Queen Emma Land Co.’s plan to build a roughly $350 million Waikiki retail complex where the International Market Place, Waikiki Town Center and Mira­mar Hotel now sit has been challenged by two entities representing the Outrigger hotel chain.

Project developer TRG IMP LLC, an affiliate of Michigan-based mall developer Taubman Centers Inc., received approval from the city Department of Planning and Permitting on Jan. 2 for a major special district permit, a necessary step in Waikiki construction. The company intends to build a 360,000-square-foot open-air retail, dining and entertainment complex. The new development will consist of one anchor store and will house approximately 60 retail shops and five to seven restaurants. The project also will include about 750 parking spaces in a five-story garage.

Outrigger Hotels Hawaii and RP/OE Waikiki Beachcomber LLC have asked a city review board to withdraw the permit for the project, which it contends would create traffic and noise disruptions. In their filing, Outrigger said that the city’s planning director acted in an "arbitrary or capricious manner, manifestly abused his discretion and/or acted based on erroneous findings of fact."

"We filed an appeal on a couple of issues. One of them had to do with loading zones. There are a few near our buildings, and we were concerned about noise," said David Carey, president and CEO of Outrigger Enterprises Group. "The other aspect was parking. I drive down Kuhio Avenue every day, and I’ve got to tell you, part of their plan would change traffic."

While asking the city’s Zoning Board of Appeals to review decisions has become the norm for most Oahu projects of substance, this case stands out because the petitioners, which have operated hotels in Hawaii for 60 years, represent big business interests. Historically, environmental advocacy groups have spurred Oahu development battles like those that have delayed Kyo-ya Hotels & Resorts’ plan to build an oceanfront hotel and condominium tower next to the Moana Surfrider, a Wes­tin Resort & Spa, or blocked resort expansion at Turtle Bay.

"I’ve been here 11 years and never seen anything like this," said Waikiki Neighborhood Board Member Jeff Merz, who is an urban planner. "It’s unusual in this community for hotels to publicly fight or argue or appeal other commercial entities because when they want to do their own changes, it might come back to bite them."

There is an even odder twist to this story. Queen Emma Land, which owns the land under the International Market Place project, also owns the land under three Outrigger hotels: the Outrigger Waikiki, Holiday Inn Beachcomber and Ohana East. Carey said Outrigger did not ask Queen Emma Land to extend its lease for the Ohana West when it expired in 2010; however, at least one of the current leases bind the parties for three more decades.

"It’s tricky," Carey said. "They weren’t happy with us. But, they seemed to understand when we explained that we are tenants, and our performance under their lease is tied to how those assets perform."

Taubman Centers said in an email it was not surprised that Outrigger chose to comment on the project, given they are adjacent to the site.

Before filing the appeal, Carey said Outrigger met with the developer and attempted to work out a solution.

"It’s my belief that they have worked on it and will eventually take care of those issues and we’ll withdraw our appeal," Carey said.

However, the nature of the process compelled Outrigger to appeal, Carey said.

"If we missed the deadline and they failed to resolve the issues, there would not be any opportunities later," he said.

Taubman Centers officials said the company is working with Outrigger and expects the hotel chain to withdraw its appeal in the coming weeks and fully support the project. The developer said it does not expect Outrigger’s appeal to affect the project, which is scheduled to break ground this year and open in 2015.

"We believe ultimately everyone will see the benefit of revitalizing the International Market Place, as it helps generate new excitement and activity in the area that benefits not only Waikiki, but all of Hawaii," Taubman Centers officials said, adding that the company believes it is close to finalizing all agreements and receiving its final Waikiki Special District permit.

That said, other corporate conflicts have occurred in the past, and more could ensue as Waikiki increases density, said Waikiki-based retail analyst Steph­any Sofos. Hyatt Waikiki Beach Resort and Spa complained about Kyo-ya’s proposed tower blocking its view; however, Hyatt never filed any formal opposition against the project.

