King Kalakaua Plaza has had a hard life as a retail complex in Waikiki.
The four-story building was positioned for success when it opened in 1997 anchored by NikeTown and Banana Republic, but its fortune quickly faded and the place has been empty for the last three years.
The newest owner of the building has been trying to interest retailers for about two years, and said it remains committed to restoring retail use of the site toward the Ewa end of Waikiki. But one day, King Kalakaua Plaza could be replaced by a mixed-use tower.
Zoning rule amendments passed by the City Council in December have opened the way for the property occupying the whole block fronting Kalakaua and Kuhio avenues between Olohana and Kalaimoku streets to be used for residential and hotel use, which weren’t permissible before.
The height limit for the King Kalakaua Plaza property was unchanged at 280 feet, or the equivalent of roughly 28 stories, though the zoning overhaul provides an opportunity to go higher if certain view planes aren’t obstructed.
King Kalakaua Plaza’s owner, an affiliate of California-based development firm Robertson Properties Group, emphasizes that its focus is finding retail tenants to fill the roughly 80,000-square-foot building for terms that could run a couple of decades or so. But the company also has longer-term visions to develop a high-rise with a mix of uses including residences.
“There’s certainly (redevelopment) opportunities for that property … but there’s really no plan for the short term,” said John Manavian, Robertson’s executive vice president for real estate, design and development.
The far vision was made public in a recent letter from Robertson consultant and local planning firm PBR Hawaii to the city Department of Planning and Permitting. The letter mentioned Robertson’s present effort to lease the building to retailers along with the long-term intention to build a mixed-use tower on the site.
Manavian acknowledges that challenges exist to make retail work on the site, given a location perceived by some retail analysts and tourists as being outside the typical pedestrian travel range along Kalakaua.
“We certainly need a destination-oriented tenant to drive traffic to that location,” he said. “We feel it can be done.”
Local retail analyst Stephany Sofos agrees with Manavian about King Kalakaua Plaza being able to succeed as a retail complex if a tenant or tenants with exceptionally strong consumer pull — like an Apple store or Cheesecake Factory — can be attracted to the site with favorable rent.
“If it’s the right tenant, (consumers) will walk all over to get there,” she said.
Sofos also questioned the suitability of the site for a high-rise, and what that would do to the character of Waikiki’s main entryway.
But other real estate observers note that Robertson received the building at no cost following a bankruptcy and foreclosure, and that demand is rising for hotel, time-share and residential condominiums in a visitor destination enjoying record tourist arrivals. A residential or hotel tower, they say, could capitalize on this demand and also provide retail space.
King Kalakaua Plaza is just Ewa of the 2100 Kalakaua luxury retail complex, which includes Tiffany & Co., and a vacant property once envisioned to be part of 2100 Kalakaua but now slated for development of a hotel-condo tower dubbed 2121 Kuhio.
King Kalakaua Plaza preceeded 2100 Kalakaua and represented a high-stakes bet placed by local developer Honu Group that big-name tenants would pull a critical mass of consumers westward beyond the typical fringe of dense Waikiki pedestrian traffic.
Honu Group leased land under the former Kuhio Theatres in 1995 with the ambition of building Waikiki’s first new retail center in 20 years. King Kalakaua Plaza cost nearly $45 million and included 186 underground parking stalls to compensate for the pedestrian challenge.
The center opened in 1997 with its first tenant, a flagship two-story Banana Republic store.
The apparel retailer soon had two neighbors filling multilevel spaces in the project — NikeTown and the Official All Star Cafe, a sports-themed restaurant established by Planet Hollywood and backed by professional athletes including Tiger Woods, Shaquille O’Neal, Ken Griffey Jr., Joe Montana, Wayne Gretzky and Andre Agassi.
But within two years, All Star Cafe closed. A replacement was found but fizzled. Meanwhile, a fourth-floor space intended for a restaurant was never occupied.
In 2006 amid a booming economy and peaking tourism, Honu Group lost the building to foreclosure, and an affiliate of investment bank Lehman Bros. that financed the project stepped in as owner.
Then the economic downturn unfolded, forcing Lehman into bankruptcy in 2008. A year later Banana Republic and NikeTown closed their stores in the troubled Waikiki project.
Lehman sought to sell the leasehold building for $7 million in 2009, but a tentative deal for $3 million fell through, and delinquent ground rent payments owed to the landowner mounted.
The landowner is the affiliate of Robertson, which used to be the real estate arm of Consolidated Amusement Co. that operated the Kuhio Theatres and leased the King Kalakaua Plaza site to Honu.
Robertson claimed that Lehman owed it $9 million for breaking the ground lease, delinquent rent and bankruptcy-related expenses. Instead, Lehman handed the building over to Robertson about two years ago with approval of a New York bankruptcy judge.
Robertson has been active in redeveloping former theater parcels in Hawaii, as it retained considerable real estate under former Consolidated theater buildings.
Among the firm’s projects are retail stores that replaced the Waikiki I, II and III theaters, and an active plan to develop three condo towers on the former Kam Drive-In theater site in Aiea.
The old Kuhio Theatres site used to be zoned resort commercial, which limited uses largely to retail, office and entertainment. Last year the City Council did away with the resort commercial designation, and the site, along with other areas, was rezoned for resort mixed-use, permitting a wide variety of uses.
Manavian said Robertson has been trying to find retail tenants for the building for about two years through commercial real estate brokerage firm Colliers International.
A present leasing plan from Colliers contemplates filling the building with about 10 tenants in spaces ranging from 558 to 11,920 square feet.
“Ideally located at the entrance to Waikiki, this beautiful building provides a prominent and enviable presence for any retailer looking to capture the visitor and local traffic offered by no other location on Kalakaua Avenue,” the firm said in a marketing brochure that lists rental terms as negotiable.
