Outrigger plans facelift for its Waikiki properties
By Michele Kayal
Advertiser Staff Writer
Hawai'i's largest local hotel company is expected to announce as early as Monday that it is moving forward with long-awaited plans for a major redevelopment in Waikiki.
Outrigger Enterprises Inc.'s massive renovation project, known as Waikiki Beach Walk and anticipated to cost approximately $75 million by one estimate, would transform the stifling and overdeveloped Lewers Street area into a panoply of open spaces, pedestrian thoroughfares, retail and entertainment venues, and new hotel construction.
Outrigger Enterprises chairman Richard Kelley confirmed yesterday that the company is going ahead with its plans, but referred questions on details to David Carey, Outrigger's chief executive officer.
Carey and other Outrigger executives were unavailable for comment yesterday.
Outrigger Enterprises, which owns or manages 30 hotels and condominiums in Hawai'i and a growing number in the Pacific, plans to formally notify the city Monday that it will perform an environmental impact statement for redevelopment of properties from Lewers Street to Saratoga Road, said Roy Nihei, principal at Group 70 International, the architectural firm working on the project.
The environmental impact statement, required for all development in Waikiki, is the first step in getting clearance from the city to build, Nihei said.
"It's a prelude," he said.
A final environmental impact statement should be completed and through its hurdles in January, Nihei said. The permitting process will go forward from there.
Groundbreaking would not come for at least several months after the environmental statement is complete, he said. He would not comment on when construction is expected to be finished.
The Outrigger project has been a half-decade in the making, and would be the latest development in hundreds of millions of dollars worth of change that over the last two years has begun remaking Waikiki into a sleeker, more competitive visitor destination.
Focus returns to Waikiki
Outrigger, which started in Waikiki, recently has focused its attention on expansion in the Pacific. Its renewed focus on Hawai'i's most famous visitor destination marks a return to the company's roots and brought accolades from tourism executives.
"That area of Waikiki does not speak well for the Hawai'i experience, and I am completely happy to hear that they are going to bring that up to the level of the rest of Waikiki," said Classic Custom Vacations senior vice president Lois Shore, whose company specializes in upscale getaways. "When the redevelopment is done, we may see a resurgence of people requesting to go to Waikiki to experience it again."
Though it has more than half of all the rooms in the state, Waikiki has lost ground to the Neighbor Islands and other destinations in the past five years. Analysts hailed Outrigger's plans as a key to helping the resort catch up to its competitors.
"For many years, the hoteliers in Waikiki stopped putting money into it because of the downturn in the early '90s, and many Japanese owners didn't have the money to reinvest," said Miguel Rivera, vice president of the San Francisco office of hospitality consultancy HVS International. "There has been a large gap between the clientele that has been attracted to Waikiki now and the Neighbor Islands, which has been a more upscale clientele. ... It's not realistic to think (Waikiki) could become the most upscale development in Hawai'i, but if you have new product it will help close that gap between low-end wholesalers in Waikiki and Maui and the Big Island."
Lewers Street shows its age
Conducted in two phases, the project will eventually affect 7.9 acres in the area, Nihei said, and will include all the Outrigger properties fronting Lewers Street, Beach Walk, Kalia Road and Saratoga Road, including, to a lesser degree, properties that are not hotels.
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The Lewers Street corridor is one of Waikiki's earliest developments, and it shows its age in the rundown infrastructure, old-style attractions and fast-food restaurants, and cramped, cavernous avenues that in recent years have become thoroughfares for delivery trucks and noisy service vehicles.
The aging Waikiki Edgewater on Kalia Road is expected to be among the buildings affected by the redevelopment.
People familiar with the project who asked not to be named because of their close ties to Outrigger, said the Ohana Edgewater, the Ohana Village and the Ohana Waikiki Tower, which now form a rough "L" along Lewers and Kalia Road, will be among those affected by the redevelopment.
Ohana is Outrigger's midrange, family-oriented brand. Outrigger Hotels are the company's upscale product.
The Edgewater, built in 1951 by company founders Roy and Estelle Kelley, was one of the company's first properties. Built before air conditioning was de riguer, the Edgewater is considered functionally obsolete, and has received only cosmetic renovations in its 50-year history. The Village and the Waikiki Tower are newer properties. The number of rooms between the three is about 1,000.
Area will be opened up
The development plans call for razing the area's short, squat buildings virtually from property line to property line, a person familiar with the project said. The move would make way for open-air gathering spaces, tropical foliage, water features, shopping opportunities and pedestrian walkways.
The buildings will be moved back from the street, sources said, creating a sense of looser density, and the sidewalks will be widened. It will also evoke a strong sense of Hawaiiana, sources said.
"The problem with Lewers Street is the way it's developed; it's very crowded, there's no pedestrian space, and very small sidewalks," said Joel Hiser, executive managing director at Hospitality Asset Advisors in San Francisco.
Hiser worked for Outrigger for five years in the early '90s, he said, dealing with the company's real estate-related activities.
"If you can redevelop some of these blocks and setbacks to open space, it gives Waikiki a more tourist-friendly feel, versus a concrete urban resort," Hiser said. "Anything that improves the open space in Waikiki is a real plus."
The project will also contain a "significant increase in retail," one person close to Outrigger said.
The space will continue to belong to Outrigger, said Philip Russell, principal at retail consultancy Graham Murata Russell, which has been advising Outrigger on the project. It will not be independent retail or contracted out under a master lease, Russell said.
Capital markets have been very tight for hotel development for the past few years, and it was unclear yesterday how Outrigger plans to finance the project.
Hiser said some companies refinance higher-valued assets and leverage them against new developments. Recently, some companies have begun doing joint ventures with major capital funds, he said, which sometimes provide debt as well as equity.
Correction: Roy Nihei is an architect with Group 70 International. His name was misspelled in a previous version of this article.