"The issue is that they are trying to build too much in that area, and everyone is concerned because they don’t have the proper infrastructure," Sofos said.

Sofos said the International Market Place revitalization has a larger footprint than Royal Hawaiian Center.

"There has to be some give and take," Sofos said. "In the last 10 years, it’s rare to see a developer come in that isn’t concerned about anything but maximum density because the land values are so high."

Sofos praised Outrigger for its stewardship of Waikiki. The company’s Waikiki Beach Walk and its Outrigger Reef projects were not built to allowable density, she said.

"These projects could have been much larger, but instead they’ve got lots of green space. It also tells you a lot about Outrigger that they are willing to take a stand against their landlord when they feel something isn’t right," she said. "Whenever you go against the landlord, it can become adversarial, and you don’t know what it will do to your relationship down the line."

Queen Emma Land contends the new center will enhance the streetscape of Kalakaua and Kuhio avenues, improve traffic along Kuhio, increase tax revenue and fund the state’s largest private nonprofit hospital. The center also is expected to create 1,000 construction jobs and 2,500 permanent jobs.

The project was not challenged by any environmental groups, and it was supported by the Waikiki Neighborhood Board and the Waikiki Improvement Association. It also has mostly garnered support from other visitor industry neighbors such as the Moana Surfrider and the Sheraton Princess Kaiu­lani. Mike McCartney, president and CEO of the Hawaii Tourism Authority, testified in favor of the project, which he said promotes a Hawaiian sense of place and incorporates many cultural, historical and educational elements that will benefit Waikiki and Hawaii.

"It’s very important to refresh and revitalize and improve Waikiki, and this is the heart and soul of Waikiki," McCartney said. "It’s equally important that this provides an important source of revenue for an alii trust, which was a legacy started by Queen Emma. It keeps The Queen’s Medical Center able to provide health care for the people in our community that don’t have it."

WHILE McCartney said he was not aware of the particulars of Outrigger’s appeal, he hoped that both parties would work out their differences and move forward.

"Outrigger also is an important asset to the visitor industry and the community," McCartney said. "We have a lot of momentum in the market, and we need to get on with improving our product for the long term."

Some visitors are happy with the International Market Place as it is. Brian Solie, a Navy sailor from San Diego, said he stops at the International Market Place whenever he is in port. He enjoys the bazaar’s ambience and values and doesn’t want to see it transformed into an upscale mall.

"I’ve traveled the world, and the first thing I look for when I’m overseas is a market like this one," Solie said. "They have them in Dubai, Thailand and Hong Kong. They aren’t in any better shape than this one, and all the places are always packed full of tourists. "

Edward Carrera, Solie’s shipmate, said he’s seen redevelopment hurt his native San Antonio and San Diego, where he is currently stationed.

"All the green is beautiful here," Carrera said. "You can find malls anywhere, but not these beautiful shade trees."

Taubman Centers said in an environmental impact statement released last year that the project will preserve several of the large trees, including one exceptional banyan tree.

Solie and Carrera also expressed concern that the renovations will make Waikiki less affordable for tourists.

"They’re going to make it hard for people who come to Hawaii that don’t have a lot of money," Solie said. "Even people who have a lot of money still enjoy visiting a fun place like this where you can get knickknacks that bring a lifetime of memories."

Judy Lee, co-owner of J&P Gift, said customers like the tradition of coming to the market.

"This is beautiful. They just need to fix up this place," said Lee, who has worked at the market for 20 years and owned her business there for seven.

About 170 stores, carts and kiosks plus 25 food vendors operate at the market.

Lee said she and other small-business owners are worried about what they will do for work when the redevelopment gets under way or how they will dispose of their inventories. Others question whether there will be affordable opportunities for them in the new development, she said.

"They put millions and millions in here, and they need their money back," she said. "If the rent is too high, I can’t come back."

Taubman Centers officials said it’s too early to say when demolition will begin or how many current businesses will return.