A movie theater is envisioned to return to the site of the former Varsity Theater in Moiliili as part of a plan exploring retail and residential redevelopment on three parcels that also include Puck’s Alley.

Kamehameha Schools, which owns the three adjacent parcels, has engaged California-based retail center developer and operator Festival Cos. to solicit interest in the project.

Festival envisions creating a “new town center” for the area fringing the University of Hawaii at Manoa, with roughly 250,000 square feet of retail space including a theater on the three parcels in three-story buildings along with a seven-story residential building on the Puck’s Alley site.

Kamehameha Schools spokesman Kekoa Paulsen said no timetable exists for redevelopment, and that proceeding with plans could be years away, depending on the response Festival receives.

“We’re in very, very early stages of putting that whole thing together,” he said. “Right now we don’t have a good sense for what kind of development might make sense there.”

Festival is an experienced developer and shopping center operator, and handled the $115 million makeover of Waikiki’s Royal Hawaiian Center, which  Kamehameha Schools also owns.

Royal Hawaiian Center spans about three blocks along Kalakaua Avenue and comprises about 310,000 square feet, making its size fairly close to what’s envisioned for the Varsity/Puck’s Alley plan, though the layout and target consumer would be different.

If the project proceeds, it would be the biggest upgrade of property owned by the trust in Moiliili.

Many tenants also could face relocation.

Karim Hammani, owner of Aloha Boardshop in Puck’s Alley, said he had not been informed by Kamehameha Schools of any possible redevelopment plans.

“What am I supposed to do? Are they going to move me? Are they going to pay for my move?” asked Hammani, who has been at the location for eight years. “Are they going to find me a place to move into? There are a lot of questions. They’ve got to come and talk to the actual people that are going to be involved.”

Hammani said many of his customers shop at his store because they like the character of the neighborhood.

“That’s why Moiliili is what it is. People like supporting the small little guy. The lady across the street that runs the shoe store — she’s a fourth-generation owner,” he said. “They can do whatever they want to do, but they’re sure not looking after the little guy.

“If they build a mall then you’ll have one of those mall surf shops. I don’t know if you’ve been in a mall surf shop lately, but there aren’t many surfboards in there — maybe a couple for decorations. I have 900 square feet and 360 surfboards in here.”

Lianne Higa, who has been selling rubber stamps and accessories for 15 years at a store called Cute Stuff on the second floor of Puck’s Alley, said she wasn’t surprised to hear of Kamehameha Schools’ possible plan.

Higa said that when she renewed her lease three years ago, Kamehameha Schools would extend it for only four years, even though she wanted a longer term. She also said that many of her neighboring tenants are on month-to-month leases.

Commercial real estate broker Steve Sofos of Sofos Realty Corp. said trying to lease 250,000 square feet of new retail space in Moiliili at rents that support new development could be tough.

“There’s a lot of demand from retailers, but will they pay (market rents for new space)?” he asked.

Developers and property owners have long eyed Puck’s Alley and the theater properties as a prime opportunity for redevelopment.

Local developer Peter Savio floated a plan in 2003 to tear down the landmark theater to build 400 student dorms and a commercial complex with a college town atmosphere. That plan followed another one from 1996 that also failed to take off.

Kamehameha Schools acquired the Varsity site and the adjacent circular Varsity Office Building from Consolidated Theatres affiliate Robertson Properties Group in 2007, a year after Consolidated closed the movie house.

The trust initially envisioned renovating the interior of the theater, which was built in 1939, and leasing it to a commercial tenant until a longer-term redevelopment plan was devised, but the theater was demolished in 2008 after Kamehameha Schools discoverered structural damage that it said made saving the building cost prohibitive.

Savio also floated a plan in 2005 to renovate Puck’s Alley and add 375 student dorm rooms largely in a six-story addition. That plan was contingent on Kamehameha Schools and another landowner extending the ground lease on the retail complex that opened in 1973.

If Kamehameha Schools and Festival proceed,  the latest plan would represent the largest improvement of the trust’s considerable land holdings in the area.

Kamehameha Schools in recent years has renovated three properties a block or so Ewa from the Varsity/Puck’s Alley site along Beretania Street, upgrading apartment buildings and adding new commercial tenants including Teddy’s Bigger Burgers. Earlier this year, the trust finished renovating a fourth apartment building on Kolo Place about a block behind Puck’s Alley. It plans to renovate more apartments in the Kolo Place neighborhood after leases expire next year.

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Star-Advertiser staff writer Alan Yonan Jr. contributed to this story