The former Hilo Hattie factory outlet in Iwilei once eyed by city officials for a massive homeless shelter is being put to new use after three years of inactivity.

FedEx plans to turn the site and a neighboring property into a package sorting and delivery base by the end of the year.

The company is converting the sites into what it calls a new “city station” capable of launching 50 small delivery vans to support its operations based at the Daniel K. Inouye International Airport.

FedEx spokeswoman Gretchen Mathis said the new facility is needed to accommodate business that has grown significantly in Honolulu.

Local retailer Hilo Hattie, which was founded as Kaluna Hawaii Sportswear in 1963, opened its flagship outlet at 700 N. Nimitz Highway in 1983 on land leased from an affiliate of the Harry &Jeanette Weinberg Foundation. The 87,000-square-foot facility included manufacturing and retail operations that bused in tourists from Waikiki.

In 2015, Hilo Hattie filed for bankruptcy and closed the flagship store that no longer was used for manufacturing and had grown too costly in the face of lower sales.

As part of the bankruptcy case, Hilo Hattie sought to sell its lease to a high bidder. City Council members including the district’s representative, Joey Manahan, championed the property as ideal for a homeless shelter that could serve up to 800 people.

Mayor Kirk Caldwell’s administration was open to bidding on the lease but also had reservations, including having such a high concentration of homeless on one parcel and lease costs.

Ultimately, the Weinberg Foundation was the only entity that bid on the lease. The nonprofit paid $4.1 million to get the lease back and wrote off $1.5 million in unpaid rent from Hilo Hattie. The retailer used proceeds to pay off some debts and stay in business with smaller stores.

Mathis said FedEx arranged a 15-year lease for the former Hilo Hattie site and a smaller adjacent parcel that is owned by three individuals and previously was used for used car sales and operations of Koala Moa barbecued chicken.