Financing woes might doom Ala Wai project

Honey Bee USA Inc., the developer of the planned Waikiki Landing at the Ala Wai Small Boat Harbor, has to secure financing in time to meet a sewer permit deadline or the troubled project may have reached its end.

The state Department of Land and Natural Resources’ Division of Boating and Ocean Recreation will state its intent on Friday to put the controversial development on the agenda for the Board of Land and Natural Resources’ March 13 meeting.

The state entered into an agreement with Honolulu attorney Keith Kiuchi, Honey Bee’s principal, in 2009 to build a boat repair facility and fuel dock combined with restaurants, entertainment venues, wedding chapels and space for the U.S. National Kayak Team.

The project is about two years behind the original construction plan.

DLNR spokeswoman Deborah Ward said Tuesday that Kiuchi still owes the state at least $280,719.69 in rent and has not satisfied the state’s concerns over the project’s funding.

Kiuchi, who was left scrambling to save the project after Kyoto-based Hideaki Shimakura ended his role as the project’s major financer last July, said he is confident that he can appease the state’s concerns over the project’s funding and its timetable.

"We are going to make the presentation in front of the board and I feel it would be unfair to discuss it ahead of time. We do have a joint equity partner to present to the board," said Kiuchi, who previously told the Honolulu Star-Advertiser that interim financing from Japan would allow him to pay his rent.

Dale Rak, a consultant for the Honey Bee project, earlier said the rent issue would be resolved by Feb. 18. Rak also said full project financing was coming due to interest from several lenders, including one that was willing to offer Kiuchi a loan for more than $30 million without taking an equity position.

"It seems strange to me that they’ve invested so much money over the last five years of site preparation and worked their way through the permitting process — you would think that the easiest thing would be to keep the project financing," said Jeff Merz, a Waikiki Neighborhood Board member and urban planner.

However, financing is only one of the state’s concerns that Kiuchi needs to satisfy.

"The issue isn’t just back rent anymore," Kiuchi said. "DLNR wants to see that we are moving forward. That’s fair, but I feel that we can satisfy those concerns."

Kiuchi, who already has made substantial investments in the project, also is bumping up against permit deadlines. His sewer permit expires May 13; however, he said the project is on track to meet that deadline provided that the state approves his new partner and allows the project to proceed.

New city zoning and state legislation paved the way for the planned complex, which was designed to serve as a hub for boating and ocean activities. Since 2010, Honey Bee has paid the state more than $1.1 million in rent and development fees. The company also cleared the property, removed contaminated soil, razed a dilapidated building, secured various land-use entitlements and approvals, and obtained city permits. As a result of the preparations, a long-time fuel dock was shuttered and a boat repair facility was razed.

The Division of Boating and Ocean Recreation issued Honey Bee a 65-year lease, which commenced on Jan. 1, 2014, for an annual minimum base rent of $821,652 per year, with periodic rent increases through the first 30 years. But construction still hasn’t started on the three-building development, which includes 44,153 square feet of leaseable space and a 17,000-square-foot boat repair dock with parking.

And now it’s unclear to some where this project, which was once touted as having the potential to generate more than $900,000 a year for the state and more than $200,000 in annual city property taxes, is headed.

"I don’t think anyone likes to see a delayed construction area," said Nancy Mueting, who lives near the lot that Honey Bee cleared to make way for its still-absent project. "It’s ugly and it causes a lot of problems. I’m sure the new owners of the Hawaii Prince Hotel aren’t happy that their guests have to look out at that site. The fencing also makes it harder to clean the catchments that keep the trash from the Ala Wai from going into the ocean."

Merz, who lives down the street from the project, said he doesn’t think the state will cut Kiuchi too many breaks because the project was controversial from the start. Initially, some Waikiki residents didn’t think a wedding chapel and entertainment complex were a good fit for a boating community. Complaints became more earnest when the boat haul-out was closed and the fuel dock vendor decided to stop selling fuel. Criticism intensified in September 2013 when the project’s preliminary site work stopped.

"A lot of people didn’t like this whole concept," Merz said. "They made some changes and people liked that better. I thought it would be a nice project that would energize the location. Personally, the public-private approach has merit. We need money to pay for these boating facilities. But right now, what we’ve got is a big empty construction site, which is not good for the community. We lost the fuel dock and the boat repair facility and there is nothing there generating revenue."