved- unpaved lands are estimated discounted 25 percent from the industrial improved-unpaved land rate.

Annual Rent Improved-Unpaved Land $5.67 Factor x .75 Annual Rent Unimproved-Unpaved Land $4.25

(d) Ramp Area Rents

The fair market rental rates for the benchmark open (uncovered) ramp equipment parking areas are estimated to be similar to the annual rent estimated for the industrial paved and unpaved improved lands.

Based on the relationship between covered and uncovered parking stalls, the fair market rental rates for the covered ramp equipment parking areas are estimated to be 50 percent higher than the rental rates for the paved open areas.

(3) Rental Rates for T-Hangar Spaces

Hangar spaces (T-Hangars and End Rooms) are available for rent at the following airports:

 Honolulu International Airport  Kalaeloa Airport  Kawaihapai Airfield

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Historically, the rental rates for hangar space are estimated to be equivalent to the rental rates for warehouse space, with a downward adjustment associated with the characteristics and limited use of the space.

As detailed earlier, the concluded 2016 benchmark rents for warehouse space was estimated based on an analysis of current industrial warehouse rents as follows: Current Whse Rent Per SqFt Airport Monthly Annually Honolulu Intl. $1.30 $15.60

Based on the characteristics and limited use of the space, a discount rate of 40 percent was considered reasonable. Application of the 40 percent discount rate results in the following benchmark hangar rate.

Monthly Monthly Warehouse Hangar Airport Rate Discount Rate Honolulu Intl. $1.30 40% $0.78

Table HN-13 summarizes existing 2014 Honolulu Airport T-Hangar and End room rents compared to our projected 2016 rental rates.

Table HN-13 PROPOSED RENTAL RATES FOR T-HANGAR SPACES T-Hangars and End Rooms Honolulu International Airport 2014 2016 2016 Actual 2014 2016 Estimated Projected Rent Monthly Whse Area Warehouse Use Per Monthly Type of Space Rent Rent (SqFt) Rent Adjust. Sq. Ft. Total Buildings 420/421/422 T-Hangar 1,462 $1.30 -40% $0.78 $1,140.00 T-Hangars $674.00 $1.10 1,247 $1.30 -40% $0.78 $973.00 Large End Rooms $233.00 $1.10 437 $1.30 -40% $0.78 $341.00 Small End Rooms $107.00 $1.10 207 $1.30 -40% $0.78 $161.00

Commercial use of the space, other than plane storage and maintenance, is at the non-discounted rate of $1.30 per square foot.

(4) Concluded Automobile Parking Rates

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Parking rates were estimated earlier in Chapter IX (Tables HN-4, HN-5 and HN-6). The conclusions in Table HN-6 are as follows.

PROPOSED AIRPORT PARKING RENTAL RATES

Monthly Parking Rate Type of Uncovered Demand Covered Paved Unpaved Honolulu International Airport High $170.00 $110.00 $99.00

(5) Concluded Rates for Aircraft Storage (Tie Down) Areas

Tie-down rents were estimated earlier in Chapter IX (Tables HN-7 and HN-8). The conclusions in Table HN-8 are as follows.

PROPOSED AIRCRAFT STORAGE RATES CURRENT 2014 AIRCRAFT STORAGE RATES Small Aircraft Storage Large Aircraft Storage Airport Daily Monthly Daily Monthly Honolulu International Airport $10.00 $96.00 $20.00 $136.00

PROPOSED 2016 AIRCRAFT STORAGE RATES Small Aircraft Storage Large Aircraft Storage Airport Daily Monthly Daily Monthly Honolulu International Airport $10.00 $144.00 $20.00 $208.00

6) Rental Conclusions for Honolulu International Airport

Table HN-14 summarizes rent projections for the designated terminal buildings, industrial lands, ramp areas, plane hangars, automobile parking and aircraft storage within the Honolulu International Airport facility.

7) Rental Conclusions for Special Properties- Honolulu International Airport

Table HN-15 summarizes the rent projections for the designated Honolulu International Special Properties.

