The state Department of Land and Natural Resources’ Division of Boating and Ocean Recreation plans to recommend on Friday that the state terminate its lease with Honey Bee USA Inc., the developer of the planned Waikiki Landing at the Ala Wai Small Boat Harbor, for nonpayment of more than $425,000 in back rent and for failing to pay the nearly $1 million performance bond and keep the lease free of encumbrances and liens.

This will be the third time the division has sought approval from the state Board of Land and Natural Resources to terminate its lease with Honey Bee, who has not made a lease rent payment since March 17 and has a history of past delinquencies and lease violations.

The state entered into an agreement with Honolulu attorney Keith Kiuchi 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 division issued Honey Bee a 65-year lease, which commenced on Jan. 1, 2014, for a minimum base rent of $821,652 a 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.

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 nearly $1.6 million in rent and development fees. However, the company has fallen at least two years behind its original construction plan.

Kiuchi said the company began struggling in July 2014 after former partner Kyoto-based Hideaki Shimakura ended his role as the project’s major financier. However, according to the division, Honey Bee has a history of delinquencies before 2014 in the fees required under the development agreement. The division said the company fell behind $108,000 from March to September 2012. In December 2012, it failed to make a $30,000 payment. From January to May 2013, the company went $75,000 into arrears. And from June to December 2013, it also accrued $105,000 in bad debt.

Despite the company’s history of delinquencies, the Land Board gave it a second reprieve at its July 10 meeting. Kiuchi told the board that Honey Bee had secured a new majority investor, ICON Commercial Lending Inc., who was willing to provide a $35 million construction loan and, if granted an extension, could shore up the agreement and bring past due payments current by the end of August.

“Based in large part on this representation by Honey Bee, the BLNR agreed to defer action on terminating the lease until the end of August 2015,” said DLNR spokeswoman Deborah Ward. “The August deadline has since passed and Honey Bee has yet to obtain the required funding.”

Under the proposed funding agreement, ICON would provide Honey Bee with a 24-month, interest-only construction and development line of credit up to $35 million secured by a first mortgage and a 50 percent equity ownership in Honey Bee. Since the transfer of Honey Bee’s ownership interest is considered an assignment of the lease, the division was required to vet ICON.

Ward said Honey Bee has not cured its debt or provided the division with enough information to determine if ICON possessed the necessary experience or financial capacity to undertake the Waikiki Landing project. Division Administrator Ed Underwood detailed these concerns in a submission to the board. Underwood said he is concerned that ICON could ultimately acquire a 100 percent interest in Honey Bee or in the lease if Honey Bee defaults or is unable to secure permanent take-out financing.

Regardless, Underwood said that ICON has not placed the promised $12 million into escrow by Aug. 1 and Honey Bee is now telling division officials that escrow funding will not come until October. In his submission, Underwood also expressed concern that many of the documents and agreements have not been finalized, making it difficult to close the loan any time soon.

Based on Honey Bee’s past performance, Underwood said the division does not believe the proposal will materialize, or will materialize in a timely manner. Honey Bee has provided DOBOR with copies of at least six separate funding proposals from various entities, but Underwood said none have progressed beyond initial proposals or resulted in good-faith deposits.

The division has been “extremely patient and accommodating to Honey Bee, but that the prudent course of action is to terminate the lease and begin the process of seeking a new developer for this prime Waikiki property,” he said.