Lawsuit threatens to delay condo hotel at King’s Village site

The future of 133 Kaiulani, the 32-story high-rise condominium hotel that was planned to replace the aging King’s Village Shopping Center in Waikiki, is less certain following the filing of a lawsuit in Honolulu 1st Circuit Court on Monday.

The suit pits BlackSand Capital, co-founded by local developers BJ Kobaysahi and Ian MacNaughton, against Elda Investments, lead by principal Marcus Fullard-Leo, a member of the family that previously owned the site, which once belonged to Prince Jonah Kuhio Kalanianaole.

Elda, which was formed to own King’s Village, alleges in the 42-page complaint that Koba­yashi and BlackSand used information from Scott Gradisnik, a Fullard-Leo financial manager, to conspire to undermine Elda’s rights under the property’s lease. The suit says Kobayshi and Gradisnik, who was not a party to the suit, were high school friends.

The lawsuit could slow progress on the 133 Kaiulani project, which was supposed to add 213 units to Waikiki’s hotel market, as well as several community improvements.

The city Department of Planning and Permitting required that BlackSand transform Kaiu­lani Avenue into a two-way street and fund up to $1 million in community benefits such as providing surplus parking stalls to the public, offering art and cultural programs, and promoting outdoor activities on its street frontages.

Kathy Sokugawa, DPP acting director, said the department “cannot speculate on what will happen as the result of a lawsuit” and that it hasn’t “been informed of any changes to this project.”

If BlackSand doesn’t make the proposed changes to Kaiulani Avenue, it could have an effect on traffic plans for Kyo-ya’s upcoming Sheraton Princess Kaiulani Hotel redevelopment, said Waikiki Neighborhood Board Chairman Bob Finley.

Also, likely to be affected would be the Queen Emma Land Co.’s new partnership with Oliver McMillian, which would add a grocery store and 500 market-rate and affordable rentals to the neighborhood.

“The lawsuit is terrible news. This thing could end up in court for years,” Finley said. “I guess we won’t get our $1 million in improvements, and the traffic concerns could impact more Waikiki projects than just one. It’s a big chunk of Waikiki property. I hope that they will reach out to give us an update.”

On the flip side, Waikiki residents who had complained about the project’s potential to take away views and add congestion say they are thrilled with yet another potential delay. BlackSand Capital postponed the project in March, for a second time, but said it remained “excited about this project” and would “proceed as soon as conditions allow.”

“It smacks of poetic justice,” said Denise Boisvert- Jorgensen, who lives near King’s Village. “It certainly makes one wonder if there is a pattern in how these developers treat others. They heartlessly planned to kick out mom-and-pop businesses that serve lower- and middle-income tourists so they could build a gigantic condo-hotel for the ultrarich — a structure that would obliterate what little remains of Waikiki’s open air space.”

BlackSand declined Thursday to talk about its plans for 133 Kaiulani but said in a statement that the lawsuit was “baseless.”

BlackSand said that it paid Elda more than $40 million in 2012 for the King’s Village property. Before the lease on the property was terminated, BlackSand said it gave Elda a month’s notice and supplied it with all relevant agreements.

“Elda is attempting to unfairly enrich itself after selling its interest and staying silent while BlackSand Capital invested millions of dollars to develop its plans and entitlements with the vision to create a new mixed-use development,” the statement said.

BlackSand said it would defend its legacy against the claim, which is the “latest lawsuit of over a dozen other lawsuits that the plaintiff, led by Marcus Fullard- Leo, has brought against local companies in recent years to obtain undeserved gains.”

Fullard-Leo said in a Thursday statement that BlackSand did not supply “relevant documents in 2012 until after Elda’s sale to them was complete. Other documents were not provided until 2016.”

Fullard-Leo said he doesn’t know how BlackSand could make a judgment on the merits of other “highly complex” lawsuits that don’t concern it.

“Those other lawsuits primarily involve violations of trust by longtime business partner, former family friend, mentor and adviser Peter Savio. Savio has refused to honor his commitments and left us with no choice but to bring suits against him so that we can be made whole,” Fullard-Leo said.

Savio said his relationship with the Fullard-Leo family deteriorated after Marcus’ father, Ainsley Fullard-Leo, died in 2008 and Marcus took on an expanded business role.

“Marcus Fullard-Leo has a number of lawsuits, about nine or 10, against my various companies,” Savio said. “I believe all his accusations are wrong and inappropriate. He believes they are true. We will let the courts decide. I think that I will win. I’m sure BlackSand feels the same way.”