Shirokiya facing demise after centuries-long existence

Shirokiya, a venerable retailer in Hawaii and conduit of Japanese culture for over 60 years, appears on the brink of permanent closure.

The longtime anchor tenant at Ala Moana Center is battling its landlord in a legal dispute over unpaid rent and has been barred from accessing its shuttered Japan Village Walk complex and two Vintage Cave restaurants at the state’s largest shopping center after closing last year due to COVID-19 restrictions.

Many retailers and restaurants statewide have been trying to rebound after difficulties stemming from government-imposed restrictions on tourism and customer capacity.

However, the predicament for Shirokiya has turned into a drawn-out fight in state court.

The ongoing struggle for Shirokiya represents the second time in a little over two decades that the retailer, which has been described as the oldest company doing business in Hawaii when considering its roots in Japan dating to 1662, has faced dire uncertainty over its continued existence.

Ala Moana’s owner filed its lawsuit in January, alleging that efforts over the prior seven months to resolve unpaid rent were unsuccessful.

The owner of the mall, a company led by Canadian real estate firm Brookfield Property Partners, claims that Shirokiya had been delinquent on roughly $964,000 in rent prior to the coronavirus pandemic emerging in Hawaii early in 2020.

Shirokiya contends that unpaid rent before COVID-19 stemmed from disagreement over mall conditions, though the retailer acknowledged in documents filed in the case that it had been assessing the viability of the business before COVID-19 and later became engaged in a difficult assessment over whether to permanently close.

The retailer also informed the mall owner that it was trying to find investors to restructure its business and retain its three spaces for Village Walk, a Vintage Cave Cafe and the Vintage Cave Honolulu restaurant in the shopping center’s Ewa and Diamond Head wings.

“While Shirokiya appreciates (Ala Moana’s) willingness to explore a resolution which allows Shirokiya to remain in possession of the Vintage Cave, Cafe and Village Walk premises, provided the ‘pre-COVID-19 arrearages’ are paid in accordance with (Ala Moana’s request), Shirokiya will need additional time to evaluate its options and make the difficult decision of whether to permanently close all or some of the businesses, particularly the Shirokiya line of business which has been a Hawaii and Ala Moana institution for over six decades,” Shaun Mukai, an attorney representing Shirokiya, wrote in a June 2020 letter responding to the mall’s demand that the nearly $1 million in pre-COVID-19 rent be paid within 10 business days.

Mukai’s letter sought four months’ leeway for Shirokiya to render a decision, and went on to ask the mall owner whether it could bow out with honor if the retailer decided to call it quits.

“In the event Shirokiya’s ownership decides to permanently close all of the businesses, Shirokiya would appreciate the opportunity and courtesy to work out a graceful exit with (Ala Moana) and extend its deepest gratitude to the people of Hawaii and Ala Moana Center for the many years of support and patronage,” the letter said.

About a month later Derek Kobayashi, a lawyer representing the mall, responded with a demand that Shirokiya pay about $3.7 million in delinquent rent within 10 business days.

Over the next five months, Shirokiya and Ala Moana exchanged more letters that included the retailer saying talks with potential investors in Japan to rework its business could lead to a proposal by mid-December to restructure its mall leases and an equitable repayment of overdue rent.

No such proposal was received, according to the mall, which by December had seized possession of Shirokiya’s retail spaces and terminated all three leases.

After the mall sued to recover past-due rent plus attorneys’ fees, claims by the landlord and tenant escalated.

Ala Moana is seeking $8 million in unpaid rent through the beginning of this year.

Shirokiya filed a counterclaim in March contending that unpaid rent during the pandemic should be excused because of government restrictions, that its earlier unpaid rent was due to unresolved water leak issues and that it is entitled to at least $110 million in damages to cover $50 million it invested in its mall spaces five years ago, plus at least $60 million for lost future profits due to “premature destruction” of the Shirokiya brand.

Ryan Tanaka, a local business consultant who has urged city and state government leaders to financially help commercial property landlords and tenants over pandemic impacts, said most landlords and tenants are trying to amicably work out rent arrears, especially because the cost to find new tenants can be more costly.

