Redevelopment work at Aloha Tower Marketplace may begin as early as this summer after a state agency gave its consent Monday for Hawaii Pacific University to lead a $32 million makeover of the retail center fronting Honolulu Harbor despite objections by a real estate developer who put the project together.
The Aloha Tower Development Corp., the state agency that owns the land under the marketplace, agreed to work with HPU as the developer of the unorthodox plan to add student housing and other university amenities to the struggling 165,000-square-foot open-air retail center that was built in 1994 but has been in bankruptcy twice.
HPU officials said they hope to begin selling bonds to finance the project in about a month, which would allow construction to proceed as early as summer.
New retailers and restaurants could begin opening next year, and the student housing could be ready for occupancy in the summer of 2014, according to university spokesman Todd Simmons.
The redevelopment plan calls for re-branding the marketplace with a new name — possibly Tower District or Honolulu Live — and creating loft-style dorms for 320 students on the second story of the center, which was about 70 percent vacant last year.
The ground floor of the marketplace, which is anchored by Gordon Biersch Brewery Restaurant and Hooters, would keep its retail focus but also include some HPU facilities, including classroom space and the university’s business school.
Efforts to attract new tenants, including Lucky Strike (a bar and restaurant with bowling lanes) and the restaurant Hash House A Go Go, will continue, HPU officials said.
Space at Pier 10 would become a sports and entertainment complex dubbed the Aloha Cultural Theater, with a spectator capacity of 1,000 to 2,000 indoors and potentially 4,000 using an outside promenade. The facility would feature a basketball court for the university and also serve as a venue for concerts, performing arts and other community events.
At Pier 7 the former Hawaii Maritime Center would be converted to an HPU faculty club and alumni center.
Expanded parking around the marketplace, including Piers 5 and 6, is also part of the plan.
Heading up the redevelopment effort for HPU is Scott Hayashi, a 20-year Hawaii real estate industry veteran whose experience includes serving as asset manager for Koko Marina Center and Royal Hawaiian Center, and chief operating officer of the commercial real estate firm now known as Colliers International.
The plan differs little from one started by Ed Bushor, a developer who partnered with HPU and negotiated to buy the struggling retail and entertainment complex for $14 million in December 2011, according to HPU Vice President and General Counsel Janet Kloenhamer.
Bushor, who heads Hawaii Lifestyle Retail Properties LLC, arranged for HPU to put up the money for the purchase and worked with Hawaii’s largest private university to fill up large amounts of empty space with new retail tenants as well as student housing and other HPU amenities.
But in October, HPU executed a contract provision to buy Bushor’s interest for $5 million, and removed Bushor as project manager in November.
HPU has said took control of the redevelopment project so it could take advantage of tax-free bond financing.
The university plans to sell $60 million in bonds, floated by the state, to finance the marketplace work plus $28 million in improvements to its Hawaii Loa campus in Kaneohe, school property elsewhere downtown and its Oceanic Institute affiliate.
The bond financing would save HPU about $60 million in debt payment costs over 30 years, according to Kloenhamer. However, as a nonprofit university, HPU can’t sell tax-free bonds with Bushor as a for-profit partner.
The state agency, ATDC, was asked to consent to the buyout and management change, but twice previously deferred taking action at meetings in November and earlier this month after Bushor objected to the move and alleged that HPU had acted fraudulently.
HPU has said that the buyout and management change are allowed under an operating agreement signed by Bushor.
On Monday, Randy Grune, ATDC’s acting chief executive officer and deputy harbors division director for the state Department of Transportation, said the allegation of fraud is something to be sorted out by the legal system — not ATDC. He also said the agency’s consent to the transfers is ministerial.
“This type of agreement was neither conceived nor executed by ATDC,” he said.
Gregg Kinkley, a deputy attorney general representing the agency, added that ATDC’s consent isn’t an endorsement or rejection of any claims pertaining to the ownership and management dispute.
The dispute was taken to arbitration under provisions of the contract between Bushor and HPU. The university has said that if Bushor prevails, the only damages available to him are monetary.
No one representing Bushor addressed the agency at Monday’s meeting.