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Table HN-14 RENTAL CONCLUSIONS HONOLULU INTERNATIONAL AIRPORT Honolulu, Oahu, Hawaii Current (Per Sqft) Proposed (Per Sqft) Category Per Annum Per Month Per Annum Per Month Overseas Terminal, Administration Building and International Arrivals Building Terminal Floor Space (non-air carrier) $84.00 $7.00 $114.00 $9.50 Service Counters (non-air carrier) $84.00 $7.00 $114.00 $9.50 Concessionaire-Sales-Retail (F) $84.00 $7.00 $114.00 $9.50 Concessionaire-Food & Beverage (F) $75.60 $6.30 $102.60 $8.55 VIP Lounge (F) $27.00 $2.25 $30.00 $2.50 Office (F) (non-air carrier) $21.60 $1.80 $24.00 $2.00 Ramp Office (F) (non-air carrier) $21.60 $1.80 $24.00 $2.00 Storage $15.60 $1.30 Remnant Storage (non-air carrier) $6.60 $0.55 $7.80 $0.65 Inter Island Terminal (Building 310) Terminal Floor Space (non-air carrier) $84.00 $7.00 $114.00 $9.50 Concessionaire-Sales-Retail (F) $84.00 $7.00 $114.00 $9.50 Concessionaire-Food & Beverage (F) $75.60 $6.30 $102.60 $8.55 VIP Lounge (F) $27.00 $2.25 $30.00 $2.50 Office (F) (non-air carrier) $21.60 $1.80 $24.00 $2.00 Ramp Office (F) (non-air carrier) $21.60 $1.80 $24.00 $2.00 Storage $15.60 $1.30 Remnant Storage (non-air carrier) $6.60 $0.55 $7.80 $0.65 Commuter Terminal (Buildings 304 and 306) Terminal Floor Space (non-air carrier) $75.60 $6.30 $102.60 $8.55 Concessionaire-Food & Beverage (F) $37.80 $3.15 $51.30 $4.28 VIP Lounge (F) $24.25 $2.02 $27.00 $2.25 Office (F) (non-air carrier) $19.40 $1.62 $21.60 $1.80 Rental of Buildings other than Passenger Terminal Trailers $17.30 $1.44 $19.20 $1.60 Lei Stands (Average Area 353 sf) N/A N/A $12.00 $1.00 Versus 10% Rental of Industrial Lands Improved Land-Unpaved $5.00 $0.42 $5.67 $0.47 Improved Land-Paved $5.43 $0.45 $6.20 $0.52 Unimproved Land-Unpaved $3.75 $0.31 $4.25 $0.35 Ramp Area Covered Equipment Parking-Paved (non-air carrier) $8.15 $0.68 $10.00 $0.83 Covered Equipment Parking-Unpaved (non-air carrier) $7.50 $0.63 $9.21 $0.77 Open Equipment Parking-Paved $5.43 $0.45 $6.67 $0.56 Open Equipment Parking-Unpaved $5.00 $0.42 $6.14 $0.51 Open Equipment Maintenance-Paved $5.43 $0.45 $6.67 $0.56

T-Hangars (Bldgs. 420/421/422) Per Month Per Month Per Sqft/Mo Bldg. 420, 421 & 422-105; T-Hangar, Large (1,462 sf) N/A $1,140.00 $0.78 Bldg 420-106 to 130 T Hangar, Small (1,247 sf) $674.00 $973.00 $0.78 Bldg 421-106 to 140 T Hangar, Small (1,247 sf) $674.00 $973.00 $0.78 Bldg 422-106 to 122 & 422-124 T Hangar, Small (1,247 sf) $674.00 $973.00 $0.78 Bldg 420-132, Large End Room (437 sf) $233.00 $341.00 $0.78 Bldg 421-142, Large End Room (437 sf) $233.00 $341.00 $0.78 Bldg 420-131, Small End Room (207 sf) $107.00 $161.00 $0.78 Bldg 421-141, Small End Room (207 sf) $107.00 $161.00 $0.78 Bldg 422-123, Small End Room (207 sf) $107.00 $161.00 $0.78 T-Hangar Used as Commercial Space -- -- $1.30

Automobile Parking Stalls Covered-Paved Parking Per Month $150.00 Per Month $170.00 Uncovered-Paved Parking Per Month $98.00 Per Month $110.00 Uncovered-Unpaved Parking Per Month $88.00 Per Month $99.00

Aircraft Storage Charges Small general aviation aircraft (46' x 32' or smaller) Per Day $10.00 Per Day $10.00 Per Month $96.00 Per Month $144.00

Large general aviation aircraft (47' x 33' or larger) Per Day $20.00 Per Day $20.00 Per Month $136.00 Per Month $208.00

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Table HN-15 Honolulu International Airport Special Properties Honolulu, Oahu, Hawaii

Concluded Rent Remaining Map Bldg. Tenant Area Use Condition Sqft/Mo. Sqft/Year Book Value Economic Life C1 345 Old Commuter Terminal 9,620 Office Poor $0.90 $10.80 N/A D1 150 IICC Flight Kitchen Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A Single Rate 25,741 Office/Warehouse Good $1.25 $15.00 N/A D1 151 United Airlines Office Good $1.30 $15.60 $4,500,000 20 Years Warehouse Good $1.20 $14.40 N/A Single Rate 90,653 Office/Warehouse Good $1.15 $13.80 N/A D1 152 Cargo Building 47,189 Office Good $1.30 $15.60 N/A Warehouse Good $1.20 $14.40 N/A Parking (Rooftop) Good $0.50 $5.43 N/A AOA9 137 Delta Cargo 19,905 Office Good $1.30 $15.60 N/A Warehouse Good $1.20 $14.40 N/A Reefer Good $1.50 $18.00 N/A AOA12 132 Old Northwest Cargo 29,600 Warehouse Good $1.30 $15.60 N/A SO2 206 General Aviation 1 39,289 Hangar Bay Good $1.30 $15.60 N/A Office Poor $0.50 $6.00 N/A SO2 213 General Aviation 2 16,777 Hangar Bay Good $1.30 $15.60 N/A Office Good $1.40 $16.80 SO2 210 City &County 12,323 Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A SO2 212 Galiher 6,636 Hangar Bay Good $1.30 $15.60 $200,000 15 years SO4 253 3,737 Office Good $1.40 $16.80 N/A Hangar Good $1.30 $15.60 AOA11 265 Dollar 2,217 Office/Storage Good $1.40 $16.80 N/A AOA11 269 Budget 6,758 Office/Storage Good $1.40 $16.80 N/A AOA11 007-110A VIP Trans 1,113 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-110B VIP Trans 1,113 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-110C VIP Trans 750 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-110D VIP Trans 156 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-110E VIP Trans 313 Office/Storage Poor $0.70 $8.40 N/A AOA11 264 VIP Trans 675 Office Good $1.40 $16.80 N/A AOA11 274 VIP Trans 764 Office Good $1.40 $16.80 N/A AOA11 275 VIP Trans 192 Office/Storage Poor $0.70 $8.40 N/A AOA11 276 VIP Trans 313 Office/Storage Poor $0.70 $8.40 N/A AOA11 007-113/114 Budget Office Good $1.40 $16.80 N/A AOA14 266 Hertz 3,338 Office Good $1.40 $16.80 N/A AOA14 267 Avis 5,400 Office Good $1.40 $16.80 N/A AOA14 007-121A Hertz 1,781 Office Good $1.40 $16.80 N/A I-1 184 Honolulu Freight Service 49,793 Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A Land (Paved) $0.52 $6.20 N/A I-1 185 Honolulu Freight Service 7,133 Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A Land (Paved) $0.52 $6.20 N/A I-1 186 Honolulu Freight Service 6,874 Office Good $1.40 $16.80 N/A Warehouse Good $1.30 $15.60 N/A Land (Paved) $0.52 $6.20 N/A

