Tenants, landlord clash at Kewalo Basin harbor

Two small businesses operating charter boats in Honolulu have been caught up in a dispute with the contractor running a state-owned harbor.

The dust-up involves the boat owners and an affiliate of a company developing million-dollar condominiums at Ward Village while also managing the adjacent Kewalo Basin for the state.

An attorney for the two boat owners is seeking to have the dispute resolved at hearings at the state agency that owns the harbor, the Hawaii Community Development Authority.

HCDA has asked its board to approve spending more than $25,000 to conduct the hearings.

The dispute involves Queen of the Ring, a 64-foot fishing and dive boat, and Emeraude II, an 80-foot sailboat.

Christopher Muzzi, a local attorney representing the owners of the two boats, contends in petitions seeking the hearings that an affiliate of Ward Village developer Howard Hughes Corp. and its hired harbor manager wrongfully terminated mooring permits for the vessels earlier this year after making unfair demands of the boat owners.

Muzzi’s complaint also alleges that Hughes Corp. and its contracted harbor manager, Almar Management Inc., have singled out the two boats because they earn less revenue and therefore pay less rent, while ignoring rule violations by other boats that pay more rent. The aim of the evictions, the complaints said, is to replace Queen of the Ring and Emeraude II, which can carry only up to six passengers, with boats that generate more income and pay more rent, thus increasing profits for Hughes Corp. and Almar.

“Almar is discriminating against vessels that can only carry six passengers in an attempt to increase their profits at the expense of existing small business permittees,” the petitions said. “Almar is selectively enforcing (harbor rules).”

Specifically, Muzzi said in one complaint that some boat owners at Kewalo Basin violate rules prohibiting people living aboard, and that one tenant, a cruise boat that looks like a pirate ship, is too big for its berth — yet annual permits for those boats are renewed.

Todd Apo, vice president of community development for Hughes Corp. in Hawaii, said the company can’t comment other than to say Almar operates Kewalo Basin under the requirements of its lease with HCDA and enforces state regulations governing the harbor.

A representative of Almar said the company would not comment because of the litigation.

HCDA leased the harbor to Hughes Corp. in 2014 for 45 years, and the company earlier this year began work on a $20 million improvement plan to upgrade and expand slips.

According to the complaints, Emeraude II has been at Kewalo Basin 44 years, and its owner, Golden Eagle Marine Charter Services Corp., led by Laurie Bakke, pays $1,228 a month for a slip on the harbor’s high-profile front row. Queen of the Ring has been at the harbor four years, and its owner, S.O.M. LLC, led by Joan Joyce, pays $1,380 a month for a front-row slip.

These rental rates are minimums under HCDA rules, and boat operators must pay 2 percent of their gross revenue if it’s greater than the minimum rent.

In April, Almar informed both boat owners that it was auditing the businesses, and demanded documents including tax returns, guest logs, checking account statements and credit card statements.

Both boat owners objected, and Muzzi questioned whether audits were being done for other tenants. Furthermore, Muzzi’s complaint claims that audits can be done only for three reasons under state regulations, and that none of the reasons logically apply. One reason is to determine fees owing to HCDA.

The complaint said Emeraude II would have to generate more than $50,000 a month to qualify for paying the higher-percentage rent, and that this is almost impossible given that only six passengers are permitted on board.

Bakke, Emeraude II’s owner, said in a May 10 letter to harbor manager John Eveleth that the boat would have to generate more revenue each month than it has generated in any single year over 44 years to qualify for percentage rent. “Surely the audit isn’t to determine if there are any additional fees owing to HCDA,” she wrote.

Eveleth replied by letter May 31 saying that the annual permit for Emeraude II was expired, won’t be renewed and that the boat had until June 30 to leave the harbor.

Muzzi filed the petition for a contested case June 30 and argued that the boat’s owner had a right to due process over the action. Emeraude II remains at the harbor.

A similar situation unfolded for Queen of the Ring, which reported to Almar that its monthly revenue last year was $2,550 — just $1,318 more than its monthly rent.

Dates for the contested case hearings have not yet been set.