The state Board of Land and Natural Resources issued another reprieve to the financially adrift Wakiki Landing, a controversial public-private partnership at the Ala Wai Small Boat Harbor.
On Jan. 1, 2014, the state issued developer Honey Bee USA Inc. a 65-year lease to build a boat repair facility and fuel dock combined with restaurants, entertainment venues, wedding chapels and space for the U.S. National Kayak Team.
On Friday the state Department of Land and Natural Resources’ Division of Boating and Ocean Recreation (DOBOR) recommended the board terminate Honey Bee’s lease. But the board decided to give Honey Bee more time.
According to DOBOR, Honey Bee owes back rent, has acquired liens on the property and still hasn’t paid the state the $1 million performance bond that was required at the start of the project. And it’s unclear whether Honey Bee has come up with an appropriate financial partner to replace Kyoto-based Hideaki Shimakura, who reneged on an earlier $25 million loan commitment.
"The board may recall we came before you in March basically requesting the same thing," said DOBOR Administrator Ed Underwood.
Following its March meeting, BLNR allowed Honey Bee’s lease to continue with the understanding that the principals would make their lease rent current, produce an acceptable financing partner, pay the performance bond and cure defects.
Four days later Honolulu attorney Keith Kiuchi, Honey Bee’s principal, paid the state $417,662 in back rent to avoid having his lease terminated. However, since then he lost another possible equity partner, Chicago-based Next; fell behind in rent again; and failed to clear $550,000 worth of liens and settle another debt for $725,000.
"I’m asking the board to let us proceed until the end of August," said Deron Akiona, a Honey Bee consultant.
Following discussion, BLNR board members agreed to another extension.
"They’ve put a lot of work into it. They are asking for one last chance. There are some advantages to keeping it going and seeing if they can make it happen," said BLNR member Chris Yuen.
Having entered into a funding agreement with Utah-based Icon Commercial Lending, Honey Bee is finally in a position to move forward, Akiona said. Icon has agreed to supply $35 million in financing for the project if the state approves it as Honey Bee’s new 50 percent partner.
"Icon has committed to pay the back rent and whatever liens sit on the property," Akiona said. "Icon presents the last, best hope for this project."
To be sure, the project has hit lots of road bumps since 2009 when DOBOR and Honey Bee entered into a development agreement.
Kiuchi said the project was on track for the first three years and that Honey Bee has put more than $5.1 million into developing the Waikiki Landing project, including environmental remediation.
"Anyone who claims that the state was shortchanged — they were not," Akiona said.
Kiuchi said Honey Bee has paid the state about $1.6 million just for the development rights and lease rent, which runs $877,146.60 annually.
"I do give credit to Honey Bee. For the first three years they performed as required, they paid their fees and did the remediation," said DOBOR’s Keith Chun. "But we’ve been chasing ever since. We’ve had proposals come in that have never come to fruition."
Kiuchi said struggles started only last year after Honey Bee lost its primary funding partner and ran into problems finding another partner willing to meet strict lease requirements, which included building a fuel dock and boat maintenance facility and a clause that if the project gets sold during the first five years, the state gets 50 percent of the profit.
"We talked to an A-plus list of developers, and that clause was an issue in all of the meetings," Kiuchi said.
However, Kiuchi said Honey Bee was able to get past that issue with Icon since the company intends to be a long-term partner.
While DOBOR rejected Icon in November, Kiuchi said he hopes the agency will take another look.
If the state approves Honey Bee’s latest partner, Kiuchi said the first installment of project funding, some $12 million, would be available buy August’s end.
"We could start dredging at the end of September and get the property turned over to tenants by October of next year," Kiuchi said. "Icon is pushing to open in December of 2016."
While Kiuchi said the project will bring economic benefit to Waikiki, some community members have grown weary.
"Enough is enough," said Ilikai resident Bruce Lenkeit. "They should have pulled the lease when they first started missing their rent payments. How many chances do they need?"
The state should move on, said Janet Mandrell, who heads the Makai Society, which is made up of recreational boaters.
"The Land Board and/or (DLNR) Director (Suzanne) Case should direct DOBOR to unbundle or unlink the two parcels and issue separate requests for proposals for private operators to provide services to recreational boating to make Ala Wai Harbor a world-class marina," Mandrell said.
During the interim, Mandrell said the state could allow pop-up businesses to offer fuel, pump-out services and convenience store amenities.
Jeff Hossellman, a 30-year boater and retired attorney, said boaters don’t want the state to continue running any harbors.
"Perhaps the boat repair facility should go to the Waikiki Yacht Club and the fuel dock to Hawaii Yacht Club," Hossellman said. "The clubs could take those two properties and devote them to real boating, not a wedding chapel as the state wants."
Hossellman said in his estimation the clubs provide almost all of the harbor’s boating activity, such as junior sailing, paddling, kayaking, yacht racing and fishing tournaments.
"Without the clubs it is ‘Ala Wai Trailer Park,’ the residents’ pet name for the community," Hossellman said.