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Table HN-15 Honolulu International Airport Ualena Street Properties Honolulu, Oahu, Hawaii

Concluded Rent Address Sqft/Mo. Sqft/Year Land Only Ualena Street 3239, 3159, 3039, 2979, 2969, 2959, 2949, 2939, 2865, 2855 Improved-Unpaved $0.47 $5.67 Improved-Paved $0.52 $6.20

Land Only Ualena Street (Restricted) 2805 and 2815 Improved-Unpaved $0.24 $2.84 Improved-Paved $0.26 $3.10

Floor Concluded Rent Address Bldg. Level Area Construction Use Condition Sqft/Mo. Sqft/Year Improved Properties 3239 Ualena St 184 1st 2,160 Masonry Office Good $1.50 $18.00 184 1st 13,000 Masonry Warehouse Good $1.30 $15.60 184 2nd 9,960 Masonry Office Good $1.30 $15.60 184 3rd 15,120 Masonry Office Good $1.10 $13.20 Total 40,240 185 1st 8,000 Masonry Warehouse Good $1.30 $15.60 185 1st 1,152 Masonry Office Good $1.50 $18.00 185 2nd 1,152 Masonry Office Good $1.30 $15.60 Total 10,304

3219 Ualena St 186 1st 13,269 Masonry Warehouse Good $1.30 $15.60

3209 Ualena St 186 1st 13,269 Masonry Warehouse Good $1.30 $15.60

3169 Ualena St 187 1st 25,000 Steel Warehouse Good $1.30 $15.60 187 1st 1,620 Steel Enclosed Office Good $1.50 $18.00 Total 26,620 3077 Ualena St 191 1st 18,993 Masonry Warehouse Good $1.30 $15.60 191 1st 2,665 Masonry Office Good $1.50 $18.00 191 1st 1,062 Masonry Parts Dept. Good $1.30 $15.60 Total 22,720

3069 Ualena St 183 1st 15,979 Steel Warehouse Poor $1.00 $12.00 183 1st 572 Steel Enclosed Office Poor $0.90 $10.80 Total 16,551

3059 Ualena St 181 1st 10,135 Steel Warehouse Poor $1.00 $12.00 182 1st 3,105 Steel Office Poor $0.90 $10.80 Total 13,240 3017 Ualena St 192 1st 19,200 Steel Warehouse Good $1.30 $15.60 193 1st 738 Steel Shed - - - Total 19,938 3005 Ualena St 194 1st 3,500 Masonry/Steel Warehouse Good $1.30 $15.60 194 1st 1,624 Masonry/Steel Office Good $1.50 $18.00 194 2nd 1,624 Masonry/Steel Office Good $1.50 $18.00 195 1st 5,600 Steel Warehouse Good $1.30 $15.60 Total 12,348

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Table HN-15 Honolulu International Airport Ualena Street Properties Honolulu, Oahu, Hawaii

Floor Concluded Rent Address Bldg. Level Area Construction Use Condition Sqft/Mo. Sqft/Year

2999 Ualena St 196 1st 1,040 Steel/Masonry Enclosed Office Good $1.50 $18.00 196 1st 12,712 Steel/Masonry Warehouse Good $1.30 $15.60 Total 13,752

2989 Ualena St 197 1st 11,160 Masonry Warehouse Poor $1.00 $12.00 197 1st 1,471 Masonry Office Poor $0.90 $10.80 Total 12,631 2909 Ualena St 198 1st 10,004 Steel/Masonry Warehouse Good $1.30 $15.60 198 1st 2,476 Steel/Masonry Office Good $1.50 $18.00 198 2nd 1,092 Steel/Masonry Office Good $1.30 $15.60 Total 13,572

2895 Ualena St 199 1st 10,920 Steel/Masonry Warehouse Good $1.30 $15.60 199 1st 1,638 Steel/Masonry Office Good $1.50 $18.00 199 2nd 1,638 Steel/Masonry Office Good $1.30 $15.60 141 1st 312 Steel Shed - - - Total 14,508

2885 Ualena St 142 1st 9,000 Steel/Masonry Warehouse Good $1.30 $15.60 142 1st 1,240 Steel/Masonry Office Good $1.50 $18.00 142 2nd 1,240 Steel/Masonry Office Good $1.30 $15.60 143 1st 2,895 Steel Shed - - - Total 14,375

