Development of a Safeway-anchored shopping center in Lihue once delayed by the recession is facing a new problem that puts the project in doubt again.
The development arm of the California-based grocery chain recently filed a lawsuit in federal court in Honolulu on Oct. 19, alleging that the previous owner of the 22-acre center site is blocking the project Safeway had expected to break ground on this year and complete next year.
Safeway’s affiliate, Property Development Centers LLC, sued a subsidiary of major Kauai landowner Grove Farm Inc., which sold Safeway the site in 2008 for $11 million.
Safeway is asking the court to undo the sale or prevent Grove Farm from inhibiting construction through actions Safeway claims amount to retaliation against the retailer’s decision to develop only half of the 210,000-square-foot center named Hokulei Village.
The dispute threatens to upend the long-anticipated move to establish a second major shopping center in Kauai’s growing commercial core, and a second Safeway store on Kauai.
Safeway announced plans in 2008 for the project on former sugar cane fields and anticipated the center, which is less than a mile from Lihue’s main 330,000-square-foot Kukui Grove Center mall, would be finished in 2010.
But the recession put the project on hold.
In April, The Garden Island newspaper reported that Safeway intended to start construction in the second half of this year and that tenant leases were being finalized.
But Safeway also informed Grove Farm in April that it would develop only the first of two phases for Hokulei Village, according to the lawsuit.
Safeway said in the suit that it established the option to develop only a 115,000-square-foot first phase anchored by its 57,000-square-foot store as part of the land purchase. In the event the option was exercised, the roughly 89,000-square-foot second phase would be left for Grove Farm to develop.
Safeway claims that Grove Farm responded by saying Safeway had to significantly revise its plan for phase 1 to be independent, as opposed to integrated as had been called for in the original plan. Safeway also claims that Grove Farm is inhibiting Safeway from making required road improvements, won’t allow utility connections through the phase 2 parcel and is curtailing parking rights.
“(Grove Farm’s) stated positions are retaliatory against (Safeway) for having exercised its right not to retain title to phase 2,” the retailer stated in the suit. “Without access, utility, parking, drainage and other easements and rights over phase 2, the development of phase 1 as contemplated in the purchase agreement is not possible.”
Marissa Sandblom, a Grove Farm vice president, said it is company policy not to comment on pending litigation.
Keith Turner, a Safeway spokesman, also would not comment for the same reason.
Hokulei Village was designed to provide space for about 16 businesses besides the grocery store, including a Walgreens, a gas station, two or three sit-down restaurants, several small retail shops and two “junior anchor” stores between 25,000 square feet and 37,000 square feet.
Walgreens, the gas station and several other spaces are part of phase 1. The two junior anchor stores and a few smaller store spaces are part of phase 2.
Safeway said in the suit that it has spent $3 million on plans, permits and road improvement work.
The company is asking the court to force Grove Farm to cooperate with development of the project or void the purchase and award Safeway the purchase price plus damages.
