The state is finally pulling the plug on Honey Bee USA Inc., developer of the planned Waikiki Landing at the Ala Wai Small Boat Harbor, for nonpayment of more than $500,000 in back rent and a $1 million performance bond.
“(The state) has been extremely patient and accommodating to Honey Bee, but the prudent course of action is to terminate the lease. We can then begin the process of seeking a new development proposal for this prime Waikiki property,” said Ed Underwood, administrator of the Board of Land and Natural Resources Division of Boating and Ocean Recreation.
Honey Bee’s lease will be terminated Sunday. The BLNR voted at its Sept. 25 meeting to terminate the lease in November if the developer failed to secure viable financing. That meeting marked the third time that the division’s staff had come before the Land Board with a recommendation to cut ties with the developer, whose unfunded project is behind schedule.
The state expected the project to be completed in December. However, Division of Boating and Ocean Recreation staff say that none of the five loan proposals turned in by the company have materialized. Honey Bee now owes the state $562,932 in unpaid rent, according to Department of Land and Natural Resources spokeswoman Deborah Ward. She said collection of the debt might require further legal action.
The project, which was conceived with much hype under Gov. Linda Lingle’s administration, was originally intended as a model for public-private partnerships that would provide taxpayers with needed services without draining state coffers.
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In 2009 the state agreed to let Honey Bee build a boat repair facility and fuel dock along with restaurants, entertainment venues, wedding chapels and space for the U.S. National Kayak Team. Some members of the Waikiki community opposed the project as an ill fit for surrounding boaters. Regardless, in 2014 the state issued Honey Bee a 65-year lease.
“From the beginning we could see that the project wasn’t solid,” said Waikiki Neighborhood Board member Jeff Merz, whose home overlooks the stalled construction site. “It only went downhill from there. The fact that Honey Bee was the only bidder should have sent warning bells to the state that there wasn’t a market for this type of development or it wasn’t designed properly. “
Merz, who is an urban planner, said the state’s commercialization concept was good but poorly executed and the victim of changing political whims.
“I don’t think the original developer from Japan knew what they were getting into,” Merz said. “Because of multijurisdictional issues, this project would have been difficult for a well-seasoned local developer.”
Keith Kiuchi, who was originally the project’s legal counsel and a minority investor, was left scrambling to save the project after Kyoto-based Hideaki Shimakura ended his role as the project’s major financier in July 2014. Under Kiuchi the project went through multiple redesigns. While the community was more accepting of later plans, the redesigns drove costs up to $35 million.
Waikiki boater Bruce Lenkeit said he would have supported Honey Bee’s plan if it had been crafted in the best interests of the boating community.
“The two state properties should be developed, but the fact that they were going to throw a few wedding chapels in the middle of a boatyard tells me they weren’t really serious,” Lenkeit said. “It was all smoke and mirrors. I’m so glad that the state finally pulled the lease on this developer.”
Honey Bee could not be reached for comment. Consultant Dale Rak told the Honolulu Star-Advertiser last month that the company’s latest funder, Utah-based ICON Commercial Lending Inc., had hit a snag with the project’s financing timetable because it was to be funded along with a pool of other projects and the volume was triggering delays. Rak said he was convinced that the project still was viable.
“The money is in a Hong Kong bank. ICON has had challenges getting it released to a mainland bank,” Rak said. “However, I believe the money will come through.”
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DLNR spokesman Dan Dennison said the state will explore other options for the site.
“They will try to find someone else to come in and develop the property. The whole process starts from scratch,” Dennison said. “They will have to develop a new request for proposals, which will take some time.”
In the interim, Ward said the Division of Boating and Ocean Recreation will take over the management of the area that was under lease, including issuing temporary mooring permits for vessels there.
“The whole situation is way worse than if they had left it like it was to begin with,” Merz said. “What are we left with? A giant eyesore and the possibility of a site that has environmental issues. The developer isn’t going to take responsibility, so the state will have to. You can’t get blood out of a turnip.”
Merz said the state should promptly embark on a thoughtful request for proposals process. Based on the failed project’s timetable, Merz said it could take years to rectify the situation.
“Next time around, they should stipulate that they will cancel their request for proposals if they do not get multiple bidders,” Merz said. “If you are forced to take the only bid, that’s not competition, and it’s not in the best interest of the taxpayers. This whole episode just proves that.”
During the next go-round, Lenkeit recommends that the state evaluate the project’s scope and come up with a plan more suitable for helping Ala Wai Small Boat Harbor become a world-class marina.
“A lot of people in the harbor are against privatization of the slips, but I’m not. It’s obvious from the harbor’s Third World condition that the state can’t run it. I think it would work if some entrepreneur would come in and take over the boatyard, fuel dock, all the slips and throw in a few restaurants,” he said. “Yes, it would cost more for us to keep the boats there, but we might have a decent harbor. Regardless, they need to move forward. We need a fuel dock and boat repair facility.”