2875 Ualena St 144 1st 6,920 Steel/Masonry Warehouse Good $1.30 $15.60 144 1st 820 Steel/Masonry Office Good $1.50 $18.00 144 2nd 640 Steel/Masonry Office Good $1.30 $15.60 145 1st 1,400 Steel Shed - - - 282 1st 1,573 Steel Shed - - - Total 11,353 2845 Ualena St 147 1st 3,280 Masonry/Steel Warehouse Good $1.30 $15.60 147 1st 3,120 Masonry/Steel Office Good $1.50 $18.00 147 2nd 3,240 Masonry/Steel Office Good $1.30 $15.60 284 1st 3,000 Steel Shed - - - Total 12,640

2835 Ualena St 148 1st/2nd 21,860 Steel/Masonry Warehouse Good $1.10 $13.20

2825 Ualena St 149 1st/2nd 17,769 Steel/Masonry Warehouse Good $1.10 $13.20

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Overseas Terminal-Terminal Floor Space

Overseas Terminal-Service Counters

Overseas Terminal-Concessionaire F & B

Overseas Terminal-Sales/Retail

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Overseas Terminal-VIP Lounge

InterIsland Terminal-Terminal Floor Space

InterIsland Terminal-Concessionaire

InterIsland Terminal-VIP Lounge

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HNL Special Property- Bldg 151

HNL Special Property- Bldg 151

HNL Special Property- Bldg 151

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HNL Special Property Building 150

HNL Special Property Building 150

HNL Special Property Building 150

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HNL Special Property Building 152

HNL Special Property Building 345 Old Commuter Terminal

HNL Special Property Building 345 Old Commuter Terminal

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HNL Special Properties - Bldg. 132

HNL Special Properties - Bldg. 132

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HNL Special Property Building 137 Delta Cargo

HNL Special Property Building 253

HNL Special Property Building 213

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HNL Special Property Building 212

HNL Special Property Building 206

HNL Special Property Building 210

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HNL Special Property Building 007-113

HNL Special Property Building 274

HNL Special Property Building 269

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HNL Special Property Building 265

HNL Special Property Building 266

HNL Special Property Building 267

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HNL T-Hangars

HNL Special Property Lei Stands

HNL Commuter Terminal Buildings 304 and 306

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Iwilei Property Building 184

Iwilei Property Building 185

Iwilei Property Building 186

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HNL Ualena Street- Bldg 185

HNL Ualena Street- Bldg 184

HNL Ualena Street- Bldg 186

HNL Ualena Street- Bldg 265

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HNL Ualena Street- Bldg 187

HNL Ualena Street- Bldg 191

HNL Ualena Street- Bldg 183

HNL Ualena Street- Bldg 181

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HNL Ualena Street- Bldg 182

HNL Ualena Street- Bldg 192

HNL Ualena Street- Bldg 194

HNL Ualena Street- Bldg 195

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HNL Ualena Street- Bldg 182

HNL Ualena Street- Bldg 192

HNL Ualena Street- Bldg 194

HNL Ualena Street- Bldg 195

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HNL Ualena Street- Bldg 196

HNL Ualena Street- Bldg 197

HNL Ualena Street- Bldg 198

HNL Ualena Street- Bldg 199

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HNL Ualena Street- Bldg 142

HNL Ualena Street- Bldg 144

HNL Ualena Street- Bldg 147

HNL Ualena Street- Bldg 148

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X. KALAELOA AIRPORT (JRF)

A. Airport Description

Kalaeloa Airport, formerly Naval Air Station, Barbers Point, is a general aviation facility that uses 805 acres of the former Naval facility. The State operates the three runways at the airport, the control tower and support facilities.

B. Environs

The subject airport is located within the former United States Naval Air Station, Barbers Point, Hawaii (NASBP), which was closed in July 1999.

The area associated with the former NASBP has been renamed and is currently identified as Kalaeloa. Although redevelopment plans for Kalaeloa continue to be formulated at the State and County Government levels and, to a more limited degree, within the private sector too, redevelopment implementation has been slow. The characteristic landscape of Kalaeloa is one of general abandonment and neglect. Pockets of activity continue throughout the area, in particular retained military housing and airfield use, but large areas of land are currently out of use and becoming overgrown.

C. Rental Analysis

(1) Space Rents

Sufficient market data is available in similar “off airport” markets to establish rents for the office spaces at the Kalaeloa Airport. The office spaces in the Kalaeloa Airport are judged to be inferior in physical condition or accessibility to the typical office spaces within the nearby Waipahu/Kapolei area.

Table HN-16, following, presents industrial rents within the Kapolei/Waipahu area.

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Table HN-16 COMPARABLE SPACE RENT SURVEY Kalaeloa Airport Kalaeloa, Oahu, Hawaii Area in Monthly Rent Per SqFt Lease Term Address/TMK Sq. Ft. Net CAM Gross Date (Years) Warehouse 94-478 Ukee Street 2,050 $1.25 $0.28 $1.53 Aug-15 3 96-1368 Waihona Street 10,080 $0.89 $0.35 $1.24 Mar-15 5 94-111 Leokane Street 2,500 $0.95 $0.25 $1.20 Apr-15 3 94-390 Ukee Street 15,058 $1.15 $0.29 $1.44 Apr-14 3 94-155 Leoole Street 17,266 $0.85 $0.32 $1.17 May-15 5 23,040 $0.85 $0.32 $1.17 May-15 5 2,285-3,840 $1.05 $0.32 $1.37 Asking - 94-457 Ukee Street 1,100-2,560 $1.30 $0.49 $1.79 Asking - 98-747 Kuahao Place 5,000 $1.15 $0.47 $1.62 Asking - 96-1333 Waihona Street 8,833 $1.15 $0.20 $1.35 Asking 5 Office 99-053Koaha Place 3,263 $1.52 $0.47 $1.99 Jan-14 5 99-295 Waiau Place 7,368 $1.30 $0.47 $1.77 Asking - 4429 Malaai St. - 102 2,471 $1.25 $0.40 $1.65 May-14 5 4429 Malaai St. - 103 2,554 $1.23 $0.40 $1.63 Apr-15 5 4429 Malaai St. - 104 3,552 $1.20 $0.40 $1.60 Jul-14 5