Yet litigation, he added, will take place in some instances.

“Unfortunately, that is just one natural remedy that is right when there are no other options,” he said.

Jacob Wilson, Ala Moana’s senior general manager, said in a statement the mall has taken “extraordinary measures” to support tenants during the pandemic but that Shirokiya did not reopen and so the mall had to terminate the retailer’s leases.

“The decision to bring suit was not taken lightly, and we very much wanted Shirokiya to remain part of the Ala Moana Center community,” he said. “There is no denying that last year was difficult for retailers across the board, and helping tenants remain in business was an important priority for us.”

David Minkin, an attorney representing Shirokiya, said in a statement that the retailer, which is not commenting on the litigation, “appreciates the continued support of the people of Hawaii, and whatever the future may hold for Shirokiya, it has been a privilege to be part of Hawaii’s ohana for the past sixty-one years.”

If Shirokiya doesn’t survive, it would be the end of a legacy bridging Hawaii and Japan.

The brand originated as a notions store started by Hikotaro Omura in 1662 in what is now Tokyo. Centuries later, the business had become part of Japan’s largest department store chain under a subsidiary of the 500-company conglomerate Tokyu Group.

Hawaii was Tokyu’s first expansion of its department store business outside Japan in 1959 when Shirokiya opened as one of the first tenants in Ala Moana’s initial phase.

The retailer offered customers Japanese merchandise from 5-cent chopsticks to a $4,000 ceremonial teahouse amid departments for electronics, toys, clothes, cosmetics, jewelry, food and more. Shirokiya also put on cultural fairs showcasing the sights, sounds and food of different prefectures in Japan.

Shirokiya added two more Hawaii stores in the 1970s and 1980s at Pearlridge Center and on Maui. Then in 2000, Tokyu announced plans to sell the three stores after closing all its other department stores inside and outside Japan.

Local analysts at the time saw little prospect for anyone buying and running the Hawaii stores, and the Pearlridge and Maui stores closed in 2001. But local managers saved the money- losing Ala Moana store, which had annual revenue around $35 million, by arranging a purchase for $1.

After two reconfigurations of the store at the mall’s Diamond Head end, the new owners executed plans in 2016 to create the Village Walk concept in a new Ewa wing expansion.

Village Walk cost about $40 million and included an 800-seat food court with 50 vendors and five beer stations as well as traditional Japanese product shops mixed with other offerings in an atmosphere designed to resemble a shopping alley in Kyoto when it was Japan’s imperial capital.

Shirokiya’s owners and investors, led by longtime Hawaii real estate developer Takeshi Sekiguchi, who opened Vintage Cave in 2012 and added a second restaurant in 2016 at a cost of $10 million, expected the new retail concept to roughly triple Shirokiya annual sales to over $100 million.

In one of its letters to the mall’s owner, Shirokiya said it wasn’t able to reap expected benefits of the Village Walk and Vintage Cave ventures.

Wilson said the mall, which now has only two remaining original tenants — Longs Drugs and Foodland — is in preliminary discussions regarding the future of Shirokiya’s space.

SHIROKIYA TIMELINE

>> 1662: Established as a notions store in Edo (now Tokyo).

>> 1958: Acquired by Tokyo-based conglomerate Tokyu Corp.

>> 1959: First store outside Japan opens at Ala Moana Center’s initial Ewa phase near Sears.

>> 1961: Celebrates 300th anniversary as Japan’s oldest retailer.

>> 1966: Enlarged store opens in new Diamond Head phase of Ala Moana.

>> 1973: Maui store opens at Kaahumanu Shopping Center.

>> 1979: Waikiki boutique store opens in the Tokyu-owned Hawaiian Regent Hotel.

>> 1981: Pearlridge Center store opens on Oahu.

>> 2000: Tokyu announces effort to sell three remaining Hawaii stores.

>> 2001: Local managers buy Ala Moana store for $1 after other stores close.

>> 2016: Japan Village Walk concept opens in place of department store.

>> 2020: Japan Village Walk closes amid coronavirus pandemic restrictions.

>> 2021: Ala Moana owner sues to recover unpaid rent after terminating Shirokiya’s lease.