Timing is everything.
Just before COVID-19 broke out, ABC Stores purchased two derelict sites with a string of business vacancies along Kuhio Avenue. The sites are across the street from its upscale complex Dukes Lane Market & Eatery, which includes Basalt Restaurant and is located inside the Hyatt Centric Waikiki Beach Hotel.
ABC Stores President and CEO Paul Kosasa said the company eventually plans to redevelop the property, retaining as much of the existing footprint and buildings as possible. When he purchased the property, he had envisioned adding retail, food and office space to the gentrifying neighborhood.
The property was originally listed for $19.5 million by an affiliate of the Harry and Jeanette Weinberg Foundation. According to real estate records, SMK Inc.’s fee purchase recorded on March 6 was for roughly $15.9 million, including the land and existing buildings. SMK Inc. lists Kosasa as its agent on the Hawaii information page.
Given COVID-19’s impact on Hawaii tourism and the economy in general, the project’s timeline is still uncertain. In the meantime, Kosasa said the company will use fencing, lighting and cameras to secure the property.
ABC Stores has been hit hard by the pandemic. Kosasa said about half of the chain’s 80 locations, which are located in Hawaii, Las Vegas and Guam, have been temporarily closed.
“It’s been pretty brutal. There’s hardly any traffic and we have expense obligations,” Kosasa said. “Most of our employees are furloughed. I was hoping this thing would not last long, but it looks like it’s going to be a long time.”
Still, Waikiki residents are excited about the eventual upgrade of the derelict site, which they see as critical to continue expanding Waikiki’s tourism center. Kuhio Avenue always has been secondary to Kalakaua Avenue, Waikiki’s prime commercial hot spot. But in the last several years, redevelopment on Kuhio Avenue has included the Ritz-Carlton Residences, Waikiki Beach at the Ewa end, a Denny’s at the Diamond Head end, and Hotel Renew, Hilton Garden Inn and the Hyatt Centric in between. Construction of the planned Brookfield Properties residential project has started at the old Food Pantry site.
Waikiki Neighborhood Board chairman Robert Finley said that he is “greatly pleased that an outstanding company like ABC Stores has acquired this vacant property” and is looking forward to seeing the company’s future development plans.
“This site has long been an eyesore,” Finley said. “I’m glad that they’ve purchased it with future improvements in mind. I was also glad to hear that they are taking steps to secure it now. In the past, there had been criminal activity there.”
The site at the corner of Kuhio and Seaside avenues has something of a checkered history, including a 2017 shooting outside Club Alley Cat in which a man was killed and two others injured.
In 2018, owner the Harry and Jeanette Weinberg Foundation evicted about a dozen businesses from the complex, including: Swat Gun Club, Seaside Bar & Grill, Tsunami’s Waikiki nightclub, Vietnamese restaurant Old Saigon, a tattoo parlor, the Amnesia and Envy nightclubs, Club Alley Cat, strip club Hawaii By Night and adult video store King Video. Soon after, the state Health Department said the foundation had to clean up and remove lead at the former gun club site.
Despite the building’s recent past and the current economic downturn in Waikiki, the purchase still could prove to be a good longer-term investment, said real estate analyst Stephany Sofos.
“Waikiki is Waikiki. Historically, it’s been a dream for people to come from all over the world. I don’t think COVID has changed that. It’s just a burp in history,” Sofos said. “Eventually it will come back and probably be even stronger.”
Kosasa always has been bullish on Waikiki, where there’s practically an ABC Store on every corner.
He expects Waikiki to rebound, just not as fast as it did in other downturns.
“I do think it will come back eventually. I do think there will be casualties along the way,” Kosasa said. “We are not presently facing casualties, but it depends on how long this thing lasts.”