These rents were considered reasonable comparables to set a market rent for the Kalaeloa Airport office and Building 110 spaces. As seen in Table HN-16 rents for small warehouse space within industrial buildings ranges between $0.95 to $1.25 per square feet, averaging $1.15 per square feet. Office space within industrial areas ranged between $1.20 to $1.52 per square feet.

Based on the rents within Table HN-16 the appraisers conclude a base off- airport warehouse market rent of $1.10 per square foot per month and a base off-airport office market rent of $1.30 per square foot per month. A benchmark rent of $1.30 per square foot per month or $15.60 per annum is projected for Building 4 (Tower Building) ground and second floor office space. Office space within Building 110 was projected at the same rate based on the existing renovations which are in progress. The Hangar floor area was projected at the off-airport market rate of $1.10 per square foot per month.

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(2) Industrial Land Rents

a) Industrial Improved-Unpaved Land Rents

This section presents a brief overview of the industrial “off airport” land market. The intent of this analysis is to provide a meaningful assessment of the unit land values within the Kalaeloa Airport immediate “off airport” area. The market data was employed as a basis for estimating industrial land rents for the Kalaeloa Airport.

Market Data

Research focused on lot sales in the Kapolei Business Park and Malakole Industrial Park. Of the transactions disclosed by our investigation, three industrial transactions were selected for critical analysis to establish a value index for the subject airport land. These transactions are analyzed in summary form in Table HN-17.

Table HN-17 COMPARABLE LAND TRANSACTIONS ADJUSTMENT SCHEDULE Kalaeloa Airport Kalaeloa, Oahu, Hawaii

Transaction Number Subject 1 2 3 First Division, Tax Map Key 9-1-75-35 (Lot 18) 9-1-75-35 (Lot 3) 9-1-75-20 Location Kalaeloa Airport Kapolei Bus. Kapolei Bus. Kapolei Bus. Land Area in Acres 1.233 1.060 2.078 Land Area in Square Feet 53,709 46,174 90,518 Zoning I-2, Industrial I-2, Industrial I-2, Industrial Transaction Date 9/27/15 4/28/15 3/26/14 Instrument Deed Deed Deed Sale Price $1,786,009 $1,524,000 $2,786,500

Unit Land Price, Per Sq. Ft. $33.25 $33.01 $30.78 Terms of Sale Adjustment 1.00 1.00 1.00 Cash Equivalent Unit Land Value $33.25 $33.01 $30.78 Market Conditions Adjustment 1.02 1.03 1.07 Market Conditions Adjusted Unit Value $33.92 $34.00 $32.93 Adjustments (%) Location 0% 0% 0% Physical Characteristics 0% 0% 0% Net Adjustments (%) 0% 0% 0% Adjusted Unit Land Value $33.92 $34.00 $32.93 Weighting Factor 0.35 0.35 0.30 Product $11.87 $11.90 $9.88 Range of Values $32.93 to $34.00 per sqft Mean Unit Value $33.62 per sqft Weighted Unit Value $33.65 per sqft Concluded Unit Value $33.65 per sqft

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Transaction Number 1 is the September 2015 purchase of rectangular shaped interior parcel with a gross land area of 53,709 square feet and frontage on Lauwiliwili Street in the Kapolei Business Park Phase 2A. The site has a level topography. The purchase price was $1,786,009 which equates to an unadjusted unit value of $33.25 per square foot of gross land area.

Transaction Number 2 is the April 2015 purchase of rectangular shaped interior parcel with a gross land area of 46,173 square feet and frontage on Lauwiliwili Street in the Kapolei Business Park Phase 2A. The site has a level topography. The purchase price was $1,524,000, which equates to an unadjusted unit value of $33.01 per square foot of gross land area.

Transaction Number 3 is the March 2014 purchase of rectangular shaped corner parcel with a gross land area of 90,518 square feet and frontage on Munu Street and Opakapaka Street in the Kapolei Business Park. The site has a level topography. The purchase price was $2,786,500, which equates to an unadjusted unit value of $30.78 per square foot of gross land area.

Adjustments

The value indications of each selected transaction were adjusted relative to the subject to compensate for various comparative factors. The factors include terms of sale, market conditions, location and physical characteristics in order to determine a lease rent indication for the subject site. A final adjustment for size differential was not considered.

Terms of Sale -- Comparable “off airport” transactions were analyzed as to economic and financing conditions (terms of sale) to reflect the impact of non-institutional methods of financing or the advent of low financing costs due to favorable exchange rates and foreign financing. Down payment, interest rates and loan terms were considered in the cash equivalency analysis. Each comparable transaction was a cash equivalent transaction thus no adjustments for terms of sale were considered necessary.

