The largest private university in Hawaii wants to take control of Aloha Tower Marketplace and execute a $32 million plan to transform the downtown waterfront mall into a blend of retail, student housing and school facilities, including a sports and entertainment complex.
Hawaii Pacific University presented its plan to the state Aloha Tower Development Corp. Wednesday seeking approval to assume management and redevelopment of the 165,000-square-foot open-air retail center from a private developer that started the project last year.
Under the plan, the marketplace plagued by high vacancy would get a new name, possibly Tower District, as well as new retailers and restaurants, dorms for 320 students and a sports and entertainment complex.
The ground floor would keep its retail focus but also include some classroom space and HPU’s business school.
The sports and entertainment complex, dubbed the Aloha Cultural Theater, would have a spectator capacity of 1,000 to 2,000 indoors and potentially 4,000 using an outside promenade. The facility would feature a basketball court for the university and also serve as a venue for concerts, performing arts and other local community events.
Dorms would be created from the mall’s second-story space.
The former Hawaii Maritime Center at Pier 7 would be converted to an HPU faculty club and alumni center.
A new parking lot at piers 5 and 6 is also part of the plan.
The state stands to benefit from the project because the marketplace is on state land and generates lease revenue through the Aloha Tower Development Corp., a board tied to the state Department of Transportation.
However, board members balked at approving HPU’s takeover plan because of a disagreement between HPU and the private developer that initiated the redevelopment project in partnership with the university.
Hawaii Lifestyle Retail Properties LLC led by developer Ed Bushor bought the marketplace last December for $14 million, and crafted the redevelopment plan with HPU as major financing partner, marketplace occupant and 80 percent owner.
Bushor, as the developer and operating partner, lined up interest from retailers and restaurants — including Lucky Strike (a bar and restaurant with bowling lanes) and the restaurant Hash House A Go Go — to lease ground-floor space in the center that earlier this year was about 70 percent vacant.
Bushor committed to complete redevelopment work by the end of this year under an agreement with the Aloha Tower Development Corp.
ALOHA TOWER MARKETPLACE MAKEOVER
Elements of the plan to redevelop the urban waterfront mall
>> Cost: $32 million
>> New name: Tower District
>> First floor: Retail and restaurants
>> Second floor: Dorms for 320 Hawaii Pacific University students
>> Pier 10 building: Sports and entertainment center (rendering pictured at right)
>> Former Maritime Center at Pier 7: HPU faculty club and alumni center
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But HPU decided to pass up traditional bank financing and instead pursue tax-free bonds floated by the state to pay for redevelopment as well as improvements to other HPU campus sites at Fort Street Mall and in Kaneohe.
The Legislature approved issuing up to $120 million in special purpose revenue bonds issued by the Department of Budget and Finance on behalf of the university earlier this year through House Bill 2248, which Gov. Neil Abercrombie signed in July.
HPU plans to spend $32 million on the marketplace project, and $28 million on its Hawaii Loa campus in Kaneohe, other downtown facilities and its affiliate Oceanic Institute, according to the plan.
The bond financing will save HPU about $60 million in debt payment costs over 30 years, according to HPU Vice President and General Counsel Janet Kloenhamer, who explained the university’s plan to the Aloha Tower board.
But to tap tax-free bond financing, HPU as a nonprofit university can’t have a for-profit partner. So the university has sought to buy out the 20 percent interest Bushor’s company held.
Bushor is a real estate investor and developer who co-founded San Diego-based eRealty Cos., a firm that has acquired several Hawaii properties in recent years including The Modern Honolulu hotel (former Waikiki Edition), the former Ohana Waikiki Surf hotel towers and the Airport Center office building.
Bushor hasn’t agreed to a buyout, but told the Aloha Tower board he wants to see his plan succeed and benefit the state and the university.
Bushor and Kloenhamer didn’t disclose specific issues holding up a buyout, but said it is going to arbitration and is resolvable.
Because of the dispute, the board deferred action on requests to extend or waive the development deadline, transfer marketplace management and issue a new lease.
The deadline and lease changes are tied to the bonds, which HPU intended to start marketing next week and selling next month.
If HPU resolves the buyout issue and takes over the redevelopment project, Kloenhamer said the university won’t change the concept envisioned by Bushor. "We intend to have thriving retail on the first floor," she said. "Thriving retail is absolutely essential to support the debt financing payments."
If realized, the redevelopment stands to infuse new life and activity to the marketplace that was built in 1994, fell into bankruptcy in 1997 and could not be turned around by previous owners.
Students and faculty would help generate business for commercial tenants in the retail complex, which is anchored by Hooters and Gordon Biersch Brewery Restaurant.
HPU also would reduce an acute student housing shortage. Kloenhamer said a university the size of HPU should have housing for 2,000 students. "We have only 200 beds for 8,000 students," she said.
