The Waikiki Landing, a controversial public-private partnership at the Ala Wai Small Boat Harbor, could be in jeopardy again.
Termination of developer Honey Bee USA Inc.’s boating lease and its nonexclusive term easement with the state is on the agenda for Friday’s Board of Land and Natural Resources meeting, which will take place at 9 a.m. in Room 132 of the Kalanimoku Building.
It’s the second time in less than four months that the project has come before the board. The state Department of Land and Natural Resources’ Division of Boating and Ocean Recreation (DOBOR) recommended March 13 that the state terminate its lease with Honey Bee USA Inc. for failing to pay a $1 million performance bond, clear back rent and come up with an appropriate financial partner to replace Kyoto-based Hideaki Shimakura, who reneged on an earlier $25 million loan commitment.
Following its March meeting, BLNR gave Honey Bee a reprieve with the understanding that the principals would make their lease rent current, produce an acceptable financing partner, pay the performance bond and cure any other defects. Four days later Honolulu attorney Keith Kiuchi, Honey Bee’s principal, paid the state $417,662 in back rent to avoid having his lease terminated.
Honey Bee’s consultant Texas-based Dale Rak said Kiuchi also has entered into a funding agreement with Utah-based Icon Commercial Lending Inc., which will supply $35 million in financing if the state approves it as Honey Bee’s new 50 percent partner.
"The first financing increment is slated to come in on Aug. 1. With that in mind, the state should not move to terminate the lease on Friday," Rak said. "If they terminate, it would be another four years to put out a new RFP and find someone that wants to do it."
Conception of the project, which includes a boat repair facility and fuel dock combined with restaurants, entertainment venues, wedding chapels and space for the U.S. National Kayak Team, started in 2009 when DOBOR and Honey Bee entered into a development agreement. But it wasn’t until Jan. 1, 2014, that the state issued Honey Bee a 65-year lease to proceed.
The project went further adrift after Kiuchi lost his primary funding partner last year and failed to make his June rental payment on time. While he was able to clear that debt, Kiuchi failed in his search for a primary funder and fell delinquent again in October and November.
"It’s virtually impossible to find someone in the financial world willing to put up $35 million for leased land," Rak said.
However, Rak added that Honey Bee has succeeded with Icon, a commercial lender that he believes is well versed in working on public-private projects, most recently the Dixie Towers, a dorm at Dixie State University in St. George, Utah.
"Going forward with this project would be tremendously good for the state," Rak said. "It would bring increased tourism, retail and entertainment traffic, revenue and taxes."
So what’s the problem? The state Department of Land and Natural Resources declined to answer any questions Tuesday about why Honey Bee is back on the BLNR’s agenda.
Rak said the lenders are on the ground this week; however, Kiuchi failed to make the latest monthly installment on his lease rent, which runs $877,146.60 annually.
"There weren’t any funds available for rent," Rak said. "Mr. Kiuchi had to deposit $50,000 to escrow and $15,000 in hard cash for the site inspection."
To date, Rak said Honey Bee has put more than $5.1 million into the development of the Waikiki Landing project, including environmental remediation.