Market Conditions -- The adjustment for market conditions (time) considers changes in the real estate market price levels between the date of each comparable and the June 2016 effective date of the appraisal. For the period 2001 through 2006, the overall real estate market throughout most of the State of Hawaii appeared strong reflecting upward trends in pricing. Beginning in 2007, the markets exhibited more stabilization with relatively flat pricing levels throughout the market. From around the end

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of 2007, prevailing market conditions turned negative, culminating with the financial crisis of 2008. Considering the Hawaii real estate market, a negative annual adjustment from January 1, 2008 to January 1, 2010 was considered reasonable. For the period January 1, 2010 to the effective date of value of June 2016 a rate of increase of 3.0 percent was considered reasonable, reflecting the stabilization and current increases in industrial and commercial land values.

Location -- The location adjustment considered the relative location of the comparables to the subject as to potential development desirability and exposure. All transactions are considered relatively equal to the subject airport lands and therefore require no adjustments.

Physical Characteristics -- The physical characteristics adjustment considered the shape, topography and utility factors of the comparables in terms of development potential as compared to the subject. All the comparable transactions were considered similar requiring no adjustment.

Conclusion Fee Simple Land Value – As demonstrated in Table HN-17, the adjusted unit values ranged from $32.93 to $34.00 per square foot with a mean unit value of $33.62 per square foot. Weighting factors were applied to the comparable transactions based on the reliability of each transaction as an indicator of value as well as the degree of comparability of each transaction to the subject. Most weight was awarded to Transactions Number 1 and 2, resulting in a weighted unit value of $33.65 per square foot. Based on the market data the appraisers conclude a market land value for a comparable area within the Kalaeloa Airport of $33.65 per square foot.

Rent Conclusion Improved-Unpaved Industrial Land -- Applying an 8.0 percent market rate of return results in an indicated fair market annual rent for improved industrial unpaved land of $2.69 per square foot.

Fee Simple Improved-Unpaved Land Value $33.65 Market Rate of Return x .08 Annual Rent Improved-Unpaved Land $ 2.69

b) Calculation of Industrial Improved-Paved Land Rents

The market rents for the benchmark industrial improved-paved properties are based on the market rents for the industrial improved-unpaved land with an adjustment for the amortized cost of the paving over their remaining useful lives.

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Adding $0.53 for the estimated annual recovery for paving estimated earlier in Table HN-3 results in an annual rent for industrial improved- paved land of $3.22.

Annual Rent Improved-Unpaved Land $2.69 Add Annual Recovery for Paving .53 Annual Rent Improved-Paved Land $3.22

c) Calculation of Industrial Unimproved Land Rents

The Kalaeloa Airport also has industrial unimproved land, which is land that is not graded and that lacks utilities and paved road access. Rates for unimproved industrial lands are to be discounted from improved- unpaved rates by 25 percent to 50 percent, depending on the distance to paved access and utilities.

Considering the distance from utilities and paved road access and the associated cost, the fair market rental rate for the industrial unimproved lands are discounted 25 percent from the industrial improved-unpaved land rate.

Annual Rent Improved-Unpaved Land $2.69 Factor x .75 Annual Rent Unimproved-Unpaved Land $2.01

(3) Concluded Rental Rates for T-Hangar Spaces

The rental rates for hangar space are estimated to be equivalent to the rental rates for warehouse space, with a downward adjustment associated with the characteristics and limited use of the space.

As detailed earlier, the concluded 2016 benchmark rents for warehouse space was estimated based on an analysis of current industrial warehouse rents as follows: Current Whse Rent Per SqFt Airport Monthly Annually Kalaeloa $1.10 $13.20

Application of the 40 percent discount rate results in the following benchmark hangar rates. Monthly Monthly Warehouse Hangar Airport Rate Discount Rate Kalaeloa $1.10 40% $0.66

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Table HN-18 summarizes existing 2014 Kalaeloa Airport T-Hangar and End room rents compared to our projected 2016 rental rates.

Table HN-18 PROPOSED RENTAL RATES FOR HANGAR SPACES T-Hangars and End Rooms Kalaeloa Airport

2014 2016 2016 Actual 2014 2016 Estimated Projected Rent Monthly Whse Area Warehouse Use Per Monthly Type of Space Rent Rent (SqFt) Rent Adjust. Sq. Ft. Total Buildings 409 T-Hangar 784.00 0.90 1,750 1.10 -40% 0.66 1155.00 Buildings 410 T-Hangar 783.00 0.90 1,750 1.10 -40% 0.66 1155.00

Commercial use of the space, other than plane storage and maintenance, is at the non-discounted rate of $1.10 per square foot.

(4) Concluded Automobile Parking Rates

Parking rates were estimated earlier in Chapter IX (Tables HN-4, HN-5 and HN-6). The conclusions in Table HN-6 are as follows.

PROPOSED AIRPORT PARKING RENTAL RATES

Monthly Parking Rate Type of Uncovered Demand Covered Paved Unpaved

Kalaeloa Airport Low $66.00

(5) Concluded Rates for Aircraft Storage (Tie Down) Areas

Tie-down rents were estimated earlier in Chapter IX (Tables HN-7 and HN-8). The conclusions in Table HN-8 are as follows.

