A&B understands the importance of developing welcoming gathering places at our community shopping centers and offering services that appeal to residents in our communities. For some residents of Kailua, that place is Pali Lanes.
Recently, you may have heard about changes to the Pali Lanes lease agreement, which, as of Feb. 1, reverted to a month-to-month lease. Although we do not typically discuss business relationships with our tenants, we are making a rare exception because it’s time to share some facts.
In December 2013, we purchased the Kaneohe Ranch/Harold K.L. Castle commercial real estate portfolio in Kailua that included the ground lease under the Pali Lanes building at 120 Hekili St. We honored the current tenant’s existing month-to-month lease and it operated for several more years under that month-to-month lease. We have never increased its rent.
In late 2017, when we communicated our long-term intent to redevelop the area, the owners of the bowling alley informed us they were struggling and needed financial assistance to remain open and make needed repairs. To support the tenant, we changed the lease agreement to a one-year lease and provided rent relief for four months with the understanding that bowling operations would cease in early 2019. This was publicly announced in December 2017.
Following a strong response from the community, we put our plans on hold and committed to further engagement in order to learn the broader community’s preferences for the Pali Lanes building and surrounding area. We learned the importance of the structure itself to many Kailua residents, as well as the desire to maintain bowling. This was further validated through a resident opinion survey we sent to 16,000 households and during discussions at Kailua Neighborhood Board meetings that we attend regularly.
With this feedback from the community, we began exploring ways to keep the Pali Lanes building and bowling in Kailua. To allow time for a full evaluation, in 2019, we provided the tenant another one-year lease with 4-1/2 months of additional rent relief. At the same time, we requested that the tenant develop a viable, long-term business plan with a solid funding source and provide standard financial documents we require from all tenants.
Despite dozens of interactions with the tenant over the past two years, we have not received critical pieces of information we requested.
We have sincerely tried to assist our struggling bowling tenant as much as possible, including $91,800 in free rent over the past two years. Today, the tenant is in no better shape, and we have no greater assurances of its long-term viability. Therefore, on Feb. 1, this tenant returned to a month-to-month lease at the same below-market rent and terms it had when we bought the land.
Through all of this, we remain hopeful we can find a viable bowling operator for Kailua. As part of this effort, we have been engaging with strong local and national bowling and entertainment operators to explore their interest, but so far we have not had much interest.
Like the community, we envision 120 Hekili St. as a welcoming, attractive gathering place with activities that appeal to Kailua residents. As we continue to assess options for the building and bowling, we will share our thoughts and plans with the community and seek feedback from residents.
A&B has deep roots in Hawaii and will continue to listen and partner with communities where we live and do business.
Chris Benjamin is president/CEO of Alexander & Baldwin.
