The roll in which a cheesesteak sandwich is served is key to the success or failure of the final product, and Pepper’s Place in Kailua serves its cheesesteaks on genuine, Philadelphia-made Amoroso rolls.
Not for much longer, though, as owners John and Carol Dee will be closing Sept. 30, having failed to extend their lease with landowner A&B Properties, a subsidiary of Alexander & Baldwin Inc.
A&B leased the space Pepper’s has occupied, for about 14 years, to another tenant.
Fellow tenants in Kailua Shopping Center are upset and concerned about their futures as well, Carol Dee said, but none the Honolulu Star-Advertiser reached were willing to speak on the record.
Alexander & Baldwin bought 70 percent of Kailua’s commercial real estate and 90 percent of its retail property from Kaneohe Ranch and the Harold K.L. Castle Foundation last year.
David Haverly, senior vice president of leasing for A&B Properties, said in a statement A&B Properties has completed lease renewals with 10 local tenants since the beginning of the year and is "actively working with several others."
"Inevitably there will be some changes in tenant mix over time as we seek to provide a great customer experience. We are actively evaluating each of our shopping centers and tenants, and engaging in discussions with tenants as their leases come up for renewal," he said.
The Dees said they reached out to A&B in February but were told "we can’t do anything right now" by a longtime official of Kaneohe Ranch who transitioned to A&B.
"And then it just kept getting put off," Carol Dee said. "We never imagined they’d give the shop away."
At a June meeting the Dees learned a prospective tenant had offered A&B double the rent that Pepper’s had been paying. "I guess we have to decide whether we’re going to pay double rent or move," Carol Dee said she told A&B at that time.
The Dees went to a meeting with A&B a week ago thinking they would finally be negotiating a new lease to succeed the one that expires Aug. 15.
The agent "apologized, saying the situation ‘with our lease was not handled very well’ but our space was already leased," Carol Dee said.
He told them it had happened a while ago.
"He asked us what our plans were," she said. She told the A&B representative they had no plans "as this came as quite a shock to us."
During the July 28 meeting, the agent reminded them of the more than twice-as-big, 900-square-foot space available on Hekili Street they’d previously been offered, Carol Dee said.
Any move would be akin to starting all over again, she said, but the Hekili Street location also includes a risk of getting, at any time, a 180-day notice to vacate for redevelopment of the building, via a clause in the lease.
The "clause was included in the majority of the leases assumed when acquiring the portfolio in late 2013," Haverly said.
Haverly would not identify the new tenant taking the Pepper’s location, saying the company "does not disclose specific information regarding negotiations or arrangements with tenants."
At one point A&B had told the Dees that lease considerations weren’t just focused on money, but on the tenant mix. The Dees offered to adjust their menu if that was an issue.
Last week they began telling customers that Pepper’s last day in business will be Sept. 30.
"People are really upset," she said. "I had one older man, who comes from the other side of the island for his steak sandwich once a month, break down with tears in his eyes. It made me so sad."
Reach Erika Engle at 529-4303, erika@staradvertiser.com or on Twitter as @erikaengle.