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PROPOSED AIRCRAFT STORAGE RATES

CURRENT 2014 AIRCRAFT STORAGE RATES Small Aircraft Storage Large Aircraft Storage Airport Daily Monthly Daily Monthly Kalaeloa Airport $5.00 $24.00 $10.00 $34.00 PROPOSED 2016 AIRCRAFT STORAGE RATES Small Aircraft Storage Large Aircraft Storage Airport Daily Monthly Daily Monthly Kalaeloa Airport $5.00 $54.00 $10.00 $78.00

(6) Rental Conclusions for Kalaeloa Airport

Table HN-19 summarizes rent projections for the designated terminal buildings, industrial lands, ramp areas, plane hangars, automobile parking and aircraft storage within the Kalaeloa Airport facility.

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Table HN-19 RENTAL CONCLUSIONS KALAELOA AIRPORT Kapolei, Oahu, Hawaii

Current (Per Sqft) Proposed (Per Sqft) Category Per Annum Per Month Per Annum Per Month Building 104 (Tower Building) Office Per SqFt $12.60 $1.05 $15.60 $1.30

Building 400 (Hangar 110) Workshop Per SqFt $12.60 $1.05 $15.60 $1.30 Office Per SqFt $12.60 $1.05 $15.60 $1.30 Hangar floor area (subdivided) Per SqFt $10.80 $0.90 $14.40 $1.20 Single Rate (Hangar/Office/Workshop Combined) Per SqFt -- -- $13.20 $1.10 Remnant Storage Per SqFt -- -- $7.20 $0.60

Trailers Per SqFt $10.20 $0.85 $12.50 $1.04

T-Hangars Per Month Per Sqft/Mo Per Month Bldg. 409-101 to104, T-Hangar (1,750 sf) $784.00 $0.66 $1,155.00 Bldg. 410-101 to 106, T-Hangar (1,750 sf) $783.00 $0.66 $1,155.00 T-hangar Used as Commercial Space $1.10 --

Rental of Industrial Lands Improved Land-Unpaved Per SqFt $2.16 $0.18 $2.69 $0.22 Improved Land-Paved Per SqFt $2.59 $0.22 $3.22 $0.27 Unimproved Land-Unpaved Per SqFt N/A N/A $2.01 $0.17 Unimproved Land-Paved Per SqFt N/A N/A $2.54 $0.21

Automobile Parking Uncovered Paved Parking Per Month $39.00 Per Month $66.00

Aircraft Storage Charges (Tie-Downs) Small general aviation aircraft (46' x 32' or smaller) Per Day $5.00 Per Day $5.00 Per Month $24.00 Per Month $54.00

Large general aviation aircraft (47' x 33' or larger) Per Day $10.00 Per Day $10.00 Per Month $34.00 Per Month $78.00

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Tower Building 104 1st Floor Office

Tower Building 104 1st Floor Office

Unimproved Land-Unpaved

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Tie-Down Area

Parking

Building 400 - Hangar 110

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Building 400 - Hangar 110

Building 400 - Hangar 110 Office

Building 400 - Hangar 110 Workshop

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T-Hangars

T-Hangars

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XI. KAWAIHAPAI AIRFIELD (HDH)

A. Airport Description

Kawaihapai Airfield is a general aviation joint-use facility, occupying 211 acres, on the north shore of Oahu near the community of Waialua. The airfield has one runway, a State-operated control tower, several hangars, and a tie down area for recreation aircraft, but no other facilities. Air traffic is limited to daytime operations by small single-engine and light twin-engine aircraft, sailplanes, ultra- lights aircraft, and helicopters. Traditionally, the airfield has been used mainly for recreation, such as glider soaring, hang-gliding, parachuting, and sky jumping.

B. Environs

The Kawaihapai Airfield is located at Mokuleia, Waialua along Farrington Highway at the northwestern point of the Island of Oahu. Mokuleia is situated approximately 37 miles from Downtown Honolulu within the Waialua District, an area known for its open space, scenic beauty, extensive beaches and recreational attraction. Farrington Highway is the major thoroughfare along the north shore coast.

The airfield is in the vicinity of the Mokuleia Ranch with gently sloping agricultural lands between the shoreline and the steeper foothills and slopes of 15 to 40 degrees which begin approximately 6,000 feet from the Farrington Highway. These lands were formerly utilized in sugar production. Currently there are a variety of floral, ornamental trees and fruit farms taking over the former sugar lands.

The area is very sparsely populated. There are zoning and infrastructure limits to further development. In recent years, new construction has required septic tanks since there is no municipal sewer.

Recreational areas include the Haleiwa Beach Park and boat harbor, Sunset Beach, Waimea Bay, Waimea Falls Park and the numerous surfing beaches of the north shore. Agriculture still remains a viable industry on the north shore with pineapple, seed crop, aquaculture, livestock breeding and diversified farming operations as the most visible users of agricultural lands.

C. Rental Analysis

Rents for the retail, office, and industrial type spaces were based on 50 percent of the base rents estimated for the Kalaeloa Airport.

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Industrial Land Rents

Rents for industrial lands classified as “Improved-Unpaved,” “Improved-Paved,” and “Unimproved” are based on 50 percent of the base rents estimated for the Kalaeloa Airport.

The Concrete Revetments are treated as either paved or unpaved industrial use lands.

Rental Rates for T-Hangar Space

The rental rates for T-Hangar space are estimated to be equivalent to the rental rates for warehouse space, with a downward adjustment associated with the characteristics and limited use of the space.

As detailed earlier, the concluded 2016 benchmark rents for Kalaeloa warehouse space were estimated based on an analysis of current industrial warehouse rents as follows: Current Whse Rent Per SqFt Airport Monthly Annually Kalaeloa $1.10 $13.20

Rates for Kawaihapai T-Hangars with doors are based on Kalaeloa Warehouse rates discounted 25 percent.

Kalaeloa Kawaihapai Monthly Monthly Warehouse Warehouse Rate Discount Rate $1.10 -25% $0.83

Application of the 40 percent discount rate results in the following benchmark hangar rates with doors.

Kawaihapai Kawaihapai Monthly Monthly Warehouse T-Hangar (w/door) Rate Discount Rate $0.83 -40% $0.50

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Table HN-20 summarizes existing 2014 Kawaihapai Airport T-Hangar and End room rents compared to our projected 2016 rental rates. T-Hangars without doors were discounted an additional ten percent.

Table HN-20 PROPOSED RENTAL RATES FOR HANGAR SPACES T-Hangars and End Rooms Kawaihapai Airfield 2014 2016 2016 Actual 2014 2014 Estimated Projected Rent Monthly Whse Area Warehouse Use Per Monthly Type of Space Rent Rent (SqFt) Rent Adjust. Sq. Ft. Total Buildings 401 & 402 T-Hangars (w/doors) 371.00 0.67 1,107 0.83 -40% 0.50 551.00 Buildings 401 & 402 T-Hangars (wo/doors) 343.00 0.62 1,107 0.75 -40% 0.45 498.00

Commercial use of the space other than plane storage and maintenance is at the non-discounted warehouse rate of $0.83 per square foot (with doors) and $0.75 per square foot (without doors).

Automobile Parking

Parking rates were estimated earlier in Chapter IX (Tables HN-4, HN-5 and HN- 6). The conclusions in Table HN-6 are as follows.

PROPOSED AIRPORT PARKING RENTAL RATES Monthly Parking Rate Type of Uncovered Demand Covered Paved Unpaved

Kawaihapai Airfield Low $66.00

Aircraft Storage (Tie Down)

Tie-down rents were estimated earlier in Chapter IX (Tables HN-7 and HN-8). The conclusions in Table HN-8 are as follows.

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PROPOSED AIRCRAFT STORAGE RATES CURRENT 2014 AIRCRAFT STORAGE RATES Small Aircraft Storage Large Aircraft Storage Airport Daily Monthly Daily Monthly Kawaihapai Airfield $5.00 $24.00 $10.00 $34.00 PROPOSED 2016 AIRCRAFT STORAGE RATES Small Aircraft Storage Large Aircraft Storage Airport Daily Monthly Daily Monthly Kawaihapai Airfield $5.00 $54.00 $10.00 $78.00

Rental Conclusions for Kawaihapai Airfield

Table HN-21 summarizes rent projections for the designated terminal buildings, industrial lands, ramp areas, plane hangars, automobile parking and aircraft storage within the Kawaihapai Airfield facility.

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Table HN-21 RENTAL CONCLUSIONS KAWAIHAPAI AIRFIELD Mokuleia, Oahu, Hawaii

Current (Per Sqft) Proposed (Per Sqft) Category Per Annum Per Month Per Annum Per Month

Rental of Buildings other than Passenger Terminal Trailers Per Sq.Ft. $5.00 $0.42 $6.25 $0.52

Rental of Industrial Lands Improved Land-Unpaved Per Sq.Ft. $1.08 $0.09 $1.35 $0.11 Improved Land-Paved Per Sq.Ft. $1.33 $0.11 $1.61 $0.13 Unimproved Land-Unpaved Per Sq.Ft. $0.54 $0.05 $1.00 $0.08

Concrete Revetments Spaces 630-102, 103-Unpaved Per Sq.Ft. $1.08 $0.09 $1.35 $0.11 Spaces 630-102, 103-Paved Per Sq.Ft. $1.33 $0.11 $1.61 $0.13

Sail Plane Hangars Per Month Per Sqft/Mo Per Month Building 403 (1,877 sf) $657.00 $0.36 $676.00

T-Hangars Per Month Per Sqft/Mo Per Month Bldg. 401 & 402 T Hangar w/o door (1,107 sf) $343.00 $0.45 $498.00 Bldg. 401 & 402 T Hangar w/ door (1,107 sf) $376.00 $0.50 $551.00 T-Hangar Used as Commercial Space Without Doors -- $0.75 -- T-Hangar Used as Commercial Space With Doors -- $0.83 --

Automobile Parking Uncovered-Paved Parking Per Month $39.00 Per Month $66.00

Aircraft Storage Charges Small general aviation aircraft (46' x 32' or smaller) Per Day $5.00 Per Day $5.00 Per Month $24.00 Per Month $54.00

Large general aviation aircraft (47' x 33' or larger) Per Day $10.00 Per Day $10.00 Per Month $34.00 Per Month $78.00

Table HN-22 Kwaihapai Airfield Special Properties Mokuleia, Oahu, Hawaii

Concluded Rent Bldg. Tenant Area Use Condition Sqft/Mo Sqft/Year 201 Glider Plane Booths (RM 101 & 103) 86 sqft each Retail Good $0.55 $6.60 91A Fighter Town 7,500 Hangar Good 0.55 6.60 301 Control Tower 797 Office Poor 0.35 4.20

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T-Hangars

Typical interior of T-Hangar

Sail Plane Hangars

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Control Tower

Office in Control Tower

Aircraft Storage

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Parking lot

Concrete Revetment area

Trailer type installation

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PROFESSIONAL QUALIFICATIONS

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